Northern District of Texas
Press releases recorded for this federal judicial district.
Former Mexican Municipal Police Officer Charged with Trafficking Enough Fentanyl to Kill 10 MillionRead the Press Release
A federal grand jury in Amarillo, Texas has indicted a former Mexican municipal police officer for fentanyl trafficking, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
In a superseding indictment filed Thursday evening, Assmir Contreras-Martinez, 30, of Tucson, Arizona, was charged with conspiracy and possession with intent to distribute fentanyl, a powerful synthetic opioid 50 times more potent than heroin.
He was allegedly discovered with roughly 33 kilograms of the drug – likely enough to kill more than 10 million people, according to DEA experts.
“Fentanyl is devastating communities across the country,” said U.S. Attorney Nealy Cox. “We cannot tolerate the trafficking of this deadly drug through North Texas— especially by those who are charged with protecting our communities, foreign or domestic.”
“Fentanyl is the number one threat causing our opioid epidemic in the United States,” said Clyde E. Shelley, Jr., DEA Special Agent in Charge of the Dallas Field Division. “This seizure alone has potentially save millions of lives.”
According to a criminal complaint filed earlier this summer, Mr. Contreras-Martinez was pulled over by a Texas DPS trooper driving eastbound on Interstate 40 in Amarillo in May 2019.
A search of his vehicle, a 2007 Ford Explorer, allegedly revealed approximately 33 kilograms of a white powdery substance, which the trooper suspected to be drugs, likely cocaine. Subsequent testing revealed the substance was actually fentanyl.
After being advised of his rights, Mr. Contreras-Martinez allegedly admitted he was paid $6,000 to transport illegal contraband from California to Florida. This was his second such trip, he said.
During that interview, Mr. Contreras-Martinez allegedly stated that before his unlawful immigration to the United States seven months prior, he had been employed for eight years as a municipal police officer in Cananea, Sonora, Mexico.
An indictment is a formal accusation of criminal conduct, not evidence, and the defendant is presumed innocent until proven guilty in a court of law.
If convicted, Mr. Contreras-Martinez faces 30 years to life in federal prison, and may face deportation proceedings after serving his sentence.
Overdoses involving synthetic opioids like fentanyl killed almost 32,000 Americans last year, according to provisional data released by the CDC last week. Because of the drug’s deadly potency, the U.S. Attorney’s Office for the Northern District of Texas has a zero-tolerance policy on fentanyl, taking federally any case that involves the substance or its unlawful analogues, no matter the quantity.
The Texas Department of Public Safety and the U.S. Drug Enforcement Administration conducted the above investigation. Assistant U.S. Attorney Anna Marie Bell is prosecuting the case.
Nonprofit Owner Pleads Guilty in Public Corruption SchemeRead the Press Release
A local nonprofit owner has pleaded guilty to his role in a public corruption scandal, admitting he funneled bribes from real estate developer Ruel Hamilton to former Dallas City Council Member Carolyn Davis, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Jeremy Scroggins, 44, pleaded guilty to misprision of a felony, or concealing knowledge of the actual commission of a felony, before Chief U.S. District Judge Barbara M.G. Lynn on Tuesday.
“As I have said from the start of my tenure as U.S. Attorney, North Texas will not and cannot tolerate public corruption at any level,” said U.S. Attorney Nealy Cox. “Mr. Scroggins facilitated bribe payments, and must be held accountable. ”
“Public corruption is one of the FBI’s top criminal priorities. It is often a multilayered scheme that extends much further from our elected officials,” said Matthew J. DeSarno, Special Agent in Charge of the FBI Dallas Field Office. “We are committed to investigating all levels of these deceptive schemes, including individuals like Mr. Scroggins who facilitate bribes.”
In plea papers, Mr. Scroggins, the owner of nonprofit Hip Hop Government (HHG), admits that Mr. Hamilton repeatedly wrote checks payable to Mr. Scroggins or HH, but these payments were generally meant for Ms. Davis.
Mr. Scroggins – who knew the payments were intended to influence the councilwoman’s official actions on Mr. Hamilton’s housing projects – admits that he cashed Mr. Hamilton’s checks and transferred the funds to Ms. Davis in cash without alerting authorities.
The late Ms. Davis pleaded guilty to conspiracy to commit bribery in March and was set to be sentenced September 20. Mr. Hamilton was charged with bribery in February, and has entered a plea of not guilty. Like all defendants, Mr. Hamilton is presumed innocent until proven guilty in a court of law. His trial is slated for January 6, 2020.
“We were shocked to hear of Ms. Davis’ tragic passing, and our sympathies go out to her family, friends, and former constituents,” said U.S. Attorney Nealy Cox. “Ms. Davis took responsibility for her conduct and she never wavered in her desire to make things right. We are confident justice will be served in all our public corruption cases.”
The Federal Bureau of Investigation conducted the investigation with assistance from the Internal Revenue Service - Criminal Investigations. Assistant U.S. Attorneys Marcus Busch, Andrew Wirmani, and Chad Meacham are prosecuting the case.
Federal Home Loan Bank Execs Plead Guilty Mid-TrialRead the Press Release
Several days into their trial, two former Federal Home Loan Bank executives pleaded guilty to conspiring to lie to the government-sponsored financial institution, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Terence Carlyle Smith, former FHLB - Dallas President, and Nancy B. Parker, former Chief Information Officer, both pleaded guilty to conspiracy to make false statements to a Federal Home Loan Bank.
Mr. Smith, 62, entered his plea before U.S. District Judge Jane J. Boyle on Friday morning, midway through the prosecution’s case; Ms. Parker, 66, made her plea on Tuesday morning, before trial recommenced. The jury was dismissed on what would have been the sixth day of trial.
“These defendants attempted to trick a Federal Home Loan Bank into footing the bill for their exorbitant personal travel,” said U.S. Attorney Nealy Cox. “We believe they were right to plead guilty, even at this late date, and are confident justice will be served at sentencing.”
“The actions of these defendants placed at risk the public’s trust in the Federal Home Loan Bank of Dallas. The Federal Housing Finance Agency Office of Inspector General (FHFA-OIG) is committed to investigating allegations of fraud committed against the Government Sponsored Enterprises, including the 11 Federal Home Loan Banks,” said Catherine Huber, Special Agent in Charge of the FHFA-OIG’s Central Region Office. “We are proud to have partnered with the U.S. Attorney’s Office for the Northern District of Texas in this case.”
In plea papers, the pair admitted that from 2009 to 2013, they submitted dozens of bogus expense reports to FHLB, claiming they’d attended professional conferences they never visited -- prompting FHLB to foot the bill for what was actually personal travel to Florida, California, and Nevada. They also admitted to repeatedly falsely reporting their number of unused vacation hours.
Their pleas come on the heels of a pre-trial plea by former FHLB-Dallas Chief Financial Officer Michael Sims, who pleaded guilty to misprision of a felony, or concealing knowledge of the actual commission of a felony, on June 27.
According to the Indictment filed in 2017, the scheme cost FHLB more than $1.2 million -- $780,000 in travel expenses, including airfare, limousine rides, concerts, vineyard tours, luxury hotel rooms, and lavish meals for Mr. Smith, Ms. Parker, Mr. Sims and several colleagues, and $450,000 in unused vacation time reimbursements.
Mr. Smith and Ms. Parker each face up to five years in federal prison, and will both be required to pay restitution. In addition, as part of their plea agreements, both agreed to repay FHLB - Dallas for attorneys’ fees incurred by the bank and its insurance carrier; Mr. Smith will pay $4.2 million and Ms. Parker will pay just over $227,900.
Mr. Sims, meanwhile, faces three years in federal prison, and will also be required to pay restitution.
The Federal Housing Finance Agency Office of Inspector General led the investigation. Assistant U.S. Attorneys Errin Martin, Lindsey Beran, Tiffany Eggers, and Douglas Brasher prosecuted the case.
Texas Tax Return Preparer Sentenced to Prison in False Tax Return SchemeRead the Press Release
A Dallas, Texas, area tax return preparer was sentenced to 63 months in prison today for conspiring to defraud the United States and for aiding and assisting in the preparation of false tax returns, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Erin Nealy Cox for the Northern District of Texas.
According to documents and information provided to the court, Francisco Ventura owned and operated tax preparation businesses located in the Northern District of Texas from 2012 through 2015. During 2014, Ventura was the de factoowner and manager of a business named AJJ Tax and More. In 2014, Ventura was also the de facto co-owner of a second preparation business, named Uptown Multi Services, which he co-owned with Mario Melendez.
From November 2013 through May 2014, Ventura conspired with Melendez and others to file fraudulent federal income tax returns for clients with the Internal Revenue Service (IRS) that included false education credits, Schedule C expenses and other deductions. In addition to preparing such returns, Ventura taught training classes for new return preparers during which he instructed employees how to prepare fraudulent tax returns in order to maximize client refunds. Ventura is responsible for attempting to cause over $8.3 million of tax loss to the United States.
In addition to the term of imprisonment imposed, Ventura was ordered to serve two years of supervised release and to pay restitution in the amount of $8,310,261 to the IRS.
Melendez previously pleaded guilty in November 2018 to conspiring to defraud the United States and to aiding and assisting in the preparation of false tax returns. In April 2019, he was sentenced to 51 months in prison.
Principal Deputy Assistant Attorney General Zuckerman and U.S. Attorney Nealy Cox commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorney Alexander Effendi of the Tax Division and Assistant United States Attorney Melanie Smith, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Justice Department Launches National Public Safety Partnership with Amarillo Police DepartmentRead the Press Release
Today, officials from the Department of Justice's Bureau of Justice Assistance, the United States Attorney's Office's Northern District of Texas, the Amarillo Police Department and other law enforcement agencies convened in Amarillo, TX to kick off Amarillo’s National Public Safety Partnership (PSP) with a listening session.
Last month, Attorney General William Barr announced the selection of the Amarillo Police Department as one of ten FY 2019 PSP sites where the Justice Department will work collaboratively to provide training and technical assistance in areas such as crime analytics, emerging technology and community engagement. This Justice Department program is a three-year engagement that seeks to leverage department assets in support of a local jurisdictions' commitment to drive down violent crime.
Since 2017, the Justice Department has directed nearly $14.9 million in customized training and technical assistance to help build crime fighting capacity in PSP sites, including $6.6 million to support the FY 2019 sites through FY 2022. PSP seeks to bring law enforcement stakeholders together to work collaboratively in reducing violent crime attributed to felonious firearm use, drug trafficking and human trafficking.
“Today our team is on-site in Amarillo to collaborate with local law enforcement officials in their mission to improve public safety and drive down violent crime,” said Jon Adler, Director of the Bureau of Justice Assistance. "Through the Public Safety Partnership, we are committed to fulfilling the Attorney General's priority of supporting local law enforcement combat violent gangs, felonious firearms use and drug trafficking," added Adler.
“Our Project Safe Neighborhoods partnership with state and local law enforcement in Amarillo has already proven enormously successful,” said U.S. Attorney for the Northern District of Texas Erin Nealy Cox. “I’m confident that by bringing even more federal resources to bear here, we can make a significant dent in the crime occurring in the Panhandle.”
Since 2017, the Justice Department has worked with more than 30 local jurisdictions under the nationwide PSP program. Many participating cities have already seen dramatic reductions in violent crime. New Orleans ended 2018 with 146 murders, the lowest number of murders since the early 1970s. In Milwaukee, homicides declined in 2018 for a third straight year after hitting a deadly peak in 2015.
Agencies in attendance at this meeting will include the U.S. Attorney’s Office, Northern District of Texas; the Office of Justice Programs; the Federal Bureau of Investigation; the U.S. Bureau of Alcohol, Tobacco, Firearms & Explosives; the U.S. Drug Enforcement Administration; the U.S. Marshals Service; Amarillo Police Department; the Texas Department of Public Safety; the Potter County Sheriff’s Office; the Potter County District Attorney’s Office; the Potter County Attorney’s Office; the Randall County Sheriff’s Office; the Randal County District Attorney’s Office; and Mayor Ginger Nelson’s Office.
For more information about PSP, visit https://www.nationalpublicsafetypartnership.org.
NDTX Round-up July 11, 2019Read the Press Release
Indictment – Staci West League
On July 9, a federal grand jury indicted Staci West League, 48, for bank robbery and brandishing a firearm during a crime of violence. League allegedly entered the bank concealing a firearm and demanded large bills. Within minutes, Irving Police reported that League was in the police department with the intention of turning herself in for the bank robbery she just committed. This case was investigated by the Violent Crimes Task Force within the FBI-Dallas Division and prosecuted by AUSA Shane Read.
Indictment – Tracie Turner and Justin Wheeler
On July 9, Turner, 55, and Wheeler, 35, were charged with conspiracy to commit theft of government funds. The pair allegedly conspired to take advantage of the SSI disability benefits available when Wheeler began working full-time and was no longer eligible for disability benefits, but did not report this. Wheeler’s disability checks were deposited into Turners account, and Wheeler opted out of his employer’s health insurance to use Medicaid for his health insurance. They are also charged with theft of government funds and aiding and abetting. This case was prosecuted by AUSA Danielle Renee Jones and investigated by Jeffery Green with the Social Security Administration. If convicted, the defendants will face a maximum sentence of 6-12 months.
Sentencing – Alvin Tedvorick Hayes
On July 8, Hayes, 33, was sentenced to 147 months in prison following his conviction of possession of marijuana with the intent to distribute. He possessed seven guns in furtherance of his drug trafficking crime. The Desoto Police Department responded to multiple shooting calls, where they found a man whose trail of blood led to Hayes residence. After obtaining a search warrant, the authorities discovered 223 grams of a substance containing a designer drug, seven pounds of marijuana. This case was prosecuted by AUSA John Boyle.
Indictment – Orfilia Sanchez Benitez and Osbaldo Rangel
Benitez, 26, and Rangel, 33, are charged with conspiracy to possess with intent to distribute a controlled substance. Benitez and Rangel allegedly planned to distribute 500 grams or more of methamphetamine, a Schedule II controlled substance and 100 grams or more of a substance containing heroin. The pair are also charged with the intent to distribute a controlled substance. If convicted, the defendant face life sentences. This case was prosecuted by AUSA John Kull and investigated by the Drug Enforcement Administration Strike Force One.
Indictment – Martin Alberto Cardoza-Cavazos
On July 9, Cardoza-Cavazos, 45, was charged as an illegal alien in possession of 6 firearms. This case was prosecuted by AUSA Cathy Richardson and investigated by Special Agent Rick Parker of Homeland Security Investigations and ICE Enforcement and Removal Operations. If convicted, the defendant will face a maximum sentence of 10 years.
Straw Purchaser Pleads Guilty to 150+ Gun ConspiracyRead the Press Release
A straw purchaser pleaded guilty today to her role in a conspiracy to buy more than 150 guns for an unidentified Mexican man, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Sylvia Diaz, 36, pleaded guilty to conspiracy to acquire a firearm from a licensed dealer by false statement Thursday morning. Her co-conspirator, Jose Cruz Diaz, also 36, pleaded guilty to the same charge last October.
In plea papers, the duo admitted to purchasing 160 firearms for a Mexican man who gave them a list of the types of firearms he wanted and money to purchase the guns.
Together, the pair conducted approximately 50 transactions at various sporting goods stores, gun shows, and pawn shops between October 2017 and March 2018. At some point, each signed an ATF form claiming to be the guns’ actual buyers.
Ms. Diaz now faces up to 5 years in federal prison. Mr. Diaz has already been sentenced to 5 years behind bars.
The Bureau of Alcohol, Tobacco, Firearms & Explosives conducted the investigation. Special Assistant U.S. Attorney Cathy Richardson prosecuted the case.
Top Dealer in Han Gil Case Pleads GuiltyRead the Press Release
The lead defendant in the Han Gil criminal case pleaded guilty today to gun and drug charges, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Eric Dewayne Freeman, aka “Stuff,” pleaded guilty to conspiracy to possess with the intent to distribute a Schedule I controlled substance, possession of a firearm in furtherance of a drug trafficking crime, and possession of a firearm by a felon.
Freeman, 44, is the seventh defendant to plead guilty in the Han Gil case, which has so far resulted in charges against 18 individuals and 1 corporation associated with the notoriously dangerous hotel.
“In his plea, Mr. Freeman admitted that the Han Gil was a haven for drug dealers and violent criminals like himself,” said U.S. Attorney Erin Nealy Cox. “But we knew that based upon the efforts of our investigative team. The Han Gil posed a significant danger to our community, and we’re gratified we succeeded in shutting it down completely.”
“The DEA will pursue investigations, much like the Han Gil Hotel case, until these places are extinct,” said DEA Special Agent in Charge of the Dallas Division Clyde E. Shelley, Jr.
In his plea papers, Freeman admits that he and dealers on his payroll routinely used so-called “trap rooms” within the Han Gil to distribute heroin, methamphetamine and crack cocaine to numerous customers. (Other drug dealers unaffiliated with Freeman used multiple other guest rooms within the hotel in a similar manner.) The users often smoked or injected the drugs inside the trap rooms where drugs were peddled or on hotel premises, which were within 1000 feet of Dallas’ Herbert Marcus Elementary School.
Freeman admitted that two overdose victims died inside rooms at the Han Gil, and their bodies were dumped elsewhere. DEA agents discovered the corpse of a young woman, who died on December 27, 2018, decomposing in the woods almost a month after Freeman and two others dragged her body out of the hotel, he conceded.
Freeman further admitted the owner of the Han Gil, codefendant Su Y. Amos Mun, was aware of the drug dealing, overdoses, and body dumping. He said Mun charged dealers an inflated room rate, dubbed a “drug tax,” in exchange for allowing them to deal out of trap rooms.
Mun collected thousands of dollars from Freeman alone, and often tipped off dealers before law enforcement or city officials arrived for inspections, Freeman said in his plea papers, in which he also admitted that on at least one occasion, he discharged a handgun during an argument over some allegedly stolen drugs.
The hotel – which Mr. Freeman admitted was routinely mired in criminal activity, including drug dealing, unlawful possession of firearms, prostitution and other crimes – was raided on March 7 by a taskforce of more than 50 agents and officers concerned about rampant drug use and escalating criminal activity.
In addition to charging Freeman, Mun, and more than a dozen other conspirators using the hotel, the government moved to shut down the Han Gil, which the Court agreed “endangers the general welfare of the community.”
Freeman now faces a sentence of 10 years to life in federal prison.
Mun, meanwhile, has entered a plea of not guilty. The Indictment against Mun is a formal accusation of criminal conduct, not evidence; like all other defendants, he is innocent until proven guilty. Mun has moved to postpone his trial, which is currently set for July 29.
The Drug Enforcement Administration conducted the investigation with assistance from the Federal Bureau of Investigation, Coppell Police Department, Dallas Police Department, the Bureau of Alcohol, Tobacco, Firearms & Explosives, the U.S. Marshal’s Service, Grand Prairie Police Department, Arlington Police Department, Grapevine Police Department, Lancaster Police Department, the State Department, IRS, U.S. Postal Inspection Service, Plano Police Department, Farmers Branch Police Department, Homeland Security Investigations, Garland Police Department, Rowlett Police Department, Denton Police Department, Lewisville Police Department and McKinney Police Department. Assistant U.S. Attorneys Rick Calvert, Chief of NDTX’s Narcotics Section, and Phelesa Guy, Deputy Chief of the Narcotics Section, are prosecuting the criminal case. Assistant U.S. Attorney Lindsey Beran, NDTX Deputy Civil Chief, is handling the civil case.
Man Who Kidnapped Fort Worth 8-Year-Old IndictedRead the Press Release
A federal grand jury has indicted the man caught on camera last month abducting an 8-year-old girl in Fort Worth, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
The grand jury charged Michael Webb, 51, with kidnapping.
Despite filing papers signaling his intent to plead to an Information – a charging document that does not require signoff from a grand jury – Webb elected not to enter a plea at Wednesday morning’s scheduled hearing.
Prosecutors decided to present the case to a grand jury, forgoing any further delay in charging. The grand jury true billed an Indictment Wednesday afternoon.
“We are determined to hold the Defendant accountable for his alleged crime. If he wants a trial – which is his right – we are prepared to prove the facts before a jury,” said U.S. Attorney Nealy Cox, who is on the trial team. “We’ll do whatever it takes to bring this man to justice.”
“FBI Dallas will exhaust the necessary resources to recover all abducted and missing children,“ said Matthew J. DeSarno, Special Agent in Charge of the FBI Dallas Field Office, which worked with the Fort Worth Police Department to investigate the kidnapping and rescue the little girl. “In this case, we were able to actively work with our partners at the Fort Worth Police Department, Department of Public Safety, and Arlington Police Department to safely recover the victim and arrest her alleged abductor.”
Webb, who has been in federal custody since his arrest on May 19, will be arraigned before U.S. District Judge Reed O’Connor on Monday, June 24 at 9 a.m. At that time, he will be required to enter a plea: guilty or not guilty.
An Indictment is a formal accusation of criminal conduct, not evidence; like all other defendants, Webb is presumed innocent until convicted in a court of law.
If proven guilty, he faces a mandatory minimum of 20 years in federal prison and up to life behind bars.
The investigation was conducted by the Federal Bureau of Investigation’s North Texas Child Exploitation Task Force, the Fort Worth Police Department’s Major Case Unit Taskforce, which includes representatives of local law enforcement around the region, and the Texas Department of Public Safety. U.S. Attorney Erin Nealy Cox, Fort Worth Branch Chief Alex Lewis, and Assistant U.S. Attorney Aisha Saleem, the District’s Project Safe Childhood Coordinator, are prosecuting the case.
Reagor Dykes CFO Pleads Guilty to Wire Fraud ConspiracyRead the Press Release
Reagor Dykes Auto Group’s Chief Financial Officer, Shane Andrew Smith, pleaded guilty today to conspiracy to commit wire fraud, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
“From ‘dummy flooring’ to check-kiting, this was blatant, large-scale fraud,” said U.S. Attorney Nealy Cox. “We will hold Mr. Smith – and any other Reagor Dykes executives involved in this behavior – accountable for this breach of trust. The investigation is ongoing.”
“One of the goals of the FBI is to protect the financial services industry, and by extension, the economy. To that end, the FBI will continue to target those with an intent to defraud businesses and erode the public’s confidence,” said Matthew DeSarno, Special Agent in Charge of FBI’s Dallas Division.
In plea papers, Mr. Smith, 45, outlined the $50 million scheme, which involved defrauding the auto group’s main lender, Ford Motor Credit Company (FMCC), and concealing the fraud by cross-depositing checks across several banks, a ploy known as check-kiting.
In order to cover ballooning expenses, Mr. Smith admitted, he instructed Reagor Dykes accountants to engage in a practice they dubbed “dummy flooring.”
At his direction, accounting staff dug through records for vehicle identification numbers (VIN) of cars Reagor Dykes had already sold, then submitted new loan applications to FMCC using the old VINs – falsely indicating that the company was seeking a loan in order to repurchase the vehicle for resale. Instead of re-buying the car, however, Reagor Dykes used the ensuing loan to cover other expenses.
“Whatever it takes, we need to floor anything and everything we can even think of to cover payoffs each day,” Mr. Smith wrote in an email quoted in his factual resume.
To disguise the shortfall from the dummy flooring scheme, Mr. Smith and his employees engaged in check-kiting, artificially inflating the company’s bank account balances by cross-depositing insufficient checks.
Vendor and payroll checks that should have bounced were instead cleared during banks’ float time, the period between the deposit in the recipient account and the deduction from the payer’s account.
“The deposits we do each do [sic] will most likely cover the checks we write each other,” Mr. Smith wrote in an email.
Reagor Dykes also routinely violated a clause in its loan agreements that required them to repay FMCC within seven days of selling the vehicle for which the loan was issued, Mr. Smith admits.
Rather than cop to the delay, Reagor Dykes accountants created false paperwork, which they referred to as “dummy shucks,” in order to make it appear that the car had been sold more recently.
Mr. Smith now faces up to 20 years in federal prison. His plea agreement requires he pay a mandatory restitution of more than $50 million, equal to the total amount of loss suffered by FMCC and victim banks, and testify truthfully in any court proceedings.
The Federal Bureau of Investigation and Internal Revenue Service - Criminal Investigation Division conducted the investigation. Magistrate Judge Lee Ann Reno presided over the plea. Assistant U.S. Attorneys Joshua Frausto, Jeffrey Haag, and Sean Taylor are prosecuting the case.
PSN Amarillo Taskforce Arrests 4 Alleged Cocaine DealersRead the Press Release
A Project Safe Neighborhoods - Amarillo Taskforce arrested four defendants while executing search warrants at two North Heights area crack houses, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
All defendants have been charged via criminal complaint with distribution and possession with intent to distribute cocaine or cocaine base, and all remain in federal custody pending trial.
Among those arrested during the PSN - Amarillo raid was Earnest Tywane Drone, 39, a well-known dealer who allegedly sold cocaine to a confidential government source last month. Other defendants include: Joseph Dean Taylor, Treson Blake Fugit, and Trevon Montel Monroe.
Officers recovered crack cocaine, marijuana, and a pistol with ammunition during the raids, which occurred late last month.
The Project Safe Neighborhoods - Amarillo initiative – a coalition of federal and local law enforcement focused on a high-crime hotspot in Amarillo – uses a three-pronged approach that combines traditional enforcement with community outreach and recidivism reduction to drive down violent crime.
Criminal charges are merely an allegations of wrongdoing, not evidence. All defendants in this case are presumed innocent until proven guilty in a court of law.
The joint operation was conducted by Amarillo DPS – Criminal Investigation Division, Amarillo DPS – Texas Highway Patrol, Amarillo DPS Air-Wing, the Drug Enforcement Administration, the Bureau of Alcohol, Tobacco, Firearms & Explosives, the Amarillo Police Department, the U.S. Marshals’ North Texas Fugitive Task Force, Homeland Security Investigations, the Federal Bureau of Investigation, and the Randall County Sheriff’s Office. Assistant U.S. Attorneys Josh Frausto and Sean Taylor are prosecuting the case.
Dallas Trafficker Ordered to Pay $330,000+ in Restitution to VictimRead the Press Release
A Dallas area sex trafficker was sentenced today to 11 years in federal prison and ordered to pay his victim nearly $333,000, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Gregory Bowden, aka “G,” pleaded guilty to a racketeering charge in January.
In plea papers, Mr. Bowden admitted he recruited his 19-year-old victim, identified in court documents by her initials “R.R.,” in 2014.
He advertised her services on Backpage.com and trafficked her across Texas, from Odessa to Euless to Corpus Christi, using violence to force her to engage in commercial sex acts while he kept the proceeds.
On Friday, U.S. District Judge Sidney A. Fitzwater sentenced Mr. Bowden to 11 years behind bars and ordered him to pay $332,990 in restitution to R.R.
Homeland Security Investigations and the Corpus Christi Police Department conducted the investigation. Assistant U.S. Attorney Cara Foos Pierce prosecuted the case.
Anyone with information pertaining to possible human trafficking, please call the National Human Trafficking Hotline, live 24/7, at 1-888-373-7888.
NDTX Roundup -- 6/13/19Read the Press Release
SENTENCING – Sherryol Elton Clack, Jr.
On June 7, Sherryol Clack, Jr. was sentenced to three months in federal prison for shining a laser pointer at an aircraft, causing temporary blindness to its pilot. The aircraft, a Texas Department of Public Safety helicopter assisting in the apprehension of a murder suspect, was forced to abort its mission.
PLEA – Joe Larry Straw
On June 11, Joe Larry Straw pleaded guilty to conspiracy to commit health care fraud. In plea papers, Mr. Straw admits he accepted more than $68,000 in kickbacks in return for facilitating the referral of TRICARE patients to Trilogy Pharmacy. More than a dozen co-defendants have been indicted in the scheme, which violated the federal anti-kickback statute, and caused an actual loss to TRICARE of more than $100 million. The Defense Criminal Investigative Service and FBI investigated.
PLEA – Randal Anthony Melton
On June 11, Randal Melton pleaded guilty to felon in possession of a firearm. In his plea papers, Mr. Melton admits to unlawful possession of a 9 mm Smith and Wesson despite a prior felony conviction. ATF and the Dallas Police Department investigated the case.
SENTENCING – Damon Williams
On June 13, Damon Williams was sentenced to 7 years, 11 months in federal prison for his involvement in a methamphetamine conspiracy. In February, Mr. Williams pleaded guilty to conspiracy to possess with intent to distribute a controlled substance, admitting he delivered meth to a co-conspirator who then sold the drugs to an undercover officer.
Attorney General William Barr Announces Domestic Violence Working Group Chaired by U.S. Attorney Erin Nealy CoxRead the Press Release
Attorney General William P. Barr today announced the formation of a Domestic Violence Working Group aimed at keeping guns out of the hands of convicted abusers, using the tools of federal firearm prosecutions to prevent domestic violence.
The group will operate under the auspices of the Attorney General’s Advisory Committee (AGAC) and be comprised of nine U.S. Attorneys across the country, chaired by U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
“Too often, domestic abusers start with threats and abuse, and end up committing extreme violence and even homicide, with devastating impact on families and the community around them,” said Attorney General Barr. “I have directed this working group to examine this issue and determine the best way to use federal gun prosecutions and other appropriate tools to supplement state, local and tribal efforts to address domestic violence.”
“With so many domestic disputes escalating from bruises to bullets, we felt we needed to supplement our state and local partners’ efforts to curb domestic violence with federal prosecutions,” said U.S. Attorney Nealy Cox. “We hope our initial cases send a message to convicted abusers: Not only could the Justice Department theoretically prosecute abusers for firearm possession – they have and they will.”
Federal law has long barred convicted felons, as well as individuals subject to certain domestic violence protective orders or convicted of domestic violence misdemeanors, from possessing firearms.
Offenders with domestic violence in their past pose a remarkably high risk of homicide. Research shows that abusers with a gun in the home are five times more likely to kill their partners than abusers who don’t have that same access to a firearm. And according to one recent study, more than half of America’s mass shootings are cases of extreme domestic violence.
Keeping guns from domestic abusers legally prohibited from possessing them would significantly reduce violence in America, a major priority of the Justice Department.
However, federal gun cases involving domestic violence present unique challenges. In some states, the federal and state definitions of domestic violence differ, requiring complex legal analysis that varies based on the location of conviction.
The Working Group will share best practices, legal analysis and guidance on prosecuting abusers who unlawfully possess guns, and will advise U.S. Attorneys across the country on outreach to local law enforcement, judges, and nonprofit groups.
Working Group members include:
- Scott W. Brady, U.S. Attorney for the Western District of Pennsylvania
- Robert M. Duncan, Jr., U.S. Attorney for the Eastern District of Kentucky
- Nicola T. Hanna, U.S. Attorney for the Central District of California
- Justin E. Herdman, U.S. Attorney for the Northern District of Ohio
- Erin Nealy Cox, U.S. Attorney for the Northern District of Texas
- Christina E. Nolan, U.S. Attorney for the District of Vermont
- Byung J. Pak, U.S. Attorney for the Northern District of Georgia
- R. Trent Shores, U.S. Attorney for the Northern District of Oklahoma
- Timothy J. Downing, U.S. Attorney for the Western District of Oklahoma
Examples of domestic violence firearm prosecutions already underway in the Northern District of Texas can be found here.
U.S. Attorney’s Office Launches Project Safe Neighborhoods LubbockRead the Press Release
The U.S. Attorney’s Office for the Northern District of Texas – in partnership with the Lubbock Police Department and a host of other federal, state, and local law enforcement partners – today launched Project Safe Neighborhoods Lubbock, its third PSN initiative in North Texas, announced U.S. Attorney Erin Nealy Cox.
A nationwide program spearheaded by the Justice Department, Project Safe Neighborhoods surges federal and local resources to communities’ most violent neighborhoods in order to root out the area’s worst offenders and build positive relationships with crime victims and witnesses.
The PSN Lubbock Taskforce – which includes officers, agents, and staff from the Lubbock Police Department, Lubbock County Sheriff’s Office, Lubbock County District Attorney’s Office, Texas Department of Public Safety, U.S. Attorney’s Office, Federal Bureau of Investigation, Bureau of Alcohol, Tobacco, Firearms & Explosives, Drug Enforcement Administration, U.S. Marshals Service and Homeland Security Investigations – worked with a university criminologist to analyze city-wide crime data and zeroed in on a violent crime “hotspot” in central Lubbock, west of I-27 and north of the South Loop:
Data showed violent crime –including assault, and robberies – creeping up in the region. Aggravated assaults, for example, rose more than 28% over four years. The Taskforce felt the region could benefit from Project Safe Neighborhood’s three-pronged approach, which combines traditional enforcement with community outreach and recidivism reduction.
To that end, the Taskforce created an email tip line where members of the community can reach out: [email protected]. The inbox is monitored by federal agents who will route comments and concerns to the appropriate authority. Lubbock’s Crime Line will offer monetary rewards for information leading to the successful federal prosecution of PSN crimes in Lubbock.
“Project Safe Neighborhoods is a collaborative initiative that draws upon the collective wisdom of our local, state and federal law enforcement partners to reach a common goal: Reducing violent crime inside the PSN hotspot and citywide,” said U.S. Attorney Erin Nealy Cox. “We’ve found that when crime lacks a geographic locus, it dissipates. And when a community trusts law enforcement, it thrives.”
“The Lubbock Police Department takes the protection of its citizens and their quality of life very seriously. We use all the available tools and resources to bring criminals to justice and make our communities stronger through active engagement,” said Lubbock Police Chief Jerry D. Brewer.
"The FBI is pleased to continue our support for the Project Safe Neighborhoods initiative," said FBI Dallas Special Agent in Charge Matthew J. DeSarno. "We remain committed to working closely with our federal, state, and local law enforcement partners to ensure the safety and well being of the Lubbock community."
To date, the Northern District of Texas has launched two other PSN initiatives: PSN Dallas and PSN Amarillo. Both have proved enormously successful. For more information on PSN, visit: https://www.justice.gov/usao-ndtx/project-safe-neighborhood-psn-revitalized-2018.
U.S. Attorney Nealy Cox Announces Support to Amarillo as Part of the National Public Safety Partnership to Combat Violent CrimeRead the Press Release
As the Department of Justice continues its efforts reduce violent crime in America, Attorney General William P. Barr today announced that Amarillo, TX was selected to join the National Public Safety Partnership (PSP) initiative.
PSP provides a framework for enhancing federal support of state, local and tribal law enforcement officials and prosecutors as they aggressively investigate and pursue violent criminals, specifically those involved in gun crime, drug trafficking and gang violence.
“The Public Safety Partnership is a successful program that directs federal law enforcement resources to the cities where they can have the greatest impact," Attorney General Barr said. "These resources help police departments to diagnose where crime is highest—and why—and to find, arrest and prosecute criminals. Several participating cities have already seen dramatic reductions in violent crime over the past two years. As we expand this program to 10 more cities across America, we are determined to replicate that success.”
“Federal law enforcement is proud to bring our resources to bear in communities fighting persistent crime,” said U.S. Attorney Erin Nealy Cox. “The people of Amarillo deserve to feel safe in their city. I’m confident that with Chief Drain’s help, we can make a significant dent in the violent crime plaguing the Panhandle.”
The Justice Department created PSP and the Task Force on Crime Reduction and Public Safety in response to President Donald Trump’s February 9, 2017, Executive Order charging the agency with leading a national effort to combat violent crime. In June 2017, the Department of Justice announced the formation of the National Public Safety Partnership initiative.
To be considered for selection, a site must have sustained levels of violence that exceed the national average, demonstrate a commitment to reducing crime, and display compliance with federal immigration requirements.
The 10 sites announced today are as follows:
- Anniston, Alabama
- Oxford, Alabama
- Anchorage, Alaska
- Davenport, Iowa
- Wichita, Kansas
- Baton Rouge, Louisiana
- Baltimore, Maryland
- Cleveland, Ohio
- Amarillo, Texas
- Harris County, Texas
More than 30 cities have participated in PSP. The primary participating Justice Department components include the Office of Justice Programs, Office on Violence Against Women, Office of Community Oriented Policing Services, Bureau of Alcohol, Tobacco, Firearms and Explosives, FBI, U.S. Drug Enforcement Administration and U.S. Marshals Service.
More information about PSP can be found at: http://www.nationalpublicsafetypartnership.org.
Darknet Fentanyl Dealer Indicted for Selling Deadly Drug for BitcoinRead the Press Release
A darknet drug dealer has been indicted for leveraging bitcoin’s apparent anonymity to sell fentanyl online, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
A federal grand jury charged Sean Shaughnessy, 51, with conspiracy to possess with intent to distribute controlled substances, distribution of a controlled substance, distribution of a controlled substance analogue, and eight counts of money laundering. Today, he waived his detention hearing, and will remain in custody until trial.
“Darknet dealers often believe that by using bitcoin, they can evade authorities. This prosecution proves that’s not the case,” said U.S. Attorney Nealy Cox. “We will continue to pursue anyone peddling this deadly drug – on the streets or online.”
“Our significant domestic and international HSI resources and expertise, along with the considerable resources of our law enforcement partners, provided an unbeatable team to investigate this fentanyl smuggling operation so that we could effect this indictment,” said Katherine Greer, Acting Special Agent in Charge of Homeland Security Investigations’ Dallas field office. “This deadly drug —combined with the secrecy of bitcoin currency — represent a significant danger to an already-devastating national opioid epidemic.”
According to the indictment, which was unsealed on Friday following the defendant’s initial appearance, Mr. Shaughnessy allegedly sold fentanyl and fentanyl analogues over the dark web, an unindexed portion of the internet accessible only via specialized software that allows users to conduct transactions with relative anonymity.
His buyers purchased the fentanyl and fentanyl analogues, which was shipped to their addresses, using cryptocurrencies like bitcoin, the indictment alleges.
One user, who allegedly purchased a fentanyl analogue from Mr. Shaughnessy, overdosed on the substance and died.
Mr. Shaughnessy allegedly transferred his bitcoin proceeds to other cryptocurrency wallets in exchange for regular fiat currency, which was shipped to his home in Dallas. Unbeknownst to Mr. Shaughnessy however, he sent more than $120,000 in bitcoin to wallet addresses controlled by federal agents.
An indictment is a formal accusation of criminal conduct, not evidence, and the defendant is presumed innocent until proven guilty in a court of law.
If convicted, Mr. Shaughnessy faces up to 20 years in federal prison on each of his 11 charges.
Fentanyl and its analogues – among the most lethal opioids used in the United States, according to the Drug Enforcement Administration – are partly responsible for the sharp increase in opioid deaths across the nation. In just three years, the fentanyl death toll rose more than 5,000 percent, from around 5,500 in 2014 to almost 30,000 in 2017, according to the National Institute of Health. Just a few milligrams, equivalent to a few grains of table salt, may be deadly.
Homeland Security Investigations’ Dallas field office, the IRS - Criminal Investigation Division’s Los Angeles field office, and the U.S. Postal Inspection Service conducted the investigation. Assistant U.S. Attorney Sid Mody is prosecuting the case, with the assistance of the Justice Department’s Money Laundering and Asset Recovery Section.
Two Human Traffickers Plead GuiltyRead the Press Release
Two human traffickers who advertised victims on Backpage.com have pleaded guilty in federal court, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Joshua Glaze, 30, pleaded guilty this morning to conspiracy to conspiracy to commit sex trafficking through force fraud or coercion. His codefendant, Faizal Sabar, 34, pleaded guilty to the same charge on May 13.
In court documents, the defendants admitted they conspired to advertise victims on the now-defunct Backpage.com.
Mr. Sabar admitted that in 2017, he traveled with one victim from Pennsylvania to Texas, where he forced the victim to engage in commercial sex at various local hotels, including inside a room rented by Mr. Glaze at the Home2Suites hotel in Northlake.
Mr. Sabar instructed the victim how much to charge for each sexual encounter, and pocketed the profits, he admitted.
“Trafficking – people selling other people – is a particularly vile crime,” said U.S. Attorney Nealy Cox. “Even though the website in this case has been shut down, others continue to proliferate, and we remain vigilant for signs of trafficking, online and off.”
Mr. Sabar and Mr. Glaze now face up to life in federal prison. Mr. Sabar will be sentenced on August 26 before Judge Reed C. O’Connor in Fort Worth.
Homeland Security Investigations and the Bureau of Alcohol, Tobacco, Firearms & Explosives conducted the investigation. Assistant U.S. Attorney Douglas Allen prosecuted the case.
If you know someone who may be a victim of trafficking or otherwise believe you have information pertaining to human trafficking, please call the National Human Trafficking Hotline, live 24/7, at
1-888-373-7888.Last Defendant in Large-Scale Narcotic Distribution Conspiracy Sentenced to 30 Years in PrisonRead the Press Release
Roberto Omar Vera, 53, of Corpus Christi - the last of 23 defendants in a large-scale narcotic distribution conspiracy - was sentenced to 30 years in federal prison on May 16 by U.S. District Judge Jane J. Boyle.
Vera was apprehended after he engaged in a lengthy high-speed chase in Hunt County, resulting in speeds of up to 100 miles per hour, and Vera firing a gun at law enforcement multiple times. After an hour and half standoff, Vera was taken into custody along with the firearms and illegal narcotics that were in his possession.
The defendants in this case were found responsible for distributing more than 72 kilograms of methamphetamine, along with heroin and other illegal drugs to the Northern Dallas area. Combined, they were responsible for 142 prior criminal convictions, with 52 of them being drug related and 6 being violent offenses. They received a total of over 245 years in federal prison, with sentences ranging from 33 to 360 months.
- Roberto Vera – 360 months
- Elizabeth Causey-Eck – 240 months
- Daniel Moss – 215 months
- John Owen – 210 months
- Roberto Munoz - 190 months
- Simon Trevino – 188 months
- Rodney Broach – 188 months
- Larry Lincks – 188 months
- Arthur Currie – 168 months
- Clisty Pratt – 130 months
- Brandi Turcola – 100 months
- Angela Burkham – 87 months
- Illona King – 85 months
- Kneely Abadie – 75 months
- Paul Shreves – 71 months
- Lauren Crites – 70 months
- Kameron Vera – 60 months
- Mark Craven – 60 months
- Stephanie Aldava – 57 months
- Charley Crossland – 57 months
- Chelsea Johnson – 57 months
- Caitlyn Johnson – 51 months
- Jorge Morales – 33 months
The investigation was led by the Texas Department of Public Safety and the Bureau of Alcohol, Tobacco, Firearms and Explosives. Assistant U.S. Attorney P.J. Meitl, Northern District of Texas, was in charge of these prosecutions.
Man Involved in 13-Year-Old’s Revenge Killing Sentenced to 18 YearsRead the Press Release
Darius Fields, a drug trafficker implicated in the kidnapping of 13-year-old Shavon Randle, was sentenced today to 216 months in federal prison, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Following a three-day trial in April 2018, Mr. Fields, then 27, was convicted on two counts of “lying and buying” – aiding and abetting false statements in the acquisition of a firearm – and one count of unlawful possession of a pistol.
At his sentencing, prosecutors introduced evidence indicating Mr. Fields was involved in the kidnapping of 13-year-old Shavon Randle, who was then brutally killed following a dispute over stolen marijuana.
The prosecution also presented evidence that Mr. Fields and his associates originally planned to kidnap Ms. Randle’s adult cousin, L.R., in retribution for her boyfriend’s supposed theft of their marijuana. When they arrived at her residence and discovered L.R. was gone, Mr. Fields’ associates instead abducted Ms. Randle, forcing her out of the house with a pillowcase over her head, agents testified. They later used a prepaid phone to call L.R. with a ransom demand: Return the stolen marijuana or they would kill the young girl.
Four days later, authorities discovered Ms. Randle’s body, with gunshot wounds in her head and torso, decomposing alongside the body of another dealer inside an abandoned home in Oak Cliff.
Additional evidence introduced at sentencing also indicated that shortly after Ms. Randle’s body was found, Mr. Fields, then incarcerated at Fannin County Jail, bragged to a fellow inmate about his involvement in the Randle murder, the inmate testified.
Taking into account Mr. Field’s relevant conduct in the Randle matter, Chief U.S. District Judge Barbara M.G. Lynn sentenced him to 216 months (18 years) behind bars.
“We can never heal this family’s wound, but we hope the knowledge that Mr. Fields will spend 18 years behind bars brings Ms. Randle’s loved ones some measure of relief,” said U.S. Attorney Nealy Cox. “Thankfully, federal law gives Judges discretion to adjust a defendant’s sentence based on all the relevant circumstances of the crime and the defendant’s criminal history, provided the sentence remains within the statutory range for the crime of conviction. In this case, as in all cases, we wanted the Judge to have all the pertinent facts – including the full extent of defendants’ involvement in the kidnapping of an innocent thirteen-year-old. It would be irresponsible for us not to provide the Court with such evidence.”
“Thank you to our partners at the Lancaster, Irving, and Dallas Police Departments as well as the FBI special agents whose tireless commitment ensured a positive outcome,” said Matthew J. DeSarno, Special Agent in Charge of the FBI Dallas Division. “This collaborative team effort demonstrates the dedication of DFW area law enforcement to the communities we serve.”
Local law enforcement has named Mr. Fields a “person of interest” in the Randle case, but has not charged Mr. Fields in connection with the girl’s murder.
The Federal Bureau of Investigation and the Lancaster Police Department conducted the investigation with assistance from Irving and Dallas Police. Assistant U.S. Attorneys Camille Sparks and Gary Tromblay prosecuted the case.
Woman Sentenced to 30 Years for Medicaid Fraud Perpetrated from PrisonRead the Press Release
Just three years into serving an eight-year sentence for health care fraud, Alexis C. Norman was sentenced yesterday to another 30 years for a second health care fraud scheme, some of it committed while she was behind bars, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox. Her new sentence will run concurrent to her original one, starting this week.
In December, Ms. Norman pleaded guilty to one count of conspiracy to commit health care fraud and four counts of health care fraud – three committed before she was sentenced in the prior case and one committed while she was behind bars.
According to plea papers, Ms. Norman approached co-conspirator Karen Jones in February 2015 with a business idea she hoped could help pay legal fees from her previous case. Ms. Jones agreed to help Ms. Norman by listing herself as the administrator of Janus Children Services, Inc., opening a bank account in Janus’ name, and leasing office space for Janus in Tyler, Texas.
The company never occupied the office space, never hired any employees, and never provided any services.
Together, Ms. Norman and Ms. Jones used stolen identities of licensed counselors and Medicaid recipients to submit more than $810,000 in fraudulent claims to Medicaid, and were paid more than $427,000.
After Medicaid paid Janus for the false claims, Ms. Norman directed Jones to withdraw cash from the Janus bank account, always in amounts less than $10,000. Roughly once a month from April 2015 to February 2016, the pair would meet at a restaurant. When they finished their meal, Ms. Jones – who carried the cash in a gift bag – would leave the package on a chair for Ms. Norman.
Following Ms. Norman’s incarceration in April 2016, Ms. Jones agreed to help Ms. Norman submit additional fraudulent claims through a second company, Therapeutic Outreach Services Inc.
Ms. Jones helped Ms. Norman lease office space for Therapeutic in Waco, Texas, and visited Ms. Norman in prison on multiple occasions to gather billing instructions and identifying information of counselors and Medicaid clients. Ms. Norman concealed the information on a piece of paper hidden in her shoe, which she retrieved during Ms. Jones’ visits.
Like Janus, Therapeutic never operated out of the Waco location, had no employees, and provided no services.
The U.S. Department of Health and Human Services – Office of Inspector General and the Texas Attorney General’s Medicaid Fraud Control Unit conducted the investigation. Assistant U.S. Attorney Douglas Brasher and DOJ Trial Attorney Christina Liu are prosecuting the case.
Bribe Payer in DCS Scheme Sentenced to 7 Years in Federal Prison, Ordered to Pay $125M in RestitutionRead the Press Release
Force Multiplier Solutions CEO Robert C. Leonard was sentenced today to seven years in federal prison and ordered to pay $125 million in restitution for his role in a bribery scheme that took down multiple public officials and precipitated the collapse of Dallas County Schools, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Mr. Leonard, of New Orleans, Louisiana, pleaded guilty on August 9 to conspiracy to commit honest services wire fraud.
“In peddling bribes and kickbacks, Mr. Leonard undermined Dallas’ trust in its public officials. And in bringing him to justice, we hope to restore citizens’ faith in the system,” said U.S. Attorney Nealy Cox. “As I’ve said repeatedly over the past year and a half, the U.S. Attorney’s Office will be relentless in its pursuit of anyone involved in bribing public officials – from bribe recipients to bribe facilitators to bribe payers. The citizens of Dallas deserve integrity from City Hall.”
In plea papers, Mr. Leonard, now 71, admits he paid local officials – including then Mayor Pro Tem Dwaine Caraway and former DCS Superintendent Ricky Sorrells – more than $3.5 million in order to secure DCS contracts for his company’s stop-arm camera technology.
In an attempt to conceal the illicit payments, the majority of the bribe money was funneled through ELF Investments, a sham consulting firm run by Mr. Leonard’s business associate, Slater Swartwood. The remainder was funneled through law firms or doled out in the form of credit card debt repayments, student loan payments, custom-made suits, fully funded trips, casino chips, fake loans, funeral expenses, and cash payments.
A criminal indictment against former DCS Board President Larry Duncan revealed Mr. Leonard also gave Mr. Duncan a quarter of a million dollars in campaign contributions – money the DCS Board President diverted from his re-election bid and instead used to cover personal expenses.
Councilmembers Duncan and Caraway, as well as Mr. Sorrells and Mr. Swartwood, have pleaded guilty to criminal wrongdoing in the case.
Chief U.S. District Judge Barbara M.G. Lynn sentenced Mr. Caraway to 56 months in federal prison and Mr. Duncan to six months’ home confinement. Mr. Sorrells and Mr. Swartwood are set to be sentenced in August 2019.
Dallas County Schools, which collected property taxes to purchase stop-arm cameras for its fleet of about 2,000 busses, was shuttered in November 2017, saddled with approximately $103 million in debt.
The Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation unit conducted the investigation. Assistant U.S. Attorneys Andrew Wirmani, NDTX’s Public Corruption Coordinator, Marcus Busch, NDTX’s Fraud Section Chief, Chad Meacham, and Joseph Magliolo prosecuted the case.
Pill Mill Physician Sentenced to 13 Years for Conspiracy to Distribute NarcoticsRead the Press Release
A “pill mill” physician who oversaw the illegal prescription of nearly a million units of narcotics with no legitimate medical purpose was sentenced today to 13 years in federal prison, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Carlos Luis Venegas, 62, was convicted of conspiracy to distribute a controlled substance following a 5-day trial before U.S. District Judge David C. Godbey in early February.
According to evidence presented at trial, Dr. Venegas acted as the supervising physician for a series of sham medical clinics – all merely fronts for the illegal distribution of Hydrocodone and Alprazolam.
“These pill mills help to perpetuate the tragic opioid crisis gripping our country,” U.S. Attorney Nealy Cox said following the guilty verdict. “Last year, America lost, on average, 116 people per day to opioid overdoses. We cannot allow unscrupulous conduct by physicians to add to the supply of dangerous drugs on the streets.”
“The DEA will continue to investigate these types clinics and health care personnel who are facilitating illegal distribution of prescription drugs”, said DEA Special Agent in Charge of the Dallas Field Division Clyde E. Shelley, Jr. “One overdose is one too many”.
At trial, witnesses testified that members of the conspiracy paid homeless and indigent people to pose as patients seeking pain medication. Runners coached these men and women on how to describe their (nonexistent) symptoms, drove them to the clinics, and paid for their appointments.
At the clinics, nurse practitioners and physician’s assistants, working under Dr. Venegas’ supervision, conducted only cursory medical exams, witnesses said. Medical files seized from the clinics showed that most exams were conducted without any medical testing and rarely produced documentation of patients’ purported ailments.
At the conclusion of the visit, patients were almost always prescribed a cocktail of medications, including Hydrocodone and Xanax, generally for the highest dosages available.
Several of his codefendants, including several nurse practitioners and clinic managers, previously pleaded guilty to their roles in the scheme.
Codefendant sentences include:
- Christan Michael Hicks – 70 months
- Craig Zahn – 33 months
- Leslie Rodriguez – 33 months
- Don Broussard – 33 months
- Ron Cunningham – 18 months
- James Christopher Ware (co-owner of clinics, charged in a separate indictment) – 135 months
- Stanley James (co-owner of clinics, also charged in a separate indictment) – 97 months
For more information on the opioid epidemic, see the DEA's National Drug Threat Assessment.
The Drug Enforcement Administration conducted the investigation. Assistant U.S. Attorneys Myria Boehm, Renee Hunter, and Nicholas Bunch prosecuted the case.
Justice Dept. Files Action to Enjoin Texas Doctors from Illegally Prescribing Highly Addictive OpioidsRead the Press Release
The United States Attorney’s Office for the Northern District of Texas and the Department of Justice’s Civil Division today announced an action to stop two Texas doctors from unlawfully prescribing powerful opioids linked to abuse and diversion. To protect the public, the United States sought and the court granted immediate relief through a temporary restraining order.
In a civil complaint unsealed today in the Northern District of Texas, the United States alleges that Cesar B. Pena Rodriguez M.D., and Leovares A. Mendez M.D., were prescribing in violation of the Controlled Substances Act. According to the complaint, the defendants issued thousands of prescriptions without apparent regard for patient harm, including prescriptions for a combination of an opioid, a short-acting benzodiazepine, and a muscle relaxer – a dangerous and frequently-abused drug cocktail known as the “trinity.” The United States Attorney’s Office worked with the Consumer Protection Branch of the Justice Department’s Civil Division in this effort.
“With opioid addiction ravaging communities across the nation, we are going to fight against doctors who are handing out prescriptions like candy,” said U.S. Attorney for the Northern District of Texas Erin Nealy Cox. “We are determined to stem the tide of the crisis and we will use all the legal authorities at our disposal -- both criminal and civil.”
“The prescribing patterns of the doctors in this case are extremely disturbing and present a significant threat to the community,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “The Department of Justice will use every available tool to stop doctors who fail to uphold their legal obligation to prescribe controlled substances properly.”
The complaint alleges that Dr. Pena Rodriguez and Dr. Mendez issued numerous prescriptions without a legitimate medical purpose and outside the usual course of professional practice. Specifically, the complaint alleges that in the course of an investigation of the defendants by the U.S. Drug Enforcement Administration (DEA), the defendants repeatedly issued prescriptions for controlled substances, including hydrocodone, alprazolam, and tramadol, to undercover agents posing as prospective new patients in exchange for $250 cash payments. The complaint alleges that the defendants issued prescriptions despite performing only minimal or perfunctory medical evaluations, at best, during the visits. According to the complaint, the defendants sold medically unjustified prescriptions to undercover agents in all but one of 25 undercover visits.
“The DEA has teams of investigators specialized in finding negligence when writing perilous prescription, which can cause a harmful addiction or potential overdose,” said Special Agent in Charge Clyde E. Shelley Jr. of the DEA Dallas Field Division. “The DEA will investigate the doctors who conduct this kind of practice and continue to combat the opioid crisis.”
According to court documents that the United States filed with its complaint, the defendants’ troubling prescribing practices were widespread and raised multiple warning signs or “red flags” of abuse and diversion, such as patient overdoses and prescriptions issued to groups of related individuals as well as to individuals who traveled unusual distances to receive their controlled substances.
The action represents an innovative use of the Department’s civil enforcement authorities – a tactic amplified by the Attorney General’s Prescription Interdiction & Litigation (PIL) Task Force, which was formed in early 2018 to promote deployment of all available criminal, civil, and regulatory tools to reverse the tide of opioid overdoses in the United States.
Judge Karen Scholer of the U.S. District Court for the Northern District of Texas issued the temporary restraining order. Along with injunctive relief, the United States seeks civil monetary penalties.
The United States is represented by Northern District of Texas Opioid Coordinator Lindsey Beran and Assistant U.S. Attorney Sarah Delaney and Trial Attorneys Arturo DeCastro and Anwar Graves of the Justice Department’s Consumer Protection Branch. This investigation is being conducted by the DEA.
A complaint is merely an allegation and there has been no determination of liability.
Additional information about the Consumer Protection Branch and its enforcement efforts may be found at www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Northern District of Texas, visit its website at https://www.justice.gov/usao-ndtx.
Justice Department Files Action to Enjoin Texas Doctors from Illegally Prescribing Highly Addictive Opioids and Other Controlled SubstancesRead the Press Release
The Department of Justice’s Civil Division and the United States Attorney’s Office for the Northern District of Texas announced an action today to stop two Texas doctors from unlawfully prescribing powerful opioids linked to abuse and diversion. To protect the public, the United States sought and the court granted immediate relief through a temporary restraining order.
In a civil complaint unsealed today in the Northern District of Texas, the United States alleges that Cesar B. Pena Rodriguez M.D., and Leovares A. Mendez M.D., were prescribing in violation of the Controlled Substances Act. According to the complaint, the defendants issued thousands of prescriptions without apparent regard for patient harm, including prescriptions for a combination of an opioid, a short-acting benzodiazepine, and a muscle relaxer – a dangerous and frequently-abused drug cocktail known as the “trinity.” The United States Attorney’s Office worked with the Consumer Protection Branch of the Justice Department’s Civil Division in this effort.
“With opioid addiction ravaging communities across the nation, we are going to fight against doctors who are handing out prescriptions like candy,” said U.S. Attorney for the Northern District of Texas Erin Nealy Cox. “We are determined to stem the tide of the crisis and we will use all the legal authorities at our disposal -- both criminal and civil.”
“The prescribing patterns of the doctors in this case are extremely disturbing and present a significant threat to the community,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “The Department of Justice will use every available tool to stop doctors who fail to uphold their legal obligation to prescribe controlled substances properly.”
The complaint alleges that Dr. Pena Rodriguez and Dr. Mendez issued numerous prescriptions without a legitimate medical purpose and outside the usual course of professional practice. Specifically, the complaint alleges that in the course of an investigation of the defendants by the U.S. Drug Enforcement Administration (DEA), the defendants repeatedly issued prescriptions for controlled substances, including hydrocodone, alprazolam, and tramadol, to undercover agents posing as prospective new patients in exchange for $250 cash payments. The complaint alleges that the defendants issued prescriptions despite performing only minimal or perfunctory medical evaluations, at best, during the visits. According to the complaint, the defendants sold medically unjustified prescriptions to undercover agents in all but one of 25 undercover visits.
“The DEA has teams of investigators specialized in finding negligence when writing perilous prescription, which can cause a harmful addiction or potential overdose,” said Special Agent in Charge Clyde E. Shelley Jr. of the DEA Dallas Field Division. “The DEA will investigate the doctors who conduct this kind of practice and continue to combat the opioid crisis.”
According to court documents that the United States filed with its complaint, the defendants’ troubling prescribing practices were widespread and raised multiple warning signs or “red flags” of abuse and diversion, such as patient overdoses and prescriptions issued to groups of related individuals as well as to individuals who traveled unusual distances to receive their controlled substances.
The action represents an innovative use of the Department’s civil enforcement authorities – a tactic amplified by the Attorney General’s Prescription Interdiction & Litigation (PIL) Task Force, which was formed in early 2018 to promote deployment of all available criminal, civil, and regulatory tools to reverse the tide of opioid overdoses in the United States.
Judge Karen Scholer of the U.S. District Court for the Northern District of Texas issued the temporary restraining order. Along with injunctive relief, the United States seeks civil monetary penalties.
The United States is represented by Northern District of Texas Opioid Coordinator Lindsey Beran and Assistant U.S. Attorney Sarah Delaney and Trial Attorneys Arturo DeCastro and Anwar Graves of the Justice Department’s Consumer Protection Branch. This investigation is being conducted by the DEA.
A complaint is merely an allegation and there has been no determination of liability.
Additional information about the Consumer Protection Branch and its enforcement efforts may be found at www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Northern District of Texas, visit its website at https://www.justice.gov/usao-ndtx.
Two Leaders of ‘Jugging’ Crew Sentenced in Federal CourtRead the Press Release
Two leaders of a Houston-based robbery conspiracy were sentenced to more than a dozen years in prison each this week, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Chrisheena Ladale Milburn, 28, of Houston, and her brother, Brandon Chermaine Mallet, 32, of Missouri City, Texas, pleaded guilty in July 2018 to one count of conspiracy to interfere with commerce by robbery and two counts of interference with commerce by robbery for their role in spate of local “juggings.”
“Jugging” refers to a scheme in which a group of perpetrators follows bank customers suspected of having large containers of cash – often small business owners – leaving financial institutions. At the customers’ next location, the group takes the money by force, either by confronting victims or by breaking into their vehicles.
On Wednesday, U.S. District Judge Ed Kinkeade sentenced Ms. Milburn to 220 months (18 years, 4 months) and Mr. Mallet to 170 months (14 years, 2 months) in federal prison.
The FBI began investigating this conspiracy – which eventually netted 13 defendants – after the Dallas area experienced a surge in jugging offenses in 2016 and 2017.
Ms. Milburn, Mr. Mallet, and two others were first arrested by Dallas Police Department in June 2016, while fleeing from a robbery. Ms. Milburn, Mr. Mallet, and three others were arrested again in July 2017 during a DPD undercover sting targeting jugging activity.
Through various investigative techniques, the FBI tied the Houston-based crew to an estimated 30+ jugging offenses in the Dallas area. The FBI concluded that the crew had taken more than three-quarters of a million dollars, primarily from Dallas-area small business owners and operators.
Thirteen defendants were charged in federal court. Eleven have pleaded guilty.
Previously sentenced co-defendants include:
• Jarvis Broussard — 90 months
• Gemarcus Dontae Earl — 72 months
• Christian Demond Gilbert — 50 months
• Randy Lamark Hammond — 50 months
• John Christopher Jones — 180 months
• Tony Jarel Russell — 65 months
• Fernando Rafael Taylor — 60 months
• Jonathan Walker — 50 months
Charges remain pending against three defendants in connection with the conspiracy.
This is believed to be the first federal prosecution of a jugging robbery conspiracy in the nation.
“These defendants were systematically harming small business owners, who represent a backbone of Dallas’ economy,” said U.S. Attorney Erin Nealy Cox. “I’m proud of the prosecutors, agents, and officers who helped us bring justice in this milestone case.”
“FBI Dallas and its local partners worked together through our Violent Crimes Task Force to combat the threat of jugging and dismantled this criminal enterprise," said FBI Dallas Acting Special Agent in Charge Michael Schneider. "We will continue to pursue criminals with all available resources at our disposal and remain determined to eradicate violent crime from our streets."
In 2017, the FBI Violent Crimes Task Force received reports of in excess of 80 jugging robberies in the Dallas area. The FBI received a report of only one jugging robbery in 2018.
However, the agency urges the banking public to remain vigilant.
The Federal Bureau of Investigation conducted the investigation with assistance from the Dallas, Garland, Irving, and Richardson Police Departments. Assistant United States Attorneys Brian McKay and Sid Mody are prosecuting the case.
Texas Man Pleads Guilty to Conspiring to Provide Material Support to a Foreign Terrorist OrganizationRead the Press Release
A Fort Worth man today pleaded guilty to a federal terrorism charge, announced Assistant Attorney General for National Security John C. Demers and U.S. Attorney Erin Nealy Cox for the Northern District of Texas.
Michael Kyle Sewell, 18, who was arrested in February, formally pleaded guilty to conspiracy to provide material support to Lashkar-e-Taiba, a Pakistani-based foreign terrorist organization also known as LeT.
According to court documents, Sewell admitted to encouraging an individual, identified in court documents only as coconspirator 1, to join LeT.
Sewell then provided the coconspirator, who he spoke to on social media, with contact information for an individual he believed could facilitate the coconspirator’s travel to Pakistan to join LeT. Unbeknownst to Sewell and the coconspirator, the facilitator was an undercover FBI agent.
Sewell and the coconspirator discussed what the coconspirator should say to the undercover agent who posed as the facilitator, in order to gain the facilitator’s trust and be permitted to join LeT. Sewell also contacted the facilitator to vouch for the coconspirator’s authenticity.
Sewell now faces up to 20 years in federal prison and a fine of up to $250,000. He will be sentenced on Aug. 12, 2019 in Fort Worth.
The Federal Bureau of Investigation and its Joint Terrorism Task Force members, including the Arlington Police Department, the Fort Worth Police Department, the Tarrant County Sheriff’s Office, the Naval Criminal Investigation Service, Homeland Security Investigations, and the Texas Department of Public Safety conducted the investigation. Assistant U.S. Attorney Jay Weimer prosecuted the case with the assistance of Trial Attorney Bridget Behling of the National Security Division's Counterterrorism Section.
Six Men Charged for Role in Five-Year High-Yield Investment Fraud SchemeRead the Press Release
Six men were charged in an indictment unsealed today for their alleged participation in a five-year high-yield investment fraud scheme.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Erin Nealy Cox of the Northern District of Texas and Inspector in Charge Delany DeLeon-Colón of the U.S. Postal Inspection Service’s Criminal Investigations Group in Washington, D.C., made the announcement.
Cengiz Jan “CJ” Comu, 58, of Dallas, Texas; John Mervyn Price, 63, also of Dallas; Harley E. “Buddy” Barnes, III, 60, of Plano, Texas; Richard Laurence Kadish, 57, of Miami, Florida; Richard Lawrence Green, 69, also of Miami; and Daniel Thomas Broyles Sr., 61, formerly of Malibu, California, were charged in an indictment returned in the Northern District of Texas with one count of conspiracy to commit mail and wire fraud, 10 counts of mail fraud and 10 counts of wire fraud. Price and Barnes were arrested and appeared Monday before U.S. Magistrate Judge Renee H. Toliver of the Northern District of Texas. Comu was arrested and appeared on Wednesday, also before Judge Toliver. Kadish was arrested and appeared Wednesday in Miami before U.S. Magistrate Judge Jacqueline Becerra of the Southern District of Florida. Kadish was arrested and appeared Wednesday in Fort Lauderdale before U.S. Magistrate Judge Lurana S. Snow of the Southern District of Florida. A trial date has not yet been set.
Broyles, who was previously indicted in the Western District of North Carolina for his role in another high-yield investment fraud scheme, also remains a fugitive.
“These individuals are charged with making multiple false and fraudulent representations as part of a five-year fraud scheme that ripped off investors, many of whom were elderly,” said Assistant Attorney General Benczkowski. “The indictment unsealed today underscores the Criminal Division’s commitment to combating high-yield investment fraud, which often targets and victimizes some of the most vulnerable members of our community.”
“The defendants peddled an absurd get-rich-quick scheme, deceiving hundreds of hardworking Americans,” said U.S. Attorney Erin Nealy Cox. “We will not stand for this type of blatant fraud.”
“Anyone who engages in deceptive securities practices needs to know they will not go undetected and will be held accountable,” said Inspector in Charge DeLeon-Colón. “The Postal Inspection Service has been investigating crimes like the ones alleged here for many years. Our duty is to protect investors and defend the integrity of the marketplace and the U.S. Mail.”
The indictment alleges that, beginning in 2013, Comu, Price, Barnes, Kadish, Green and Broyles conspired to sell stock in EarthWater, a United Kingdom company headquartered in Dallas County, Texas. EarthWater manufactured and sold bottled water that it claimed was infused with special minerals mined from an 80-million-year-old deposit hidden in a secret location.
According to the indictment, Comu, who is EarthWater’s founder, chairman and chief executive officer, falsely represented to victim investors that he was a successful Wall Street veteran with decades of experience and did not disclose to investors that, among other things, he was permanently barred from selling unregistered securities as a result of actions filed by state and federal securities regulators.
The indictment further alleges that, to induce victims to purchase EarthWater stock, Comu, Price, Barnes, Kadish, Green, Broyles, and others made numerous false and misleading representations, including that victim investors only had a brief opportunity to purchase EarthWater stock for anywhere from $.10 to $.50 per share in an unregistered offering before EarthWater launched an initial public offering (IPO) or was acquired by a large well-known company and EarthWater’s stock price would increase anywhere from 10- to 50- times the purchase price. In reality, EarthWater allegedly never initiated an IPO, or a merger or acquisition.
The indictment also alleges that defendants falsely represented to victim investors that EarthWater would use 90 percent of invested funds to grow its business and expand operations, and that any fees paid to broker-dealers with respect to the sale of EarthWater stock would not exceed 10 percent of the purchase price of the shares. In reality, Comu, Price and Barnes allegedly agreed to split victim investors’ funds 50-50 with Kadish, Green, Broyles and other individuals who sold EarthWater stock. As a result, nearly half of all of the money victims invested in EarthWater allegedly went directly into the pockets of the individuals who sold them the stock.
In addition, according to the indictment, the defendants also falsely represented to victim investors that Comu, Price and Barnes did not receive salary from EarthWater in 2014, 2015 or 2016. In reality, Comu, Price and Barnes allegedly used EarthWater’s investment account as a personal piggybank, using victim investor funds for their own personal benefit and transferring victim investor funds to bank accounts controlled by them for their own personal use.
An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
This case was investigated by the U.S. Postal Inspection Service. Trial Attorneys Christopher Fenton and William Bowne of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mary F. Walters of the Northern District of Texas are prosecuting the case.
The Criminal Division’s Fraud Section plays a pivotal role in the Department of Justice’s fight against white collar crime around the country.
Individuals who believe that they may be a victim in this case should visit the Fraud Section’s Victim Witness website for more information.
Fort Worth Man Pleads Guilty to Conspiring to Provide Material Support to Foreign Terror GroupRead the Press Release
A Fort Worth man today pleaded guilty to a federal terrorism charge, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox and Assistant Attorney General for National Security John C. Demers.
Michael Kyle Sewell, 18, who was arrested in February, formally pleaded guilty Wednesday morning to conspiracy to provide material support to Lashkar-e-Taiba, a Pakistani-based foreign terrorist organization also known as LeT.
According to court documents, Sewell admitted to encouraging an individual identified in court documents as coconspirator 1 to join LeT.
Sewell provided the coconspirator, who he spoke to on social media, with contact information for an individual he believed could facilitate the coconspirator’s travel to Pakistan to join LeT. Unbeknownst to Sewell and the coconspirator, the facilitator was an undercover FBI agent.
Sewell and the coconspirator discussed what the coconspirator should say to the undercover agent who posed as the facilitator, in order to gain the facilitator’s trust and be permitted to join LeT. Sewell also contacted the facilitator to vouch for the coconspirator’s authenticity.
Sewell now faces up to 20 years in federal prison and a fine of up to $250,000. He will be sentenced on August 12 in Fort Worth.
The Federal Bureau of Investigation and its Joint Terrorism Task Force members, including the Arlington Police Department, the Fort Worth Police Department, the Tarrant County Sheriff’s Office, the Naval Criminal Investigation Service, Homeland Security Investigations, and the Texas Department of Public Safety conducted the investigation. Assistant U.S. Attorney Jay Weimer prosecuted the case.
Texas Man Found Guilty of Conspiring to Support ISISRead the Press Release
A federal jury convicted a Dallas, Texas man on multiple terror charges, Assistant Attorney General for National Security John C. Demers and U.S. Attorney Erin Nealy Cox for the Northern District of Texas announced today.
Following a three-and-a-half day trial, Said Azzam Mohamad Rahim, a 42-year-old United States citizen, was convicted of one count of conspiracy to provide material support to a designated foreign terrorist organization (FTO), one count of attempting to provide material support to an FTO, and six counts of making false statements involving international terrorism to federal authorities.
“Said Azzam Mohamad Rahim operated online to spread ISIS’s poisonous message of hate and violence,” said Assistant Attorney General Demers. “Then he attempted to travel to support ISIS and he lied to the FBI when questioned about his activities. With the jury’s guilty verdicts, he is being held accountable for his crimes. I want to thank the prosecutors, agents, and analysts who are responsible for this result.”
“We will not allow radical terrorists motivated by dangerous ideologies to promote violence against innocent people,” said U.S. Attorney Nealy Cox. “The Justice Department is committed to combatting terror at home and abroad.”
According to evidence presented at trial, Mr. Rahim moderated a social media channel dedicated to recruiting fighters for the Islamic State of Iraq and al-Sham, or ISIS, a State Department designated terror group.
Mr. Rahim used Zello, a push-to-talk direct messaging application, to promote violence in ISIS’s name, prosecutors said.
Records showed he spent hours on Zello’s “State of the Islamic Caliphate” channel, where he touted acts of terror under various monikers:
“Kill and do not consult anyone,” he said in July 2016. “Kill by any means, smash his head on the wall, spit in his face, burn -- I mean anything, anything – poison, anything.”
“Brothers! What are you waiting for?,” he said a month later. “Mobilize and perform jihad for the cause of Allah…. Some of the brothers mobilized from this channel, they were amongst us. ”
He even praised several terrorist attacks after the fact.
“I was happy for this act,” Rahim said after a truck barreled into a crowd of people in Nice, France, killing 86. “Those dogs.”
Mr. Rahim was arrested on March 5, 2017 at the Dallas Fort Worth International Airport, where he was attempting to board a flight to Amman, Jordan. Asked by agents if he had ever supported ISIS, advocated travel for the purposes of jihad, promoted violence on ISIS’s behalf, or encouraged anyone to kill infidels at the urging of ISIS spokesman Abu Mohammed Al Adnani, Mr. Rahim said “no.”
Rahim now faces up to 20 years in federal prison for each material support count and eight years for each false statement count, for a total of up to 88 years imprisonment. The FBI, the U.S. Department of State – Diplomatic Security Services and the Joint Terrorism Task Force conducted the investigation. Assistant United States Attorney Errin Martin and Trial Attorney Taryn Meeks of the National Security Division’s Counterterrorism Section prosecuted the case. U.S. District Court Judge Jane J. Boyle presided over the trial.
Dallas Man Found Guilty of Conspiring to Support ISISRead the Press Release
A federal jury convicted a Dallas man on multiple terror charges, U.S. Attorney for the Northern District of Texas Erin Nealy Cox and Assistant Attorney General for National Security John C. Demers announced today.
Following a three-and-a-half day trial, Said Azzam Mohamad Rahim, a 42-year-old United States citizen, was convicted Friday of one count of conspiracy to provide material support to a designated foreign terrorist organization (FTO), one count of attempting to provide material support to an FTO, and six counts of making false statements involving international terrorism to federal authorities.
“We will not allow radical terrorists motivated by dangerous ideologies to promote violence against innocent people,” said U.S. Attorney Nealy Cox. “The Justice Department is committed to combatting terror at home and abroad.”
“Said Azzam Mohamad Rahim operated online to spread ISIS’s poisonous message of hate and violence,” said Assistant Attorney General Demers. “Then he attempted to travel to support ISIS and he lied to the FBI when questioned about his activities. With the jury’s guilty verdicts, he is being held accountable for his crimes. I want to thank the prosecutors, agents, and analysts who are responsible for this result.”
According to evidence presented at trial, Mr. Rahim moderated a social media channel dedicated to recruiting fighters for the Islamic State of Iraq and al-Sham, or ISIS, a State Department designated terror group.
Mr. Rahim used Zello, a push-to-talk direct messaging application, to promote violence in ISIS’s name, prosecutors said.
Records showed he spent hours on Zello’s “State of the Islamic Caliphate” channel, where he touted acts of terror under various monikers:
“Kill and do not consult anyone,” he said in July 2016. “Kill by any means, smash his head on the wall, spit in his face, burn -- I mean anything, anything – poison, anything.”
“Brothers! What are you waiting for?” he said a month later. “Mobilize and perform jihad for the cause of Allah…. Some of the brothers mobilized from this channel, they were amongst us.”
He even praised several terrorist attacks after the fact.
“I was happy for this act,” Rahim said after a truck barreled into a crowd of people in Nice, France, killing 86. “Those dogs.”
Mr. Rahim was arrested on March 5, 2017 at the Dallas Fort Worth International Airport, where he was attempting to board a flight to Amman, Jordan. Asked by agents if he had ever supported ISIS, advocated travel for the purposes of jihad, promoted violence on ISIS’s behalf, or encouraged anyone to kill infidels at the urging of ISIS spokesman Abu Mohammed al-Adnani, Mr. Rahim said “no.”
Mr. Rahim now faces up to 20 years in federal prison for each material support count and eight years for each false statement count, for a total of up to 88 years imprisonment.
The Federal Bureau of Investigation, the U.S. Department of State – Diplomatic Security Services, and the Joint Terrorism Task Force conducted the investigation. Assistant United States Attorney Errin Martin and Trial Attorney Taryn Meeks of the National Security Division’s Counterterrorism Section prosecuted the case. U.S. District Judge Jane Boyle presided over the trial.
New Mexico Man Convicted in Amarillo Minor Sex CaseRead the Press Release
Following a three-day trial, a federal jury in Amarillo convicted a New Mexico man who kidnapped and assaulted a young girl from Texas, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Royce Wade Lander, 32, of Continental Divide, N.M., was convicted Wednesday evening of transportation of a minor with intent to engage in criminal sexual activity.
According to testimony presented at trial, Mr. Lander picked up his minor victim at a truck stop near Amarillo. He drove her hundreds of miles along I-40 into New Mexico, where he sexually assaulted her until she was able to escape.
Mr. Lander now faces a sentence of up to life in federal prison.
The Federal Bureau of Investigation and the Potter County Sheriff’s Office conducted the investigation. Assistant U.S. Attorneys Sean Taylor, Anna Marie Bell, and Josh Frausto prosecuted the case.
Former Service Provider at State Supported Living Center in Texas Pleads Guilty to Civil Rights Offense After Kicking Resident in the FaceRead the Press Release
Tesa Keith, 37, pleaded guilty yesterday to violating the civil rights of a resident at the San Angelo State Supported Living Center in San Angelo, Texas, announced Assistant Attorney General Eric Dreiband of the Department of Justice’s Civil Rights Division, U.S. Attorney for the Northern District of Texas Erin Nealy Cox, and Michael Schneider, Acting Special Agent in Charge of the FBI Dallas Division.
“This defendant physically assaulted a resident at the Living Center with no legal justification,” said Assistant Attorney General Eric Dreiband of the Civil Rights Division. “The Department of Justice will continue to defend the civil rights of Americans and seek justice for those who have suffered unlawful abuses.”
“Instead of the care and compassion she deserved, this victim suffered abuse and humiliation,” said U.S. Attorney Erin Nealy Cox. “One of the DOJ’s most sacred duties is seeking justice for our district’s most vulnerable. We will not tolerate this sort of terrible behavior.”
“The FBI works closely with our federal, state, and local partners to investigate any type of civil rights violation,” said Michael Schneider, Acting Special Agent in Charge of the FBI Dallas Division. “The victim was unfairly prevented from receiving the care she was entitled to under the law.”
According to the plea agreement, Keith was working on June 13, 2017, as a Direct Service Provider at the San Angelo State Supported Living Center, a state-run facility. K.B. was a resident of the facility. Keith admitted to kicking K.B. in the face without legal justification and for the purpose of punishing her. Keith’s assault on K.B. resulted in bodily injury to K.B.
Keith faces a maximum statutory penalty of 10 years in prison and a fine of up to $250,000 for the civil rights offense. The maximum statutory sentence prescribed by Congress is provided here for information purposes, as the sentence will be determined by the court based on the advisory sentencing guidelines and other statutory factors.
The FBI’s San Angelo Field Office conducted the investigation. Assistant U.S. Attorney Juanita Fielden of the Northern District of Texas and Trial Attorneys Rose E. Gibson and Kate Hill of the Department of Justice’s Civil Rights Division are prosecuting the case.
Gas Marketer B. Charles Rogers Gas and Three Individuals Agree to Pay $4.375 Million to Resolve Royalty Fraud AllegationsRead the Press Release
Gas marketer B. Charles Rogers Gas Ltd. (BCR), which operated in the San Juan Basin area of New Mexico and southern Colorado, and its owners Billy Charles Rogers Jr. and Wynon Rogers, of Fort Worth, Texas, have agreed to pay $3.575 million to resolve False Claims Act (FCA) allegations that they caused reduced mineral royalty payments to the United States, the Department of Justice announced today. In addition, Thomas R. Lutner III, of Katy, Texas, who worked with BCR while employed as a gas supply manager at a natural gas distributor based in Houston, Texas, has agreed to pay $800,000 to resolve FCA allegations relating to his role in BCR’s alleged royalty fraud.
“The Department of Justice is committed to ensuring that those who remove valuable assets from public or Indian lands pay a fair price for those assets,” said Assistant Attorney General Jody Hunt, of the Department of Justice’s Civil Division. “We will continue to pursue claims against those who evade, or cause others to evade, their royalty obligations.”
“Businesses that underpay for our nation’s natural resources must be held to account,” said U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
The United States alleged that, while operating as a gas marketer in the San Juan Basin, BCR, at the direction of Mr. and Mrs. Rogers and Mr. Lutner, issued to producers false transaction statements in connection with BCR’s gas purchases. Those transaction statements allegedly underreported the volume and value of the natural gas liquids that BCR purchased. The United States alleged that many of the producers had federal gas leases, and that BCR’s fraudulent conduct caused those producers to underpay royalties owed to the United States on gas removed from those leases. BCR, Mr. and Mrs. Rogers, and Mr. Lutner have admitted and accepted responsibility for making and using, or causing to be made and used, false records that were material to producers’ obligations to pay royalties to the United States.
“The Department of the Interior (DOI) Office of the Inspector General (OIG) is committed to working with the Department of Justice and the Office of Natural Resources Revenue to ensure that public oil and gas revenues are properly accounted for and collected on behalf of the American public and all mineral interest owners,” said Ron Gonzales, Special Agent in Charge of the DOI OIG Energy Investigations Unit.
The civil settlement was the result of a coordinated effort by the Justice Department’s Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the Northern District of Texas; and the DOI OIG.
Except to the extent of the facts admitted by the settling parties, the claims resolved by the settlement agreement are allegations only and there has been no determination of liability.
NDTX Roundup -- 4/26/19Read the Press Release
SENTENCING -- Mario Melendez
On April 26, Dallas tax return preparer Mario Melendez was sentenced to 51 months in prison for conspiring to defraud the United States and aiding in the preparation of false tax returns. From November 2013 to April 2014, Mr. Melendez, a manager at Uptown Multi Services, helped prepare fraudulent income tax returns for clients, including false education credits, Schedule C expenses, and other items. He also assisted in trainings instructing new employees how to prepare fraudulent tax returns. The IRS – Criminal Investigations unit conducted the investigation.INDICTMENT* – J. Concepcion Serrano-Alba
On April 24, a federal grand jury indicted J. Concepcion Serrano-Alba, 47, on three counts of straw purchase, or acquiring a firearm from a licensed dealer by false or fictitious statement. Over a 13-month period, Mr. Alba allegedly purchased several pistols from pawn shops across the Northern District of Texas. He told the shops that he was the actual buyer of the firearm, when in fact, the guns were meant for someone else. If convicted, Mr. Serrano-Alba faces 30 years in federal prison. The Bureau of Alcohol, Tobacco, Firearms & Explosives investigated.INDICTMENT* – Austin Reed
On April 24, a federal grand jury indicted Austin David Reed, 26, of Dallas, Texas, for carjacking and brandishing a firearm during a crime of violence. When Dallas police officers responded to a domestic violence all at his hotel room, Mr. Reed allegedly donned a bullet-proof vest and stated he was “not going down like this.” He then lead officers on a dangerous pursuit through a wooded area and into a neighborhood, firing several rounds at officers as he fled. Once inside the neighborhood, he allegedly brandished his weapon to carjack a vehicle, which he promptly crashed into a light pole. He exited the mangled vehicle and entered a home, where he demanded the keys to another car. When the victims confronted him with a gun, he fled the home through the garage. If convicted, Mr. Reed faces up to 22 years in federal prison. ATF and Dallas Police Department and investigated the case.INDICTMENT* – Lilla Haiddar
On April 24, a federal grand jury indicted Lilla Haiddar, 56 of Arlington, Texas on two counts of making false statements in her passport applications. In October 2011 and again in November 2018, Ms. Haiddar applied for a passport without disclosing a name she had used previously: Marufa Khashim Surgul. If convicted, Ms. Haiddar faces up to 120 months in federal prison on each count. United States Department of State, Diplomatic Security Service conducted the investigation.SENTENCING – Toure couple
On April 22, Mohamed Toure, 58, and Denise Cros-Toure, 58, of Southlake, Texas, were sentenced seven years in prison each and ordered to pay $288,620.24 in restitution following a January forced labor conviction. According evidence preented at trial, the defendants, members of powerful Guinean families, arranged for the victim, then a young child from a rural Guinean community, to travel alone from her home in West Africa to the defendants’ home in Southlake, Texas, in early 2000. Once in the United States, the defendants forced the victim to cook, clean, and take care of their biological children, some of whom were close in age to the victim, without pay for the next 16 years. The U.S. Department of State’s Diplomatic Security Service, Houston Field Office, investigated the case. More here.SENTENCING -- Matias Alacala
On April 22, 23-year-old Matias Medina Alcala, of Zacatecas, Mexico, was sentenced to 97 months confinement in federal prison for conspiracy to possess with intent to distribute methamphetamine. According to Court documents, in December 2015, Mr. Alcala delivered approximately 1 kilogram of meth to another individual at the request of Domingo Arreola Avalos (see below). As part of the plea agreement, the defendant, who was in the U.S. illegally at the time of the offense, agreed to forfeit a firearm and $36,900 in U.S. currency. The case was investigated by the Federal Bureau of Investigation and the IRS – Criminal Investigations Division and prosecuted by AUSA George Leal.SENTENCING -- Pedro Barriga-Avalaos
On April 22, 28- year-old Pedro Barriga-Avalos, of Michoacán, Mexico, was sentenced to 97 months confinement in federal prison for conspiracy to possess with intent to distribute methamphetamine. Court documents indicate that on New Year’s Day 2016, the defendant delivered approximately 1 kilogram of methamphetamine to another person. During the delivery, the defendant advised he had two kilograms of methamphetamine but one was for another person. Mr. Barriga Avalos, who was in the U.S. illegally at the time of the offense, forfeited $9236.00 in U.S. currency, as well as a firearm. The case was investigated by the Federal Bureau of Investigation and the IRS – Criminal Investigations Division and prosecuted by AUSA George Leal.* An indictment is merely an accusation of criminal conduct, not evidence. All criminal defendants are presumed innocent until proven guilty in a court of law.
Dallas Return Preparer Sentenced to Prison in Scheme to File False Tax ReturnsRead the Press Release
A Dallas, Texas-area tax return preparer was sentenced to 51 months in prison today for conspiring to defraud the United States and aiding and assisting in the preparation of false tax returns, announced Principal Deputy Assistant Attorney Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Erin Nealy Cox for the Northern District of Texas.
According to documents and information provided to the court, Mario Melendez worked as a manager and return preparer at Uptown Multi Services, a tax preparation business located in the Northern District of Texas. Co-defendant, Francisco Ventura owned Uptown and other tax preparation businesses.
From November 2013 and continuing through April 2014, Melendez conspired with others to prepare fraudulent federal income tax returns for clients that included false education credits, Schedule C expenses and other such items. Melendez also assisted Ventura during training classes for new tax return preparers during which they instructed employees how to prepare fraudulent tax returns in order to maximize clients’ refunds. Melendez is responsible for attempting to cause an estimated $3.8 million tax loss to the United States.
In addition to the term of imprisonment imposed, Melendez was ordered to serve one year of supervised release and to pay restitution in the amount of $3,885,456 to the Internal Revenue Service (IRS).
Ventura pleaded guilty to aiding and assisting in the preparation of a false return. His sentencing is scheduled for June 14, 2019.
Principal Deputy Assistant Attorney Zuckerman and U.S. Attorney Nealy Cox commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorney Alexander Effendi of the Tax Division and Assistant United States Attorney Melanie Smith, who are prosecuting this case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Texas Couple Each Sentenced to Seven Years in Prison for Forced Labor and Related OffensesRead the Press Release
U.S. District Court Judge Reid O’Connor sentenced defendants Mohamed Toure, 58, and Denise Cros-Toure, 58, of Southlake, Texas, to seven years in prison each and ordered them to pay $288,620.24 in restitution. A federal jury convicted the defendants of forced labor, conspiracy to commit alien harboring, and alien harboring on Jan. 11 following a four-day trial. As a consequence of their convictions, the defendants, who are citizens of Guinea and lawful permanent residents of the United States, may lose their U.S. immigration status and be removed to Guinea pursuant to law. Today’s sentences were announced by Assistant Attorney General Eric Dreiband of the Department of Justice’s Civil Rights Division, U.S. Attorney Erin Nealy Cox of the Northern District of Texas, and Special Agent in Charge Jeffrey McGallicher of the U.S. Department of State’s Diplomatic Security Service (DSS) Houston Field Office.
“I hope that today’s sentence brings some measure of justice and healing to the victim, who suffered untold trauma as a result of the defendants’ heinous crimes. The defendants stole her childhood and her labor for years, enriching themselves while leaving her with pain and an uncertain future,” said Assistant Attorney General Eric Dreiband. “I am very grateful to all who supported, and continue to support, the victim as she attempts to rebuild her life. The Department of Justice will continue to investigate and vigorously prosecute human traffickers and vindicate the rights of their victims.”
“Forced labor trafficking cases are notoriously difficult to prosecute – in part because victims are often afraid to speak out,” said U.S. Attorney Erin Nealy Cox. “It took tremendous courage for this young woman to share her story at trial. She was brought to this country at a young age, pressured to stay quiet, and forced to work for this family without pay for 16 years. I want to commend her, as well as the witnesses who helped shine a light on her circumstances. If we want to wipe out human trafficking, we need to remind witnesses to speak up, and ask the community to remain alert.”
“Today’s sentence sends a strong message to those abusing and exploiting individuals: you will be held responsible for your vicious acts,” said Jeffrey McGallicher, Special Agent in Charge of the DSS Houston Field Office. “The Diplomatic Security Service wields a global law enforcement reach, is committed to investigating these crimes wherever they occur, and remains dedicated to its partnerships in pursuing justice for the victims of human trafficking.”
According to the evidence at trial, the defendants, members of wealthy and powerful Guinean families, arranged for the victim, then a young child from a rural Guinean community, to travel alone from her home in West Africa to the defendants’ home in Southlake, Texas, in early 2000. Once in the United States, the defendants forced the victim to cook, clean, and take care of their biological children, some of whom were close in age to the victim, without pay for the next 16 years.
Evidence at trial further established that the defendants physically, emotionally, and verbally punished the young victim when she disobeyed or otherwise failed to perform the required labor to their satisfaction. For example, the defendants called the victim a “dog,” “slave,” and “worthless.” They repeatedly hit her on multiple occasions, including with an electrical cord. They forced her to sleep alone in a nearby park as punishment, abused her by shaving her head and washing her outside with a hose, and rendered her completely dependent on them for everything. They isolated her from her family and society and prevented her from receiving any education, while their own children attended school and college.
The U.S. Department of State’s Diplomatic Security Service, Houston Field Office, investigated the case. It was prosecuted by Trial Attorney Rebekah Bailey and Special Litigation Counsel William Nolan of the Civil Rights Division’s Criminal Section and Human Trafficking Prosecution Unit and Assistant U.S. Attorney Alex Lewis of the Northern District of Texas.
If you know someone who may be a victim of trafficking or otherwise believe you have information pertaining to human trafficking, please call the National Human Trafficking Hotline at 1-888-373-7888.
Texas Couple Each Sentenced to Seven Years in Prison for Forced Labor and Related OffensesRead the Press Release
U.S. District Court Judge Reid O’Connor sentenced defendants Mohamed Toure, 58, and Denise Cros-Toure, 58, of Southlake, Texas, to seven years in prison each and ordered them to pay $288,620.24 in restitution. A federal jury convicted the defendants of forced labor, conspiracy to commit alien harboring, and alien harboring on Jan. 11 following a four-day trial. As a consequence of their convictions, the defendants, who are citizens of Guinea and lawful permanent residents of the United States, may lose their U.S. immigration status and be removed to Guinea pursuant to law. Today’s sentences were announced by Assistant Attorney General Eric Dreiband of the Department of Justice’s Civil Rights Division, U.S. Attorney Erin Nealy Cox of the Northern District of Texas, and Special Agent in Charge Jeffrey McGallicher of the U.S. Department of State’s Diplomatic Security Service (DSS) Houston Field Office.
“I hope that today’s sentence brings some measure of justice and healing to the victim, who suffered untold trauma as a result of the defendants’ heinous crimes. The defendants stole her childhood and her labor for years, enriching themselves while leaving her with pain and an uncertain future,” said Assistant Attorney General Eric Dreiband. “I am very grateful to all who supported, and continue to support, the victim as she attempts to rebuild her life. The Department of Justice will continue to investigate and vigorously prosecute human traffickers and vindicate the rights of their victims.”
“Forced labor trafficking cases are notoriously difficult to prosecute – in part because victims are often afraid to speak out,” said U.S. Attorney Erin Nealy Cox. “It took tremendous courage for this young woman to share her story at trial. She was brought to this country at a young age, pressured to stay quiet, and forced to work for this family without pay for 16 years. I want to commend her, as well as the witnesses who helped shine a light on her circumstances. If we want to wipe out human trafficking, we need to remind witnesses to speak up, and ask the community to remain alert.”
“Today’s sentence sends a strong message to those abusing and exploiting individuals: you will be held responsible for your vicious acts,” said Jeffrey McGallicher, Special Agent in Charge of the DSS Houston Field Office. “The Diplomatic Security Service wields a global law enforcement reach, is committed to investigating these crimes wherever they occur, and remains dedicated to its partnerships in pursuing justice for the victims of human trafficking.”
According to the evidence at trial, the defendants, members of wealthy and powerful Guinean families, arranged for the victim, then a young child from a rural Guinean community, to travel alone from her home in West Africa to the defendants’ home in Southlake, Texas, in early 2000. Once in the United States, the defendants forced the victim to cook, clean, and take care of their biological children, some of whom were close in age to the victim, without pay for the next 16 years.
Evidence at trial further established that the defendants physically, emotionally, and verbally punished the young victim when she disobeyed or otherwise failed to perform the required labor to their satisfaction. For example, the defendants called the victim a “dog,” “slave,” and “worthless.” They repeatedly hit her on multiple occasions, including with an electrical cord. They forced her to sleep alone in a nearby park as punishment, abused her by shaving her head and washing her outside with a hose, and rendered her completely dependent on them for everything. They isolated her from her family and society and prevented her from receiving any education, while their own children attended school and college.
The U.S. Department of State’s Diplomatic Security Service, Houston Field Office, investigated the case. It was prosecuted by Trial Attorney Rebekah Bailey and Special Litigation Counsel William Nolan of the Civil Rights Division’s Criminal Section and Human Trafficking Prosecution Unit and Assistant U.S. Attorney Alex Lewis of the Northern District of Texas.
If you know someone who may be a victim of trafficking or otherwise believe you have information pertaining to human trafficking, please call the National Human Trafficking Hotline at 1-888-373-7888.
Man Sentenced to 58 Months for Darknet Credit Card SchemeRead the Press Release
A Lewisville man who stole more than a thousand credit and debit card numbers was sentenced today to 58 months in federal prison, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Odis Edwards, 40, pleaded guilty to conspiracy to commit access device fraud in January.
In plea papers, Mr. Edwards admits he stole more than 1,200 credit and debit card numbers via the darknet and internet chat rooms. He and his co-conspirators used counterfeit cards to book more than $250,000 in rooms and incidentals at hotels around Dallas.
An agent testified in Court on Monday that Mr. Edwards sub-rented the rooms to drug dealers and pimps at a fraction of their true cost.
Hotel personnel became suspicious when multiple people racked up hefty room service bills, all charged to Mr. Edward’s account. Inside the rooms, law enforcement officers found altered credit cards as well as notebooks containing what appeared to be credit card numbers and URLs for digital credit card number generators.
“More and more, we’re seeing perpetrators attempt to cloak themselves in the seeming anonymity of the darknet. But they should know that we prioritize the investigation of illicit activity on the darknet and will vigorously prosecute this unlawful behavior ,” said U.S. Attorney Nealy Cox. “In this case, I applaud the hard work of our Secret Service and police partners, as well as the hotel workers who reached out to law enforcement when they felt something was amiss.”
“The Dallas Field Office and the entire Secret Service is dedicated to the investigation of financial crime,” said William Noonan, Special Agent in Charge of the Secret Service’s Dallas Field Office. “This investigation is a testament to the Secret Service’s commitment to working with our partners on accomplishing our dual mission.”
The U.S. Secret Service conducted the investigation with the assistance of the Colleyville Police Department. Assistant U.S. Attorneys Ryan Raybould and Damien Diggs prosecuted the case.
Two Men Charged in $1.5 Million Apple Gift Card SchemeRead the Press Release
A New York man appeared in federal court in Dallas Tuesday afternoon on charges related to his alleged role in a $1.5 million Apple gift card scheme, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Syed Ali, 29, and his co-conspirator, Jason Tout-Puissant, 27, were both charged with conspiracy to commit wire fraud and wire fraud in December.
“These defendants may have assumed their fraud would go unnoticed simply because $1.5 million is small compared to the revenue that Apple expects to generate – but thankfully, the FBI is vigilant for fraud of all shapes and sizes,” said U.S. Attorney Nealy Cox. “DOJ is committed to protecting American companies, large and small, from fraudulent schemes like this.”
“The FBI worked to identify and end the scheme carried out by the defendants,” said Michael Schneider, Acting Special Agent in Charge of the FBI Dallas Division. “Our private sector partnerships allow us to effectively target cyber criminals who attempt to steal property or sensitive information.”
According to the indictment, Mr. Tout-Puissant allegedly obtained an Apple point-of-sale device called an “Isaac” and used it to load thousands of dollars of fraudulent store credits onto gift cards over the course of about 16 months.
He then sent the gift cards digitally to Mr. Ali, who allegedly used them to purchase computers and other Apple products from the company’s brick-and-mortar retail stores across the country.
Mr. Ali was arrested in New York in March, and subsequently removed to the Northern District of Texas, where he appeared before U.S. Magistrate Judge David L. Horan Tuesday afternoon. If convicted, Mr. Ali and Mr. Puissant face up to 20 years in federal prison on each count.
An indictment is merely an allegation of wrongdoing, not evidence. Both defendants are presumed innocent until proven guilty in a court of law.
The Federal Bureau of Investigations conducted the investigation. Assistant U.S. Attorney Sid Mody prosecuted the case.
Seven Guilty in Forest Park Healthcare Fraud TrialRead the Press Release
Following four days of deliberations, a federal jury returned guilty verdicts for seven individuals implicated in the Forest Park Medical Center bribery scheme Tuesday evening, announced U.S. Attorney Erin Nealy Cox.
Wilton McPherson “Mac” Burt, Jackson Jacob, Douglas Sung Won, Michael Bassem Rimlawi, Shawn Mark Henry, Mrugeshkumar Shah, and Iris Kathleen Forrest were all convicted of conspiracy to pay or receive healthcare bribes.
“The verdict in the Forest Park case is a reminder to healthcare practitioners across the District that patients – not payments – should guide decisions about how and where doctors administer treatment,” said U.S. Attorney Nealy Cox. “We are grateful to the Forest Park jury, 12 men and women who listened attentively through seven long weeks of trial. It’s obvious from the verdict that they deliberated each charge carefully, and we appreciate their service.”
Ten other defendants had already pleaded guilty in the $200 million scheme, designed to induce doctors to steer lucrative patients – particularly those with high-reimbursing, out-of-network private insurance – to the now defunct hospital.
Most of the kickbacks, which totaled more than $40 million, were disguised as consulting fees or “marketing money” doled as a percentage of surgeries each doctor referred to Forest Park.
Instead of billing patients for out-of-network co-payments, instituted by insurers to de-incentivize the high costs associated with out-of-network treatment, Forest Park allegedly assured patients they would pay in-network prices. Because they knew insurers wouldn’t tolerate such practices, they concealed the patient discounts and wrote off the difference as uncollected “bad debt.”
Hospital manager Alan Beauchamp, who testified for the government, admitted that Forest Park “bought surgeries,” and then “papered it up to make it look good.”
The verdict was as follows:
Mr. Burt, Forest Park’s managing partner, was found guilty on 10 of 12 counts, including one count of conspiracy, two counts of paying kickbacks, six counts of commercial bribery in violation of the Travel Act, and one count of money laundering. He faces up to 65 years in federal prison.
Mr. Jacob, owner of the shell companies through which some of the bribes were routed, was found guilty on four of 14 counts, including conspiracy and three counts of paying kickbacks. He faces up to 20 years in federal prison.
Dr. Won, a spinal surgeon, was found guilty on one of two counts, conspiracy. He faces up to 5 years in federal prison.
Dr. Rimlawi, a spinal surgeon who partnered with Won, was found guilty on three of four counts, including conspiracy and two counts of receiving kickbacks. He faces up to 15 years in federal prison.
Dr. Henry, a spinal surgeon who invested in FMPC, was found guilty on three of three counts, including conspiracy, commercial bribery, and money laundering. He faces up to 30 years in federal prison.
Dr. Shah, a pain management doctor, was found guilty on four of four counts, including conspiracy, two counts of paying kickbacks, and one count of commercial bribery. He faces up to 20 years in federal prison.
Ms. Forrest, a nurse who recruited and preauthorized worker’s comp requests, was convicted on two of two counts, including conspiracy and paying kickbacks. She faces up to 10 years in federal prison.
Dr. William Daniel “Nick” Nicholson, a bariatric surgeon who invested in FPMC, was found not guilty on all three counts against him.
The jury could not come to a verdict as to Ms. Carli Adele Hempel, and the judge declared a mistrial for her.
Defendants who pleaded guilty before the case went to trial include: Alan Andrew Beauchamp, Richard Ferdinand Toussaint, Jr., Wade Neal Barker, Kelly Wade Loter, David Daesung Kim, Israel Ortiz, Andrea Kay Smith, Frank Gonzales, Jr., Andrew Jonathan Hillman, and Semyon Narosov.
Sentencing dates for convicted defendants have not yet been set.
The case was investigated by the U.S. Office of Personnel Management Office of Inspector General, the Federal Bureau of Investigation, the U.S. Department of Labor Office of Inspector General, the U.S. Department of Labor Employee Benefits Security Administration, the U.S. Department of Defense - Defense Criminal Investigative Service, and Internal Revenue Service Criminal Investigation, with assistance from the Food and Drug Administration Office of Criminal Investigations.
Assistant U.S. Attorneys Andrew Wirmani, Kate Pfeifle, Marcus Busch, Mark Tindall and Gail Hayworth are prosecuting the case.
Former Councilman Larry Duncan Sentenced to 6 Months’ House Arrest in Public Corruption ProbeRead the Press Release
Former Dallas City Councilman Larry Duncan was sentenced this morning on charges stemming from the public corruption investigation into Dallas County Schools (DCS), announced U.S. Attorney Erin Nealy Cox.
A former DCS Board of Trustees President, Mr. Duncan, 73, pleaded guilty in October to one count of tax evasion, admitting he failed to pay income tax on campaign contributions from a DCS vendor. He was sentenced this morning to six months of home confinement and three years of probation; he will also be required to repay more than $45,000 in back taxes and interest and perform community service for the City of Dallas.
“This particular investigation has netted six convictions to date,” said U.S. Attorney Nealy Cox. “We expect elected officials to be absolutely fastidious with money they receive as a result of their official position. When public officials behave unscrupulously, North Texas can count on federal prosecutors to intervene. We hope officials will heed our commitment to exposing corruption in any form it takes, and act accordingly.”
According to plea papers, between 2012 and 2016, Mr. Duncan accepted nearly a quarter of a million dollars in campaign contributions from Force Multiplier Solutions president Robert Leonard, who happened to be pursuing lucrative stop-arm camera contracts with DCS.
Instead of putting Mr. Leonard’s money towards legitimate campaign expenses associated with his DCS re-election bid, Mr. Duncan admits he used at least $184,726.03 for personal benefit, taking out cash withdrawals, passing on money to his wife, and even using funds to pay car-related expenses.
He then failed to disclose the money he diverted from the campaign on his tax returns, hiding the income from the IRS.
Mr. Duncan’s campaign contributor, Mr. Leonard, along with former Mayor Pro Tem Dwaine Caraway, pleaded guilty in August to conspiracy to commit honest services wire fraud, after the DCS investigation revealed that Mr. Leonard had funneled over $3 million in bribes to Caraway and Dallas County Schools Superintendent Ricky Sorrells. Mr. Sorrells pleaded guilty in April to conspiracy to commit honest services wire fraud. Another defendant, Slater Swartwood, who operated the shell companies used to conceal the bribes, admitted in December 2017 to conspiring to launder money.
Dallas County Schools, an agency that collected property taxes to fund its fleet of around 2,000 buses, was shuttered in November 2017, saddled with approximately $103 million in debt.
The Internal Revenue Service Criminal Investigation unit (IRS-CI) and Federal Bureau of Investigation conducted the investigation. Assistant U.S. Attorneys Andrew Wirmani, NDTX’s Public Corruption Coordinator, Marcus Busch, and Chad Meacham prosecuted the case.
Fmr. Dallas Mayor Pro Tem Dwaine Caraway Sentenced to 56 Months in Bribery SchemeRead the Press Release
Former Dallas Mayor Pro Tem Dwaine Caraway was sentenced this afternoon to 4 years and 8 months in federal prison for public corruption, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Councilmember Caraway pleaded guilty on August 9 to one count of conspiracy to commit honest services wire fraud and one count of tax evasion. He resigned his seat on the Dallas City Council later that same day.
“Over the past year and a half, the Northern District of Texas has been relentless in rooting out public corruption, and we will continue to prioritize corruption cases,” said U.S. Attorney Nealy Cox. “This case should serve as a warning to public officials across North Texas: If you betray the trust of your constituents, we will prosecute you. We’ll prosecute the bribe payers. And we’ll prosecute those who attempt to conceal bribe payments. Anyone who fosters a kickback culture, prioritizing financial interest ahead of constituent rights, will be prosecuted to the fullest extent of the law.”
According to plea papers, Councilmember Caraway, now 66, admits he accepted roughly $450,000 in bribes from Force Multiplier Solutions CEO Robert Leonard, an entrepreneur who sold faulty stop-arm cameras for use on Dallas County school busses.
In return for these kickbacks, Councilmember Caraway voted to promote and continue Dallas County Schools’ stop-arm camera program, which relied on equipment sold by Force Multiplier. He also promoted Mr. Leonard’s planned real estate development in South Dallas.
The majority of bribes from Mr. Leonard to Councilmember Caraway – which the former Mayor Pro Tem admits he omitted from his tax returns – were funneled through a sham consulting firm run by Mr. Leonard’s business associate, Slater Swartwood. The remainder was doled out in the form of custom-made suits, fully funded trips, casino chips, fake loans, funeral expenses, and cash payments.
Both Mr. Leonard and Mr. Swartwood have pleaded guilty to their roles in the scheme.
Dallas County Schools, which collected property taxes to purchase stop-arm cameras for its fleet of about 2,000 busses, was shuttered in November 2017, saddled with approximately $103 million in debt.
The Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation unit conducted the investigation. Assistant U.S. Attorneys Andrew Wirmani, NDTX’s Public Corruption Coordinator, Marcus Busch, NDTX’s Fraud Section Chief, Chad Meacham, and Joseph Magliolo prosecuted the case.
Amarillo Man Sentenced for Shooting at Wife at Public Middle SchoolRead the Press Release
An Amarillo man who shot at his wife during a youth football practice session was sentenced yesterday to 2 years and 9 months in federal prison, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Stephen Andrew Hale pleaded guilty to discharge of a firearm in a school zone in December 2018.
According to his plea documents, Mr. Hale – who was under a protective order at the time of the incident – confronted his wife at Horace Mann Middle School’s football field in August 2018.
As the argument escalated, he gave chase, shooting five rounds from his Ruger .357 magnum revolver in her direction. Though around 50 parents and children were present, no one was injured. When law enforcement arrested Mr. Hale shortly thereafter, officers discovered the firearm, loaded, in the front seat of his car.
“Anytime we can use federal firearm laws to stem the tide of violence against women, we will,” said U.S. Attorney Nealy Cox. “Randomly firing a weapon at a public school is unlawful, no matter who the intended victim – and the fact that Mr. Hale targeted his wife makes this incident all the more troubling. In fact, because of the protective order against him, Mr. Hale was prohibited from having a gun at all.”
Research shows that abusers with a gun in the home are five times more likely to kill their partners than abusers who don’t have that same access to a gun. The U.S. Attorney recently announced an initiative designed to fight domestic violence using existing federal firearm laws.
“Mr. Hale’s actions endangered the lives of his family and approximately 50 innocent people,” stated ATF Special Agent in Charge of the Dallas Field Division Jeffrey C. Boshek II. “One instance of violent crime against an intimate partner or family member is one too many. Firearms do not belong in the hands of domestic violence offenders.”
The Bureau of Alcohol, Tobacco, Firearms & Explosives, the Amarillo Police Department, and the Potter County Sheriff’s Office conducted the investigation. Assistant U.S. Attorney Joshua Frausto prosecuted the case.
Dallas-Area Home Health Care Employee Sentenced to Five Years in Prison for His Role in a $3.7 Million Health Care Fraud SchemeRead the Press Release
A Collin County, Texas man was sentenced to 60 months in prison today following his trial conviction for conspiracy to commit health care fraud.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Erin Nealy Cox of the Northern District of Texas, Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Dallas Region, Acting Special Agent in Charge Michael Schneider of the FBI’s Dallas Field Office and Director of Law Enforcement David Maxwell of the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU) made the announcement.
Paul Emordi, 52, was sentenced by U.S. District Judge Jane Boyle of the Northern District of Texas, who also sentenced Emordi to two years of supervised release and ordered Emordi to pay restitution in the amount of $3,559,154.22. After a six-day trial, Emordi; Celestine “Tony” Okwilagwe, 50, of Dallas County, Texas; Adetutu Etti, 60, also of Dallas County; and Loveth Isidaehomen, 49, also of Dallas County, were each convicted of one count of conspiracy to commit health care fraud. In addition, Okwilagwe and Etti were each convicted of two counts of false statement in connection with a health care benefit program. Sentencing has been scheduled for Etti on March 28 and for Okwilagwe and Isidaehomen on April 18.
According to evidence presented at trial, Okwilagwe and Emordi owned and operated Elder Care, a Medicare and Medicaid provider in Garland, Texas, when both were previously excluded from participating in any federal health care benefit program. Etti, the administrator of Elder Care, concealed Okwilagwe’s ownership and Okwilagwe and Emordi’s exclusions from Medicare and Medicaid. Etti signed false documents that indicated that no one associated with Elder Care was excluded and that another individual owned Elder Care, the evidence showed. The evidence further established that Isidaehomen, who is Okwilagwe’s wife, signed bank documents and wrote employee paychecks to conceal both Okwilagwe’s and Emordi’s involvement with Elder Care. The defendants also engaged in a scheme to submit false and fraudulent bills to Medicare for services that were not needed, the evidence showed.
This case was investigated by HHS-OIG, the FBI and MFCU. Assistant Deputy Chief Adrienne Frazior and Trial Attorney Catherine Wagner of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Russell Fusco of the Northern District of Texas are prosecuting the case.
The Fraud Section leads the Medicare Fraud Strike Force. Since its inception in March 2007, the Medicare Fraud Strike Force, which maintains 14 strike forces operating in 23 districts, has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
Man Pleads Guilty to Kidnapping, Conspiracy Charges After Using Grindr to Target Gay Men for Violent CrimesRead the Press Release
Michael Atkinson, 24, pleaded guilty today to kidnapping and conspiracy charges in connection with his involvement in a scheme using Grindr to target gay men for violent crimes, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox and Assistant Attorney General Eric Dreiband of the Justice Department’s Civil Rights Division.
“The Department of Justice will continue to protect individuals and communities from violence based on sexual orientation or gender identity,” said Assistant Attorney General Eric Dreiband. “The Department will continue to bring perpetrators of hate crimes to justice.”
“The Northern District of Texas will not tolerate criminals who single out victims based on their sexual orientation,” said U.S. Attorney Erin Nealy Cox. “Unfortunately, this is not the first time we’ve seen despicable crimes committed on apps like Grindr. I want to urge the public to be vigilant online and recognize the dangers that are lurking there.”
“Michael Atkinson targeted the victims in this case because of their sexual orientation. Hate crimes affect not only the victims, but also have a devastating impact on their families and an entire community,” said Michael Schneider, Acting Special Agent in Charge of the FBI Dallas Division. “The FBI works tirelessly with our federal, state, and local partners to thoroughly investigate many types of hate crimes, hold the perpetrators accountable for their actions, and bring justice to the victims.”
According to his plea papers, Mr. Atkinson admitted to joining a conspiracy to use Grindr, a social media dating platform, to lure gay men to areas around Dallas, including a vacant apartment, for robbery, carjacking, kidnapping, and hate crimes.
On Dec. 11, 2017, Atkinson reached out to one co-conspirator and asked to join the conspiracy.
Following this conversation, Atkinson brought a loaded handgun to a vacant apartment where the victims were being held captive. Upon arriving, Atkinson learned that a co-conspirator had sexually assaulted at least one of the victims and that a co-conspirator had wiped human feces and urinated on another victim.
Atkinson remained with the conspirators and allowed a co-conspirator to use his handgun to hold victims in the apartment against their will. Atkinson and a co-conspirator then took one of these victims at gunpoint to the victim’s home in an attempt to steal the victim's property.
According to the plea papers, Atkinson witnessed a co-conspirator assault one victim and call the victim gay slurs. In addition, Atkinson admitted to going to local ATMs to withdraw cash from the victims’ accounts.
Atkinson faces a maximum statutory penalty of life in prison for the kidnapping charge and five years in prison for the conspiracy charge, and a fine of up to $250,000 with respect to each offense. The maximum statutory sentence prescribed by Congress is provided here for information purposes, as the sentence will be determined by the court based on the advisory sentencing guidelines and other statutory factors.
The FBI’s Dallas Field Office conducted the federal investigation with the assistance and cooperation of the Dallas Police Department. Assistant U.S. Attorney Nicole Dana of the Northern District of Texas and Trial Attorneys Rose E. Gibson and Kathryn Gilbert of the Justice Department’s Civil Rights Division are prosecuting the case.
Read the indictment release here.
Dallas Man Pleads Guilty to Kidnapping and Conspiracy Charges After Targeting Gay Men for Violent CrimesRead the Press Release
Michael Atkinson, 24, pleaded guilty today to kidnapping and conspiracy charges in connection with his involvement in a scheme to target gay men for violent crimes, announced Assistant Attorney General Eric Dreiband of the Justice Department’s Civil Rights Division, U.S. Attorney for the Northern District of Texas Erin Nealy Cox, and Acting FBI Special Agent-in-Charge of the Dallas Division Michael Schneider.
“The Department of Justice will continue to protect individuals and communities from violence based on sexual orientation or gender identity,” said Assistant Attorney General Eric Dreiband of the Civil Rights Division. “The Department will continue to bring perpetrators of hate crimes to justice.”
“The Northern District of Texas will not tolerate criminals who single out victims based on their sexual orientation,” said U.S. Attorney Erin Nealy Cox. “Unfortunately, this is not the first time we’ve seen despicable crimes committed on apps like Grindr. I want to urge the public to be vigilant online and recognize the dangers that are lurking there.”
“Michael Atkinson targeted the victims in this case because of their sexual orientation. Hate crimes affect not only the victims, but also have a devastating impact on their families and an entire community,” said Michael Schneider, Acting Special Agent in Charge of the FBI Dallas Division. “The FBI works tirelessly with our federal, state, and local partners to thoroughly investigate many types of hate crimes, hold the perpetrators accountable for their actions, and bring justice to the victims.”
According to the plea agreement, Atkinson admitted to joining a conspiracy to use Grindr, a social media dating platform, to lure gay men to areas around Dallas, including a vacant apartment, for robbery, carjacking, kidnapping, and hate crimes. On Dec. 11, 2017, Atkinson reached out to one co-conspirator and asked to join the conspiracy. Following this conversation, Atkinson brought a loaded handgun to a vacant apartment where the victims were being held captive. Upon arriving at the apartment, Atkinson learned that a co-conspirator had sexually assaulted at least one of the victims and that a co-conspirator had wiped human feces on and urinated on another victim. Atkinson remained with the conspirators and allowed a co-conspirator to use his handgun to hold victims in the apartment against their will. Atkinson and a co-conspirator then took one of these victims at gunpoint to the victim’s home in an attempt to steal the victim's property. According to the plea papers, Atkinson witnessed a co-conspirator assault one victim and call the victim gay slurs. In addition, Atkinson admitted to going to local ATMs to withdraw cash from the victims’ accounts.
Atkinson faces a maximum statutory penalty of life in prison for the kidnapping charge and five years in prison for the conspiracy charge, and a fine of up to $250,000 with respect to each offense. The maximum statutory sentence prescribed by Congress is provided here for information purposes, as the sentence will be determined by the court based on the advisory sentencing guidelines and other statutory factors.
The FBI’s Dallas Field Office conducted the federal investigation with the assistance and cooperation of the Dallas Police Department. Assistant U.S. Attorney Nicole Dana of the Northern District of Texas and Trial Attorneys Rose E. Gibson and Kathryn Gilbert of the Justice Department’s Civil Rights Division are prosecuting the case.
For more information about DOJ’s work to combat and prevent hate crimes, visit www.justice.gov/hatecrimes: a one-stop portal with links to DOJ hate crimes resources for law enforcement, media, researchers, victims, advocacy groups, and other organizations and individuals.
Texas Man Indicted on Charges of Kidnapping Two Children and Other OffensesRead the Press Release
A federal grand jury returned a superseding indictment today charging a Texas man with two counts of kidnapping a minor, one count of coercion and enticement of a minor into illegal sexual activity and one count of cyberstalking.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Erin Nealy Cox of the Northern District of Texas and Acting Special Agent in Charge Michael Schneider of the FBI’s Dallas Field Office made the announcement.
According to the indictment, on Dec. 24, 2018, Rene Gloria, 57, of Muleshoe, Texas allegedly kidnapped two minors to whom he was not related. In addition, Gloria allegedly used a cellular phone to attempt to coerce and entice a third minor victim into illegal sexual activity. He also allegedly used a cellular phone to cause substantial emotional distress to an adult victim.
The case is being investigated by the FBI with the assistance of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the Muleshoe Police Department, the Bailey County Sheriff’s Office, the Plainview Police Department and the Hale County Sheriff’s Office. Trial Attorney Kyle P. Reynolds of the Criminal Division’s Child Exploitation and Obscenity Section (CEOS) and Assistant U.S. Attorney Russell Lorfing of the Northern District of Texas are prosecuting the case.
An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
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 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.
Cryptocurrency CEO Pleads Guilty to Securities Fraud in $4 Million Crypto SchemeRead the Press Release
The inventor of cryptocurrency AriseCoin pleaded guilty today to duping investors out of more than $4 million, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
AriseBank CEO Jared Rice, Sr. – who settled a civil action involving AriseCoin filed by the SEC’s Fort Worth regional office last year – pleaded guilty to one count of securities fraud Wednesday afternoon. His plea makes this case one of the first in which an individual has pleaded guilty to securities fraud involving a cryptocurrency in U.S. federal court.
According to his plea papers, Mr. Rice, 30, admits he lied to would-be investors, claiming that AriseBank – billed as the world’s “first decentralized banking platform” based on the proprietary digital currency AriseCoin – could offer consumers FDIC-insured accounts and traditional banking services, including Visa-brand credit cards, in addition to cryptocurrency services. In actuality, AriseBank had not been authorized to conduct banking in Texas, was not FDIC insured, and did not have any sort of partnership with Visa.
Even as he touted AriseBank’s nonexistent benefits, Mr. Rice quietly converted investor funds for his own personal use, spending the money on hotels, food, transportation, a family law attorney, and even a guardian ad litem – facts he failed to disclose to investors. He also failed to disclose that he’d plead guilty to state felony charges in connection with a prior internet-related business scheme.
Meanwhile, hundreds of investors bought approximately $4,250,000 in AriseCoin using digital currencies like Bitcoin, Ethereum, and Litecoin, as well as fiat currency.
“I’m proud of the Northern District of Texas’ innovative work enforcing the rule of law in the cryptocurrency space,” said U.S. Attorney Nealy Cox. “We will not tolerate flagrant deception of investors – virtual or otherwise.”
Statutorily, Mr. Rice faces 0 to 20 years in federal prison. His sentencing is slated for July 11, 2019. He is expected to be required to reimburse investors he deceived.
The Federal Bureau of Investigations conducted the investigation. Assistant U.S. Attorneys Mary Walters and Sid Mody are prosecuting the case.
Chinese Citizen Sentenced in Scheme to Sell Mislabeled Dietary SupplementsRead the Press Release
Xu Jia Bao (aka Fred Xu), of Shanghai, China, was sentenced in Dallas yesterday to 18 months’ imprisonment and one year of supervised release in connection with a scheme to sell mislabeled dietary supplements, the Department of Justice announced today.
Xu, 48, is the principal of Shanghai Waseta International Trade Co. Ltd., a Chinese firm that sells raw ingredients for use in dietary supplements. Xu pleaded guilty in August 2018 in the Northern District of Texas to one count of wire fraud. Waseta, the company, also pleaded guilty to wire fraud in September 2018. The company was sentenced in February 2019 to one year of probation and ordered to pay a $500,000 fine.
In pleading guilty, Xu admitted that he agreed with others working at Waseta to sell synthetic stimulant ingredients, including the substance known as DMHA, to a purported dietary supplement manufacturer in the United States. Xu admitted that the purported dietary supplement manufacturer, actually a confidential government informant, told him that Waseta ingredients would not be accurately listed on the labels of the finished dietary supplement. Xu admitted that he knew major American retailers would refuse to carry supplements known to contain certain stimulants, such as DMHA. Xu also admitted that he and Waseta caused a falsely labeled shipment of DMHA to be sent to Texas.
“Consumers are entitled to trust that dietary supplements products accurately identify their ingredients,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “We will vigorously pursue and prosecute those who attempt to circumvent the law by falsely identifying the substances they import into the United States.”
Xu and Waseta both were sentenced by U.S. District Court Judge Sam A. Lindsay of the Northern District of Texas. Xu was arrested in September 2017 while attending a dietary supplement trade show in Las Vegas. Another defendant named in the case, Li Ting Ting (a.k.a. Sunny Lee), the overseas sales manager for Shanghai Waseta, is not believed to be in the United States.
“Consumers deserve to know what’s in the supplements they ingest,” said U.S. Attorney Erin Nealy Cox. “The Northern District of Texas will not stand by as companies mislead consumers.”
“Dietary supplements that contain undeclared synthetic stimulant ingredients pose a risk to the health of U.S. consumers,” said Charles L. Grinstead, Special Agent in Charge, FDA Office of Criminal Investigations’ Kansas City Field Office. “We will continue to investigate and bring to justice those who jeopardize the public health by importing and selling misbranded supplements.”
The case was investigated by FDA’s Office of Criminal Investigations. The case was prosecuted by David Sullivan and Patrick R. Runkle, Trial Attorneys in the Department of Justice’s Consumer Protection Branch, and Kate Rumsey and Douglas Brasher, Assistant United States Attorneys for the Northern District of Texas.
Additional information about the Consumer Protection Branch and its enforcement efforts may be found at http://www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Northern District of Texas, visit its website at https://www.justice.gov/usao-ndtx.