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Friday 4 May 2018
The United States District Court for the Eastern District of Washington Appoints Joseph H. Harrington to Serve as United States AttorneyRead the Press Release
Today, by way of the Vacancies Reform Act, the United States District Court for the Eastern District of Washington appointed Joseph H. Harrington as the United States Attorney for the Eastern District of Washington. The Eastern District of Washington comprises the twenty counties east of the crest of the Cascade Mountains.
Harrington said, “I am humbled that the District Court extended me the honor of serving as the U.S. Attorney: I consider it a great honor and privilege. I look forward to continuing to work with the outstanding, dedicated Assistant U.S. Attorneys and staff in this office, together with our federal, state, county, local, and tribal law enforcement partners, to carry on the remarkable work being accomplished in the Eastern District of Washington. The office continues to ‘punch above its weight’”.
Harrington served as the Acting U.S. Attorney, then as Interim U.S. Attorney, since March 10, 2017. He worked for the U.S. Securities and Exchange Commission in Washington D.C. before joining the office in 1990. During his tenure in the office he has held the positions of First Assistant U. S. Attorney, Criminal Chief, Deputy Criminal Chief, Anti-Terrorism Advisory Coordinator, and Health Care Fraud Coordinator. Harrington was involved with the prosecutions of: Kevin W. Harpham, an avowed white supremacist who planted a sophisticated remotely-controlled IED along the route of the Martin Luther King, Jr. Day Unity March in Spokane; the Phineas Priest domestic terrorism case involving bank robberies and bombings of a Planned Parenthood office and a Spokane newspaper facility; and the Karl F. Thompson / Otto Zehm civil rights case. In addition to his broad-ranging criminal practice, Harrington has also defended the United States in civil cases involving medical malpractice tort claims, employment discrimination allegations, and the like. He has argued dozens of cases in the Ninth Circuit Court of Appeals.
Harrington received his J.D. from Gonzaga University in 1986, where he was a Thomas Moore Scholar (full academic scholarship) and served as the Editor-in- Chief of the Gonzaga Law Review. He holds a B.A. in Mathematics and a B.S. in Engineering.
Southern District of Georgia Announces Results of Recent Criminal and Civil Procurement Fraud ProsecutionsRead the Press Release
AUGUSTA and SAVANNAH, GA: As part of a new emphasis on procurement fraud enforcement within the Southern District of Georgia, the United States Attorney’s Office for the Southern District of Georgia announced the results of a series of recent procurement fraud prosecutions. Over the past several months, the strike force’s efforts resulted in five guilty pleas and twelve civil settlements, including the following publically available actions:
- United States of America v. Dwayne Fulton (1:17-CR-35)
- United States of America v. Calvin Lawyer (1:17-CR-35)
- United States of America v. Anthony Roper (1:17-CR-35)
- United States of America v. Audra Roper (1:17-CR-35)
- United States ex rel. Major Contracting Services, Inc. v. Military Training Solutions, LLC and ADCO Holdings, Inc., et al. (4:16-cv-115)
- United States of America v. Robert Obradovich (4:18-CR-47)
These prosecutions and civil settlements with the named individuals and entities, as well as others, stemmed from a wide variety of fraudulent conduct, including bribery of public officials, illegal kickbacks, illegal arrangements between large contracting companies and certified small or 8(a) businesses acting as “front” companies, and billing for services not rendered. Each of the individuals who has pled guilty awaits sentencing. The total financial recovery for the United States thus far has exceeded $7.4 million. Several of these investigations remain ongoing.“The Southern District of Georgia is the proud home of several major military installations that serve a vital role both in our national defense and the district’s local economy,” said United States Attorney Bobby L. Christine. “Those who do business with these installations should be on notice – ripping off the United States will not be tolerated! This office will bring to bear the full weight of our resources to hold fraudsters accountable.”
The joint strike force that led to these convictions and settlements involved agents, investigators, and auditors from the Department of Justice, Defense Criminal Investigative Service, Army Criminal Investigation Command (Major Procurement Fraud Unit), Naval Criminal Investigative Service, the Small Business Administration Office of Inspector General. Significant and critical assistance was also provided by civilian and military personnel from the Army, Navy, and Air Force stationed at affected military installations.
“The American public expects the Department of Defense (DoD) to spend limited taxpayer funds efficiently and economically. Bribery and other corrupt behavior by public officials and defense contractors diverts and wastes precious dollars intended to provide critical products and services for our Warfighters. These results demonstrate the effectiveness of investigative efforts by the Defense Criminal Investigative Service to protect the integrity of all DoD programs,” said Special Agent in Charge John F. Khin, Southeast Field Office.
“These settlements stand as proof of the tenacity of our special agents,” said Frank Robey, director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit. “It is important for those who conspired to profit from illegal payments take responsibility for their actions. The settlements hold the defendants accountable and send a message to others that these violations will be taken seriously.”
“Our partnership with the joint procurement fraud strike force ensures fair and open competition for U.S. Government contracts which support the training and readiness of Marine Corps personnel,” said H. Andrew Goodridge, Special Agent in Charge, NCIS Carolinas Field Office.
“SBA OIG will aggressively investigate allegations of fraud involving SBA’s preferential contracting programs, to include false statements made to gain access to contracting opportunities set aside for small businesses,” said SBA OIG Eastern Region Special Agent-in-Charge Kevin Kupperbusch. “SBA’s preferential contracting programs are intended to promote the economy and grow and develop small businesses across the nation. I want to thank the U.S Attorney’s Office and our law enforcement partners for their dedication and hard work throughout these investigations.”
SBA’s General Counsel, Christopher Pilkerton said, “These successful prosecutions demonstrate the tremendous results achieved through the combined efforts of federal agencies to uncover and forcefully respond to procurement fraud. SBA is strongly committed to identifying and aggressively pursuing instances of fraud perpetrated by those participating in SBA's procurement programs.”
The United States was represented by Assistant United States Attorneys Brian T. Rafferty, Shannon H. Statkus, J. Thomas Clarkson, Matthew A. Josephson, and Jonathan A. Porter. Any claims resolved by the civil settlement agreements are allegations only and there has been no determination of liability.
Each of the civil settlements resolved potential liability under the False Claims Act. Under the False Claims Act, whistleblowers can be entitled to a portion of the amount recovered by the United States. The United States Attorney’s Office also reminds contractors that businesses and individuals that self-disclose potential violations can be eligible for significantly reduced penalties. If you have any information regarding potential procurement fraud, please contact Assistant United States Attorney J. Thomas Clarkson at (912) 201-2601.
For additional information about this press release, please contact First Assistant United States Attorney David Estes at (912) 652-4422.
Shreveport felon sentenced to 41 months in prison for possessing a handgun, ammunitionRead the Press Release
SHREVEPORT, La. – United States Attorney David C. Joseph announced that a Shreveport felon was sentenced Thursday to three years and five months in prison for possessing a handgun with an obliterated serial number.
Jarvis L. Alexander, 33, of Shreveport, was sentenced by U.S. District Judge S. Maurice Hicks Jr. on one count of possession of a firearm by a convicted felon. He was also sentenced to three years of supervised release. According to the January 12, 2018 guilty plea, a Shreveport Police officer was attempting to execute an arrest warrant at a Canal Street residence when the officer came upon Alexander sleeping in a car in the driveway. The officer asked Alexander to step out of the car and noticed a black and silver handgun in the driver’s door compartment. The loaded Smith and Wesson SD 40 caliber handgun also had an obliterated serial number. Alexander has a previous felony conviction in Caddo Parish.
This case is part of Project Safe Neighborhoods (PSN), a program bringing together all levels of law enforcement and the communities they serve to reduce violent crime and make our neighborhoods safer for everyone. Attorney General Jeff Sessions reinvigorated PSN in 2017 as part of the Department’s renewed focus on targeting violent criminals, directing all U.S. Attorney’s Offices to work in partnership with federal, state, local and tribal law enforcement and the local community to develop effective, locally-based strategies to reduce violent crime.
The ATF and Shreveport Police Department conducted the investigation. Assistant U.S. Attorney Tiffany E. Fields prosecuted the case.
Sacramento Man Sentenced for Bank Fraud and Identity Theft Scheme Using Stolen U.S. MailRead the Press Release
SACRAMENTO, Calif. — U.S. District Judge Garland E. Burrell Jr. sentenced a Sacramento man today for his participation in a scheme that involved stealing and deconstructing U.S. Postal Service locks to reverse engineer keys in order to steal U.S. Mail, steal identities and defraud financial institutions, U.S. Attorney McGregor W. Scott announced.
Billee Vang, 27, was sentenced to two years and eight months in prison and ordered to pay $5,733 in restitution. On November 17, 2017, Vang and his co-defendant, Dang Vue, 28, of Sacramento pleaded guilty to bank fraud, aggravated identity theft, theft of stolen U.S. mail, stealing and reproducing postal service locks and keys, and unlawful possession of at least five identification documents for fraudulent purposes.
According to court documents, between January 13, 2017, and May 12, 2017, Vang and Vue stole mail throughout Sacramento and Placer Counties, including neighborhoods in Roseville, Elk Grove, and Sacramento. As part of their criminal scheme, the defendants stole Postal Service locks and used them to reverse engineer keys to open neighborhood mailbox units and steal mail from them.
Vang and Vue used the stolen mail, including checks and identification documents, to take over victim bank and credit accounts. Additionally, they used and attempted to use credit and debit cards, credit card convenience checks, and personal checks that had been stolen from postal customers to conduct unauthorized transactions at the expense of federally insured financial institutions.
On May 12, 2017, when arrested in Elk Grove, the defendants were found to possess numerous reverse engineered counterfeit keys, metal filing tools, pry bars and other burglary tools, and stolen U.S. mail from neighborhood mailbox units. On April 27, 2018, Vue was sentenced to three years and nine months in prison and ordered to pay $5,733 in restitution.
This case was the product of an investigation by the U.S. Postal Inspection Service with assistance from Elk Grove Police Department, Sacramento County Sheriff’s Office, and Roseville Police Department. Assistant U.S. Attorney Michelle Rodriguez prosecuted the case.
Roseboro Man Charged with Carjacking on Interstate 95Read the Press Release
RALEIGH – The United States Attorney for the Eastern District of North Carolina, Robert J. Higdon, Jr., announced that in federal court, before United States Magistrate Judge Robert T. Numbers, II, RAYMOND LEE BRYANT, JR, of Roseboro, North Carolina, was charged in a federal Criminal Complaint with carjacking and carrying and brandishing a firearm during and in relation to the carjacking.
According to the affidavit attached to the Criminal Complaint, BRYANT, is alleged to have committed multiple carjackings on Interstate 95 in Dunn, North Carolina on May 3, 2018. BRYANT is alleged to have approached a semi-truck and trailer, forced the driver and passenger out of the truck at gunpoint after firing a round and attempted to drive the truck away. As BRYANT was backing up the truck, it jack-knifed which blocked the northbound lanes of Interstate 95. BRYANT exited the truck, attempted to carjack another semi-truck and trailer however the driver of that truck exited the vehicle as he saw BRYANT approach. BRYANT then approached a third vehicle, had a confrontation with the two occupants, the two occupants fled the vehicle and BRYANT sped from Harnett County in the truck heading north on Interstate 95.
The charge and allegations contained in the Criminal Complaint are merely accusations. The defendant is presumed innocent unless and until proven guilty in a court of law.
This case is part of the Take Back North Carolina Initiative, which was newly implemented by United States Attorney’s Office for the Eastern District of North Carolina. This initiative emphasizes the regional assignment of federal prosecutors to work with law enforcement and District Attorney’s Offices on a sustained basis in those communities to reduce the violent crime rate, drug trafficking, and crimes against law enforcement
The Bureau of Alcohol, Tobacco, Firearms and Explosives, the North Carolina State Highway Patrol and the Harnett County Sheriff’s Office investigated this case.
Randolph Man Sentenced for Drug TraffickingRead the Press Release
BOSTON – A Randolph man, who was involved in drug trafficking with his father and others, was sentenced yesterday in federal court in Boston.
Larry Lovell Bailey, 42, was sentenced by U.S. District Court Judge Richard G. Stearns to 46 months in prison and three years of supervised release. Judge Stearns also ordered Bailey to forfeit $300,000, a vehicle and other property. In March 2016, Bailey pleaded guilty to possession of cocaine base (crack cocaine) with intent to distribute. Bailey, along with 53 members and associates of the Columbia Point Dogs street gang, was arrested in June 2015 on various racketeering, drug trafficking, and firearms charges.
Bailey was involved with his father, Larry Bailey, in the distribution of cocaine base and cocaine. The two used two Boston businesses – Finest Cuts barbershop on Blue Hill Avenue and Bailey’s Laundromat on Harrison Avenue – to distribute cocaine and cocaine base. During the investigation, law enforcement determined that Bailey was cooking cocaine base at his residence in Randolph. A search warrant executed at Bailey’s residence resulted in the seizure of cocaine base, powder cocaine, drug trafficking paraphernalia, a loaded .40 caliber handgun and over $300,000 in cash.
United States Attorney Andrew E. Lelling; Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Albert Angelucci, Acting Special Agent in Charge of the Drug Enforcement Administration, New England Field Division; Mickey D. Leadingham, Special Agent in Charge of the Bureau of Alcohol, Tobacco, Firearms and Explosives, Boston Field Division; John Gibbons, U.S. Marshal for the District of Massachusetts; Suffolk County District Attorney Daniel F. Conley; Colonel Kerry A. Gilpin, Superintendent of the Massachusetts State Police; Suffolk County Sheriff Steven W. Tompkins; Boston Police Commissioner William Evans; and Commissioner Thomas Turco of the Massachusetts Department of Correction, made the announcement.
Quad Cities Men Found Guilty of Crack Cocaine and Firearms OffensesRead the Press Release
DAVENPORT, Iowa - On May 3, 2018, following a three-day jury trial, Bruce Zachary Pugh, age 26, Darren Lamont Warren, age 22, and Desharrlequez Malike Vesey, age 23, were each found guilty of conspiracy to distribute crack cocaine, carrying a firearm during and in relation to a drug trafficking crime, and felon in possession of a firearm, announced United States Attorney Marc Krickbaum. Additionally, Warren and Vesey were convicted of possession of crack cocaine with the intent to distribute.
Evidence was presented at trial that the Defendants occupied a rented Jeep Compass at a gas station in the 1000 block of West River Drive in Davenport. While at that location, the rear seat occupant, Pugh, waived a black pistol at another man. The Davenport Police were alerted as to the threat and the Jeep was stopped by officers. The driver, Warren, and the front passenger, Vesey, fled and Pugh was arrested while attempting to exit the vehicle.
Davenport Police Officers recovered crack cocaine; a box of plastic sandwich bags; two digital scales, cash; and a loaded black Hi-Point 9mm pistol from the vehicle. Evidence at trial showed in the minutes preceding the threat, the Defendants were engaged in conduct consistent with the distribution of crack cocaine.
The Defendants’ sentencings are scheduled for September 12, 2018, before United States District Court Judge John A. Jarvey.
The Davenport Police Department and the United States Bureau of Alcohol, Tobacco, Firearms and Explosives investigated this matter. The case was prosecuted by the United States Attorney’s Office for the Southern District of Iowa.
This case is part of Project Safe Neighborhoods (PSN), a program bringing together all levels of law enforcement and the communities they serve to reduce violent crime and make our neighborhoods safer for everyone. Attorney General Jeff Sessions reinvigorated PSN in 2017 as part of the Department’s renewed focus on targeting violent criminals, directing all U.S. Attorney’s Offices to work in partnership with federal, state, local, and tribal law enforcement and the local community to develop effective, locally-based strategies to reduce violent crime.
Phoenix Spice and Bath Salts Manufacturer SentencedRead the Press Release
PHOENIX – This week, Juan Mark Sayegh, 44, of Phoenix, Ariz., was sentenced by U.S. District Judge David G. Campbell to 48 months’ imprisonment and ordered to forfeit approximately $1.7 million in cash, real property, and other assets. Sayegh had previously pleaded guilty to conspiracy to distribute a controlled substance analogue and conspiracy to commit money laundering.
A controlled substance analogue is a substance that is intended for human consumption and is substantially similar in chemical structure and pharmacological effect, or intended effect, to any drug scheduled under the federal Controlled Substances Act, like cocaine, methamphetamine, JWH-018, Methcathinone, or Methylone.
Sayegh owned and operated Greenlight Distribution in Phoenix, Ariz., from July 2010 through July 2012. Greenlight manufactured and distributed designer synthetic drugs. Specifically, Greenlight manufactured and distributed synthetic cannabinoid products (commonly referred to as “spice”) under the brand names Mary Jane’s Potpourri and Mary Jane’s Private Reserve. Greenlight also manufactured and distributed synthetic cathinone products (commonly referred to as “bath salts”) under the brand names Go Fast Carpet Deodorizer and Quick Clean Carpet Deodorizer. These synthetic drugs were manufactured with chemicals imported from China and were designed to be smoked or ingested in order to get users high. These designer drugs were intentionally and falsely mislabeled as innocuous household products that were “not for human consumption” in order to circumvent federal consumer and drug laws. The products were sold to stores and individuals across the United States for great profit.
The operations at Greenlight ceased on July 25, 2012, when the Drug Enforcement Administration executed a search warrant at several locations associated with Greenlight and its employees as part of Operation Logjam. Operation Logjam was a U.S. Department of Justice -coordinated investigation of synthetic drug manufacturers and distributors across the United States.
The investigation in this case was conducted by the Drug Enforcement Administration’s Phoenix, Milwaukee, and Kansas City field offices, the Internal Revenue Service Criminal Investigation Phoenix field office, and the Johnson County Sheriff’s Office in Kansas under the Department of Justice’s Organized Crime Drug Enforcement Task Force (OCDETF) Program. The prosecution was handled by Lacy Cooper, D.J. Pashayan, and Mark Wenker, Assistant U.S. Attorneys, District of Arizona, Phoenix.
CASE NUMBER: CR-16-00506-PHX-DGC (DKD)
RELEASE NUMBER: 2018-057_ Sayegh
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For more information on the U.S. Attorney’s Office, District of Arizona, visit http://www.justice.gov/usao/az
Philadelphia Man Charged with Failing to Register as a Sex OffenderRead the Press Release
James Samuel McKethan, 51, of Philadelphia, and formerly of Baltimore, Maryland, was charged today by indictment with failure to register as a sex offender, announced U.S. Attorney William M. McSwain.
McKethan was previously convicted of 4th degree sexual contact in Maryland and, as a result of his conviction, is required to register as a sex offender. When he failed to update his sex offender registration as required, a warrant was issued for his arrest. The U.S. Marshal Service located him in Philadelphia after it was discovered that he had been residing and working in Pennsylvania for all four quarters of 2017, but had failed to register his sex offender status with the Pennsylvania State Police.
If convicted, the defendant faces 10 years’ imprisonment, 3 years’ supervised release, a $250,000 fine, and $100 special assessment.
The case was investigated by the U.S. Marshal Service and is being prosecuted by Assistant U.S. Attorney Michelle Rotella.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by United States Attorney’s Offices and the Criminal Division's Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.
An Indictment, Information or Criminal Complaint is an accusation. A defendant is presumed innocent unless and until proven guilty.
Oxford Restaurant to Make Changes to Comply with Americans with Disabilities ActRead the Press Release
John H. Durham, United States Attorney for the District of Connecticut, today announced that the U.S. Attorney’s Office has reached a settlement agreement with Fritz’s Snack Bar in Oxford to resolve allegations that the restaurant was not operating in compliance with the Americans with Disabilities Act of 1990 (“ADA”).
The settlement agreement resolves an ADA complaint filed by an individual with disabilities alleging that Fritz’s Snack Bar was not accessible for individuals with physical disabilities. The restaurant is in the process of making the changes required by the settlement agreement, including adding accessible parking, ensuring that there is an accessible entry route to the restaurant, increasing the number of accessible dining seats within the restaurant and in the patio area, ensuring that the patio area has an accessible entrance, and ensuring that the surface of the patio has a stable, firm and slip resistant surface so that it is accessible for individuals with mobility disabilities. Fritz’s Snack Bar will continue to make improvements over the next nine months.
Under federal law, private entities that own or operate places of “public accommodation,” including restaurants, are prohibited from discriminating on the basis of disability. The ADA authorizes the U.S. Department of Justice to investigate complaints and undertake periodic reviews of compliance of covered entities. The Justice Department is also authorized to commence a civil lawsuit in federal court in any case that involves a pattern or practice of discrimination or that raises issues of general public importance, and to seek injunctive relief, monetary damages, and civil penalties.
U.S. Attorney Durham noted that the owners of Fritz’s Snack Bar have worked cooperatively and collaboratively with the U.S. Attorney’s Office to address the ADA issues without litigation.
“The Americans with Disabilities Act ensures that individuals are able to access and enjoy the state’s restaurants and other places of public accommodation,” stated U.S. Attorney Durham. “Our Office is committed to enforcing the ADA, which requires businesses to appropriately serve the diverse populations of patrons who live, work, and visit Connecticut. We appreciate the cooperation of the owners of Fritz’s Snack Bar and their commitment to increase the accessibility of their restaurant.”
Any member of the public who wishes to file a complaint alleging that any place of public accommodation or public entity in Connecticut is not accessible to persons with disabilities may contact the U.S. Attorney’s Office at 203-821-3700.
Additional information about the ADA can be found at www.ada.gov, or by calling the Justice Department’s toll-free information line at (800) 514-0301 and (800) 514-0383 (TTY). More information about the Civil Rights Division and the laws it enforces is available at www.justice.gov/crt.
This matter was handled by Assistant U.S. Attorney Jessica H. Soufer of the District of Connecticut in coordination with the Disability Rights Section of the U.S. Department of Justice Civil Rights Division.
Owner of Colorado Martial Arts Academy Charged with Tax CrimesRead the Press Release
A federal grand jury sitting in Denver, Colorado has returned an indictment, which was unsealed yesterday, charging an Arvada, Colorado resident with failure to pay over payroll taxes to the Internal Revenue Service (IRS) and filing false corporate tax returns, announced Principal Deputy Assistant Attorney Richard E. Zuckerman of the Justice Department’s Tax Division.
According to the indictment, Marlene Seo owned and operated National Martial Arts Academy. From 2011 through 2013, Seo allegedly directed deposits of income from her martial arts school into bank accounts that she did not disclose to her bookkeeper and accountants, which resulted in her underreporting the business’s gross receipts on corporate tax returns for tax years 2011, 2012, and 2013.
The indictment further alleges that from 2012 through June 2014 Seo failed to pay the IRS payroll taxes that she withheld from employees’ paychecks, despite her obligation to do so.
Principal Deputy Assistant Attorney General Zuckerman commended special agents of IRS Criminal Investigation, who conducted the investigation, and Tax Division Trial Attorneys Anahi Cortada and Lisa L. Bellamy, who are prosecuting the case.
Owner of Bus Repair and Transportation Company Found Guilty in White Plains Federal Court of Fraud, Bribery, and TheftRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that RICHARD BREGA, the former owner of Brega D.O.T. Maintenance Corp. in Rockland County, was found guilty by a federal jury in White Plains of fraud, bribery, and theft of government property. The convictions were for BREGA’s billing the Rockland Board of Cooperative Educational Services (“Rockland BOCES”) for maintenance of school buses that was never performed, and bribery of a Rockland BOCES official. The convictions resulted from a three-week trial before the United States District Judge Kenneth M. Karas. BREGA is scheduled to be sentenced by Judge Karas on October 17, 2018.
U.S. Attorney Geoffrey S. Berman said: “As a unanimous jury found, Richard Brega engaged in fraud, bribery, and theft of government property. The scheme not only defrauded Rockland school districts and the federal government by billing for bus maintenance work that was not performed, but it also put children at risk of riding unsafe buses. Now Brega awaits sentencing for his crimes.”
The evidence at trial showed, among other things, the following:
Rockland BOCES serves eight school districts in Rockland County. Among the services that Rockland BOCES offers to its students – particularly children with special physical, intellectual, and emotional needs – is transportation, for which it has a fleet of buses and other vehicles (hereinafter collectively referred to as “Rockland BOCES buses” and “bus fleet”), some of which are specially equipped for students with physical disabilities. Rockland BOCES receives federal funding each year, often in excess of $1 million.
BREGA owned and controlled vehicle repair and transportation companies in Rockland County, including Brega D.O.T. Maintenance Corp. (“Brega DOT”), a fleet maintenance repair shop. From in or about 2008 or 2009, through in or about 2015, Brega DOT provided vehicle repair service and maintenance for Rockland BOCES bus fleet, including regular preventive maintenance (“Preventive Maintenance”), which is supposed to involve a thorough and detailed inspection and testing of the buses at Brega DOT’s facility, designed to ensure that the buses are defect-free and safe to operate with children aboard. Brega DOT would fix any problems with the buses that it found during Preventative Maintenance inspections before releasing the buses back to Rockland BOCES. Brega DOT also created invoices documenting the work done and provided those invoices to Rockland BOCES for payment. Rockland BOCES’ director of transportation, William Popkave, would then approve the invoice as accurately stating work that was performed on Rockland BOCES buses, and Rockland BOCES would mail payment to Brega DOT.
From in or about 2012 through in or about 2014, BREGA stole money from Rockland BOCES by, among other things, billing Rockland BOCES for Preventative Maintenance inspections that were never performed. To do so, BREGA directed his employees to prepare fraudulent invoices, as well as fraudulent supporting documentation, giving the false appearance that his company had performed regular Preventive Maintenance inspections on certain buses, when in fact those buses were not even brought to Brega DOT and Preventative Maintenance inspections were not performed.
To create the fraudulent invoices, and to obtain payment from Rockland BOCES for work that was never performed, BREGA bribed Popkave – who oversaw upkeep and maintenance of its buses – with tens of thousands of dollars’ worth of free personal vehicle repairs. Popkave sent BREGA lists of buses and their mileages so that BREGA could create fraudulent invoices and supporting documentation, and thereafter approved payment of the fraudulent invoices at Rockland BOCES, even though Popkave and BREGA knew that the buses had not even been to Brega DOT on the days for which Brega DOT billed Rockland BOCES, and had not received Preventative Maintenance inspections.
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BREGA, 50, of Rockland County, was convicted of three counts: (1) mail fraud, which carries a maximum potential penalty of 20 years in prison; (2) bribery concerning a program receiving federal funds, which carries a maximum potential penalty of 10 years in prison; and (3) theft concerning a program receiving federal funds, which carries a maximum potential penalty of 10 years in prison.
Popkave, 62, who currently resides in Florida, pled guilty before Magistrate Judge Judith C. McCarthy on January 24, 2017, to five counts: (1) conspiracy to commit mail fraud, which carries a maximum potential penalty of 20 years in prison; (2) mail fraud, which carries a maximum potential penalty of 20 years in prison; (3) theft concerning a program receiving federal funds, which carries a maximum potential penalty of 10 years in prison; (4) bribery concerning a program receiving federal funds, which carries a maximum potential penalty of 10 years in prison; and (5) obstruction of justice, which carries a maximum potential penalty of 20 years in prison.
The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as the sentencings of the defendants would be determined by the judge. BREGA will be sentenced on October 17, 2018. Popkave will be sentenced at a future date.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation, the Rockland County District Attorney’s Office, and the United States Department of Transportation Office of Inspector General. Mr. Berman also thanked the United States Department of Education, Office of Inspector General, for its assistance.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Michael D. Maimin and Benjamin Allee are in charge of the prosecution.
New York Resident Pleads Guilty to Conspiracy to Defraud the United StatesRead the Press Release
A Brooklyn, New York, resident pleaded guilty today to conspiracy to defraud the government and theft of public funds, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.
According to court documents, Akim Martin, also known as Akim Davis, 41, conspired with others to file fraudulent tax returns for companies and individual taxpayers. As part of the scheme, from March 2009 through March 2013, Martin and his coconspirators filed false tax returns in the names of businesses they purportedly owned and operated, claiming phony deductions for wages paid to employees that did not exist. Martin and his conspirators, in turn, then filed fraudulent tax returns in the names of the employees claiming bogus tax refunds.
Martin and his conspirators obtained the personal identifying information (PII) to use on the employees’ false tax returns by stealing it and by recruiting individuals to provide their information in exchange for a cut of the proceeds. Martin cashed and deposited fraudulently obtained refund checks into bank accounts that he controlled and spent the money on his personal expenses. Martin’s conduct resulted in a loss exceeding $550,000.
Sentencing is scheduled for August 24, 2018, before U.S. District Court Judge Carol Bagley Amon. Martin faces a statutory maximum sentence of 15 years in prison. He also faces a period of supervised release, restitution and monetary penalties.
Principal Deputy Assistant Attorney General Zuckerman thanked special agents of IRS Criminal Investigation, who conducted the investigation, and Tax Division Trial Attorneys Jason M. Scheff and Ann M. Cherry, who are prosecuting these cases.
Monroe felon pleads guilty to possessing pistolRead the Press Release
MONROE, La. – United States Attorney David C. Joseph announced that a Monroe resident pleaded guilty Thursday to illegal possession of a loaded pistol at his residence.
Daryl Nelson, 49, of Monroe, pleaded guilty before U.S. Magistrate Judge Karen L. Hayes to one count of possession of a firearm by a convicted felon. The plea will be final when accepted by U.S. District Judge S. Maurce Hicks Jr. According to the guilty plea, Monroe police executed a search warrant on March 28, 2017 and found Nelson alone in bed with a loaded Ruger, Model P85, 9-mm caliber pistol. The firearm belonged to Nelson, and he has been convicted of multiple felonies. During the same search, officers found a loaded Glock, model 26, 9 mm caliber pistol that belonged to codefendant Santron Jones, 33, of Monroe. Jones has been previously convicted to two drug felonies and is not allowed to possess a handgun.
The defendants face up to 10 years in prison, three years of supervised release, a $250,000 fine and forfeiture of the seized weapons. The court set sentencing for August 29, 2018. Jones pleaded guilty February 15, 2018 to the firearms count. The court set sentencing for May 21, 2018.
This case is part of Project Safe Neighborhoods (PSN), a program bringing together all levels of law enforcement and the communities they serve to reduce violent crime and make our neighborhoods safer for everyone. Attorney General Jeff Sessions reinvigorated PSN in 2017 as part of the Department’s renewed focus on targeting violent criminals, directing all U.S. Attorney’s Offices to work in partnership with federal, state, local and tribal law enforcement and the local community to develop effective, locally-based strategies to reduce violent crime.
The ATF and Monroe Metro Narcotics conducted the investigation. Assistant U.S. Attorney Seth D. Reeg is prosecuting the case.
Manhattan U.S. Attorney Announces Extradition of Four Mexican Nationals for International Sex Trafficking OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Acting Assistant Attorney General John M. Gore of the Civil Rights Division, and Angel M. Melendez, Special Agent in Charge of the New York Field Office of ICE’s Homeland Security Investigations (“HSI”), announced the extradition of EFRAIN GRANADOS-CORONA, a/k/a “Chavito,” a/k/a “Cepillo,” EMILIO ROJAS-ROMERO, ALAN ROMERO-GRANADOS, a/k/a “El Flaco,” and PEDRO ROJAS-ROMERO, who are charged together with RAUL ROMERO-GRANADOS, a/k/a “Chicarcas,” a/k/a “El Negro,” ISAAC LOMELI-RIVERA,” a/k/a “Giro,” JULIO SAINZ-FLORES, a/k/a “Rogelio,” and JUAN ROMERO-GRANADOS, a/k/a “Chegoya,” a/k/a “El Guero,” with sex trafficking offenses in a 23-count Superseding Indictment (the “Indictment”) in the United States District Court for the Southern District of New York. EFRAIN GRANADOS-CORONA and EMILIO ROJAS-ROMERO were extradited to the United States from Mexico on April 26, 2018, and presented before United States Magistrate Judge Stewart D. Aaron on April 27, 2018. ALAN ROMERO-GRANADOS and PEDRO ROJAS-ROMERO were extradited to the United States from Mexico on May 2, 2018, and presented yesterday before United States Magistrate Judge Debra Freeman. This case is assigned to United States District Judge Andrew J. Carter, Jr.
The Indictment, which was returned under seal on September 15, 2016, alleges that the defendants are members of an international sex trafficking organization that exploited and trafficked adult and minor women in Mexico and in the United States from at least 2000 to 2016. Members of the defendants’ sex trafficking organization, which operated largely as a family business, used false promises, physical and sexual violence, and threats to force and coerce adult and minor women to engage in commercial sex for the organization’s profit in both Mexico and the United States.
As part of a coordinated bilateral law enforcement action, six defendants located in Mexico – EFRAIN GRANADOS-CORONA, EMILIO ROJAS-ROMERO, ALAN ROMERO-GRANADOS, PEDRO ROJAS-ROMERO, JULIO SAINZ-FLORES, and JUAN ROMERO-GRANADOS – were arrested in Mexico and taken into custody by Mexican authorities pursuant to provisional arrest warrants requested by the United States in August 2016. As noted, the first four of these defendants were extradited to the United States from Mexico within the past week. The fifth of these defendants, JULIO SAINZ-FLORES, was previously extradited to the United States from Mexico on June 8, 2017, and was presented in Manhattan federal court before Chief United States Magistrate Judge Gabriel W. Gorenstein on June 9, 2017. JUAN ROMERO-GRANADOS remains in Mexico pending extradition proceedings. The two defendants who were arrested in the United States, RAUL ROMERO-GRANADOS and ISAAC LOMELI-RIVERA, were presented in Manhattan federal court on October 27, 2016, before United States Magistrate Judge Kevin Nathaniel Fox.
U.S. Attorney Geoffrey S. Berman said: “Sex trafficking is a heinous crime that violates both the rule of law and the most basic standards of human dignity. These defendants allegedly deprived women and girls of their freedom, and forced them into prostitution against their will. The scope of devastation these defendants allegedy inflicted on countless victims is beyond comprehension. But now they face significant criminal charges in an American court, and will have to answer for their allegedly reprensible actions. Our office is dedicated to combatting this demoralizing crime and helping survivors reclaim their lives.”
Acting Assistant Attorney General John M. Gore of the Civil Rights Division said: “The Civil Rights Division will not tolerate anyone violating an individual’s rights and freedoms through sex trafficking. We will continue to work with our law enforcement partners to vindicate the rights of victims and survivors of sex trafficking by dismantling transnational organized trafficking enterprises and putting an end to these egregious civil rights violations.”
HSI Special Agent in Charge Angel M. Melendez said: “These four individuals were transported more than 2,000 miles from Mexico to be held accountable for the callous criminal actions alleged in this case. Those extradited, along with others, allegedly operated a family business centered on making money from exploiting females they forced into sex slavery. Now these traffickers will face justice where they allegedly made their income, right here in New York. Human Trafficking remains a priority for HSI, whose primary focus is to rescue victims and release them from the grip of their captors.”
As alleged in the Indictment:[1]
EFRAIN GRANADOS-CORONA, RAUL ROMERO-GRANADOS, ISAAC LOMELI-RIVERA, JULIO SAINZ-FLORES, JUAN ROMERO-GRANADOS, ALAN ROMERO-GRANADOS, PEDRO ROJAS-ROMERO, and EMILIO ROJAS-ROMERO, the defendants, are members of an international sex trafficking organization (the “STO”). Many of the members of the STO are related by blood, marriage, and community. For example: EFRAIN GRANADOS-CORONA is the uncle of RAUL ROMERO-GRANADOS, ISAAC LOMELI-RIVERA, JUAN ROMERO-GRANADOS, and ALAN ROMERO-GRANADOS; PEDRO ROJAS-ROMERO and EMILIO ROJAS-ROMERO are brothers; JUAN ROMERO-GRANADOS and ALAN ROMERO-GRANADOS are also brothers; and ISAAC LOMELI-RIVERA is RAUL ROMERO-GRANADOS’s brother-in-law.
Between 2000 and the present, members of the STO (the “Traffickers”) have used false promises, physical and sexual violence, threats of the same, lies, and coercion to force and coerce adult and minor women (the “Victims”) to work in prostitution in both Mexico and the United States.
In most cases, a Trafficker entices a Victim – frequently a minor – in Mexico. The Trafficker then uses multiple means to isolate the Victim from her family. In some cases, the Trafficker uses romantic promises to induce the Victim to leave her family and live with him. In other cases, the Trafficker rapes the Victim, making it difficult for her to return to her family due to the associated stigma of the rape. Once a Victim is separated from her family, the Trafficker frequently monitors her communications, keeps her locked in an apartment, leaves her without food, and engages in physical or sexual violence against the Victim. Traffickers often tell Victims that the Traffickers owe a significant debt and that the Victim must work in prostitution to assist in repaying the debt. Traffickers typically begin forcing the Victims to work in prostitution in Mexico, frequently in a neighborhood of Mexico City known as “La Merced.” Victims are often required to see at least 20 to 40 customers per day. Traffickers monitor the number of clients a Victim sees by surveilling the Victim, communicating with brothel workers, and by counting the number of condoms provided to a Victim. Traffickers typically require the Victims to turn over all of the prostitution proceeds to the Traffickers.
After a Victim has worked in prostitution in Mexico for some time, Traffickers typically arrange for the Victim to be smuggled into the United States. Members of the STO assist one another in making smuggling arrangements. In many cases, multiple Traffickers and multiple Victims are smuggled into the United States together. In other cases, one Trafficker may remain in Mexico while arranging for a Victim to be smuggled together with another Trafficker and other Victims.
Once in the United States, the members of the STO generally maintain their Victims at one of several shared apartments in New York City. Victims living in the same apartment are frequently forbidden to communicate with one another. Once in the United States, Traffickers continue to use physical and sexual violence, threats of the same, lies, and coercion to force the Victims to work in prostitution.
In most cases, the Trafficker or another member of the STO provides a Victim with contact information with which to find work. The Victims typically work weeklong shifts either in a brothel, or in a “delivery service.” In a delivery service, the Victim is delivered to a customer’s home by a “driver.” These brothels and delivery services are located both within New York and in surrounding states, including, but not limited to, Connecticut, Maryland, Virginia, New Jersey, and Delaware.
Generally, each customer pays $30-35 for 15 minutes of sex. Of that, half of the money typically goes to the driver (in the case of a delivery service) or to the brothel. The other $15 goes to the Victim, who is then typically forced to give all of the proceeds to the Trafficker. When a Trafficker is unavailable, a Victim may also give the proceeds to another member of the STO.
The Traffickers then frequently send, or have their Victims send, some of the prostitution proceeds to Traffickers’ family members and associates in Mexico by wire transfer. Such transfers provide financial assistance to the Traffickers’ families and provide financial support to the Traffickers themselves if they return to Mexico.
* * *
Since 2009, the Department of Justice – through the Civil Rights Division’s Human Trafficking Prosecution Unit – and HSI have collaborated with Mexican law enforcement counterparts in a Bilateral Human Trafficking Enforcement Initiative aimed at strengthening high-impact prosecutions under both U.S. and Mexican law. The initiative is aimed at dismantling human trafficking networks operating across the United States-Mexico border, bringing human traffickers to justice, reuniting victims with their children, and restoring the rights and dignity of human trafficking victims held under the trafficking networks’ control. These efforts have resulted in successful prosecutions in both Mexico and the United States, including U.S. federal prosecutions of over 50 defendants in multiple cases in New York, Georgia, Florida, and Texas since 2009, and numerous Mexican federal and state prosecutions of associated sex traffickers. In announcing the extradition, U.S. Attorney Geoffrey S. Berman and Acting Assistant Attorney General John M. Gore of the Civil Rights Division commended U.S. and Mexican law enforcement partners for their shared and continued commitment to coordinated bilateral anti-trafficking efforts.
Mr. Berman also praised the outstanding investigative work of HSI, the work of the Mexican government, and Mexican law enforcement in executing the arrests and preparing for the extradition of the defendants to the United States, and the assistance provided by the New York City Police Department, the State Department, the Civil Rights Division’s Human Trafficking Prosecution Unit, and the Criminal Division’s Office of International Affairs. The Justice Department also acknowledged the non-governmental victim service providers and advocates for their dedicated efforts to restore and improve the lives of survivors of trafficking and their families in connection with this case and others.
* * *
Charts containing the names, ages, residences, charges, mandatory minimum penalties, and maximum penalties for the defendants are set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.
The prosecution is being handled by the Violent and Organized Crime Unit of the U.S. Attorney’s Office for the Southern District of New York. Assistant U.S. Attorneys Kristy J. Greenberg, Jacqueline C. Kelly, Elinor L. Tarlow, and Jane Kim are in charge of the prosecution.
United States v. Efrain Granados-Corona, a/k/a “Chavito,” a/k/a “Cepillo,” et al.,
S2 16 Cr. 324 (ALC)
COUNT / CHARGE
DEFENDANT(S)
MANDATORY MINIMUM PENALTIES
MAXIMUM PENALTIES
Count 1: Conspiracy to Commit Sex Trafficking
18 U.S.C. § 1594
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo,”
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro,”
ISAAC LOMELI-RIVERA,
a/k/a “Giro,”
JULIO SAINZ-FLORES,
a/k/a “Rogelio,”
JUAN ROMERO-GRANADOS,
a/k/a “Chegoya,”
a/k/a “El Guero,” ALAN ROMERO-GRANADOS,
a/k/a “El Flaco,”
PEDRO ROJAS-ROMERO,
EMILIO ROJAS-ROMERO
N/A
Life in prison
Count 2:
Sex Trafficking of a Minor by Force, Fraud, or Coercion18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro”
15 years in prison
Life in prison
Count 3:
Sex Trafficking of a Minor by Force, Fraud, or Coercion18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2
EFRAIN GRANADOS-CORONA, a/k/a “Chavito,”
a/k/a “Cepillo”
15 years in prison
Life in prison
Count 4:
Sex Trafficking of a Minor by Force, Fraud, or Coercion
18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2
JULIO SAINZ-FLORES,
a/k/a “Rogelio”
15 years in prison
Count 5:
Sex Trafficking of a Minor by Force, Fraud, or Coercion
18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo,”
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro”
15 years in prison
Life in prison
Count 6:
Sex Trafficking by Force, Fraud, and Coercion
18 U.S.C. §§ 1591(a), (b)(1), and 2
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo,”
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro,”
PEDRO ROJAS-ROMERO
15 years in prison
Life in prison
Count 7:
Sex Trafficking by Force, Fraud, and Coercion18 U.S.C. §§ 1591(a), (b)(1), and 2
ISAAC LOMELI-RIVERA,
a/k/a “Giro”
15 years in prison
Life in prison
Count 8:
Sex Trafficking by Force, Fraud, and Coercion18 U.S.C. §§ 1591(a), (b)(1), and 2
ISAAC LOMELI-RIVERA,
a/k/a “Giro”
15 years in prison
Life in prison
Count 9:
Sex Trafficking by Force, Fraud, and Coercion18 U.S.C. §§ 1591(a), (b)(1), and 2
JUAN ROMERO-GRANADOS,
a/k/a “Chegoya,”
a/k/a “El Guero”
15 years in prison
Life in prison
Count 10:
Sex Trafficking by Force, Fraud, and Coercion18 U.S.C. §§ 1591(a), (b)(1), and 2
ALAN ROMERO-GRANADOS,
a/k/a “El Flaco”
15 years in prison
Life in prison
Count 11:
Sex Trafficking by Force, Fraud, and Coercion
18 U.S.C. §§ 1591(a), (b)(1), and 2
EMILIO ROJAS-ROMERO
15 years in prison
Life in prison
Count 12:
Sex Trafficking by Force, Fraud, and Coercion
18 U.S.C. §§ 1591(a), (b)(1), and 2
PEDRO ROJAS-ROMERO,
EMILIO ROJAS-ROMERO
15 years in prison
Life in prison
Count 13:
Transportation of a Minor for Purposes of Prostitution
18 U.S.C. §§ 2423(a) and 2
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo”
10 years in prison
Life in prison
Count 14:
Transportation of a Minor for Purposes of Prostitution
18 U.S.C. §§ 2423(a) and 2
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro”
10 years in prison
Life in prison
Count 15:
Transportation of a Minor for Purposes of Prostitution
18 U.S.C. §§ 2423(a) and 2
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro”
10 years in prison
Life in prison
Count 16:
Transportation of a Minor for Purposes of Prostitution
18 U.S.C. §§ 2423(a) and 2
JULIO SAINZ-FLORES,
a/k/a “Rogelio”
10 years in prison
Life in prison
Count 17:
Transportation for Purposes of Prostitution18 U.S.C. §§ 2421 and 2
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo”
N/A
10 years in prison
Count 18:
Transportation for Purposes of Prostitution
18 U.S.C. §§ 2421 and 2
ISAAC LOMELI-RIVERA,
a/k/a “Giro”
N/A
10 years in prison
Count 19:
Transportation for Purposes of Prostitution18 U.S.C. §§ 2421 and 2
ISAAC LOMELI-RIVERA,
a/k/a “Giro”
N/A
10 years in prison
Count 20:
Transportation for Purposes of Prostitution
18 U.S.C. §§ 2421 and 2
JUAN ROMERO-GRANADOS,
a/k/a “Chegoya,”
a/k/a “El Guero”
N/A
10 years in prison
Count 21:
Transportation for Purposes of Prostitution
18 U.S.C. §§ 2421 and 2
ALAN ROMERO-GRANADOS,
a/k/a “El Flaco”
N/A
10 years in prison
Count 22:
Transportation for Purposes of Prostitution
18 U.S.C. §§ 2421 and 2
PEDRO ROJAS-ROMERO
N/A
10 years in prison
Count 23:
Transportation for Purposes of Prostitution
18 U.S.C. §§ 2421 and 2
EMILIO ROJAS-ROMERO
N/A
10 years in prison
DEFENDANT
AGE
RESIDENCE
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo”
42
Mexico
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro”
34
New York
ISAAC LOMELI-RIVERA,
a/k/a “Giro”
35
New York
JUAN ROMERO-GRANADOS,
a/k/a “Chegoya,”
a/k/a “El Guero”
32
Mexico
JULIO SAINZ-FLORES,
a/k/a “Rogelio”
36
Mexico
ALAN ROMERO-GRANADOS,
a/k/a “El Flaco”
24
Mexico
PEDRO ROJAS-ROMERO
38
Mexico
EMILIO ROJAS-ROMERO
36
Mexico
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney Announces $6.6 Million Settlement Against CityMD for Submitting False Claims to MedicareRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today a settlement of a civil fraud lawsuit against CityMD. This settlement resolves federal claims under the False Claims Act, 31 U.S.C. § 3729 et seq., alleging that CityMD billed Medicare for services rendered by physicians who did not actually perform those services, and billed Medicare for more expensive and complex services than were actually provided to patients. Under the terms of the settlement approved yesterday by U.S. District Judge Katherine Polk Failla, CityMD admitted and accepted responsibility for its conduct and agreed to pay $6,606,251.40 in damages to the United States.
Manhattan U.S. Attorney Geoffrey S. Berman said: “CityMD improperly billed Medicare at significant cost to taxpayers. This settlement holds CityMD accountable both through the significant monetary payment and the detailed admissions made by CityMD.”
CityMD manages and operates approximately 88 Urgent Care centers, located primarily in the New York City metropolitan area. As part of the settlement, CityMD admits, acknowledges, and accepts responsibility for the following conduct:
- CityMD billed Medicare for lengthier and/or more complex services or procedures than the services or procedures it actually provided to patients or that were supported with documentation in the medical records. Had CityMD billed Medicare for the services actually rendered or supported by the documents in the medical records, it would have received a lower rate of reimbursement from the Medicare program.
- Medicare rules generally prohibit medical providers, such as CityMD, from seeking reimbursement from the Medicare program for services rendered by a physician unless that physician is both enrolled with the Medicare program when the services are rendered and has reassigned his or her Medicare benefits to the billing provider (collectively known as being “credentialed” with the Medicare program).
- CityMD is generally prohibited from billing Medicare for services rendered by an uncredentialed physician unless and until he or she is credentialed with the Medicare program.
- CityMD employed a number of physicians who were not credentialed with the Medicare program at the time CityMD billed Medicare for their services.
- CityMD falsely billed Medicare for services rendered by these uncredentialed physicians using the National Provider Identification numbers of other credentialed physicians who did not actually render the services in question.
In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had been filed under seal pursuant to the False Claims Act.
* * *
Mr. Berman noted that CityMD cooperated fully with this investigation.
The case is being handled by the Office’s Civil Division. Assistant U.S. Attorneys Mónica P. Folch and Jacob M. Bergman are in charge of the case.
- CityMD billed Medicare for lengthier and/or more complex services or procedures than the services or procedures it actually provided to patients or that were supported with documentation in the medical records. Had CityMD billed Medicare for the services actually rendered or supported by the documents in the medical records, it would have received a lower rate of reimbursement from the Medicare program.
Lower Brule Man Acquitted of Sexual AbuseRead the Press Release
United States Attorney Ron Parsons announced that a Lower Brule, South Dakota, man was acquitted of Sexual Abuse of a Person Incapable of Consent as a result of a federal jury trial in Pierre, South Dakota, on May 3, 2018.
Gregory Laroche, Sr., age 53, was indicted by a federal grand jury on February 14, 2018.
The charge relates to an incident which occurred on November 14, 2017, when Laroche allegedly sexually abused a female acquaintance.
The investigation was conducted by the Bureau of Indian Affairs, Lower Brule Agency and the U.S. Attorney's Office prosecuted the case.
Lorain man faces at least 20 years in prison after jury convicts him of selling fentanyl that killed a 23-year-old Lorain manRead the Press Release
A Lorain man faces at least 20 years in prison after a jury convicted him of selling fentanyl that killed a 23-year-old Lorain man in 2016.
Russell Davis, 51, is scheduled to be sentenced on Aug. 29. The jury convicted him on one count of distribution of fentanyl that resulted in death.
Davis sold fentanyl to Jacob Castro-White that resulted in Castro-White fatally overdosing on March 7, 2016, according to trial testimony and court records.
“Aggressively prosecuting people who profit from selling the drugs killing our friends and neighbors is a crucial component to overcoming the opioid epidemic,” U.S. Attorney Justin Herdman said. “The Lorain Police Department, FBI, the Lorain County Prosecutor's Office are all to be commended for their diligence in this case.”
“It is almost a daily occurrence to hear of a death due to heroin or fentanyl,” said FBI Special Agent in Charge Stephen D. Anthony. “Law enforcement will continue to work collaboratively to hold accountable those that bring this poison and destruction to our communities.”
This case was prosecuted by Assistant U.S. Attorneys Robert Corts and Vasile Katsaros following an investigation by the FBI and Lorain Police Department, with assistance from the Lorain County Prosecutor's Office.
Long-Time Fugitive and Repeat Fraudster Sent to Prison AgainRead the Press Release
HOUSTON – The 75-year-old long time fugitive known as “Butch” Ballow has received a second federal sentence following his admission of defrauding investors in a Nevada company with shares traded on the over-the-counter securities market, announced U.S. Attorney Ryan K. Patrick. Harris Dempsey aka “Butch” Ballow, formerly of formerly of Galveston County, pleaded guilty Feb. 2, 2018, to wire fraud and conspiracy to commit wire fraud.
Today, U.S. District Judge Ewing Werlein Jr. sentenced Ballow to serve 40 years in prison – the statutory maximum. He was further ordered to pay $37,544,944 in restitution. At the hearing, the court heard from one victim whom Ballow defrauded out of $5 million. The victim explained that Ballow used religious pretenses to convince victims to invest money and that he presented himself in Mexico as a type of missionary. He further mentioned that he knew victims who had lost their life saving to Ballow.
Judge Werlein added that in all his decades on the bench, he could not think of a more outrageous fraudulent crime spree, calling it “despicable” and noting there were more than 500 victims.
Assistant U.S. Attorney (AUSA) John Lewis told the judge Ballow was a “financial predator” who would keep committing fraud as long as he was out of jail and explained Ballow had been using fake names to commit fraud since at least the early 1980s when he was convicted of a financial crime against a jewelry store in San Diego.
In this case, Ballow admitted to defrauding investors in E-SOL International Corporation.
At the time of the offense, Ballow was a fugitive from justice in the United States. He had previously been convicted of money laundering that centered on misrepresentations made in connection with the purchase and sale of stock. Ballow pleaded guilty in that case before U.S. District Judge David Hittner and was released on bond. He was set for sentencing Dec. 16, 2004, but failed to show, having fled the country for Mexico where he lived for almost five years under a series of fake names. While there, he defrauded numerous investors through a new scheme which is the basis for the sentencing today.
At the time of his plea, Ballow admitted that in 2005, while living as a fugitive in Mexico under the name John Gel, he purchased the majority of the publically traded shares of E-SOL and installed fictitious persons named Robert Remington and Marilyn Desimone as officers. At the time, E-SOL had almost no assets and conducted no business. Nonetheless, over the course of the next four years, Ballow sold E-SOL stock to investors in return for millions of dollars by deceiving them about the company’s assets and finances, while hiding his identity, his criminal convictions and his status as a fugitive.
In June 2008, Ballow pretended to be a banker named Tom Brown and convinced an American investor living in Puerto Aventuras, Mexico, to purchase E-SOL stock for $5 million. Ballow convinced the investor that E-SOL was developing a golf and recreational resort community in the jungle west of Cancun. However, the resort was fictitious and the stock was worthless. Ballow soon fled from Puerto Aventuras and surfaced under a new name a few months later in Puerto Vallarta, Mexico, where he continued to defraud investors.
Ballow was ultimately arrested by Mexican authorities July 13, 2010, in Nuevo Vallarta, Mexico, and extradited to the United States the following year.
Once in the United States, Judge Hittner ordered him to prison for 10 years in prison and to pay $10 million in restitution for the 2003 money laundering conviction.
Several other persons have been convicted of conspiring to commit wire fraud with Ballow while he was in Mexico and ordered to federal prison including Austin lawyer Patrick Lanier, 69, and Christopher Harless, 65, of Georgetown, who are currently serving a 17 and 20 years in federal prison, respectively. Other co-conspirators are awaiting sentencing or remain fugitives in the case.
The FBI and IRS - Criminal Investigation conducted the investigation with the assistance of the U.S. Marshals Service and U.S. Postal Inspection Service. The United States government also received extensive and valuable assistance from the governments of Mexico and Canada.
Assistant U.S. Attorneys John R. Lewis and Belinda Beek are prosecuting the case.
Lewisville Man Sentenced to 62 years in Federal Prison for Home Invasions/CarjackingsRead the Press Release
PLANO, Texas – A 27-year-old Lewisville, Texas man has been sentenced to 62 years in federal prison for violent crimes in the Eastern District of Texas, announced U.S. Attorney Joseph D. Brown today.
Jermaine Webster Harris was found guilty by a jury on May 25, 2017, of multiple federal charges and was sentenced to 744 months in federal prison today by U.S. District Judge Marcia Crone in Plano. Harris was convicted of 17 federal charges which included multiple violations of carjacking; conspiracy to carry a firearm during and in relation to a crime of violence; possession of a firearm during a violent crime; conspiracy to commit theft of firearms; theft of firearms; conspiracy to possess stolen firearms; and possession of stolen firearms.
According to information presented in court, Harris, along with his co-defendants, committed numerous home invasion robberies, burglaries, and two carjackings in and around Plano and Frisco, Texas. Harris was armed during the carjackings. He was indicted on Feb. 11, 2016, by a federal grand jury. Harris’ co-defendants all pleaded guilty and have already been sentenced. Alton Marshall, 26, of Frisco, Texas, was sentenced to 141 months in federal prison; Derek Polk, 28, of Irving, Texas was sentenced to 240 months in federal prison; and Kenneth Cash, 31, of the Colony, Texas, received a sentence of 300 months. Harris was the only defendant who proceeded to trial. Testimony during trial revealed that Harris was the ring-leader of these violent acts and that he recruited others to assist in the commission of the crimes.
“These were violent crimes, and this defendant terrorized many people,” said U.S. Attorney Brown. “These are the kind of violent offenders that the Justice Department will continue to prioritize for prosecution.”
This case was investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the Bedford Police Department, the Plano Police Department, the Frisco Police Department, and the Lewisville Police Department. This case was prosecuted by Assistant U.S. Attorneys Tracey Batson and Ernest Gonzalez.
####
Illegal alien from Mexico pleads guilty to illegally reentering the United States for 4th timeRead the Press Release
LAFAYETTE, La. – United States Attorney David C. Joseph announced today that an illegal alien from Mexico pleaded guilty to reentering the United States after having been previously removed from the United States on three occasions.
Alberto Rodriguez-Perez, 39, of Mexico, pleaded guilty before U.S. Magistrate Judge Patrick Hanna to one count of illegal reentry of a previously deported alien. The plea will become final when accepted by U.S. District Judge Dee D. Drell. According to the guilty plea, a deportation officer encountered Rodriguez-Perez while at the Lafayette Parish Correctional Center. The officer later discovered that Rodriguez-Perez was illegally in the United States having been previously deported in 2004, 2010 and 2013.
Rodriguez-Perez faces up to two years in prison, one year of supervised release and a $250,000 fine. If he is found to have been removed subsequent to a prior felony offense, or three or more misdemeanor offenses involving drugs, crimes against a person, or both, the defendant will face 10 years in prison, three years of supervised release and a $250,000 fine. The court set sentencing for August 30, 2018.
United States Immigration and Customs Enforcement and the Lafayette Parish Sheriff’s Office conducted the investigation. Assistant U.S. Attorney Daniel J. McCoy is prosecuting the case.
Hammond Woman ChargedRead the Press Release
SOUTH BEND – Michelle Seljan, 47, of Hammond, Indiana, was charged by information with theft of federal funds and tax evasion, announced U.S. Attorney Kirsch.
United States Attorney Kirsch said, “Ms. Seljan betrayed the public trust by using her position with the Hammond Housing Authority for her own private gain. Citizens deserve honest public servants who will efficiently carry out the mission of their agencies. Along with our law enforcement partners, we will continue to investigate and prosecute public corruption across the Northern District of Indiana.”
According to documents in this case, from 2013 through 2016, Ms. Seljan embezzled approximately $633,628 from the Hammond Housing Authority. Ms. Seljan had funds sent from the Hammond Housing Authority to bank accounts she created and made those transactions appear to be legitimate housing assistance recipient payments. During the same time period, Seljan misreported her income, evading more than $200,000 in federal taxes.
Along with this Information, a plea agreement relating to the theft of federal funds and tax evasion has been filed.
This case was being investigated by the United States Department of Housing and Urban Development, Office of Inspector General, and the Internal Revenue Service, Criminal Investigation Division. This case will be handled by Assistant U.S. Attorney Jesse Barrett.
The United States Attorney's Office emphasized that an Information is merely an allegation and that all persons charged are presumed innocent until, and unless, proven guilty in court.
If convicted in court, any specific sentence to be imposed will be determined by the judge after a consideration of federal sentencing statutes and the Federal Sentencing Guidelines.
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Fugitive Sentenced to Federal PrisonRead the Press Release
MISSOULA – Martin Jay Hope, a 57-year-old federal felon, was sentenced today to 15 months in prison followed by 3 years supervised release after pleading guilty to escape on January 24, 2018. U.S. District Judge Dana L. Christensen handed down the sentence.
In November 2008, Hope was sentenced to 312 months custody in federal prison for being a felon in possession of a firearm. In March 2017, Hope was re-sentenced to ten years imprisonment. His projected release date was October 27, 2017. Hope was to serve the last month of his sentence at the Butte Prerelease Center. In late September, Hope left California for the Butte RRC using transportation and bus tickets purchased by the BOP for his transfer. He should have arrived in Butte on September 28, 2017. The following day, the BOP notified the United States Marshals Service that Hope failed to report to the Butte RRC as scheduled. Hope was arrested on September 30, 2017, in Longview, Washington. He was returned to BOP custody shortly after his arrest. According to Hope, he absconded in order to see his mother and his sister. While at the bus station, someone offered him methamphetamine and he accepted it.
The case was prosecuted by Assistant U.S. Attorney Paulette Stewart and investigated by the Unites States Marshals Service, United States Probation Office, and Federal Bureau of Prisons.
This case is part of Project Safe Neighborhoods (PSN), a program bringing together all levels of law enforcement and the communities they serve to reduce violent crime and make our neighborhoods safer for everyone. Attorney General Jeff Sessions reinvigorated PSN in 2017 as part of the Department’s renewed focus on targeting violent criminals, directing all U.S. Attorney’s Offices to work in partnership with federal, state, local, and tribal law enforcement and the local community to develop effective, locally-based strategies to reduce violent crime.
Four Men Sentenced in Manhattan Federal Court for Their Roles in Two 2016 Bank BurglariesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that four defendants have been sentenced to significant prison terms by United States District Judge Katherine B. Forrest for their participation in two bank burglaries. In April and May 2016, MICHAEL MAZZARA, CHARLES KERRIGAN, and ANTHONY MASCUZZIO, assisted by CHRISTOPHER KERRIGAN, stole more than $20 million in cash, jewelry, collectables, and other valuables from the banks’ vaults and safe deposit boxes.
U.S. Attorney Geoffrey S. Berman said: “By using blow torches to cut through bank roofs, and subsequently into vaults and safe deposit boxes, these defendants deprived hundreds of unsuspecting victims of their valuables, priceless heirlooms, and cherished keepsakes. As a result, the defendants will serve serious prison sentences. We will now be able to reunite many of the stolen items, including religious artifacts, jewelry, baseball cards, and coins, with their rightful owners.”
According to the Complaint and Indictments filed in Manhattan federal court, as well as previous court filings and statements made in public court proceedings:
In April and May 2016, MAZZARA, CHARLES KERRIGAN, MASCUZZIO, and CHRISTOPHER KERRIGAN formed a crew that burglarized banks in Brooklyn and Queens, New York, by cutting into the banks’ vaults and the safe deposit boxes inside. MAZZARA, CHARLES KERRIGAN, and MASCUZZIO, with the assistance of CHRISTOPHER KERRIGAN, burglarized an HSBC Bank branch located at 4406 13th Avenue in Brooklyn from about April 8 through April 10, 2016, and burglarized a Maspeth Federal Savings Bank branch located at 64-19 Woodhaven Boulevard in Queens, New York, from about May 19 to May 22, 2016. On both occasions, the burglars used acetylene blowtorches to cut into the top of the banks’ vaults from the roof of the building. At the Maspeth Federal Savings Bank branch, they shielded their activities from view by constructing a plywood shed on the roof of the bank. The burglars then entered the vaults from above and took cash belonging to the bank and broke open customers’ safe deposit boxes, stealing the valuables inside. In total, the crew obtained more than $600,000 in cash and more than $20 million in valuables from the safe deposit boxes from both banks. Surveillance footage captured some of the burglars’ activities as they prepared for and executed the burglaries. Financial records and video surveillance also showed MAZZARA and MASCUZZIO purchasing some of the supplies that appear to have been used in the Maspeth burglary.
During the course of the investigation of the burglaries, the Federal Bureau of Investigation (“FBI”) and New York City Police Department (“NYPD”) executed multiple search warrants at locations in Brooklyn, Long Island, and Pennsylvania, and seized items that had been taken from safe deposit boxes during the burglaries. In addition, as part of their plea agreements, MAZZARA and MASCUZZIO returned other items that had been stolen from the safe deposit boxes. In total, more than 200 items that were stolen from safe deposit boxes – including religious artifacts, jewelry, and collectibles – have been recovered as a result of this investigation.
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MAZZARA, 46, of Brooklyn, New York, was sentenced by Judge Forrest on April 13, 2018, to a total term of 135 months in prison.
In addition to the burglaries, CHARLES KERRIGAN, 42, of Brooklyn, New York, pled guilty to one count of witness retaliation while on pre-trial release, in connection with his assault of an individual who he believed had provided information regarding the burglaries to the FBI and NYPD. CHARLES KERRIGAN was sentenced by Judge Forrest on April 11, 2018, to a total term of 200 months in prison.
MASCUZZIO, 38, of Brooklyn, New York, was sentenced by Judge Forrest on May 4, 2018, to a total term of 84 months in prison, and three years of supervised release.
CHRISTOPHER KERRIGAN, 41, of Staten Island, New York, was sentenced by Judge Forrest on March 30, 2018, to a total term of 90 months in prison.
In addition to the prison terms, Judge Forrest also ordered that the defendants forfeit more than $20 million. Judge Forrest has adjourned the entry of an order of restitution to the victims of the burglaries until June 28, 2018, so that a final determination of the victims’ losses can be made.
Mr. Berman praised the outstanding investigative efforts of the FBI and NYPD.
If you believe you were a victim of this crime, and you wish to provide information to law enforcement, receive notice of future developments in the case, or review and/or claim any of the stolen items that were recovered during this investigation, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Benet J. Kearney and David W. Denton Jr. are in charge of the prosecution.
Four Men Charged with Violations of Federal Gun Control Act and Federal Narcotics Laws in Twenty-Count IndictmentRead the Press Release
U.S. Attorney Duane A. Evans announced that TERRANCE MORGAN, age 25, of New Orleans, RICHARD GREEN, a/k/a “Blue,” a/k/a “Bam,” age 28, of New Orleans, KENDALL CELESTINE, age 20, of New Orleans, and ERIC ROBINSON, age 26, of New Orleans, were indicted yesterday by a federal grand jury.
The charging document alleges that, MORGAN, GREEN, CELESTINE, and ROBINSON conspired to distribute 100 grams or more of heroin between at least June 2014, and April 2018. If convicted of this charge, each defendant faces a term of imprisonment of 5 to 40 years, a fine of up to $5 million, and at least four years of supervised release following any term of imprisonment. The indictment also alleges that MORGAN, GREEN, CELESTINE, and ROBINSON conspired to possess firearms in furtherance of a drug-trafficking crime during the same time period. If convicted of this count, each defendant faces a term of imprisonment of up to 20 years, a fine of up to $250,000, and up to three years of supervised release following any term of imprisonment. In addition, each defendant is charged with substantive counts of possession of firearms in furtherance of a drug-trafficking crime. If convicted of this offense, each defendant faces a term of imprisonment of 5 years to life, a fine of up to $250,000, and up to five years of supervised release following any term of imprisonment.
The indictment also charges MORGAN, GREEN, and ROBINSON, convicted felons, with illegally possessing firearms. If convicted on these charges, MORGAN, GREEN, and ROBINSON face a term of imprisonment of up to 10 years, a fine of up to $250,000, and up to three years of supervised release following any term of imprisonment. GREEN is charged with six counts of distribution of a quantity of heroin. If convicted of these charges, GREEN faces, as to each count, a term of imprisonment of up to 20 years, a fine of up to $1 million, and at least three years of supervised release following any term of imprisonment. Finally, GREEN, and ROBINSON are charged with possession with intent to distribute heroin and MDMA, and MORGAN and CELESTINE are charged with possession with intent to distribute a Schedule I controlled substance called “U-47700.” If convicted of these crimes, each defendant faces a term of imprisonment of up to 20 years, a fine of up to $250,000, and at least three years of supervised release following any term of imprisonment.
U.S. Attorney Evans reiterated that the indictment is merely an allegation and that the guilt of the defendant must be proven beyond a reasonable doubt.
This case was brought as part of Project Safe Neighborhoods (PSN), a program that has been historically successful in bringing together all levels of law enforcement to reduce violent crime and make our neighborhoods safer for everyone. Attorney General Jeff Sessions has made turning the tide of rising violent crime in America a top priority. In October 2017, as part of a series of actions to address this crime trend, Attorney General Sessions announced the reinvigoration of PSN and directed all U.S. Attorney’s Offices to develop a district crime reduction strategy that incorporates the lessons learned since PSN launched in 2001.
This case is being investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives, the New Orleans Police Department, the Louisiana State Police, and the Terrebonne Parish Sheriff’s Office. Assistant United States Attorneys Maria M. Carboni and Matthew R. Payne are in charge of the prosecution.
Four Defendants Convicted in Manhattan Federal Court for Stealing Confidential Government Information and Using It to Engage in Illegal TradingRead the Press Release
Robert Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced the conviction of DAVID BLASZCZAK, a political intelligence consultant, CHRISTOPHER WORRALL, a government employee at the Centers for Medicare and Medicaid Services (“CMS”), and THEODORE HUBER and ROBERT OLAN, two partners and analysts at Deerfield Management Company, L.P., a healthcare-focused hedge fund in New York, New York (“Deerfield”). BLASZCZAK, WORRALL, HUBER, and OLAN were convicted yesterday after a four-week trial before United States District Judge Lewis A. Kaplan.
BLASZCZAK, WORRALL, HUBER, and OLAN were charged with participating in a scheme, from in or about 2009 through in or about 2014, to convert United States property, to defraud the United States, and to commit securities fraud and wire fraud for obtaining material nonpublic information from CMS and using it to execute profitable trades at Deerfield.
As part of the scheme, BLASZCZAK was charged with obtaining confidential and nonpublic information from CMS employees, including his friend, CHRISTOPHER WORRALL, who worked at CMS, and who was charged with breaching his duties as a CMS employee by providing confidential information to BLASZCZAK. BLASZCZAK then was alleged to have provided this material nonpublic information in advance of market-moving CMS announcements to employees at Deerfield, including HUBER, OLAN, and Jordan Fogel, who allegedly recommended trades on the basis of the information. Jordan Fogel, a former partner and analyst at Deerfield, previously pled guilty and is cooperating with the Government. As a result of these trades, Deerfield reaped more than $7 million in profits.
BLASZCZAK was also charged in a separate scheme with obtaining confidential and nonpublic CMS information about cuts in CMS’s reimbursement rates for home health providers, and with providing that information to Christopher Plaford, a portfolio manager at Visium Asset Management, L.P., another healthcare-focused hedge fund in New York, New York (“Visium”). Plaford then used BLASZCZAK’s information to execute trades, resulting in approximately $330,000 in profits. Plaford has previously pled guilty to this conduct and is also cooperating with the Government.
Deputy U.S. Attorney Robert Khuzami said: “As a unanimous jury found, these defendants schemed to get highly sensitive and confidential information from CMS, a governmental entity, and feed it to a hedge fund to make illegal profits in the stock market. Trading on confidential nonpublic government information is just as illegal as trading on corporate insider information. Our Office is committed to policing and prosecuting both.”
According to the allegations in the charging documents and statements made in court proceedings:
CMS
CMS, a component of the United States Department of Health and Human Services (“HHS”), administers Medicare and Medicaid, among other things. CMS is also responsible for setting Medicare reimbursement rates for healthcare providers. CMS spends more than $1 trillion annually and pays approximately one-third of the country’s health expenditures. Accordingly, CMS rulemaking decisions, including decisions that affect how much the federal government will pay to reimburse medical providers for services rendered, have a substantial, market-moving impact on publicly traded companies that depend on government healthcare spending.
WORRALL began working at CMS in or about 1999. Beginning in January 2012, WORRALL worked in the Director’s Office for the Center for Medicare (“CM”), which gave WORRALL broad access to CMS’s confidential deliberations about upcoming reimbursement decisions. WORRALL also served as a project manager for a confidential CMS database that contained CMS’s most up-to-date claims data that CMS used to inform its decision-making.
David Blaszczak
At all relevant times, BLASZCZAK served as a consultant at a number of Washington, D.C.-based firms that, in exchange for a fee, provided so-called “political intelligence,” which included analysis about how changes in Government reimbursement rates would affect publicly traded healthcare-related companies. Before becoming a political intelligence consultant, BLASZCZAK worked at CMS, eventually serving as a special assistant to the CMS Administrator. BLASZCZAK met WORRALL while the two worked at CMS.
As a former CMS employee, BLASZCZAK was well aware of CMS’s rules governing the dissemination of nonpublic information.
Deerfield Management Company, L.P.
At all relevant times, Deerfield managed multiple hedge funds specializing in healthcare-related investments. As of 2017, Deerfield had more than $7 billion in assets under management. HUBER, OLAN, and Fogel were partners and analysts at Deerfield, where their job was to analyze investment decisions and recommend potentially profitable trades for Deerfield. Deerfield’s compliance manual prohibited its employees from committing insider trading.
The Scheme to Convert and Use Confidential CMS Information
As alleged in the Indictment, from at least in or about 2009 through in or about 2014, BLASZCZAK, WORRALL, HUBER, OLAN, Fogel, and others participated in a scheme to convert to their own use confidential and material nonpublic information from CMS concerning, among other things, CMS’s internal deliberations regarding coverage and reimbursement decisions.
During this time period, Deerfield retained BLASZCZAK as a consultant who provided political intelligence related to, among other things, the content, likelihood, and timing of CMS reimbursement decisions. As part of the scheme, HUBER, OLAN, and Fogel encouraged BLASZCZAK to obtain confidential and material nonpublic information from CMS insiders. As HUBER, OLAN, and Fogel knew, these CMS insiders included BLASZCZAK’s former colleagues with whom he had close personal relationships, who were prohibited from disclosing such information to CMS outsiders.
BLASZCZAK obtained material nonpublic information from his close friend and former CMS colleague WORRALL. BLASZCZAK and WORRALL were friends since their time working together at CMS. BLASZCZAK also frequently offered to help WORRALL find lucrative private sector employment opportunities, in exchange for WORRALL giving BLASZCZAK confidential government information.
BLASZCZAK conveyed the information obtained from WORRALL to HUBER, OLAN, and Fogel, who – knowing that BLASZCZAK had obtained the information improperly from a CMS insider – used the information to trade. In exchange for being provided with this inside information, HUBER, OLAN, and Fogel caused Deerfield to pay BLASZCZAK more than $800,000 in consulting fees.
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Defendants’ Ages and Residences
Defendant
Residence
Age
David Blaszczak
Isle of Palms, South Carolina
42
Christopher Worrall
Linthicum Heights, Maryland
40
Theodore Huber
Westport, Connecticut
56
Robert Olan
Rumson, New Jersey
47
Mr. Khuzami praised the work of the Federal Bureau of Investigation and U.S. Department of Health and Human Services, Office of the Inspector General, and thanked the Securities and Exchange Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Ian McGinley, Joshua A. Naftalis, and Brooke E. Cucinella are in charge of the prosecution.
Former Nashville Metro Police Sergeant Facing Federal Theft and Money Laundering ChargesRead the Press Release
An indictment was unsealed today, charging former Nashville Metropolitan Police Department (MNPD)Sergeant James Dunaway with two counts of theft from federal program funds and two counts of money laundering, announced U.S. Attorney Don Cochran of the Middle District of Tennessee.
Dunaway, 43, of Old Hickory, Tennessee, surrendered this morning to U.S. Marshals after being indicted by a federal grand jury on Wednesday. He will appear before a U.S. Magistrate later this afternoon.
According to the indictment, during the period of November 18, 2015 through November 16, 2017, Dunaway was a supervisor in the MNPD Specialized Investigation Division-Narcotics Unit and was responsible, among other things, for monitoring and executing search warrants.
The indictment alleges that during the execution of search warrants on five separate occasions, Dunaway stole a portion of the cash discovered and seized at each location, including:
the November 18, 2015 search of a residence off Pleasant Hill Road in Nashville, where more than $100,000 was seized;
the April 10, 2017 search of a residence off Robertson Road in Nashville, where more than $500,000 was seized;
the April 26, 2017 search of a residence off Pleasant Hill Road in Nashville, where more than $182,000 was seized;
the September 13, 2017 search of a residence off Spencer Enclave Way in Nashville, where more than $70,000 was seized; and
the November 15, 2017 search of a hotel room in which the MNPD Office of Professional Accountability had placed marijuana, $28,000 cash and video cameras for the purpose of conducting an integrity check. Video cameras captured Dunaway placing money in his pockets during the search and the indictment alleges that Dunaway stole $5,860.00 during the execution of this search warrant.
The indictment also alleges that between April 11, 2017 and May 8, 2017, Dunaway made approximately $40,540.00 in cash deposits and on May 1, 2017, he obtained a cashier’s check with $42,500.00 cash, which he stole during the searches. Dunaway then used the cashier’s check to purchase a 2014 Toyota Sequoia.
The indictment further alleges that during the course of this scheme, Dunaway embezzled, stole and converted approximately $105,910.00 to his own use.
If convicted, Dunaway faces up to 10 years in prison and a $250,000 fine on each count.
This case was investigated by the FBI and the Metropolitan Nashville Police Department. U.S. Attorney Don Cochran and Assistant U.S. Attorney Ryan Raybould are prosecuting the case.
An indictment is merely an accusation. The defendant is presumed innocent until proven guilty in a court of law.
Former Camargo Bank President Sentenced to PrisonRead the Press Release
OKLAHOMA CITY – Former First State Bank of Camargo President STEPHEN GREGORY WARD, 53, of Edmond, Oklahoma, has been sentenced to eighteen months in prison for conspiring to misapply bank funds, announced Robert J. Troester, Acting U.S. Attorney for the Western District of Oklahoma.
According to charges filed in September 2017, banking regulators closed First State Bank of Camargo in 2011, one hundred years after it opened. The bank was critically undercapitalized because Ward allowed bank insiders to pay personal and business checks when their accounts had insufficient funds. Between 2006 and 2011, the practice of using deposits of other customers to cover insiders’ overdrafts led certain bank employees to manipulate bank ledgers and records, which caused a significant under-reporting of overdrafts to the Federal Deposit Insurance Corporation. The charges identify numerous instances in which Ward personally took advantage of the bank’s illegal treatment of overdrafts.
On September 29, 2017, Ward pleaded guilty to conspiracy. Yesterday, Chief U.S. District Judge Joe Heaton sentenced him to eighteen months in prison, to be followed by three years of supervised release. He must also pay $95,149.38 Judge Heaton also sentenced yesterday NICKI S. DAY and MARJORIE H. COLE, both of Camargo. These two women worked at the bank and pleaded guilty to conspiring with Ward. Cole also pleaded guilty to failing to report income from the conspiracy on her 2008 federal income tax return. Each will serve one year and one day in federal prison, followed by three years of supervised release. Day was ordered to pay $140,768.05 to the FDIC; Cole was ordered to pay $733,473.64 to the FDIC and $89,996 to the Internal Revenue Service.
This case is the result of an investigation by the Federal Deposit Insurance Corporation’s Office of Inspector General, the FBI, and the Internal Revenue Service—Criminal Investigations. It was prosecuted by Assistant U.S. Attorney Kerry A. Kelly.
Reference is made to public filings for further information.
Former Bureau of Prisons Employee Agrees to Pay $50,000 to Resolve Anti-Kickback Act AllegationsRead the Press Release
Cary Hudson, a former financial administrator for the U.S. Bureau of Prisons (BOP) in Carswell, Texas, has agreed to pay the United States $50,000 to resolve allegations that he violated the Anti-Kickback Act by accepting improper payments from Mansfield, Texas-based Integrated Medical Solutions Inc. (IMS) in exchange for his assistance in obtaining BOP contracts. In May 2017, IMS and its former president, Jerry Heftler, agreed to pay more than $2.4 million to resolve their civil liability arising from the alleged scheme.
“This settlement demonstrates that the Department of Justice is committed to protecting the integrity of the federal contracting process from unscrupulous contractors,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Improper financial arrangements between government officials and private contractors corrupt taxpayer-funded contracts.”
The settlement announced yesterday resolves allegations that Hudson, while serving as a BOP financial administrator, accepted payments from IMS in exchange for providing favorable treatment in connection with BOP contracts to manage healthcare networks that provided medical care to federal inmates. Hudson’s assistance to IMS allegedly included the provision of certain confidential, non-public information that gave IMS an unfair competitive advantage in the bidding process. The government also alleged that, after IMS obtained the contracts with BOP, Hudson improperly assisted IMS in its performance of the contracts while simultaneously serving as a BOP financial administrator.
“This case, in which our office both criminally prosecuted the responsible employee and civilly recovered almost $2.5 million for the federal fisc, should serve as an example and warning to others who might be similarly tempted to abuse positions of trust in federal programs funded with taxpayer dollars,” said U.S. Attorney Erin Nealy Cox of the Northern District of Texas.
In October 2014, Hudson pleaded guilty to a felony violation of 18 U.S.C. § 1001 for failing to disclose the payments he received from IMS as part of his annual obligation as a federal government employee to report any potential conflicts of interests.
This matter was handled by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Northern District of Texas, with assistance from the Department of Justice Office of Inspector General.
Except to the extent of the admissions in Hudson’s guilty plea, the claims resolved by the civil settlement are allegations only, and there has been no determination of liability.
Florida Residents Charged with Using Stolen IDs to Make ATM Withdrawals throughout Southeastern WisconsinRead the Press Release
United States Attorney Matthew D. Krueger for the Eastern District of Wisconsin announced today that a federal grand jury returned an eighteen-count indictment charging three Florida residents each with three counts of Wire Fraud and three counts of Aggravated Identity Theft in violation of Title 18, United States Code Sections 1028(A)(a)(1) and 1343. The defendants are Adam Yves Paul (30), of Gainesville, Florida; Frantz Aubert Nelson, (28) of Miramar, Florida; and Yann Asmael Poye (24) of Pembroke Pines, Florida.
According to the charges, the defendants obtained stolen identities and banking information of Wisconsin residents and then traveled throughout Southeastern Wisconsin to make unauthorized withdrawals from automated teller machines (ATMs). The total amount of loss caused by the scheme is not known. However, Paul used stolen identities to withdraw at least $73,290.23, Nelson used stolen identities to withdraw at least $35,564.76, and Poye used stolen identities to withdraw at least $23,439.37.
United States Attorney Krueger commented, “Identity theft is far too common in our digital age. Criminals need to know that federal law mandates at least two years in prison for aggravated identity theft. The United States Government is committed to investigating and prosecuting this crime aggressively.”
The maximum penalties for each count of Wire Fraud is 20 years imprisonment and a $250,000 fine. The Aggravated Identity Theft charges carry a mandatory minimum sentence of two years of imprisonment and up to a $250,000 fine.
This matter is being investigated by the United States Secret Service’s Milwaukee Financial Crimes Task Force. It is being prosecuted by Assistant United States Attorney Zachary Corey. The public is cautioned that an indictment is merely a charge and the defendants are presumed innocent until and unless proven guilty.
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For Additional Information Contact:
Public Information Officer Dean Puschnig 414-297-1700
Federal Fraud Charges Filed Against County Commissioner O’DonnellRead the Press Release
WICHITA, KAN. – Sedgwick County Commissioner Michael O’Donnell is charged with wire fraud, bank fraud and money laundering, U.S. Attorney Stephen McAllister said.
A federal indictment unsealed here today alleges O’Donnell took money from his campaign accounts to put into his personal account and to give to his friends and covered it up by making false reports electronically to the Kansas Governmental Ethics Commission.
Michael B. O’Donnell, II, 33, Wichita, Kan., is charged with five counts of wire fraud, five counts of bank fraud and two counts of money laundering.
The indictment alleges O’Donnell provided false information in five reports he emailed to the state ethics commission in 2016 and 2017. At issue are a series of transactions that the indictment alleges O’Donnell falsely represented as payments made for campaign-related expenses. They include:
A $1,000 check O’Donnell wrote from his “Michael for Kansas” campaign account to a person identified as C.R. The indictment alleges that after C.R. cashed the check, O’Donnell deposited the $1,000 into his personal checking account.
A $1,000 check O’Donnell wrote from his “Michael for Kansas” campaign account to a person identified as J.D. After receiving the check, J.D. allegedly wrote a $1,000 personal check to O’Donnell and O’Donnell deposited the $1,000 check into his personal account.
A total of 12 checks from the “Michael for Kansas” campaign account O’Donnell wrote to a friend identified as D.J., totaling $5,650.
Three checks O’Donnell wrote from his “Michael for Sedgwick County” account to D.J. totaling $750.Six checks O’Donnell wrote from his “Michael for Kansas” account to a friend identified as J.M. totaling $2,100.
Upon conviction, the crimes carry the following penalties:
Wire fraud: Up to 20 years in federal prison and a fine up to $250,000.
Bank fraud: Up to 30 years and a fine up to $1 million.
Money laundering: Up to 20 years and a fine up to $500,000.
Special Agent Chuck Pritchett of the FBI and Detective Jon Gill of the Sedgwick County Sheriff’s Office investigated. Assistant U.S. Attorney Aaron Smith and Assistant U.S. Attorney Mona Furst are prosecuting.
In all cases, defendants are presumed innocent until and unless proven guilty. The indictments merely contain allegations of criminal conduct.
Eagle Butte Man Sentenced for Assaulting a Federal OfficerRead the Press Release
United States Attorney Ron Parsons announced that an Eagle Butte, South Dakota, man charged with Assaulting, Resisting, Opposing, and Impeding a Federal Officer was sentenced on April 30, 2018, by U.S. District Court Judge Roberto A. Lange.
Pete Knight, age 55, was sentenced to 6 months in custody, an additional 6 months of home confinement, 18 months of supervised release, and $100 to the Federal Crime Victims Fund.
Knight was indicted by a federal grand jury on June 14, 2017, for Assaulting, Resisting, Opposing, and Impeding a Federal Officer. Knight was found guilty of that charge by a jury on February 7, 2018.
The conviction stems from an incident that took place on May 8, 2017, in Ziebach County, South Dakota. On that day, Ziebach County Sheriff, Gary Cudmore made a traffic stop on a vehicle. During the course of the traffic stop, Knight and another individual stopped at the location of the traffic stop, as the vehicle stopped by Sheriff Cudmore belonged to Knight. Knight requested to talk to the driver and the sheriff allowed it. As soon as the door to the patrol vehicle was opened, Knight began to physically assault the driver, who was handcuffed behind his back and defenseless. Sheriff Cudmore was able to pull Knight back. Knight continued to attempt to get through Sheriff Cudmore to get at the driver. In the process, Knight shoved Sheriff Cudmore. Knight eventually left the scene.
The investigation was conducted by the Cheyenne River Sioux Tribe Law Enforcement Services. The case was prosecuted by Assistant U.S. Attorney Jay Miller.
Knight was remanded to the custody of the U.S. Marshals Service.
Dublin Man Sentenced to 16 Months in Prison for Filing False Corporate Tax ReturnRead the Press Release
OAKLAND –Shiv D. Kumar, the former president and sole shareholder of A-Paratransit Inc. (API), was sentenced today to 16 months in prison for filing a false corporate tax return with the Internal Revenue Service, announced Acting U.S. Attorney Alex G. Tse and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. The sentence was handed down by the Honorable Jon S. Tigar, U.S. District Judge, following the entry of a guilty plea on April 20, 2018, in which Kumar admitted underreporting income on API’s 2010 corporate tax return.
Kumar, 61, of Dublin, Calif., was the sole shareholder and president of API, a multi-million dollar company that provided transportation services to disabled individuals in the Bay Area. Kumar filed false corporate returns with the IRS for tax years 2008, 2009, and 2010. The returns underreported API’s gross receipts in total by more than $4 million, resulting in a tax loss to the United States of more than $1.4 million. Kumar deposited API’s gross receipts into multiple bank accounts, concealed millions of dollars in gross receipts, and caused API to provide its tax return preparer with doctored and incomplete bookkeeping records showing less in gross receipts than API actually received. Kumar further admitted the unreported gross receipts were used to purchase real property in California.
In addition to the prison term, Judge Tigar ordered Kumar to serve a one-year term of supervised release. Judge Tigar ordered Kumar to self-surrender on or before June 15, 2018, to begin serving his prison term.
Assistant U.S. Attorney Jose A. Olivera is prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Des Moines Durable Medical Equipment Company to Pay $189,061.90 to Resolve Overbilling Allegations Related to Medicaid RecipientsRead the Press Release
DES MOINES, Iowa – Catholic Health Initiatives—Health at Home d/b/a Mercy Respiratory Care and Med Supply (CHI-MRC), a supplier of durable medical equipment in Des Moines, has agreed to pay $189,061.90 to the United States to resolve allegations it overbilled the State of Iowa’s Medicaid program for purchases of durable medical equipment.
The settlement resolves claims that, from January 1, 2013, to December 31, 2015, CHI-MRC improperly billed Medicaid for durable medical equipment purchases by continuing to charge for the equipment after receiving full payment for the equipment’s purchase price.
“Our office will aggressively pursue overpayment by Medicaid to providers, including providers of durable medical equipment, to ensure providers comply with state and federal regulations and taxpayers do not pay the bill for excessive expenses,” said Marc Krickbaum, United States Attorney for the Southern District of Iowa. “This recovery sends the message to health care providers there will be consequences if they fail to comply with state and federal regulations. We also note and appreciate the provider’s cooperation throughout the investigation.”
This investigation was initiated by the United States Attorney’s Office for the Southern District of Iowa with the assistance of the State of Iowa’s Medicaid Fraud Control Unit, Iowa Department of Health and Human Services, and United States Department of Health and Human Services Office of Inspector General.
DEA Suspends the Registration of Morris & Dickson Company from Distributing Controlled SubstancesRead the Press Release
The Drug Enforcement Administration today announced the issuance of an Immediate Suspension Order served on Morris & Dickson Company, a wholesale pharmaceutical distributor, located in Shreveport, Louisiana.
Morris & Dickson Company has been the subject of a DEA investigation that alleges that this distribution center failed to properly identify large suspicious orders for controlled substances sold to independent pharmacies with questionable need for the drugs. The investigation, which focused primarily on purchases of Oxycodone and Hydrocodone, revealed that in some cases, pharmacies were allowed to purchase as much as six times the quantity of narcotics the pharmacy would normally order. In spite of regulations which require distributors to identify such orders, DEA alleges that Morris & Dickson Company failed to identify these large suspicious orders resulting in millions of dosage units of Oxycodone and Hydrocodone being distributed in violation of the law.
"Opioid distributors have a legal obligation not to facilitate the illicit diversion of drugs," said Attorney General Jeff Sessions. "That obligation has never been more important than it is right now as we face the deadliest drug crisis in American history. According to the allegations, many large suspicious orders for opioids were made, filled, and unreported by Morris and Dickson. We can only imagine how many pills were diverted, abused, and how many addictions began as a result. Today's suspension will help us achieve the President's goals of reducing opioid prescriptions in the United States and stopping the spread of addiction. I want to thank the DEA for their vigilance, for all of their hard work. The Justice Department will continue to use suspensions, deregistrations, and every other tool we have to stop the drug epidemic."
“Distributors have an obligation to ensure that all pharmaceutical controlled substances their customers order are for legitimate use, and it is their duty to identify, recognize and report suspicious orders to DEA,” said DEA Acting Administrator Robert W. Patterson. “This is another reminder that DEA will hold accountable those companies who choose to operate outside the law.”
In October 2017, DEA became aware of the high-volume sales of Oxycodone and Hydrocodone from Morris & Dickson Company to five of the top ten purchasing pharmacies within the state of Louisiana. DEA records indicated that Morris & Dickson Company had not filed any suspicious order reports on any of the pharmacies in question in Louisiana. A review of the purchases made by these high-volume independent pharmacies showed that these pharmacies were purchasing quantities which were not indicative of the pharmaceutical market. Not only were numerous “independent” retail pharmacies purchasing more Oxycodone and Hydrocodone than the largest chain pharmacies operating within the state, they were purchasing more narcotics than several of the largest chain pharmacies combined within the same zip code. In some instances, DEA noted these “independent” pharmacies were purchasing more than ten times the amount of narcotics the average Louisiana pharmacy purchased per month.
DEA’s actions today suspend the DEA Certificate of Registration issued to Morris & Dickson Company as a drug distributor pursuant to Title 21, United States Code, Sections 823 and 824. The DEA’s investigation of Morris & Dickson Company determined that the continued registration of this company constitutes a substantial likelihood of imminent danger to public health and safety. This action only applies to the distribution of controlled substances and will not affect non-controlled pharmaceutical drugs distributed by the company.
Morris & Dickson Company received written notice of the factual and legal basis for this action. In addition, they will be given the opportunity for an administrative hearing within the next 60 days. After the hearing, the DEA Acting Administrator will make a final decision on whether Morris & Dickson Company’s registration should be permanently revoked. This decision will be published in the Federal Register.
Today, more than four million Americans are addicted to prescription painkillers, including a quarter million adolescents. Sadly, drug overdoses are now the leading cause of injury death in the United States, more than deaths from motor vehicle crashes or deaths from firearms. Parents and children are encouraged to educate themselves about the dangers of drugs by visiting DEA’s interactive websites at www.JustThinkTwice.com, www.GetSmartAboutDrugs.com and www.dea.gov.Corporate Executive Convicted in $300 Million Market Manipulation SchemeRead the Press Release
Abraxas J. Discala, also known as “AJ Discala,” the Chief Executive Officer of OmniView Capital Advisors LLC, was convicted today of eight counts in the indictment by a federal jury in Brooklyn. Discala was convicted of conspiracy to commit securities fraud, conspiracy to commit mail fraud and wire fraud, and two securities fraud counts related to the publicly-traded companies CodeSmart Holdings, Inc. and Cubed, Inc., and four counts of wire fraud related to Cubed and the publicly-traded company StarStream Entertainment Inc. The verdicts followed a five-week trial before United States District Judge Eric N. Vitaliano. When sentenced, Discala faces a maximum of 20 years’ imprisonment.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the verdict.
“Discala and his network of company insiders, brokers and others executed a scheme designed to dupe investors into believing that companies with little in the way of assets were worth hundreds of millions of dollars by manipulating trading activity. At the end of the day, the defendant’s criminal game of musical shares cost unsuspecting investors millions,” stated United States Attorney Donoghue. “Today’s verdict sends a powerful message that this Office, together with our law enforcement partners, will hold corporate executives accountable when they use their expertise to facilitate the commission of crimes.” Mr. Donoghue expressed his appreciation to the Securities and Exchange Commission, New York Regional Office, and the Financial Industry Regulatory Authority, Inc., Criminal Prosecution Assistance Group, for their assistance in this case.
“Investors know they’re taking a chance when purchasing stock and other securities, but they don’t anticipate the odds being stacked against them from the start,” stated FBI Assistant Director-in-Charge Sweeney. “In so many cases, we see criminals in the white collar world autonomously controlling other people’s money and diverting it for their own benefit. Stealing is stealing, in whatever form or fashion, and today’s conviction proves just that.”
The evidence at trial established that in May 2013, Discala, along with separately charged co-conspirators, engineered a reverse merger of CodeSmart, a private company, with a public shell company. After gaining control of CodeSmart’s three million purportedly unrestricted shares, Discala and his co-conspirators on two occasions fraudulently inflated share price and trading volume of CodeSmart, which traded under the ticker symbol ITEN, and then sold their shares at a profit when the price reached desirable levels — a scheme commonly referred to as a “pump and dump.”
The first pump and dump occurred between May 13, 2013 and August 21, 2013. During this period, the co-conspirators manipulated CodeSmart’s stock price causing it to rise from $1.77 to a high of $6.94, before “dumping” their shares thereby causing it to drop to $2.19.
The second pump and dump occurred between August 21, 2013 and September 20, 2013. During this period, the defendant and his co-conspirators manipulated CodeSmart’s stock price causing it to rise from $2.19 to a high of $4.60, before selling, or “dumping,” their shares causing it drop to $2.13. During the entire period, Discala and his co-conspirators coordinated their trading activity to artificially control CodeSmart’s stock price. Evidence at trial established that Discala made more than $2.8 million in trading profits from the CodeSmart pump and dumps, while investors lost millions of dollars.
CodeSmart’s market capitalization at its highest closing price of $6.94 per share on July 12, 2013 was $86,347,800. That same day, CodeSmart filed with the U.S. Securities and Exchange Commission an amended Form 10-K, in which it listed only $6,000 in total assets, $7,600 in revenue and a net loss of $103,141. By December 30, 2013, CodeSmart’s stock was trading at $0.66 per share, and on July 9, 2014, its stock closed at $0.01 per share.
The evidence at trial also established that in early 2014, Discala and his co-conspirators defrauded investors and potential investors in Cubed, which traded under the ticker symbol CRPT. Discala and his co-conspirators gradually increased the price of Cubed’s stock to give it the appearance of a legitimate company with genuine and steady market demand for the security. The conspirators used an “escrow account” to successfully control the price and trading volume of Cubed’s stock, and to conceal the defendant’s and their co-conspirators’ ownership interests. In a telephone call intercepted pursuant to a judicially authorized wiretap, Discala boasted to a co-conspirator about his control over Cubed’s stock price through the use of the escrow account, stating, “I’m the [expletive] brake and the gas . . . . If I take my foot off the brake it’s 55 [dollars] tomorrow.” At the same time the defendant and their co-conspirators were touting Cubed to prospective investors, Discala stated on an intercepted call that, “We’ll be out before [expletive] company will even see if the Cube works, ok?”
On June 23, 2014, Cubed reached its highest closing price of $6.75 per share, resulting in a market capitalization of approximately $200 million. Previously, Cubed filed with the SEC a Form 10-Q that reported less than $1,500 in cash holdings, zero revenue, negative stockholders’ equity, a net loss of $15,000 and accrued professional fees of $131,824.
The evidence at trial also established that, in addition to manipulating the stock of CodeSmart and Cubed, between October 2013 and July 2014, Discala also fraudulently manipulated the stock of StarStream Entertainment Inc. and The Staffing Group, Ltd. StarStream was a Nevada corporation with its principal place of business in Monterey, California. It was promoted as a company that produced, promoted, supported and developed motion pictures, and it traded under the ticker symbol SSET. The Staffing Group was a Nevada corporation with its principal place of business in New Orleans, Louisiana. It was promoted as a company that recruited, hired, employed and managed skilled workers for clients, and it traded under the ticker symbol TSGL.
The jury also acquitted Discala of two wire fraud counts. Separately charged defendant Kyleen Cane was acquitted of the three counts against her.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Shannon C. Jones, Patrick T. Hein and Mark E. Bini are in charge of the prosecution with assistance provided by Assistant United States Attorney Claire Kedeshian of the Office’s Civil Division which is responsible for the forfeiture of assets.
The Defendant:
ABRAXAS J. DISCALA (also known “AJ Discala”)
Age: 47
Scarsdale, New YorkE.D.N.Y. Docket No. 14-CR-399 (ENV)
Connecticut Man Found Guilty on Wire Fraud Charges for Credit and Gift Card Fraud SchemeRead the Press Release
NEWARK N.J. – A Connecticut man who defrauded credit card companies of hundreds of thousands of dollars was found guilty on stolen goods charges today, U.S. Attorney Craig Carpenito announced.
Nikolay Krechet, 47, of West Hartford, Connecticut, was found guilty on all counts on which he was indicted – one count of conspiracy to sell, receive or possess stolen goods and two counts of sale, receipt or possession of stolen goods following a two-and-a-half week trial before U.S. District Judge William H. Walls in Newark federal court. The jury deliberated 25 minutes before returning the guilty verdicts.
According to documents filed in this case and the evidence at trial:
Krechet bought and used millions of dollars of gift cards purchased with stolen credit card information. The substantive counts corresponded to the purchase of tens of thousands of dollars of gift cards in cash and bartered electronics for gift cards at a considerable discount off their face value.
The conspiracy count carries a maximum penalty of five years in prison and the two substantive counts each carry a maximum penalty of 10 years in prison. Sentencing is scheduled for July 31, 2018.
U.S. Attorney Carpenito credited special agents of FBI, under the direction of Special Agent in Charge Gregory W. Ehrie; the U.S. Secret Service, under the direction of Special Agent in Charge Mark McKevitt; and the U.S. Postal Inspection Service, under the director of Acting Inspector in Charge Ruth M. Mendonca, with the investigation leading to today’s conviction.
The government is represented by Assistant U.S. Attorneys David Feder and Joshua Haber of the U.S. Attorney’s Office Criminal Division in Newark.
Defense counsel: Thomas Ambrosio Esq., Lyndhurst, New Jersey
Connecticut Man Charged with CyberstalkingRead the Press Release
Jacob Waitze, 22, of Southbury, Connecticut, was charged today by criminal information with cyber-stalking, announced United States Attorney William M. McSwain.
The information alleges that, from October 23, 2015, through February 16, 2016, Waitze used an interactive computer service and an electronic communication system to engage in a course of cyber-stalking that caused substantial emotional distress to another individual.
If convicted as charged, the defendant faces a maximum possible sentence of five years’ imprisonment, supervised release for a maximum term of three years, a $250,000 dollar fine, full restitution of as much as $10,000, and a mandatory $100 special assessment.
The case was investigated by Homeland Security Investigations, the Philadelphia Police Department, and the Drexel University Police Department. The case is being prosecuted by Assistant United States Attorney Seth Schlessinger.
An Indictment, Information or Criminal Complaint is an accusation. A defendant is presumed innocent unless and until proven guilty.
Chandler Man Sentenced to Three Years in Prison for Tax EvasionRead the Press Release
PHOENIX – This week, U.S. District Judge David G. Campbell sentenced William “Larry” Dorsey, 56, of Chandler, Ariz., to 36 months in prison and three years of supervised release. The Court also ordered Dorsey to pay $7.3 million in restitution to the Internal Revenue Service. Dorsey had previously pleaded guilty to tax evasion.
Dorsey owned and operated several professional employment organizations, including Pinnacle Employee Group, Inc. (PEG) and Pinnacle Planning Group, Inc. (PPG), which contracted with small business owners to provide payroll services. Dorsey, through PEG and PPG, collected federal employment taxes from his clients but, instead of paying the taxes over to the IRS as he contracted to do, kept a significant portion of the taxes for his own personal use and to fund other business ventures. To conceal his theft, Dorsey filed false employment tax returns with the IRS, which underreported the taxes due from PEG and PPG. From 2011 through 2014, Dorsey underreported and underpaid approximately $7.3 million in federal employment taxes due and owing by PEG and PPG.
The investigation in this case was conducted by Internal Revenue Service Criminal Investigation. The prosecution was handled by Bridget Minder and Peter Sexton, Assistant United States Attorneys, District of Arizona, Phoenix.
CASE NUMBER: CR-18-00128-DGC-PHX
RELEASE NUMBER: 2018-058_Dorsey
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For more information on the U.S. Attorney’s Office, District of Arizona, visit http://www.justice.gov/usao/az/
Follow the U.S. Attorney’s Office, District of Arizona, on Twitter @USAO_AZ for the latest news.
Berwick Man Sentenced for Bank RobberyRead the Press Release
SCRANTON - The United States Attorney’s Office for the Middle District of Pennsylvania announced today that Justin Weist, age 26, of Berwick, Pennsylvania, was sentenced on May 2, 2018, to 33 months’ imprisonment by United States District Court Judge Robert D. Mariani for Bank Robbery.
According to United States Attorney David J. Freed, Weist admitted to the February 23, 2017, robbery of First National Bank in Tannersvile, Monroe County, Pennsylvania during his guilty plea on October 11, 2017. Weist stole $1,800, all of which was recovered. Weist, who did not possess a weapon, robbed the bank by presenting a note to a teller demanding money.
The case was investigated by the U.S. Federal Bureau of Investigation (FBI) and was prosecuted by Assistant U.S. Attorney Sean A. Camoni.
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AG Sessions Selects SDTX to Receive Additional Resources to Combat the Southwest Border CrisisRead the Press Release
HOUSTON - Attorney General Jeff Sessions has selected the Southern District of Texas (SDTX) to receive additional personnel for the fight against illegal immigration, announced U.S. Attorney Ryan K. Patrick.
A total of 35 new Assistant U.S. Attorney (AUSA) positions have been allocated to the five U.S. Attorney’s Offices along the Southwest border, eight of which were dedicated to the SDTX.
The additional prosecutors will be utilized to handle the prosecutions of improper entry, illegal reentry and alien smuggling cases.
“The SDTX regularly prosecutes multiple thousands of illegal entry, illegal reentry and smuggling cases per year,” said Patrick. “These new attorneys will go towards increased enforcement of the administration’s zero tolerance policy towards those who illegally enter the county and other immigration matters. Our offices in Laredo, McAllen, Brownsville and Corpus Christi are the front line in this effort.”
“The American people made very clear their desire to secure our borders and prioritize the public safety and national security of our homeland,” said Sessions. “Promoting and enforcing the rule of law is essential to our republic. By deploying these additional resources to the Southwest border, the Justice Department and the Trump Administration take yet another step in protecting our nation, its borders and its citizens. It must be clear that there is no right to demand entry without justification.”
Due to a recent increase in the number of apprehensions at the Southwest border, the new AUSA positions will assist in the prosecutions of illegal reentry (8 U.S.C. § 1326), alien smuggling (8 U.S.C. § 1324) and improper entry (8 U.S.C. § 1325) pursuant to the Justice Department’s “Zero-Tolerance Policy” Sessions announced April 6, 2018, and its prior April 11, 2017, directive to prioritize charging immigration offenses.
A decision on how the new SDTX positions will be specifically allocated throughout the district has yet to be determined.
Thursday 3 May 2018
Wisconsin Woman Sentenced to 41 Months in Federal Prison for Stealing More Than $2 Million from Illinois CompaniesRead the Press Release
ROCKFORD — A Gratiot, Wisc., woman was sentenced today by U.S. District Judge Frederick J. Kapala for stealing more than $2 million from her former employer and related companies.
TERESA L. JOHNSON, 53, was sentenced to 41 months in federal prison, to be followed by three years of supervised release, and was also ordered to pay $2,204,508 in restitution. Johnson pleaded guilty to a wire fraud charge on Dec. 13, 2017.
According to the written plea agreement, Johnson was a credit and collections specialist for a company located in Winslow, Ill. Johnson also did credit and collections work for two other companies, all of which had the same ownership. As a part of her duties, Johnson would send payment instructions to customers that owed money to the companies. From Jan. 18, 2012, through Aug. 15, 2016, Johnson created payment instructions for customers making payment by electronic bank transfer that contained her personal bank account number and provided those instructions to customers of the companies.
As stated in the plea agreement, the customers electronically submitted payments to the bank account number provided by Johnson, rather than to the companies. Johnson received the customers’ payments, totaling more than $2 million, in her personal bank account. Johnson also admitted that she used various methods to conceal her scheme, including using prepayments on balances due from customers and applying those prepayments to the past due balances of the customers whose money she took.
The sentencing was announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois, and Jeffrey Sallet, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government was represented by Assistant U.S. Attorney Scott R. Paccagnini.
Wisconsin Man Pleads Guilty to Firearms Straw Purchasing ConspiracyRead the Press Release
United States Attorney Gregory G. Brooker today announced the guilty plea of MICHAEL PATRICK COUPE, 27, for his role in a firearms purchasing conspiracy. COUPE, who was charged on March 22, 2018, along with his co-defendant, JAMIE FLEMING, entered his guilty plea earlier today before Judge Donovan Frank in U.S. District Court in St. Paul, Minnesota.
“This defendant is a convicted felon who broke the law by illegally obtaining firearms through the use of a straw buyer, then resold the guns to another felon” said Assistant U.S. Attorney Jeffrey Paulsen. “These illegal purchasing schemes that seek to put guns in the hands of dangerous criminals will not be tolerated.”
According to the defendant’s guilty plea and documents filed in court, from September 13, 2017, through December 14, 2017, COUPE conspired with FLEMING and others to purchase five separate firearms, including a Mossberg Tactical 22 .22 caliber rifle, a SCCY model CPX-2, 9mm pistol, a Phoenix model HP22A .22 caliber pistol, a Taurus model PT111 9mm pistol, and a Taurus model PT140 .40 caliber pistol. When purchasing the firearms, FLEMING falsely attested on the required ATF Forms 4473 that she was the actual purchaser of the firearms, when in fact she was not. FLEMING purchased the firearms at the direction of COUPE, who has two prior felony convictions in Sawyer County, Wisconsin, and is prohibited from possessing firearms.
According to documents filed in court, following the purchase of the firearms, COUPE and FLEMING transferred some or all of the firearms to others, including an individual identified as G.T., who is a convicted felon. On multiple occasions between September 14, 2017, and November 27, 2017, COUPE and FLEMING traveled from Hayward, Wisconsin to Minneapolis, Minnesota where they met with G.T. and transferred firearms to G.T.
This case is the result of an investigation conducted by the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Minneapolis Police Department, and the Sawyer County Sheriff’s Office.
Assistant U.S. Attorney Jeffrey S. Paulsen is prosecuting this case.
Defendant Information:
MICHAEL PATRICK COUPE, 27
Hayward, Wis.
Convicted:
- Conspiracy – Felon in possession of a firearm, 1 count
- Felon in possession of a firearm, 1 count
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United States Attorney’s Office, District of Minnesota: (612) 664-5600Wilmington Man Indicted on Child Pornography ChargesRead the Press Release
RALEIGH – Robert J. Higdon, Jr., the United States Attorney for the Eastern District of North Carolina, announces that a Federal grand jury in Raleigh has returned an eleven-count indictment charging RICARDO JEROME BENNETT, SR., age 47, of Wilmington, North Carolina, with ten counts of Receipt of Child Pornography and one count of Possession of Child Pornography.
The indictment alleges that, beginning at a time unknown and ending on December 19, 2014, BENNETT received at least ten images containing visual depictions of minors engaged in sexually explicit conduct. The indictment further alleges that on December 19, 2014, BENNETT was found to be in possession of digital media containing images and videos involving minors engaged in sexually explicit conduct.
If convicted of these charges, BENNETT would face a maximum of twenty years’ imprisonment and up to a lifetime of supervised release following any term of imprisonment.
The charges and allegations contained in the Indictment are merely accusations. The defendant is presumed innocent unless and until proven guilty in a court of law.
The case is being investigated by the Federal Bureau of Investigation. Assistant United States Attorney Melissa Belle Kessler is prosecuting the case for the government.
Warren Man Arraigned on Attempted Enticement, Child Pornography ChargesRead the Press Release
PROVIDENCE, RI – A Warren man who allegedly communicated with and arranged to meet with a person he believed to be a 14-year-old girl with the intent of having her wear baby diapers while walking through a local mall and then engage in illicit sexual activity in the mall with her has been charged in federal court in Providence with attempted enticement and child pornography charges.
Christopher Kinney, 43, was released on unsecured bond following an initial appearance in federal court on April 27, on a criminal complaint charging him with one count each of attempted enticement of a minor, possession of child pornography and distribution of child pornography.
Kinney’s arrest and initial appearance in U.S. District Court are announced by United States Attorney Stephen G. Dambruch, Superintendent of the Rhode Island State Police Colonel Ann C. Assumpico, and Acting Special Agent in Charge of Homeland Security Investigations (HSI) Michael S. Shea.
It is alleged in court documents that Kinney had a series of online communications with the person he believed to be a 14-year-old girl. It is alleged that he described his desire to meet with the teenager at a local mall where he would dress her in a diaper and, after walking her around the mall, would engage in illicit sexual activity with her in a mall restroom.
The person Kinney was actually communicating with was a Rhode Island State Police Detective assigned to the Rhode Island State Police Internet Crimes Against Children (ICAC) Task Force, who is also a cross-designated HSI agent.
Kinney was arrested by members of the ICAC Task Force and HSI agents inside the mall on April 26, 2018, after he arrived and then walked around the mall in what appeared to be an effort to identify members of law enforcement. Inside of Kinney’s car law enforcement discovered, among other items, a diaper bag containing several diapers, a pacifier and baby bottle, condoms, candy and a canister of children’s bubble fluid.
Seized from Kinney’s pocket was an Apple iPhone on which it is alleged in court documents that investigators identified at least fifty-six images of child pornography. In addition, investigators identified numerous times where Kinney allegedly shared images of child pornography with others and investigators identified numerous files of children allegedly being harshly punished and/or beaten.
A criminal complaint is merely an allegation and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
The matter is being prosecuted by Assistant U.S. Attorney Ronald R. Gendron.
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Virginia man sentenced to 20 years for his role in a methamphetamine distribution operationRead the Press Release
ELKINS, WEST VIRGINIA – Kevin L. Navarro, of Berryville, Virginia, was sentenced this week to 240 months incarceration for methamphetamine distribution, United States Attorney Bill Powell announced.
Navarro, age 24, was sentenced today to 240 months incarceration, to run consecutively with any other federal or state sentence. Navarro, 24, pled guilty to one count of “Possession with Intent to Distribute Methamphetamine - Aiding and Abetting” in September 2017. He admitted to conspiring with another person to distribute methamphetamine in Hardy County, West Virginia in October 2016.
Assistant U.S. Attorney Stephen D. Warner prosecuted the case on behalf of the government. The United States Postal Inspection Service and the West Virginia State Police investigated.
U.S. District Judge John Preston Bailey presided.U.S. Attorney’s Office Concludes Investigation into Fatal Shooting at Southwest Washington Recreation CenterRead the Press Release
WASHINGTON - The U.S. Attorney’s Office for the District of Columbia announced today that there is insufficient evidence to pursue federal criminal civil rights or District of Columbia charges against two officers from the Metropolitan Police Department (MPD) who were involved in the May 16, 2017, fatal shooting of Isabelle Duval in Southwest Washington.
The U.S. Attorney’s Office and the Metropolitan Police Department (MPD) conducted a comprehensive review of the incident, including interviews of civilian and law enforcement witnesses, and the review of body worn camera (BWC) and other video footage; autopsy and toxicology reports; District of Columbia Department of Forensic Sciences’ reports, photographs, and diagrams; audio transmissions; and physical evidence collected on the scene and from Ms. Duval’s vehicle, including an operable Ruger SR 22 .22LR semi-automatic pistol; an operable .45 caliber Zenith Zig 1911 semi-automatic pistol loaded with six .45 caliber GECO cartridges; a black magazine loaded with ten .22 caliber REM cartridges; an extended clip magazine loaded with nineteen 9mm cartridges of various brands; and three empty magazines.
According to the evidence, on May 16, 2017, at approximately 6:26 p.m., two Seventh District officers were dispatched to the Bald Eagle Recreation Center located at 100 Joliet Street SW, for the report of a “woman with a gun.” Several moments earlier, Ms. Duval had driven her gray Nissan Altima into a tree next to the recreation center, after previously leaving the scene of an accident six tenths of a mile away. Civilian witnesses approached Ms. Duval’s smoking vehicle to help her get out. Although Ms. Duval appeared to have a broken leg, she told the witnesses that she did not want them to call 911 because she had a warrant for her arrest. Ms. Duval then pulled out an operable Ruger SR 22 .22LR semi-automatic pistol, and started crawling and scooting towards the front door of the recreation center. As one witness called 911, two other witnesses moved the children who were on the adjoining playground and inside the recreation center to safety. When Ms. Duval reached the front door, she tried to get into the building, but the doors were locked. She then sat down in front of the entrance with the weapon in her hand.
When the two Seventh District officers arrived at the recreation center, they observed Ms. Duval sitting in front of the recreation center with the weapon still in her hand. The officers, and two other officers who had arrived on the scene, approached Ms. Duval and repeatedly ordered her to drop the weapon, but she did not comply. At approximately 6:32 p.m., as one of the officers repositioned his cruiser onto the grass next to the sidewalk so that the officers could use the doors of the cruiser as ballistic shields, Ms. Duval rose up on her knees and pointed her weapon at the officer in the cruiser. The initial two responding officers, both of whom were positioned in front of Ms. Duval with civilians to their rear, immediately fired their weapons in response. Ms. Duval was struck once in the center of the chest and once in the left buttock, and a bullet grazed her thigh and groin. She fell to the ground and dropped the weapon by her side.
The officers immediately holstered their weapons and ran towards Ms. Duval to render medical assistance, but she no longer had a pulse when personnel arrived from the District of Columbia Department of Fire and Emergency Medical Services. Ms. Duval, 41, was then transported to Howard University Hospital, where she was officially pronounced dead. The autopsy report indicates that the cause of Ms. Duval’s death was the gunshot wound to her chest, and the toxicology report revealed that Ms. Duval was under the influence of alcohol, cocaine, methamphetamine, and fentanyl.
Department of Forensic Sciences technicians recovered Ms. Duval’s operable Ruger SR 22 .22LR pistol with an empty magazine inserted into the weapon’s well, and another weapon and multiple rounds of ammunition, from her vehicle. They also recovered seven cartridge casings that were fired by the two shooting officers.
After a careful, thorough, and independent review of the evidence, federal prosecutors have found insufficient evidence to prove beyond a reasonable doubt that the officers used excessive force under the circumstances. To the contrary, there is sufficient evidence that the officers were acting in self-defense and defense of others at the time of the shooting.
Use-of-force investigations generally
The U.S. Attorney’s Office reviews all police-involved fatalities to determine whether sufficient evidence exists to conclude that any officers violated either federal criminal civil rights laws or District of Columbia law. To prove such violations, prosecutors must be able to prove that the involved officers willfully used more force than was reasonably necessary. Proving “willfulness” is a heavy burden. Prosecutors must not only prove that the force used was excessive, but must also prove, beyond a reasonable doubt, that the officer acted with the deliberate and specific intent to do something the law forbids. A conclusion that “there is insufficient evidence” is not meant to suggest anything further about what evidence, if any, exists.
The U.S. Attorney’s Office remains committed to investigating allegations of excessive force by law enforcement officers and will continue to devote the resources necessary to ensure that all allegations of serious civil rights violations are investigated fully and completely. The Metropolitan Police Department’s Internal Affairs Division investigates all police-involved fatalities in the District of Columbia.
Tucson Man Sentenced to 8 Years' Prison for Possession of Firearms by Convicted FelonRead the Press Release
TUCSON, Ariz. – On May 2, 2018, Marc Ryan Shipley, 34, of Tucson, Ariz., was sentenced by U.S. Senior District Judge David C. Bury to 96 months’ imprisonment. Shipley had been previously found guilty following trial of possession of firearms and ammunition by a convicted felon.
Shipley had been convicted in 2007 of the felony offenses of conspiracy to commit bribery of a public official and interference with commerce by extortion, and as a result was prohibited by law from possessing firearms and ammunition. However, in March of 2016, Shipley entered Benson Justice Court with a handgun and was removed by courthouse security. Later that same month, Shipley was in an automobile accident and was armed with a pistol in a holster on his hip and another firearm in his vehicle. In April of 2016, ATF agents questioned Shipley about his possession of firearms. At that time Shipley had another loaded pistol in his vehicle. Agents obtained a search warrant for Shipley’s house, where they found eight more firearms, 1,754 rounds of ammunition, and several high capacity firearm magazines.
The investigation in this case was conducted by the Bureau of Alcohol, Tobacco, Firearms, and Explosives, with assistance from the Arizona Department of Public Safety and the Tucson Police Department. The prosecution was handled by Angela W. Woolridge, Assistant U.S. Attorney, District of Arizona, Tucson.
CASE NUMBER: CR-16-01061-TUC-DCB
RELEASE NUMBER: 2018-056_Shipley
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Three from Summit County indicted for having 1,500 pills of fentanyl stamped to look like OxycodoneRead the Press Release
Three people from Summit County were indicted in federal court after they were arrested with 1,500 pills stamped to look like Oxycodone but which were actually pills of fentanyl.
Gerald Bowerman, 36, of Cuyahoga Falls, Emmett Nelson, 34, of Akron, and Cortney Williams, 22, of Cuyahoga Falls, were each indicted on one count conspiracy to possess with intent to distribute fentanyl and one count of possession with intent to distribute fentanyl.
“This case is another stark reminder that drugs bought on the street don’t come with a verified list of ingredients and people have no idea what they are putting into their body,” U.S. Attorney Justin E. Herdman said. “Those who make the mistake of trying these drugs can be making the last mistake of their lives. These arrests helped save at least 1,500 lives.”
Akron Police Chief Kenneth Ball said: “The battle against the opioid crisis takes many shapes and impacts a widely diverse group. In this instance, criminal predators were willing to put so many at great risk by poisoning prescription drugs with fentanyl. Communities and families continue to suffer significantly because of acts like this. Fortunately law enforcement continues to work together to hold these despicable lawbreakers accountable.”
Bowerman, Nelson and Williams on April 17 traveled from 789 Upson Street in Akron to a residence at 1523 S. Chapel Street in Louisville, then back to the Akron residence. Bowerman carried a package with him as he entered the Akron home, according to court documents.
All three were detained later that day. Williams possessed 260 pills stamped as Oxycodone 30 milligrams, as well as a drug ledger that contained the amounts of pills Williams was selling and delivering. Agents and officers found approximately 1,000 pills on the kitchen counter next to an empty U.S. Postal package, according to court documents.
Nelson stated the package they picked up in Louisville was supposed to contain 1,500 pills and he was in the process of counting the pills when law enforcement entered the home, according to court documents.
While the pills were stamped as Oxycodone, a subsequent test revealed the pills were made up of fentanyl and cutting agents.
The defendants are scheduled to appear in court later this week.
This case was investigated by the Drug Enforcement Administration, Summit County Drug Unit and Akron Police Department. It is being prosecuted by Assistant U.S. Attorneys Vasile Katsaros and Patrick Burke.
If convicted, the defendant’s sentence will be determined by the court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense, and the characteristics of the violation. In all cases, the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.
An indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial, in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
Three Men Arrested for Scheme to Defraud Elderly Victims in the Sale of Worthless StockRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrests of VLADIMIR ZISKIND, a/k/a “Mike Palmer,” KEITH ORLEAN, a/k/a “Jack Allen,” and KEVIN WEINZOFF, a/k/a “Mike Palmer,” and unsealing of a criminal complaint charging ZISKIND, ORLEAN, and WEINZOFF with conspiracy, securities fraud, and wire fraud in connection with their scheme to target elderly persons to solicit purchases of stock in a series of valueless companies through a variety of lies and misrepresentations. The defendants are expected to be presented this afternoon before U.S. Magistrate Judge Debra Freeman.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, the defendants worked together over several years to trick elderly individuals into investing millions of dollars in worthless stock. The defendants allegedly deceived their victims into handing over their hard-earned money in exchange for nothing but lies and false promises. Today’s arrests demonstrate that this profoundly harmful and cynical alleged conduct will not be tolerated.”
FBI Assistant Director William F. Sweeney Jr. said: “We take all cases of securities fraud seriously, but there are few fraud schemes sleazier than defrauding elderly victims through deceit and manipulation. The defendants allegedly solicited more than $2 million in stock purchases from their more than four dozen victims. While nothing could restore the damage that has already been done, today we begin the process of holding those charged accountable for their actions.”
According to the allegations in the Complaint filed today in Manhattan federal court:[1]
For several years, the defendants operated a fraudulent scheme in which a salesman named “Mike Palmer” would call elderly persons on the phone and offer them what he claimed was a time-sensitive opportunity to buy stock in certain companies. In fact, there was no “Mike Palmer,” and the salesman was actually VLADIMIR ZISKIND or KEVIN WEINZOFF, who were taking turns using the fake alias. The purported time-sensitive investment opportunity was also fabricated by the defendants, as the companies in which they solicited investments were actually companies under their control. In one intercepted phone call conversation, ZISKIND described to KEITH ORLEAN his strategy for a successful investor sales pitch as: “You ram it down their fucking throat.” In another intercepted call between ZISKIND and ORLEAN, upon learning that a particular victim investor died, ZISKIND remarked: “I knew I should have pulled the last $10,000 out of him.”
The most recent version of the defendants’ phony sales pitch included false representations about an impending initial public offering, or “IPO,” for their company, Digital Donations Technologies, Inc. For example, in April 2018, one of the defendants assured a victim investor that “our company is doing great,” that the company had an offer for an IPO valued at approximately $300 million, and that defendant KEITH ORLEAN was considering a private sale of the company for more than $1.5 billion. In truth, however, the defendants knew that the company had little or no actual commercial value and that no such IPO or sale was taking place.
The FBI estimates that since April 2014, the defendants have convinced more than approximately 50 elderly persons to purchase stock in companies controlled by one or more of the defendants based on false representations. The defendants appear to have solicited more than $2 million in stock purchases from victims.
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ZISKIND, 49, of Brooklyn, New York, ORLEAN, 60, of Dix Hills, New York, and WEINZOFF, 53, of Brooklyn, New York, are each charged with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud. The securities fraud, wire fraud, and wire fraud conspiracy counts each carry a maximum penalty of 20 years in prison. The conspiracy to commit securities fraud count carries a maximum penalty of five years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the outstanding work of the FBI.
The prosecution of this case is being overseen by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Andrew Thomas and Max Nicholas are in charge of the case.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.