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Thursday 14 July 2016
Sun Valley, California, Man Pleads Guilty to Firearm Possession, Aggravated Identity TheftRead the Press Release
MUSKOGEE, OKLAHOMA - The United States Attorney’s Office for the Eastern District of Oklahoma announced today that GRIFFIN MICHAEL SKYLER TAYLOR, age 30, of Sun Valley, California, pled guilty to FELON IN POSSESSION OF FIREARM, in violation of Title 18, United States Code, Sections 922(g)(1), 924(a)(2) and AGGRAVATED IDENTITY THEFT, in violation of Title 18, United States Code, Sections 1028A(1).
The charges arose from an investigation by the Sallisaw Police Department and the United States Secret Service.
The Information alleged that on or about April 14, 2016, within the Eastern District of Oklahoma, the defendant having been convicted of a crime punishable by imprisonment for a term exceeding one year, did knowingly possess in and affecting commerce, a firearm which had been shipped and transported in interstate commerce.
The Information further alleges that on or about March 16, 2016, within the Eastern District of Oklahoma, the defendant did knowingly possess, without lawful authority, a means of identification of another person.
The Honorable Steven P. Shreder, Magistrate Judge in the United States District Court for the Eastern District of Oklahoma, in Muskogee, accepted the guilty plea and ordered the completion of a presentence report. Sentencing will be scheduled following its completion. The defendant will remain in the custody of the United States Marshals Service pending sentencing.
The statutory range of punishment is not more than 10 years imprisonment, up to a $250,000 fine or both. However, if the Armed Career Criminal Act applies, the range of punishment will be not less than 15 years imprisonment, up to a $250,000.00 fine or both.
Assistant United States Attorney Dean Burris represented the United States.
Stevenson, Alabama, Police Chief Convicted of Civil Rights Offenses for Assaulting and Failing to Protect ArresteeRead the Press Release
The Justice Department announced today that a federal jury convicted the Chief of Police of Stevenson, Alabama, Daniel Winters, 56, of two counts of deprivation of civil rights under color of law: one count for beating an arrestee, identified as D.F., and one count for failing to protect the victim from harm.
According to evidence presented at trial, on March 22, 2015, Winters and a civilian friend went to a residence to investigate suspicions that property had been stolen from the friend’s business and was located at the residence. Upon arrival, Winters and his friend entered the residence without a search warrant and encountered the victim, D.F. Winters and his friend then began to beat D.F. The beating moved outside where Winters and his friend continued to strike and kick the victim in front of the residence. Over the course of approximately five minutes, Winters not only participated in the beating, but stood by watching his friend beat D.F. and did nothing to stop it. A passing motorist called 911 to report the beating. D.F. was left bloody with wounds to his face, chest and back and was taken to the jail at the Stevenson Police Department. While at the jail, D.F. began to spit up blood. A jailor requested Winters’ permission to call an ambulance, but Winters refused the request. Eventually, the jailor received permission from another supervisor and D.F. was transported to a hospital where he received medical attention.
“This police chief abused his authority, broke the law and violated the public trust,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “When law enforcement leaders engage in egregious, unlawful conduct – as this defendant did here – they do a disservice to the thousands of hard-working officers who perform their difficult, demanding jobs each day with integrity and distinction.”
“Civil rights enforcement is a priority of our office and the trial team on this case did an excellent job of putting the evidence together and presenting it to the jury,” said U.S. Attorney Joyce White Vance of the Northern District of Alabama.
Winters faces a statutory maximum sentence of 20 years in prison for the civil rights charges. Sentencing is scheduled for Oct. 27, 2016, before U.S. District Judge Madeline H. Haikala of the Northern District of Alabama.
This case is being investigated by the FBI and Alabama’s State Bureau of Investigation. The matter is being prosecuted by Deputy Chief Laura Hodge of the Northern District of Alabama and Trial Attorney Samantha Trepel of the Civil Rights Division’s Criminal Section.
South Bend Man Sentenced to 180 Months for Drug TraffickingRead the Press Release
SOUTH BEND – United States Attorney for the Northern District of Indiana, David Capp, announced that Roman Olvera, 29, of Elkhart, Indiana was sentenced before Judge Jon E. DeGuilio for distribution of controlled substances and carrying a firearm during and in relation to a drug trafficking crime.
Olvera was sentenced to 180 months’ imprisonment and 4 years of supervised release.
According to documents filed in this case, on September 25, 2015, Olvera distributed heroin and marijuana to another person. Olvera admitted to carrying a firearm to protect himself from being robbed of drugs or proceeds during the transaction. When arrested on February 14, 2016, Olvera had approximately 114 grams of methamphetamine in his possession.
This case was prosecuted as a result of an investigation by the Drug Enforcement Administration. This case was prosecuted by Assistant United States Attorney Jesse M. Barrett.
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Sentencings for July 13 - 14, 2016Read the Press Release
Joshua Aaron Stevens, 35, of Cheyenne, Wyoming, was sentenced by Federal District Court Judge Alan B. Johnson on July 14, 2016, for sexual exploitation of a child. Stevens was arrested in Cheyenne, Wyoming. He received 264 months imprisonment, to be followed by a life-term of supervised release, and was ordered to pay a $500.00 fine and $100.00 special assessment. Restitution will be determined at a later date. This case was investigated by the Wyoming Division of Criminal Investigation Internet Crimes Against Children Task Force, the Office of Homeland Security and the Federal Bureau of Investigation.
Joe Cruz Proo, 46, of, Riverton, Wyoming, was sentenced by Chief Federal District Court Judge Nancy D. Freudenthal on July 13, 2016, for possession with intent to distribute methamphetamine and for possession of a firearm in furtherance of a drug trafficking crime. Proo was arrested in Riverton, Wyoming. He received 81 months imprisonment, to be followed by five years of supervised release, and was ordered to pay a $200.00 special assessment and restitution in the amount of $500.00. This case was investigated by the Riverton Police Department, the Wyoming Division of Criminal Investigation and the Bureau of Alcohol, Tobacco, Firearms and Explosives.
Schoharie Man Sentenced to 18 Months for Defrauding FEMARead the Press Release
ALBANY, NEW YORK – Scott A. Clapper, Jr., age 31, of Schoharie, New York, was sentenced today to 18 months in prison for making false statements and submitting false documents in connection with government benefits he received following Hurricane Irene.
The announcement was made by United States Attorney Richard S. Hartunian and Giovanni Tiano, Special Agent in Charge of the Department of Homeland Security’s Office of Inspector General, Detroit Field Office.
Senior U.S. District Judge Thomas J. McAvoy also ordered Clapper to serve 3 years of supervised release, to begin upon Clapper’s release from prison; to pay $16,426 in restitution to the Federal Emergency Management Agency (FEMA); and to pay a $1,300 special assessment to the Court. Clapper will serve the 18-month prison sentence concurrently with state prison sentences he is currently serving for burglary convictions unrelated to his defrauding of FEMA. He becomes eligible for state parole in March 2019.
As part of his guilty plea in January, Clapper admitted to making false statements and submitting false documents to FEMA following Hurricane Irene, which struck New York in August 2011 and made uninhabitable the Schoharie County home in which Clapper was living at the time.
Clapper told FEMA that his monthly rent at his new home, in Westerlo, was $1,200, when it was really $500. In an effort to document the $1,200 monthly rent, Clapper also submitted to FEMA fake lease agreements and rent receipts containing the forged signature of his landlord. Clapper received $16,426 from FEMA as a result of these falsehoods.
This case was investigated by the Detroit Field Office of the Department of Homeland Security’s Office of Inspector General, and was prosecuted by Assistant United States Attorney Michael Barnett.
San Diego man pleads guilty to making a false statement to a federally insured financial institutionRead the Press Release
CHARLESTON, W.Va. – A San Diego man pleaded guilty today to submitting a false draw request on a construction loan from United Bank, announced Acting United States Attorney Carol Casto. Daniel Berg, 60, entered his guilty plea to making a false statement to a financial institution.
Berg admitted that in the summer of 2004, he and another individual formed a real estate development company called Mountain America, LLC, and purchased land near the town of Union in Monroe County to develop a residential community. The development was called Walnut Springs Mountain Reserve. Mountain America operated primarily out of an office located in Lewisburg.
In April 2005, Berg assisted an individual in submitting a construction loan application to United Bank in Fayetteville for the purpose of building a home on a parcel in Walnut Springs Mountain Reserve. On May 13, 2005, United Bank approved the construction loan. Following approval of the loan, Berg admitted that through Mountain America he submitted a false draw request on the construction loan for over $68,000 in reimbursement for purported construction expenses. United Bank approved this draw and deposited the funds into Mountain America’s construction control checking account. On May 19, 2005, Berg wrote a check for over $37,000 from the Mountain America construction control account to another individual. Those funds were used for expenses unrelated to home construction in Walnut Springs Mountain Reserve.
Berg faces up to 30 years in federal prison and a $1 million fine when he is sentenced on November 8, 2016.
The investigation was conducted by the FBI. Assistant United States Attorney Larry R. Ellis is in charge of the prosecution. The plea hearing was held before Senior United States District Judge David A. Faber.
Please note: The headline above has been corrected from the original version released on July 14, 2016.
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San Antonio Trio Sentenced to Federal Prison for Mail Theft, Bank Fraud and Aggravated Indentity Theft SchemeRead the Press Release
In San Antonio today, a federal judge sentenced 35-year-old Miranda Davee to 29 months in federal prison for her role in mail theft, bank fraud and aggravated identity theft scheme announced United States Attorney Richard L. Durbin, Jr. and United States Postal Inspection Service Inspector in Charge Adrian Gonzalez.
In addition to the prison term, Chief United States District Judge Orlando Garcia ordered that Davee be placed on supervised release for a period of three years after completing her prison term.
Davee is the final defendant to be convicted and sentenced to federal prison in this investigation. On June 30, 2016, Judge Garcia sentenced 41–year-old Frederick Bockelman and 33–year-old Jacquelynne Cortez to 51 months and 45 months in federal prison, respectively. Judge Garcia ordered that all three defendants joint and severally pay a total of $68,705.08 restitution.
Last year, all three defendants pleaded guilty to one count of bank fraud and one count of aggravated identity theft.
According to court records, the defendants schemed to steal checks and other items from U.S. Mail depositories in and around the San Antonio area beginning in November 2014. Utilizing the stolen information, including bank checks, the defendants created, and subsequently used, fraudulent drivers’ licenses to negotiate fraudulent checks at various businesses in Bexar County.
“The Postal Inspection Service has sought those who steal mail for hundreds of years. Postal Inspectors investigate a wide variety of crimes in our mission to protect the integrity of the U.S. Mail. This investigation was an excellent example of a partnership between local and federal law enforcement agencies working together to bring down this conspiracy. When criminals use the mail to defraud, Postal Inspectors will not hesitate to ensure they are brought to justice,” stated United States Postal Inspector in Charge Adrian Gonzalez.
All three defendants have remained in federal custody since their arrests in June and July of last year
The case resulted from an investigation by the United States Postal Inspection Service together with the Selma Police Department. Assistant United States Attorney Tom Moore prosecuted this case on behalf of the Government.
Ronald Rup, Jr. Imprisoned for Equipment Theft from Agri-MarkRead the Press Release
The Office of the United States Attorney for the District of Vermont announced that Ronald Rup Jr., 54, a former resident of Fairfax who now lives in Essex Junction, was sentenced today in United States District Court in Brattleboro to 27 months of imprisonment following his guilty plea to a charge of wire fraud. U.S. District Judge J. Garvan Murtha also ordered that Rup serve three years of supervised release following completion of his prison term and pay restitution of more than $1.5 million. The court directed Rup to surrender to the Bureau of Prisons on September 13 to begin serving his sentence.
Last October, the United States Attorney filed a criminal information charging Rup with wire fraud and Rup pleaded guilty to that charge in November. According to the information, Rup was employed by Agri-Mark as its manager of IT infrastructure. Several years ago, when Agri-Mark was constructing a new headquarters in Waitsfield, Rup was the employee responsible for purchasing the IT network equipment for the facility. As part of his criminal scheme, Rup caused Agri-Mark to purchase more than 100 pieces of switching equipment than were needed to serve the new building. The switches were expensive – many costing $8500 or more. Between about April 2012 and March 2014, Rup stole the extra switches from Agri-Mark's inventory and sold them over the Internet to a Texas company which specializes in buying and selling new and used IT networking equipment. Rup sold the switches for about one-third of their cost to Agri-Mark. The Texas company paid for the switches by depositing funds into Rup's PayPal account. Altogether, Rup realized more than $475,000 from the sales. He used the money to buy vehicles, snowmobiles, motorcycles and jewelry, and to pay for improvements to his home.
This case was investigated by the Federal Bureau of Investigation.
Rup is represented by Brooks McArthur. The prosecutor is Assistant U.S. Attorney Gregory Waples.
Quinton Man Pleads Guilty to Possession of Firearm with Obliterated Serial NumberRead the Press Release
MUSKOGEE, OKLAHOMA - The United States Attorney’s Office for the Eastern District of Oklahoma announced today that MICHAEL CHRISTOPHER CONDI, age 38, of Quinton, Oklahoma, pled guilty to FELON IN POSSESSION OF FIREARM, on two (2) separate occasions, in violation of Title 18, United States Code, Sections 922(g)(1), 924(a)(2) and 924(e)(1) and POSSESSION OF FIREARM WITH OBLITERATED SERIAL NUMBER, in violation of Title 18, United States Code, Sections 922(k) and 924(a)(1).
The charge arose from an investigation by the Muskogee Police Department, the Muskogee County Sheriff’s Department and the Bureau of Alcohol, Tobacco and Firearms. The defendant was indicted in June, 2016.
The Indictment alleged that on or about January 22, 2016, within the Eastern District of Oklahoma, the defendant having been convicted of a crime punishable by imprisonment for a term exceeding one year, did knowingly possess in and affecting commerce, a firearm with an obliterated serial number and ammunition, which had been shipped and transported in interstate commerce.
The Indictment further alleges that on or about April 13, 2016 within the Eastern District of Oklahoma, the defendant having been convicted of a crime punishable by imprisonment for a term exceeding one year, did knowingly possess in and affecting commerce, a firearm which had been shipped and transported in interstate commerce.
The Honorable Steven P. Shreder, Magistrate Judge in the United States District Court for the Eastern District of Oklahoma, in Muskogee, accepted the guilty plea and ordered the completion of a presentence report. Sentencing will be scheduled following its completion. The defendant will remain in the custody of the United States Marshals Service pending sentencing.
The statutory range of punishment is not more than 10 years imprisonment, up to a $250,000 fine or both. However, if the Armed Career Criminal Act applies, the range of punishment will be not less than 15 years imprisonment, up to a $250,000.00 fine or both.
Assistant United States Attorney Dean Burris represented the United States.
Pittsburgh Felon Admits Illegally Possessing Gun and AmmunitionRead the Press Release
PITTSBURGH – A resident of Pittsburgh, Pennsylvania, pleaded guilty in federal court to a charge of a federal firearm violation, United States Attorney David J. Hickton announced today.
Donte Lamont Hall, age 26, pleaded guilty to one count before Senior United States District Judge Terrence F. McVerry.
In connection with the guilty plea, the court was advised that on January 8, 2016, Hall, a convicted felon, was in possession of a firearm and ammunition.
Judge McVerry scheduled sentencing for Oct. 24, 2016, at 9:30 a.m. The law provides for a maximum total sentence of 10 years in prison, a fine of $250,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed is based upon the seriousness of the offense and the prior criminal history of the defendant.
Assistant United States Attorney Troy Rivetti is prosecuting this case on behalf of the government.
The Bureau of Alcohol, Tobacco, Firearms and Explosives, the Pittsburgh Police Department, and the Allegheny County Adult Probation Office conducted the investigation that led to the prosecution of Hall.
Philadelphia Man Sentenced to Prison for Assault with Intent to Commit MurderRead the Press Release
Jackson, Miss - Ruben Cruz, 26, originally of Philadelphia, Mississippi, was sentenced on Tuesday, July 12, 2016, by Senior U.S. District Judge David C. Bramlette III, to 180 months in prison followed by three years of supervised release for assault with intent to commit murder and the use of a firearm during a crime of violence, announced U.S. Attorney Gregory K. Davis and FBI Special Agent in Charge Donald Alway.
The assault took place on the Choctaw Indian Reservation located near Philadelphia, Mississippi.
This case was investigated by the Federal Bureau of Investigation with assistance from the Choctaw Police Department. Assistant U.S. Attorney Pat Lemon prosecuted the case.
Pharr Woman Charged with Bank FraudRead the Press Release
McALLEN, Texas – A former bank employee has surrendered to federal authorities following allegations she stole more than $1 million from customer accounts, announced U.S. Attorney Kenneth Magidson. Cynthia Luna Rodriguez, 43, of Pharr, surrendered this morning and is expected to make her initial appearance before U.S. Magistrate Judge Ronald Morgan at 10:00 a.m. today. According to the criminal complaint, filed yesterday and unsealed today, Rodriguez worked at PlainsCapital Bank in Edinburg. Following her termination, employees discovered documents at her desk including a 1099 statement belonging to one of the victims, according to the allegations. The statement had allegedly been altered with whiteout over the address and interest earned sections and new information typed over them. The new address was actually a private mailbox that Rodriguez leased, according to the charges. The criminal complaint alleges there were multiple accounts that had the address information changed. Those accounts allegedly had a significant number of unauthorized withdrawls. Law enforcement executed a search warrant on Rodriguez’s private mailbox, at which time they discovered multiple mailings to account holders at her private mailbox address. Further investigation revealed a large amount of unexplained money being deposited into some of Rodriguez’s accounts, corresponding with the time of the unauthorized withdrawls from the victim accounts, according to the charges. The victim accounts allegedly belonged to individuals who interacted with Rodriguez directly when she was employed at the bank. The complaint alleges the accounts primarily belonged to elderly individuals and to individuals living out of the country whom were not likely to regularly monitor their accounts. When account holders or their representatives came in to close their statements, Rodriguez would allegedly move money from another victim’s account to backfill the account about to be closed. A forensic audit conducted by an outside accounting firm determined that approximately $1.3 million was taken from six victim accounts over an eight-year time span, according to the charges. If convicted, Rodriguez faces up to 30 years in federal prison and a possible $1 million fine. The FBI conducted the investigation. Assistant U.S. Attorney Joseph Leonard is prosecuting the case. A criminal complaint is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless convicted through due process of law.Pharmacy Burglar Sentenced to 112 Months ImprisonmentRead the Press Release
Michael Katzin, 35 of Philadelphia was sentenced to 112 months’ imprisonment yesterday by the U.S. District Court Judge Gene E.K. Pratter after having been found guilty by a jury in January 2016 of one count of conspiracy to commit pharmacy burglary, one count of conspiracy to possess with the intent to distribute controlled substances, one count of pharmacy burglary, and one count of possession with the intent to distribute controlled substances, announced United States Attorney Zane David Memeger.
The defendant conspired and agreed with his brothers Harry Katzin and Mark Katzin, both convicted previously, and others known and unknown to the grand jury, to enter Rite Aid pharmacies, including the Rite Aid pharmacy located at 1852 Brownsville Rd, Feasterville-Trevose, Pennsylvania on November 18, 2010, and the Rite Aid pharmacy located at 807 S. 4th Street, Hamburg, Pennsylvania on December 16, 2010, with intent to steal materials and compounds containing any quantity of a controlled substance, including amphetamine salts, dextroamphetamine, fentanyl, methylphenidate, dexmethylphenidate, morphine sulfate, meperidine, oxymorphone, tapentadol, codeine sulfate, hydromorphone, hydrocodone, hydrocodone APAP, hydrocodone chlorpheniram, oxycodone, and oxycodone APAP, each a Schedule II controlled substance; and whose replacement value was not less than $500, and to knowingly and intentionally possess these controlled substances with the intent to distribute them.
As part of its verdict, the jury found the defendant guilty of burglarizing the Rite Aid Pharmacy at 807 South 4th Street, Hamburg, Pennsylvania on December 16, 2010, with intent to steal materials and compounds containing any quantity of a controlled substance, including to Schedule II and other controlled substances, including amphetamine salts, dextroamphetamine, fentanyl, methylphenidate, dexmethylphenidate, morphine sulfate, meperidine, oxymorphone, tapentadol, codeine sulfate, hydromorphone, hydrocodone, hydrocodone APAP, hydrocodone chlorpheniram, oxycodone, and oxycodone APAP; all Schedule II controlled substances; and whose replacement value was not less than $500, and possessed these controlled substances with intent to distribute them.
The case was investigated by agents from the Federal Bureau of Investigation, the Drug Enforcement Administration, the Pennsylvania State Police, the New Jersey State Police, the Philadelphia Police Department, the Southampton Township Police Department, and the Hamburg Borough Police Department, and was prosecuted by Assistant United States Attorney Thomas M. Zaleski.
Owner of Costa Rican Call Center and Two Others Plead Guilty to Defrauding Elderly through Offshore Sweepstakes SchemeRead the Press Release
Two U.S. citizens and a Canadian citizen have pleaded guilty for their roles in a $9 million “sweepstakes fraud” scheme to defraud hundreds of U.S. residents, many of them elderly, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina.
Jeffrey Robert Bonner, 37, of Sacramento, California; Cody Trevor Burgsteiner, 33, of Houston; and Darra Lee Shephard, 57, of Calgary, Alberta, pleaded guilty this week before U.S. Magistrate Judge David Keesler of the Western District of North Carolina to various counts of conspiracy to commit wire fraud and mail fraud, wire fraud, conspiracy to commit money laundering and international money laundering, all in connection with a Costa Rican telemarketing fraud scheme. Sentencing dates have not been set.
As part of their guilty pleas, Bonner, Burgsteiner and Shephard each admitted that from approximately 2007 through November 2012, they worked in a call center located in Costa Rica, which Bonner owned, where they placed telephone calls to U.S. residents, falsely informing them that they had won a substantial cash prize in a “sweepstakes.” The victims, many of whom were elderly, were told that in order to receive the prize, they had to pay for a purported “refundable insurance fee,” the defendants admitted. Bonner, Burgsteiner and Shephard admitted that once they received the money, they contacted the victims again to tell them that their prize amount had increased, due to either a clerical error or because other winners had been disqualified. The victims were then told to send additional money to pay for new purported fees, duties and insurance to receive the now larger sweepstakes prize, the defendants admitted. The defendants further admitted that they and their co-conspirators continued their attempts to collect additional money from the victims until an individual either ran out of money or discovered the fraudulent nature of the scheme. To mask that they were calling from Costa Rica, the conspirators utilized voice over internet protocol (VoIP) phones that displayed a 202 area code, giving the false impression that they were calling from Washington, D.C., they admitted. According to admissions made in connections with their pleas, the defendants and their co-conspirators often falsely claimed that they were calling on behalf of a U.S. federal agency to lure victims into a false sense of security.
Bonner, Burgsteiner, Shephard and their co-conspirators were responsible for causing approximately $9 million in losses to hundreds of U.S. citizens.
The U.S. Postal Inspection Service, FBI, Internal Revenue Service-Criminal Investigation, Federal Trade Commission and Department of Homeland Security investigated the case, and the Criminal Division’s Fraud Section supervised the investigation. Senior Litigation Counsel Patrick Donley and Trial Attorneys William Bowne and Gustav Eyler of the Fraud Section are prosecuting the case.
Officials from U.S. and Japan Participate in 35th Bilateral Meeting in Washington to Discuss Antitrust EnforcementRead the Press Release
The heads of the antitrust agencies of the United States and Japan met today in Washington for their 35th Bilateral Competition Consultation. Principal Deputy Assistant Attorney General Renata Hesse of the U.S. Department of Justice’s Antitrust Division and Federal Trade Commission Chairwoman Edith Ramirez participated in high level meetings with senior officials from Japan’s Fair Trade Commission (JFTC), including JFTC Chairman Kazuyuki Sugimoto.
The discussions covered a wide range of topics, including recent enforcement developments, antitrust policy and enforcement involving intellectual property and technology and international enforcement cooperation. The purpose of the meeting is to reinforce ties of cooperation and share knowledge in light of the increasing internationalization of antitrust enforcement.
“The fact that this is our 35th bilateral meeting is a testament to the depth and strength of our relationship,” said Principal Deputy Assistant Attorney General Hesse. “Given the importance of our economic ties and our shared interests in antitrust, we are incredibly fortunate to have such a close and productive relationship with the JFTC.”
“We value our longstanding and productive relationship with the JFTC,” said Chairwoman Ramirez. “The opportunity to exchange views on both current enforcement efforts as well as cutting edge policy issues such as intellectual property and the sharing economy helps to advance enforcement cooperation and the development of sound competition policies globally.”
The United States-Japan bilateral competition consultations date back to 1976, making them the U.S. antitrust agencies’ longest-running annual consultations with any foreign antitrust agency.
Nine Year Sentence for Drug and Gun RunnerRead the Press Release
PHILADELPHIA- Kenneth Nesmith, 31, of Philadelphia, was sentenced today to 110 months in prison for his role in an illegal gun trafficking conspiracy as well as a drug trafficking conspiracy.
Nesmith sold four dangerous firearms: 1) a fully automatic machine gun; 2) an SKS style semi-automatic rifle; 4) an AR-15 style semi-automatic rifle; and 4) a 9 millimeter carbine rifle and 59.9 grams of crack cocaine to undercover officers. The operation was brought to a halt by an undercover investigation involving the Bureau of Alcohol, Tobacco, Firearms and Explosives. Nesmith pleaded guilty to conspiracy, gun trafficking, drug trafficking, and two counts of being a felon in possession of a firearm.
The case was investigated by the Bureau of Alcohol, Tobacco, Firearms, and Explosives and was prosecuted by Assistant United States Attorney Jessica Natali.
Nicholas County woman pleads guilty to escaping halfway houseRead the Press Release
CHARLESTON, W.Va. – A Nicholas County woman pleaded guilty today to escaping from a halfway house, announced Acting United States Attorney Carol Casto. Nikki Doddrill, 30, of Summersville, entered her guilty plea to escaping from federal custody.
Doddrill admitted that, while serving a sentence for conspiracy to manufacture methamphetamine, she was transferred to Dismas Charities in St. Albans to complete the remaining six months of her sentence in a residential halfway house. On the evening of May 12, 2015, Doddrill left the halfway house without permission and failed to return. She was apprehended by law enforcement in Richwood on August 27, 2015, and she was incarcerated for the remainder of her sentence.
Doddrill faces up to five years in federal prison when she is sentenced on September 21, 2016.
The United States Marshals Service is responsible for the investigation. Assistant United States Attorney Gabriele Wohl is in charge of the prosecution. The plea hearing was held before United States District Judge John T. Copenhaver, Jr.
The investigation in this case resulted in the third guilty plea this year for escaping from a halfway house. The permissions granted to residents of halfway houses are designed to make transitions from federal prison back into society successful. These cases are part of an effort by the United States Attorney’s Office to deter those serving the remainder of their prison sentences in halfway houses from unlawfully abandoning this transition period before their sentences are complete.
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New York Man Charged in Manhattan Federal Court with Fraud and Impersonating A Government OfficialRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), announced today the arrest of BRANDON JONES, a/k/a “Brandon McGeer,” a/k/a “Brandon Jones-McGeer,” for impersonating an officer or employee of the United States, wire fraud, conspiring to commit wire fraud, and passing fictitious government obligations. JONES, 34, was arrested by USPIS agents this morning in Manhattan and will be presented this afternoon before U.S. Magistrate Judge Frank Maas in Manhattan federal court.
Manhattan U.S. Attorney Preet Bharara stated: “As alleged, Brandon Jones purported to be the head of a fake organization tied to the U.N. and the U.S. government that promoted ‘international peace and security.’ But, as alleged, all that Jones was really promoting was a fraud scheme to obtain goods and services for himself through fake government purchase orders and travel requests. Thanks to the work of the U.S. Postal Inspection Service, Jones’s alleged fraud has now been exposed.”
USPIS Inspector-in-Charge Philip R. Bartlett stated: “Mr. Jones attempted to outwit everyone by using bogus contractual documents to further his alleged scheme to steal and manipulate businesses to provide goods and services to him as a ‘government official;’ but he couldn’t outwit Postal Inspectors when he was arrested for his criminal activities.”
According to the criminal Complaint[1] unsealed today:
Beginning in at least November 2015, JONES held himself out as a Commissioner of “The Office of the Commissioner, an IGO,” an organization falsely purporting to be part of the United Nations and the United States government. In his role as Commissioner, JONES gave fraudulent purchase orders and government travel requests to businesses in exchange for tens of thousands of dollars’ worth of products and services, including airline tickets and electronics, to which he was not entitled and for which the businesses were never paid.
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JONES is charged with one count of impersonating an official or employee of the United States government, which carries a maximum sentence of three years in prison; one count of wire fraud, which carries a maximum sentence of 20 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and one count of passing fictitious obligations, which carries a maximum sentence of 25 years in prison. The four charges each also carry a maximum fine of $250,000, or twice the gross gain or loss from the offense.
In March 2015, an investigation undertaken with the United States Secret Service into one of JONES’s employees, an alleged “Deputy Commissioner” of the “Office of the Commissioner, an IGO,” Sandra Zongo, led to Zongo being charged with one count of impersonating an official or employee of the United States government; one count of wire fraud; and one count of passing fictitious obligations. Zongo was arrested on those charges in May 2015, and her case (15 Cr. 319) is presently scheduled to proceed to trial before U.S. District Judge Kimba M. Wood in October 2016.
Mr. Bharara praised the outstanding investigative work of the USPIS. He added that the investigation is continuing.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Kiersten A. Fletcher and Jessica K. Fender are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
The USPIS encourages the public to report any information it has regarding JONES or the “Office of the Commissioner” by phone at (212) 330-3518 or by email at [email protected].
[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.
New Orleans Man Pleads Guilty to Fraud in Connection with Stolen Credit CardsRead the Press Release
U.S. Attorney Kenneth A. Polite announced that CLIFF DURIO, age 25, of New Orleans, pled guilty today to a one-count Indictment charging him with fraud in connection with access devices.
According to court documents, DURIO knowingly and with intent to defraud, possessed numerous counterfeit and unauthorized access devices, including credit cards and gift cards. DURIO was arrested at the New Orleans Airport after TSA screeners, while investigating a suspicious object in his luggage, discovered a bundle of over 500 credit cards. The cards were encoded and embossed with stolen accounts numbers, several of which had reported fraud.
DURIO faces a minimum term of imprisonment of ten years, a fine of up to $250,000 and three years of supervised release following any term of imprisonment. U.S. District Judge Lance M. Africk set sentencing for October 6, 2016.
U.S. Attorney Polite praised the work of the U.S. Secret Service in investigating this matter. Assistant United States Attorney David Haller is in charge of the prosecution.
Myrtle Beach Man Sentenced on Wire Fraud ChargeRead the Press Release
Contact Person: John Potterfield
Florence, South Carolina---- Acting United States Attorney Beth Drake stated that Shayne Harrison Smith, of Myrtle Beach, South Carolina, was sentenced to 63 months imprisonment in federal court. In July of 2015, Smith pled guilty to Wire Fraud, in violation of Title 18, United States Code, Section 1343. After Smith completes the term of imprisonment, he will be on federal supervised release for 5 years. Smith was also ordered to pay $2,213,307.99 in restitution to the victims in his case. United States District Judge R. Bryan Harwell, of Florence, imposed the sentence.
Information presented at an earlier hearing established that Mr. Smith was involved in a "mortgage rescue scheme." He convinced distressed home owners that he could negotiate better terms of repayment with their lenders. Mr. Smith required the victims to pay him fees which he used for his own benefit. He encouraged some of the home owners to cease communicating with their lenders and stop making payments to the lenders, because he would take care of everything. Mr. Smith never successfully renegotiated any of the mortgages.
The case was investigated by the FBI. Assistant United States Attorney John C. Potterfield of the Columbia United States Attorney’s Office prosecuted the case.
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Muskogee Man Pleads Guilty to Possession of Firearm, AmmunitionRead the Press Release
MUSKOGEE, OKLAHOMA - The United States Attorney’s Office for the Eastern District of Oklahoma announced today that IKE ALEXANDER, age 34, of Muskogee, Oklahoma, pled guilty to FELON IN POSSESSION OF FIREARM AND AMMUNITION, in violation of Title 18, United States Code, Sections 922(g)(1), 924(a)(2) and 924(e)(1).
The charge arose from an investigation by the Muskogee Police Department and the Federal Bureau of Investigation. The defendant was indicted in June, 2016.
The Indictment alleged that on or about March 25, 2016, within the Eastern District of Oklahoma, the defendant, IKE ALEXANDER, having been convicted of a crime punishable by imprisonment for a term exceeding one year, did knowingly possess in and affecting commerce, a firearm and ammunition, which had been shipped and transported in interstate commerce.
The Honorable Steven P. Shreder, Magistrate Judge in the United States District Court for the Eastern District of Oklahoma, in Muskogee, accepted the guilty plea and ordered the completion of a presentence report. Sentencing will be scheduled following its completion. The defendant will remain in the custody of the United States Marshals Service pending sentencing.
The statutory range of punishment is not more than 10 years imprisonment, up to a $250,000 fine or both. However, if the Armed Career Criminal Act applies, the range of punishment will be not less than 15 years imprisonment, up to a $250,000.00 fine or both.
Assistant United States Attorney Dean Burris represented the United States.
Mississippi Drug Dealer Sentenced to Twenty Years in PrisonRead the Press Release
Jackson, Miss - On July 12, 2016, Senior U.S. District Judge David C. Bramlette III sentenced convicted drug dealer Marvin Rocedreck Brown, 42, of Union, Mississippi, to 240 months in prison and ordered him to pay a $1,500 fine for conspiracy to launder drug proceeds, announced U.S. Attorney Gregory K. Davis. The sentence came one day after U.S. District Judge Carlton W. Reeves sentenced Brown to 240 months in prison followed by five years of supervised release on drug conspiracy and distribution charges and fined him $1,500. Both sentences are to run concurrently.
Marvin R. Brown was found guilty by a jury in December, 2015, on three counts of drug conspiracy and possession with intent to distribute methamphetamine. He pled guilty in March, 2016, to conspiracy to launder drug proceeds. Brown was responsible for the distribution of large quantities of cocaine and methamphetamine in central Mississippi and throughout Newton and Neshoba Counties for several years.
Law enforcement officials have seized or forfeited Brown’s assets including his personal residence on Highway 489 in Union, a residence on Highway 15 in Union, three acres in Union, and multiple mobile homes with ten acres on Rigdon Road in Union. Other seized assets included cash, a bank account, various vehicles and ATVs, a Kamatsu bulldozer, a tractor and trailer, zero-turn mowers, motorcycles, a GMC dump truck, a Fortress track paver etc.
The Organized Crime and Drug Enforcement Task Force (OCEDTF) investigation was conducted by the Drug Enforcement Administration, the Internal Revenue Service Criminal Division, and the Mississippi Bureau of Narcotics with assistance from the Newton County Police Department, the Decatur Police Department and the Neshoba County Sherriff’s Office.
The cases were prosecuted by Assistant U.S. Attorneys Darren J. LaMarca, Christopher Wansley and Erin Chalk.
Milford Man Sentenced to 10 years for Possessing Child PornographyRead the Press Release
Contact: Chris Ruge
Assistant United States Attorney
Tel: (207) 945-0373Bangor, Maine: United States Attorney Thomas E. Delahanty II announced that Anthony Parent, 23, of Milford, Maine, was sentenced today in U.S. District Court by Judge John A. Woodcock, Jr. to 10 years in prison and 10 years of supervised release for possessing child pornography. He was also ordered to pay $7,000 in restitution to victims of his offense. He pleaded guilty on October 30, 2015.
According to court records, from about October 31, 2013 to about July 17, 2014, Parent kept images and videos of child pornography on his personal computer, uploaded them to online accounts, and used electronic mail services to trade child pornography with others.
In imposing the sentence, Judge Woodcock commented that the images possessed by the defendant, some depicting the sexual abuse of babies, were “abhorrent” and “unspeakable.”
The investigation was conducted by the Federal Bureau of Investigation, the Maine State Police, and the Penobscot County Sheriff’s Office.
Metairie Woman Convicted of Multi-State Bank Fraud Scheme and Aggravated Identity TheftRead the Press Release
BATON ROUGE, LA - United States Attorney Walt Green announced today that MARSHA COLE, age 56, of Metairie, Louisiana, pled guilty yesterday before Chief U.S. District Judge Brian A. Jackson to aggravated identity theft and engaging in a scheme to defraud numerous banks in Louisiana, Mississippi, and Texas. As part of the scheme, COLE embezzled approximately $102,257 from her victim accounts at several banks. She is set to be sentenced on November 17, 2016.
At yesterday’s hearing, COLE admitted that she obtained the personal identifiable information (PII) of her victims and used that information to create fraudulent identification cards. Armed with that information, COLE went to banks associated with her victims, forged their signatures, and withdrew funds. Throughout her scheme, COLE admitted that she attempted to withdraw over $136,000 during over thirty-one (31) attempted withdrawals from victim accounts at twenty-one (21) different banks in Louisiana, Mississippi, and Texas. Ultimately, COLE was able to withdraw over $102,257 from victim accounts.
United States Attorney Green stated: “Fraud against our banks threatens not just the financial institutions, but also their customers and ultimately the taxpayers. This case is another example of my office working together with our law enforcement partners to aggressively investigate and prosecute identity theft offenses, one of the fastest growing crimes in America.”
FBI Special Agent-In-Charge Jeffrey S. Sallet stated: “This case is yet another example of the FBI’s commitment to work with our partners at the United States Attorney’s Office to investigate and prosecute individuals who willingly violate the law in order to personally enrich themselves at the expense of others.”
This matter is being prosecuted by the United States Attorney’s Office for the Middle District of Louisiana. The investigation has been conducted by the Baton Rouge Resident Office of the Federal Bureau of Investigation and the Louisiana State Police. The matter is being prosecuted by Assistant United States Attorney Jessica M.P. Thornhill.
Manhattan U.S. Attorney Announces Settlements Totaling $4.29 Million with For-Profit School and Its Former Chief Operating OfficerRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Brian Hickey, Special Agent in Charge of the U.S. Department of Education (“USDOE”), Office of Inspector General’s Northeast Region (“OIG”), announced today that the United States has settled civil claims under the False Claims Act against the Allen School of Health Sciences (“Allen School”), a for-profit educational institution based in Brooklyn and Queens, New York, that offers certificate and degree programs in medical services fields, and Christopher Wargo (“Wargo”), the former chief operating officer of the Allen School. The settlements resolve claims that the Allen School and Wargo violated the USDOE rule prohibiting the payment of incentive compensation to enrollment personnel at for-profit schools based on their success in securing student enrollments (“incentive compensation rule”). This rule is meant to curb the risk that recruiters will seek to enroll poorly qualified students who will derive little or no benefit from the schooling and may be unable or unwilling to repay the debt they incur in connection with their enrollment. The settlement with the ALLEN SCHOOL also resolves claims that the Allen School violated a separate USDOE rule prohibiting schools from providing inaccurate job placement rates to prospective students (“job placement rates rule”).
In the settlements, approved today by United States District Judge Paul A. Engelmayer, the ALLEN SCHOOL agreed to pay $4.25 million, and WARGO agreed to pay $40,000 to resolve the claims. The Allen School and Wargo also made admissions regarding their respective conduct.
Manhattan U.S. Attorney Preet Bharara said: “The incentive compensation and job placement rates rules are designed to protect prospective students and to ensure that federal education grant and loan funds are spent appropriately. With today’s settlements, the Allen School and Wargo have taken responsibility for their conduct and agreed to pay significant financial penalties.”
USDOE OIG Special Agent in Charge Brian Hickey said: “I am proud of the work of OIG Special Agents and our law enforcement partners for their work in this case and their dedication to protecting the integrity of federal student aid funds and students that rely on those funds to make their dreams of higher education a reality. We will continue to pursue those who misappropriate federal student aid or game the system for their own self interests. America’s students and taxpayers deserve nothing less.”
As alleged in the Complaint-in-Intervention filed in Manhattan federal court:
To receive federal funds, a for-profit school like the Allen School must enter into a Program Participation Agreement (“PPA”) with the USDOE. The PPA conditions the eligibility of a school to receive federal funds on compliance with various rules and requirements, including the incentive compensation and job placement rates rules. A school that enters into a PPA certifies that, for the duration of the PPA, it will comply with those rules and requirements. Throughout the 2011-2012, 2012-2013, and 2013-2014 academic years (“Covered Period”), the incentive compensation rule precluded schools from providing any incentive payments, including salary increases, based directly or indirectly on success in securing student enrollments. The job placement rates rule prohibited schools from advertising placement rates that were false or misleading.
The Allen School entered into PPAs with the USDOE in 2007 and 2013, and based on the certifications it made in those PPAs, received federal funding from the USDOE throughout the Covered Period. Yet during that time, the Allen School systematically violated the incentive compensation and job placement rates rules.
With respect to the incentive compensation rule, the Allen School provided enrollment personnel with daily, weekly, and monthly expectations for various enrollment metrics – including the number of students enrolled – and it linked enrollment personnel’s obtaining promotions and corresponding salary increases with their success in meeting those metrics. The ALLEN SCHOOL carefully tracked the performance of enrollment personnel as to the enrollment metrics, and counseled employees for missing even one day’s goals. Moreover, during conversations with Allen School personnel, WARGO and others made it clear that a primary factor in determining whether enrollment personnel would be eligible for promotions and corresponding pay increases would be whether they had met or exceeded their numeric expectations. For example, Wargo instructed a campus director at the Allen School to tell his subordinate enrollment personnel that the only way they could increase their pay was to meet or exceed their numeric enrollment quotas. Consistent with such statements, a primary factor in the Allen School’s and WARGO’s decisions regarding promotions and salary increases for enrollment personnel was success in securing enrollments.
As to the job placement rates rule, throughout the Covered Period, enrollment personnel at the Allen School consistently represented to prospective students that the Allen School had a job placement rate of 86 percent, even though it did not. The 86 percent figure was used to describe the ALLEN SCHOOL’s job placement rate at all times during the Covered Period, for all of the ALLEN SCHOOL’s programs, and for all of its campuses. In fact, however, the ALLEN SCHOOL’s job placement rate varied from year to year, program to program, and campus to campus.
As part of the settlements, both the Allen School and Wargo admitted, acknowledged, and accepted responsibility for the following conduct, all of which occurred throughout the Covered Period:
- The ALLEN SCHOOL gave its enrollment advisers and other enrollment personnel daily, weekly, and monthly expectations for various enrollment metrics, such as number of phone calls to prospective students, number of interviews with prospective students, and number of students enrolled.
- WARGO, and other individuals employed by the Allen School with managerial responsibility over enrollment personnel, told enrollment personnel that a primary factor in determining whether they would be eligible for promotions to higher level positions with increased salaries would be whether they had met or exceeded their numeric expectations.
- As a result of the above-referenced statements by and others, many enrollment personnel believed that the only way they could receive promotions with corresponding salary increases was to meet or exceed their numeric expectations.Certain Allen School enrollment personnel who received promotions with corresponding salary increases believed that they had received the promotions and salary increases because they had met or exceeded their numeric expectations, and they further believed that they would not have received the promotions and salary increases if they had not.
- Certain enrollment personnel represented to prospective students that the had a job placement rate of 86 percent.The job placement rates that the reported to its institutional accrediting body in fact varied from campus to campus, program to program, and year to year.
In connection with the filing of the lawsuit and settlements, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.
* * *
Mr. Bharara thanked USDOE’s Office of the Inspector General for its investigative efforts and assistance with the case.
This case is being handled by the Office’s Civil Frauds Unit. Assistant United States Attorneys Christopher B. Harwood and Andrew E. Krause are in charge of the case.
Manhattan U.S. Attorney Announces Extradition of Former Chairman and CEO of Technology Start-Up Company Kit DigitalRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, today announced that KALEIL ISAZA TUZMAN, the former Chairman and CEO of KIT digital (“KITD”), was extradited from Colombia, where he had been arrested in September 2015 for market manipulation and accounting fraud charges. TUZMAN, a dual citizen of the United States and Colombia, arrived in the Southern District of New York today, and will be presented tomorrow in Manhattan federal court. The case is assigned to U.S. District Judge Paul G. Gardephe.
Manhattan U.S. Attorney Preet Bharara said: “Nearly a year ago, we charged the former Chairman and CEO of KIT digital, Kaleil Isaza Tuzman, with engaging in an elaborate scheme to mislead investors and regulators about the financial health of the publicly traded company he ran. Now, having been extradited from Colombia, Tuzman will face federal charges of market manipulation and accounting fraud in Manhattan federal court.”
According to the allegations contained in the Indictments filed in this case,[1] TUZMAN and others engaged in the following fraudulent schemes during his tenure as KITD’s Chairman and CEO:
The Market Manipulation Scheme
Between in or about December 2008 and in or about September 2011, TUZMAN, Stephen E. Maiden, who operated an investment advisory firm called Maiden Capital, and Omar Amanat engaged in efforts to artificially inflate the share price and trading volume of KITD shares. During this time period, during which KITD shares traded on the OTC Bulletin Board and on the NASDAQ, Maiden, at TUZMAN’s and Amanat’s behest, purchased and sold shares of KITD through Maiden Capital, at times for the purpose of manipulating the stock price and at times for the purpose of creating the illusion of greater volume in the trading for KITD shares.
For instance, Maiden, with TUZMAN’s knowledge and approval, frequently engaged in match trading in which Maiden caused an account under Maiden’s control to buy or sell KITD stock, and on the same day caused an account under Maiden’s control to take the opposite position. TUZMAN also directed Maiden to make timely purchases of KITD stock in an effort to manipulate the price of KITD shares at certain critical moments, including, for example, when KITD was seeking to raise additional capital and in the weeks before KITD’s stock began trading on the NASDAQ. At times, Maiden was responsible for nearly all of the day’s trading activity in KITD stock.
Over the course of the scheme, TUZMAN caused KITD to invest approximately $1,150,000 in company cash in Maiden Capital but failed to disclose to KITD shareholders that these investments with Maiden Capital were not part of an arms-length relationship. Instead, TUZMAN portrayed these investments as efforts to safely invest assets of KITD. In reality, TUZMAN caused KITD to make these investments in order to help fund Maiden’s purchases of KITD shares, as part of the effort to manipulate the market described above. And, on one occasion, TUZMAN caused KITD to invest $250,000 in Maiden Capital so that Maiden could reimburse TUZMAN for a prior, personal investment that TUZMAN made with Maiden Capital, thereby using KITD as his personal bank.
The Accounting Fraud Scheme
From at least in or about 2010 through in or about 2012, TUZMAN and Robin Smyth, KITD’s former CFO, with others, engaged in an illegal scheme to deceive KITD shareholders, members of the investing public, KITD’s independent auditors, and others concerning KITD’s true operating performance and financial results.
TUZMAN, working with others, including Smyth, devised and executed a scheme to inflate KITD’s revenue falsely. This scheme involved two principal methods: (a) the improper recognition of revenue from so-called “perpetual license” contracts for KITD software (contracts that gave the purchasing customer the right to use the licensed software indefinitely), and (b) the execution of fraudulent “round-trip” transactions which had the effect of using KITD’s own cash, rather than payments received from customers, to pay off bills, known as accounts receivable, that were due and owed to KITD, including those resulting from KITD’s improper revenue recognition practices, rather than disclose to KITD’s auditors and the investing public the fact that the bills were uncollectible or, in some cases, had resulted from fabricated contracts. These fraudulent practices caused KITD to materially overstate its reported revenue, which had the effect of materially overstating KITD’s net income and earnings on its annual and quarterly financial reports issued from the fiscal quarter ending June 30, 2010 through the fiscal quarter ending March 31, 2012.
TUZMAN, 44, was extradited on three counts in the Indictment. For the market manipulation scheme, TUZMAN faces trial on one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud. For the accounting fraud scheme, TUZMAN faces trial on one count of conspiracy to commit securities fraud, make false statements in annual and quarterly reports filed with the Securities and Exchange Commission (“SEC”), and make false statements to auditors.
The conspiracy to commit securities fraud carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The conspiracy to commit securities fraud, make false statements in annual and quarterly SEC reports, and make false statements to auditors carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The conspiracy to commit wire fraud carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Bharara praised the work of the Federal Bureau of Investigation and the United States Postal Inspection Service, and thanked the SEC for its assistance. He also thanked the Colombian government for its help in apprehending TUZMAN. He also thanked U.S. consular officials at the U.S. Embassy in Colombia and the U.S. Department of Justice, Office of International Affairs for their assistance. He added that the investigation is continuing.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Damian Williams, Andrea M. Griswold, and Edward Y. Kim are in charge of the prosecution.
The allegations contained in the Indictments are merely accusations, and the defendant is
presumed innocent unless and until proven guilty.
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[1] As the introductory phrase signifies, the entirety of the text of the Indictments and the description of the Indictments set forth below constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney Announces $9.5 Million Settlement with Columbia University for Improperly Seeking Excessive Cost Recoveries in Connection with Federal Research GrantsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Scott J. Lampert, Special Agent in Charge of the New York Region of the Office of Inspector General for the U.S. Department of Health and Human Services (“HHS-OIG”), announced today a settlement of a civil fraud lawsuit against THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK (“COLUMBIA”) for improperly seeking and receiving excessive cost recoveries in connection with research grants funded by the National Institutes of Health (“NIH”). The United States’ Complaint-In-Intervention (the “Complaint”) alleges that from July 1, 2003, through June 30, 2015, COLUMBIA impermissibly applied its “on-campus” indirect cost rate – instead of the much lower “off-campus” indirect cost rate – when seeking federal reimbursement for 423 NIH grants where the research was primarily performed at off-campus facilities owned and operated by the State of New York and New York City. The Complaint further alleges that COLUMBIA failed to disclose to NIH that it did not own or operate these facilities and that COLUMBIA did not pay for use of the space for most of the relevant period.
Yesterday, U.S. District Court Judge Paul A. Engelmayer approved a settlement stipulation to resolve the Government’s claims against COLUMBIA. Under the settlement, COLUMBIA is required to pay $9.5 million to the United States. In addition, COLUMBIA has admitted that it applied the on-campus indirect cost rate to the 423 NIH grants even though the research was primarily performed in space not owned or operated by Columbia, and that it submitted to NIH certified reports that used the on-campus indirect cost rate to calculate the indirect cost amounts claimed by the university.
Manhattan U.S. Attorney Preet Bharara said: “All institutions that receive federal grant money must abide by applicable rules and regulations governing the use of the funds and the extent to which costs incurred by the institution are reimbursable. For years and for over 400 research grants, Columbia improperly sought and recovered inflated cost recoveries. For seeking and receiving improperly inflated cost recoveries from limited federal research funds, Columbia has made admissions and will pay $9.5 million.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “It is disturbing that Columbia University, a prestigious institution, would improperly seek excessive cost reimbursements from NIH, as alleged in the settlement. Money gained by such behavior deprives other research programs of funds that could yield life-altering new treatments. We will continue to work with our law enforcement partners to ensure institutions who engage in wrongful activity are held accountable.”
As alleged in the Complaint filed in Manhattan federal court:
Educational institutions are generally entitled to seek and receive federal reimbursement only for actual costs incurred by the institution in support of federally sponsored grants. This is true regardless of whether the costs are direct costs (i.e., costs that can be identified specifically with a particular research project, such as the cost of the materials for the project) or indirect costs (i.e., costs that are incurred for common or joint objectives and, therefore, cannot be identified with work performed on a particular research project, such as operation and maintenance expenses).
A university recovers its indirect costs for a particular research project by applying the relevant facilities and administrative rate (the “F&A Rate”) for the project to a subset of the direct costs it incurred in connection with the project. HHS and educational institutions negotiate one F&A Rate for research primarily performed on-campus (“On-Campus F&A Rate”), and a separate F&A Rate for research primarily performed off-campus (“Off-Campus F&A Rate”). The On-Campus F&A Rate is typically more than double the Off-Campus F&A Rate to account for the fact that when conducting research off-campus educational institutions do not incur the indirect facilities-related costs that they would otherwise incur if the activities were performed on-campus.
From July 1, 2003, through June 30, 2015, COLUMBIA’s On-Campus F&A Rate was approximately 61 percent, its Off-Campus F&A Rate was 26 percent, and its Modified Off-Campus F&A Rate was 29.4 percent. The Modified Off-Campus F&A Rate was to be applied to research conducted off-campus but within a certain proximity of the COLUMBIA campus.
COLUMBIA has a collaborative relationship with the New York State Psychiatric Institute (“NYSPI”), a clinical research facility administered by the New York State Office of Mental Health. COLUMBIA faculty perform research in two off-campus buildings owned by the State of New York and operated by NYSPI (the “NYSPI Buildings”). COLUMBIA faculty also perform research in another off-campus building owned and operated by the City of New York (the “City Building”).
For most of the relevant period, COLUMBIA did not pay the State of New York for use of the NYSPI Buildings, and therefore did not incur indirect “facilities-related” costs with respect to the medical research performed in these buildings. Similarly, COLUMBIA did not pay the City of New York for use of the City Building.
During the relevant period, COLUMBIA received NIH funding for 423 grants where the research primarily took place in the off-campus NYSPI Buildings or the off-campus City Building (“NIH Grants”). COLUMBIA improperly applied the On-Campus F&A Rate when seeking indirect cost reimbursements from NIH for these grants. To obtain the indirect cost reimbursements, Columbia periodically submitted to NIH certified Federal Financial Reports (“FFRs”). At the time that COLUMBIA submitted the FFRs for the NIH Grants, the university knew that it did not own or operate the NYSPI Buildings or the City Building where the research was primarily being performed and that it did not incur any costs relating to those spaces for most of the relevant period, but nevertheless sought reimbursement based on the On-Campus F&A Rate.
COLUMBIA did not state on the applications for the NIH Grants that the research would be primarily performed off-campus, as required. Instead, Columbia frequently included the main address for the College of Physicians & Surgeons in the section of the application that was supposed to list the primary performance location. Even where the NYSPI Buildings or the City Building were listed in that section of the grant application, or mentioned elsewhere in the application, COLUMBIA failed to disclose that these buildings were not owned and operated by the university.
Starting in fiscal year 2009, in lieu of paying rent for use of one of the NYSPI Buildings, the Department of Neuroscience paid NYSPI a portion of the inflated indirect cost recoveries it received from NIH for research projects performed in that building.
In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.
* * *
Mr. Bharara thanked HHS-OIG for its investigative efforts and extensive assistance with the case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.
Man Pleads Guilty to Penny Stock SchemeRead the Press Release
CONTACT: Barbara Burns
PHONE: (716) 843-5817
FAX: (716) 551-3051BUFFALO, N.Y.– U.S. Attorney William J. Hochul, Jr. of the Western District of New York announced today that Jamie Boye, 34, of Jamestown, N.Y., who was convicted of conspiracy to commit securities fraud, was sentenced to 18 months by U.S. District Court Judge Richard J. Arcara.
Assistant U.S. Attorney Aaron J. Mango stated that from October 22, 2008, to September 15, 2011, the defendant participated in what is commonly known as a “pump-and-dump” scheme. Specifically, the defendant and his co-conspirators registered several Internet domain names, such as www.trypennystocks.com, and falsely advertised 29 penny stocks as being profitable investments. These misleading advertisements encouraged investors to invest in the advertised penny stocks, causing the stock prices to increase. Once the defendant and his conspirators thought that the price of any one stock would not increase any further, they sold their shares for a large profit. In total, the defendant was compensated $498,714.25 for his participation in the scheme.Pursuant to the plea agreement, the Court issued a money judgment in the sum of $498,714.25. The government seized the defendant’s 2007 Cadillac Escalade, 2007 Dodge Charger Sedan, 2009 Suzuki ATV, and the defendant’s real property, which will be sold. The proceeds will be credited toward the money judgment.
The sentence is the culmination of an investigation on the part of Special Agents of the Internal Revenue Service-Criminal Investigation, under the direction of Shantelle P. Kitchen, Special Agent in Charge, Special Agents of the Department of Homeland Security Investigations under the direction of James C. Spero, Special Agent in Charge, and Special Agents of the United States Secret Service, under the direction of Thomas Braun, Assistant Special Agent in Charge.
Man Charged with Robbery of Center City Philadelphia BanksRead the Press Release
Mikey Phang, 29, of Philadelphia, PA, was charged today by Indictment[1] with bank robbery, announced United States Attorney Zane David Memeger. The indictment alleges that the defendant robbed the PNC Bank branch located at 1849 Walnut Street, Philadelphia, Pennsylvania on April 29, 2016, and stole approximately $2,411.98 after presenting a note to the teller demanding cash and representing that he was armed with a gun. The indictment further alleges that the defendant attempted to rob the HSBC Bank branch located at 1027 Arch Street, Philadelphia, Pennsylvania on June 29, 2016, by entering the bank and presenting a note to the teller demanding cash and representing that he was armed with a gun.
If convicted the defendant faces a maximum possible sentence of 40 years’ imprisonment.
The case was investigated by the FBI, and is being prosecuted by Assistant United States Attorney Joel D. Goldstein.
[1]An Indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.
Man Charged in District Court with Trafficking in FirearmsRead the Press Release
St. Thomas, USVI – Mohammed Jubran, 27, made his initial appearance in District Court Tuesday before U.S. Magistrate Judge Ruth Miller after being charged with trafficking in firearms in a one-count criminal complaint, United States Attorney Ronald W. Sharpe announced. At a detention hearing Wednesday, the Court issued an order detaining Jubran pending trial, and set a preliminary hearing for Monday, July 18.
According to the complaint, Jubran, who is not a federally licensed firearms dealer, was trafficking in firearms on St. Thomas between September 2015 and February 2016. If convicted of trafficking in firearms, Jubran faces a maximum sentence of 10 years in prison and a $250,000 fine.
United States Attorney Sharpe reminds the public that a complaint is merely a charging document, and is not evidence of guilt. Every defendant is presumed innocent until and unless proven guilty.
This case is the result of a joint investigation by the Federal Bureau of Investigation, U.S. Drug Enforcement Administration, and the Bureau of Alcohol, Tobacco, Firearms and Explosives. It is being prosecuted by Assistant United States Attorney Sigrid Tejo-Sprotte.
Local and Federal Law Enforcement Partnerships Continue to Have an Impact on Violent Crime in the J.C. Napier NeighborhoodRead the Press Release
Nineteen additional persons have been indicted by a federal grand jury in connection with an on-going local and federal investigation addressing violent crime in the J.C. Napier public housing development, announced David Rivera, U.S. Attorney for the Middle District of Tennessee. Joining the U.S. Attorney in making the announcement are Steven Gerido, Special Agent in Charge of the Nashville Division of the ATF and Chief Steve Anderson of the Nashville Metropolitan Police Department.
The criminal conduct covered by these latest indictments include four murders, multiple armed robberies, illegal firearms possession, unlawful drug trafficking and witness tampering. Seventeen other individuals have previously been charged with federal offenses in connection with this targeted investigation, which has been on-going since March 2015.
“Rising violent crime in this neighborhood prompted a joint federal and local investigation aimed at increasing public safety and improving the quality of life for these residents,” said U.S. Attorney David Rivera. “Three murders occurred in and around the J.C. Napier development in just four months, along with multiple shootings and robberies connected to that area, which only has about 2,000 residents. We will continue our efforts to bring federal charges, when warranted, against those who remain intent on committing violent crime in this neighborhood and in other residential neighborhoods.”
Steven Gerido, Special Agent in Charge, ATF, said, “These arrests show law enforcement’s priority to reduce violent crime. The removal of crime weapons from the streets aid in providing a safe environment to the public.”
“It is very important to me that the hundreds of innocent families in the Napier/Sudekum area know that this police department is committed to their safety and bringing to justice those persons who blatantly threaten that community with violence,” Chief Steve Anderson said. “As Hermitage Precinct detectives and our Gang Unit identified multiple problem individuals, we asked the ATF and U.S. Attorney David Rivera to join us in this investigation. Our partnership and continuing federal prosecution of the defendants has without a doubt made the area a safer place.”
Those charged in the latest phase of the investigation include:
- Reginald Johnson, III, a/k/a Cheefa, 22;
- Aweis Haji-mohamed a/k/a Son Son, 28;
- Marquis Brandon a/k/a Dummy, 22;
- Keno Lane a/k/a Keno Savage, 24;
- Charles Braden a/k/a Manstinka, 22;
- Santez Bradford a/k/a Wacco, 23;
- Martez D. Parham a/k/a Tez, 24;
- Rodrecus M. Smith a/k/a Lil Rod, 27;
- Darryl A. Starks a/k/a Mac, 32;
- Calvin D. Starks a/k/a Crazy, 21;
- Ivy C. Starks, 49;
- Terrance C. Kimbrough a/k/a Lil Chris, 19;
- Tena M. Allen, 29;
- Darren Randolph a/k/a Newk, 27;
- Michael Calloway, Jr. a/k/a Oso, 20;
- Ricky Watkins a/k/a Lil Ricky, 23;
- Brandon Starks a/k/a Hot Boy, 22;
- Michael Burns a/k/a BK Mike, 27; and
- Michael Thompson a/k/a Monkey Man, 35, all of Nashville.
In addition to other offenses, four of these individuals are charged in connection with four homicides, three of which occurred in and near the vicinity of the J.C. Napier neighborhood:
- Rodricus Smith and Martez Parham are charged with the murder of Mario McKnight, which occurred on October 30, 2013, on Argyle St. in Nashville, which the indictment alleges occurred during a drug-related robbery of another person;
- Calvin Starks and Terrance Kimbrough are charged with the murder of Brendon Leggs, which occurred on November 26, 2014, which is also alleged to have occurred during the course of a drug robbery;
- Terrence Kimbrough is also charged with the murder of Monte Watson, which is alleged to have been motivated by a desire to prevent him from cooperating with law enforcement officers about the murder of Brendon Leggs and other criminal activity;
- Aweis Haji-mohamed is charged with being a felon in possession of firearms, with the underlying event being the murder of Isaiah Starks on February 9, 2015;
- Haji-mohamed is also charged with other armed robberies, including an attempt to commit an armed drug-related robbery of Isaiah Starks about one month before Haji-mohamed killed Starks .
Seventeen individuals have been previously indicted in connection with this investigation and charged with various federal offenses including firearms violations, drug offenses and offenses relating to the obstruction of the grand jury’s investigation. They are:
- Deshon Burleson, 29;
- Javonta Campbell, 23
- Ernest Eddie, 26;
- Deunta Finch, 26;
- Ramon Hughes, 27;
- Reco Jones, 28;
- Jacarlvis Marable, 23;
- Robert Moore, 35;
- Kenneth Underwood, 35;
- Charles Woods, 27;
- Joshua Woods, 25;
- Brian Blackman, 25;
- Charles Black, 26;
- Justin Walden, 25;
- Laquisha Hughes, 32;
- Laquanda Boyce, 34; and
- Jeremiah Haynes, 24, all of Nashville.
The indictments are merely accusations. All defendants are presumed innocent unless and until proven guilty in a court of law.
These cases were investigated by the Bureau of Alcohol, Tobacco, Firearms, and Explosives and the Gang Division of the Metropolitan Nashville Police Department. The cases are being prosecuted by Assistant United States Attorneys Sunny A.M. Koshy and Phillip Wehby.
Las Cruces Woman Pleads Guilty to Federal Heroin Trafficking ChargeRead the Press Release
ALBUQUERQUE – Alejandra Gomez, 28, of Las Cruces, N.M., pled guilty late yesterday afternoon in federal court to a heroin trafficking charge. Under the terms of her plea agreement, Gomez will be sentenced to 33 months in prison followed by a term of supervised release to be determined by the court.
Gomez was arrested in Sept. 2015, on a criminal complaint charging her with distributing heroin in Doña Ana County, N.M. According to the criminal complaint, Gomez sold an aggregate of 241.6 grams of heroin to an undercover law enforcement agent on three occasions in July and Aug. 2015. On Sept. 9, 2015, law enforcement officers executed a federal search warrant on Gomez’s residence where they seized two firearms.
Gomez subsequently was indicted on Dec. 9, 2015, and charged with conspiracy to distribute heroin from July 2, 2015 through Aug. 19, 2015 and distributing heroin on July 2, 2015, July 16, 2015, and Aug. 19, 2015. According to the indictment, Gomez committed the crimes in Doña Ana County.
During yesterday’s proceedings, Gomez pled guilty to a felony information charging her with conspiracy to possess heroin with intent to distribute. In entering the guilty plea, Gomez admitted that she distributed heroin to an undercover DEA agent on the following dates: on July 2, 2015, she distributed 12.9 grams of heroin; on July 16, 2015, she distributed 48.3 grams of heroin; and on Aug. 9, 2015 she distributed 68.5 grams of heroin. Gomez remains in custody pending a sentencing hearing which has yet to be scheduled.
This case was investigated by the Las Cruces office of the DEA. Assistant U.S. Attorney Anna R. Wright of the U.S. Attorney’s Las Cruces Branch Office is prosecuting the case as part of the New Mexico Heroin and Opioid Prevention and Education (HOPE) Initiative.
The HOPE Initiative was launched in January 2015 by the UNM Health Sciences Center and the U.S. Attorney’s Office in response to the national opioid epidemic, which has had a disproportionately devastating impact on New Mexico. Opioid addiction has taken a toll on public safety, public health and the economic viability of our communities. Working in partnership with the DEA, the Bernalillo County Opioid Accountability Initiative, Healing Addiction in our Community (HAC), the Albuquerque Public Schools and other community stakeholders, HOPE’s principal goals are to protect our communities from the dangers associated with heroin and opioid painkillers and reducing the number of opioid-related deaths in New Mexico.
The HOPE Initiative is comprised of five components: (1) prevention and education; (2) treatment; (3) law enforcement; (4) reentry; and (5) strategic planning. HOPE’s law enforcement component is led by the Organized Crime Section of the U.S. Attorney’s Office and the DEA in conjunction with their federal, state, local and tribal law enforcement partners. Targeting members of major heroin and opioid trafficking organizations for investigation and prosecution is a priority of the HOPE Initiative. Learn more about the New Mexico HOPE Initiative at http://www.HopeInitiativeNM.org.
Langley Park Felon Exiled to 15 Years in Federal Prison for Gun and Drug OffensesRead the Press Release
Greenbelt, Maryland – U.S. District Judge Paul W. Grimm sentenced Damien Henry Thomas, age 37, of Langley Park, Maryland, today to 15 years in federal prison, followed by five years of supervised release, for conspiracy to distribute crack and powder cocaine, and for being a felon in possession of a firearm. At today’s sentencing hearing, Judge Grimm found that Thomas was an armed career criminal and a career offender. Judge Grimm also entered an order requiring Thomas to forfeit a .38 caliber revolver and ammunition, as well as $2,916 in drug proceeds.
The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Daniel L. Board, Jr. of the Bureau of Alcohol, Tobacco, Firearms and Explosives - Baltimore Field Division; and Chief Hank Stawinski of the Prince George’s County Police Department.
According to his plea agreement, from February through May 2014, Thomas was part of a conspiracy to distribute crack cocaine in which Thomas purchased crack cocaine from several suppliers for resale to his own narcotics customers. At times, Thomas would consult with his suppliers before confirming the price of a narcotics sale to his customers. Thomas conducted narcotics transactions with his customers in their vehicles and in the parking lots of commercial establishments.
For example, on three occasions from February 28 through March 20, 2014, Thomas sold crack cocaine to a confidential informant (CI) working at the direction of law enforcement. The transactions occurred in the CI’s car and were recorded. The CI met Thomas at his residence or at commercial locations, at Thomas’ direction, in order to make the purchase. On two occasions Thomas met with one of his suppliers prior to supplying the CI with crack cocaine. Thomas sold the CI a total of 51.9 grams of crack cocaine for a total of $2,800.
Thomas admitted that during his participation in the conspiracy, between 280 and 840 grams of crack cocaine, and between 500 grams and two kilograms of powder cocaine were distributed.
On June 14, 2014, law enforcement executed a search warrant at Thomas’ residence and recovered a .38 caliber revolver hidden behind the property’s fence. On recorded jail calls Thomas made that evening he is heard expressing his displeasure at law enforcement recovering the gun. Thomas had previously been convicted of a felony and was prohibited from possessing a firearm or ammunition.
United States Attorney Rod J. Rosenstein commended the ATF and Prince George’s County Police Department for their work in the investigation. Mr. Rosenstein thanked Assistant United States Attorneys Jennifer R. Sykes and Deborah A. Johnston, who prosecuted the case.
Justice Department Settles with Orpheum Theater in Nebraska to Resolve ADA Discrimination ClaimsRead the Press Release
The Justice Department announced today it has reached an agreement with the Omaha Performing Arts Society (OPAS) resolving an Americans with Disabilities Act (ADA) complaint against the Orpheum Theater in Omaha, Nebraska.
The department alleged that OPAS failed to ensure that, to the maximum extent feasible, the theater provided access to individuals with disabilities as required after the theater underwent a renovation.
“The ADA requires that when doing renovations, public accommodations must ensure their facilities are readily accessible and fully usable by people with disabilities,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “We commend the Omaha Performing Arts Society for cooperating with the Justice Department and taking quick action to implement the necessary reforms.”
The ADA requires alterations of existing theaters to comply with certain ADA Standards for Accessible Design. Under the settlement agreement, OPAS will provide 20 wheelchair and companion seating locations and 20 designated aisle accessible seats dispersed throughout the theater. OPAS will also install a permanent lift to provide an accessible route from the orchestra floor to the stage floor and it will revise its ticketing and pricing policies to afford individuals with disabilities an equal opportunity to purchase accessible seats.
For more information about the ADA and today’s agreement, individuals may access the ADA web page at www.ada.gov.htm or call the toll-free ADA Information Line at (800) 514-0301 or (800) 514-0383 (TTY).
Omaha Performing Arts Society.
Investment Fund Manager Sentenced for Obstructing Justice in SEC Investigation of His Business ActivitiesRead the Press Release
WASHINGTON – Vineet Kalucha, 52, an investment fund manager from Washington, D.C., was sentenced today to 15 months in prison for obstructing justice in an investigation into his business activities that was being conducted by the U.S. Securities and Exchange Commission, announced U.S. Attorney Channing D. Phillips and Paul M. Abbate, Assistant Director in Charge of the FBI’s Washington Field Office.
Kalucha pled guilty to the charge in February 2016, in the U.S. District Court for the District of Columbia. He was sentenced by the Honorable Rosemary M. Collyer. Upon completion of his prison term, Kalucha will be placed on two years of supervised release.
A business partner, George Palathinkal, 55, of Singapore, pled guilty in March 2015 to a federal charge of perjury. He is awaiting sentencing before Judge Collyer.
According to the government’s evidence, Kalucha formed Aphelion Fund Management LLC (“Aphelion Management”) in 2012 and was its majority owner, partner and chief investment officer. Palathinkal was the general partner and chief financial officer. The company served as the investment adviser and general partner for two unregistered hedge funds (known as “the Aphelion Funds”).
In 2013, according to the government’s evidence, Kalucha, Palathinkal, and Aphelion Management began soliciting new investors for the Aphelion Funds. Kalucha subsequently provided potential investors with marketing materials for Aphelion Management, using inaccurate performance statistics. Among other things, he altered a report prepared by an accounting firm hired by Aphelion Management to review prior investment performance and caused this report to be sent to prospective investors.
The accounting firm became aware of the misrepresentations and demanded that Kalucha cease distributing the altered report and that he provide notice to those who received it. He incorrectly reported back to the firm that only one copy of the altered report had been distributed.
The U.S. Securities and Exchange Commission began an investigation of Aphelion Management in January 2014, including an investigation into the propriety and reasonableness of payments from Aphelion Management to Kalucha. Kalucha provided investigative testimony before the SEC on Feb. 25, 2014. Among other things, he testified that he had entered into a written promissory note for “about $350,000” with Aphelion Management. Kalucha later told Palathinkal that he had testified before the SEC that there were written promissory notes covering loans that the two of them had purportedly taken from Aphelion Management.
Knowing that these notes did not exist, Kalucha told Palathinkal that he would have Aphelion Management’s outside counsel prepare such written loan documents. Kalucha and Palathinkal later signed two such documents, both said to be promissory notes. One purportedly showed a loan of up to $350,000 for Kalucha and the other was for a loan of up to $200,000 for Palathinkal. Although these documents were actually signed in early March 2014, they were dated January 1, 2013. Kalucha and Palathinkal provided these documents to the SEC.
In announcing the sentence, U.S. Attorney Phillips and Assistant Director in Charge Abbate commended the work of those who investigated the case for the FBI’s Washington Field Office. They also expressed appreciation for the assistance provided by the SEC. They acknowledged the efforts of those who handled the case for the U.S. Attorney’s Office, including Document Management Analyst John Lowell and former Assistant U.S. Attorney Bryan Seeley. Finally, they expressed appreciation for the work of Assistant U.S. Attorney Peter C. Lallas, who investigated and prosecuted the case.
Inmate and Daughter-In-Law Sentenced in Social Security ScamRead the Press Release
David and Kathryn McPeters sentenced for defrauding Social Security of $250,000
GRAND RAPIDS, MICHIGAN — U.S. Attorney Patrick Miles announced that David R. McPeters and his daughter-in-law, Kathryn McPeters, were sentenced today in connection with their scheme to defraud the Social Security Administration.
Kathryn McPeters was sentenced to prison for a term of 36 months. Presiding Judge Janet T. Neff remarked that she selected a relatively severe sentence on Kathryn McPeters’ because she targeted a program to help the truly needy. Further, her false testimony during trial "strikes at the very integrity of the criminal justice system." David R. McPeters was sentenced to a term of 33 months, to be served consecutive to the two life sentences he is already serving in the Michigan Department of Corrections.
The two were convicted by a jury in March of defrauding the Social Security Administration between 2006 and 2015, taking in approximately $250,000 before the scheme was discovered. David McPeters has been an inmate of the Michigan Department of Corrections since 1983, when he received two life sentences for murder. Kathryn McPeters is a resident of Battle Creek,Michigan. As a prison inmate, David is prohibited by law from receiving benefits. Kathryn agreed to help him circumvent this rule by applying online for benefits using his name and other information, but hiding the fact that he was incarcerated. The plan was successful and SSA began sending funds to a bank account set up for that purpose by Kathryn. The proceeds were split between the two, with Kathryn receiving the majority of the benefits.
The case was investigated by the Grand Rapids Office of the Social Security Administration, Office of Inspector General. The case was tried by Timothy VerHey, Assistant United States Attorney.
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Honduran National Charged with Illegal Re-EntryRead the Press Release
U.S. Attorney Kenneth A. Polite announced that JUAN HUMBERTO HERNANDEZ-YONES, age 33, a citizen of Honduras, was charged today in a one-count Indictment with illegal re-entry of a removed alien.
According to the Indictment, on June 30, 2016, HERNANDEZ-YONES was found in the United States after having been deported previously on July 15, 2011.
U. S. Attorney Polite reiterated that an Indictment is merely a charge and that the guilt of the defendant must be proven beyond a reasonable doubt.
U.S. Attorney Polite praised the work of the United States Immigration and Customs Enforcement in investigating this matter. Assistant United States Attorney Emily K. Greenfield is in charge of the prosecution.
Hazleton Man Sentenced to 20 Months’ Imprisonment for Stealing Firearms from Sporting Goods StoreRead the Press Release
SCRANTON-The United States Attorney’s Office for the Middle District of Pennsylvania announced today that on July 13, Stefan Rease, age 20, of Hazleton, was sentenced by United States District Court Judge Malachy Mannion in Scranton to 20 months’ imprisonment.
In April 2016, Rease pleaded guilty to breaking in to a sporting goods store in Hazleton and stealing firearms.
This case was brought as part of the Violent Crime Reduction Partnership (“VRCP”), a district wide initiative to combat the spread of violent crime in the Middle District of Pennsylvania. Led by the United States Attorney’s Office, the VRCP consists of federal, state and local law enforcement agencies whose mission is to locate, apprehend, and prosecute individuals who commit violent crimes.
The investigation was conducted by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the Hazleton Police Department. Prosecution is assigned to Assistant United States Attorney Evan Gotlob.
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Harrison Man Sentenced to 15 Years in Federal Prison for Child Pornography OffenseRead the Press Release
Fort Smith, Arkansas - Kenneth Elser, United States Attorney for the Western District of Arkansas, announced that Kelvin Lee Pratt, age 35, of Harrison, Arkansas, was sentenced to 180 months imprisonment followed by five years of supervised release for Advertising Visual Depictions of a Minor Engaging in Sexually Explicit Conduct. The sentencing took place before the Honorable P.K. Holmes, III in the United States District Court in Fort Smith.
According to court records, from February 18, 2015 to May 20, 2015, Pratt engaged in sexually explicit conversations with an underage minor female using Facebook Messenger, a person to person chat service that sends messages through interstate commerce via a computer network. Pratt sent sexually explicit images and engaged in sexually explicit conversations with the underage female in an effort to solicit and receive nude pictures of the minor. Detectives determined that Pratt sent the messages and images from his residence in Harrison. Pratt was indicted by a federal grand jury in October, 2015 and pleaded guilty to the offense in January, 2016.
This case was investigated by Homeland Security Investigations and the Boone County Sheriff’s Office. Assistant United States Attorney Denis Dean prosecuted the case for the United States.
The 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 U.S. Attorneys’ Offices and their Criminal Division Child Exploitation and Obscenity Sections (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.
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Related court documents may be found on Public Access to Electronic Records Website @www.Pacer.gov
Guatemalan National Pleads Guilty to Illegal Re-EntryRead the Press Release
U.S. Attorney Kenneth A. Polite announced that JULIO RAYMUNDO-SANTOS, age 41, a citizen of Guatemala, pled guilty to a one-count Indictment that charged him with illegal reentry of a removed alien in violation of Title 8, United States Code, Section 1326(a).
According to court records, RAYMUNDO-SANTOS was previously removed from the United States on or about April 4, 2014. RAYMUNDO-SANTOS was later found in the Eastern District of Louisiana on or about May 10, 2016, and had not received permission from the Attorney General of the United States of the Secretary of the Department of Homeland Security to reenter.
RAYMUNDO-SANTOS faces a maximum term of imprisonment of two years, a maximum fine of $250,000, a maximum term of supervised release of one year, and a mandatory $100 special assessment. U.S. District Judge Nannette Jolivette Brown set sentencing for August 11, 2016
U.S. Attorney Polite praised the work of the United States Department of Homeland Security in investigating this matter. Assistant U.S. Attorney Spiro G. Latsis is in charge of the prosecution.
Green Bay Woman Sentenced for Vehicular Manslaughter on Menominee ReservationRead the Press Release
Gregory J. Haanstad, United States Attorney for the Eastern District of Wisconsin, announced that on July 11, 2016, Ashley E. Kitchenakow (age: 28) of Green Bay, Wisconsin, was sentenced by the Honorable William C. Griesbach to 9 years in prison and 5 years supervised release. Kitchenakow pleaded guilty to vehicular manslaughter contrary to Title 18, United States Code, Sections 1112 and 1153, and recklessly endangering the safety of others by operating a motor vehicle while under the influence of alcohol, in violation of Tittle 18, United States Code, Sections 1152 and 13, and Wisconsin Statutes Section 941.30(2).
According to the indictment and other court documents, on August 28, 2015, while on the Menominee Indian Reservation in Neopit, Wisconsin, Kitchenakow lost control of the vehicle, hit a tree, caused the death of one passenger in the vehicle, and caused serious injury to another passenger. Kitchenakow acted with wanton and reckless disregard for human life, and had actual knowledge that her conduct was a threat to the lives of others given several previous convictions for operating while intoxicated.
This case was investigated by the Federal Bureau of Investigation and Menominee Tribal Police Department. The case was prosecuted by Assistant United States Attorney William Roach.
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Four West Texas Men Indicted on Federal Charges Relating to a Motor Fuel Theft SchemeRead the Press Release
In Midland, four men are charged for scheming to steal an estimated $365,000 worth of diesel fuel announced United States Attorney Richard L. Durbin, Jr., and Federal Bureau of Investigation (FBI) Special Agent in Charge Douglas E. Lindquist.
A federal grand jury indictment unsealed this week charges 32–year-old Isai Navarette of Odessa; 35-year-old Omar Gardea Lujan of Odessa; 30-year-old Jesus Lozoya of Gardendale, TX; and, 43-year-old Jorge Urias Carrasco of Odessa with eight counts of Access Device Fraud.
The indictment alleges that from January 2014 to September 2014, the defendants knowingly used unauthorized access devices--eight stolen fuel cards--to unlawfully acquire bulk loads of diesel fuel.
Upon conviction of each charge, the defendants face up to ten years in federal prison and a maximum $250,000 fine.
Federal authorities arrested Carrasco earlier today; and, Navarrete, Lujan and Lozoya yesterday. Navarrete, Lujan and Carrasco have been released on $10,000 bonds while Lozoya remains in custody pending a detention hearing scheduled for 10:00am on July 25, 2016, before U.S. Magistrate Judge David Counts in Midland.
This investigation was conducted by the FBI’s Permian Basin Oilfield Theft Task Force and the Texas Comptroller’s Office - Criminal Investigation Division.
An indictment is merely a charge and should not be considered as evidence of guilt. The defendants are presumed innocent until proven guilty in a court of law.
Former Solicitor Pleads Guilty to Theft of $105,000 Township Escrow FundRead the Press Release
SCRANTON - The United States Attorney’s Office for the Middle District of Pennsylvania announced that the former Solicitor for Hazle Township, Luzerne County, pleaded guilty today to the theft of approximately $105,586 from the township.
According to United States Attorney Peter Smith, Charles Pedri, age 64, of Hazleton, entered a guilty plea before United States Magistrate Judge Karoline Mehlachick in Scranton to a Criminal Information which charged Pedri with theft from a program receiving federal funds. Pedri was the Solicitor for Hazle Township at the time of the theft.
As set forth in the Criminal Information, Hazle Township required a company which was developing a project in the Humboldt Industrial Park in the township to complete certain specific improvements to the property, pursuant to land development ordinances. As security for the completion of the improvements, the company and Hazle Township entered into an escrow agreement.
Pedri, in his capacity as Hazle Township Solicitor, signed the agreement as escrow agent. The company then paid to Hazle Township the sum of $105,586 to be held in escrow as security for the completion of the improvements. Pedri, as escrow agent, deposited the funds into his law office account. Thereafter, Pedri began withdrawing the funds held in trust and converted the funds to his own personal use. The investigation revealed that, between December 2012 and November 2013, Pedri wrote checks payable to himself, which were drawn on the Township funds. By November 2013, the funds were gone.
Upon completion of the improvements in May 2014, the company requested that Hazle Township return the escrowed funds. Over a period of approximately eight months, Pedri made misrepresentations to representatives of the company regarding the status of the funds and failed to make payment. In January 2015, after the company informed Pedri it intended to file a law suit, Pedri admitted that he had converted the funds to his own use.
The investigation was conducted by the Federal Bureau of Investigation. The case is being prosecuted by Assistant United States Attorney Robert J. O’Hara.
Pedri will appear for sentencing before Senior United States District Court Judge Richard P. Conaboy at a date to be scheduled.
A sentence following a finding of guilt is imposed by the Judge after consideration of the applicable federal sentencing statutes and the Federal Sentencing Guidelines.
In this case, the maximum penalty which can be imposed under federal law is ten years of imprisonment, a term of supervised release following imprisonment, and a $250,000 fine.
Under the Federal Sentencing Guidelines, the Judge is also required to consider and weigh a number of factors, including the nature, circumstances and seriousness of the offense; the history and characteristics of the defendant; and the need to punish the defendant, protect the public and provide for the defendant's educational, vocational and medical needs. For these reasons, the statutory maximum penalty for the offense is not an accurate indicator of the potential sentence for a specific defendant.
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Former Office Manager Sentenced to Jail Term for Stealing over $150,000 from ChurchRead the Press Release
WASHINGTON – Barry Tillman, 59, who worked as the office manager for a church and its affiliated non-profit organization, has been sentenced to 156 days of incarceration and ordered to perform 100 hours of community service for a scheme in which he embezzled over $150,000, U.S. Attorney Channing D. Phillips announced.
Tillman, of Washington, D.C., pled guilty in April 2016 to wire fraud. He was sentenced on July 13, 2016, by the Honorable Rudolph Contreras in the U.S. District Court for the District of Columbia. Upon completion of the jail time, which is to be served over 52 weekends, he will be placed on five years of probation. Tillman also must pay a total of $153,754 in restitution.
According to the government’s evidence, Tillman began work in 2008 as an office manager for the Wisconsin Avenue Baptist Church, as well as City Gate, an affiliated non-profit organization that provided support for youth through after-school and summer educational programs. The organization also provided support to low-income families by supplying meals and job training. Tillman’s responsibilities included bookkeeping and accounting duties.
From January 2009 through May 2013, Tillman processed salary payments to himself through both direct deposit and salary checks. He allowed the direct deposits knowing that he was receiving his salary by check, which resulted in him being paid twice. He kept a total of $153,754 of these electronic transfers for himself for his own use and benefit.
In announcing the sentence, U.S. Attorney Phillips commended the work of those who investigated the case, including Criminal Investigator Juan Juarez of the U.S. Attorney’s Office, and the Metropolitan Police Department (MPD). He also acknowledged the efforts of others who worked on the case from the U.S. Attorney’s Office, including Criminal Investigator Stephen Cohen; Paralegal Specialist Kaitlyn Krueger; Special Assistant U.S. Attorney Andrea Duvall; former Paralegal Specialist Jessica Mundi, and former Special Assistant U.S. Attorney Julia Jarrett. Finally, he expressed appreciation for the work of Assistant U.S. Attorney Teresa A. Howie, who investigated and prosecuted the case.
Former New Jersey Attorney General and Chairman of the Port Authority Board of Commissioners Pleads Guilty to BriberyRead the Press Release
Former New Jersey Transportation Commissioner Also Charged in Bribery Scheme
United Continental Holdings Inc. Agrees to Reforms, Will Pay $2.25 Million Penalty
David Samson, 76, of Aiken, South Carolina, and the former chairman of the Board of Commissioners of the Port Authority of New York and New Jersey, today pleaded guilty to bribery for using his official authority to pressure the parent company of United Airlines Inc. to institute a non-stop flight from Newark, New Jersey, to South Carolina for his personal benefit.
Jamie Fox, 61, of Lambertville, New Jersey, who at the time was a paid consultant and lobbyist for United Continental Holdings Inc. (United), the Chicago-based parent company of United Airlines Inc., was charged in a separate criminal complaint with conspiring to commit bribery. United, which operated the route between Newark Liberty International Airport and Columbia Metropolitan Airport in South Carolina solely because Samson wanted it to travel to his house in South Carolina, entered into an agreement with the U.S. Attorney’s Office to cooperate, to institute substantial reforms to its compliance program and to pay a $2.25 million penalty.
These matters were announced today by U.S. Attorney Paul J. Fishman for the District of New Jersey, Inspector General Michael Nestor of the Port Authority of New York and New Jersey, Office of Inspector General and Special Agent in Charge Timothy Gallagher of the FBI’s Newark Division.
“This kind of case shakes public confidence in our institutions of government when people who are so accomplished, and who have occupied so many positions of public trust, misuse their authority to get something for themselves,” said U.S. Attorney Fishman. “It’s a betrayal of our trust and what we have the right to expect from those in public life and it makes the job of every honest public employee just that much harder.”
“This case should serve as a strong wake-up call and warning to those public servants at all levels, who might consider abusing their official positions for their personal benefit, or the benefit of others,” said Inspector General Nestor. “They should focus their efforts on fulfilling their agency’s mission without any consideration for how the agency can be misused for personal and other improper purposes.”
“The FBI’s stance on public corruption is that of zero tolerance and therefore one of our highest priorities,” said Special Agent in Charge Gallagher. “We in the FBI believe that public corruption is among the most serious of criminal violations. It is a betrayal of the public’s sacred trust. If allowed to grow, public corruption permeates all aspects of society and affects all other criminal priorities. And if allowed to spread unchecked, public corruption can threaten the very foundation of democracy. These charges reflect the FBI’s commitment to fighting public corruption and we will continue to aggressively pursue those that participate in these types of crimes.”
Samson, who served as New Jersey Attorney General from 2002 to 2003 and was the founding member and chairman of the law firm Wolff & Samson PC, pleaded guilty today before U.S. District Judge Jose L. Linares in Newark federal court to an information charging him with one count of bribery. Fox, who was the commissioner of the New Jersey Department of Transportation from September 2014 to October 2015, was charged separately with conspiring with Samson to commit bribery. Fox will have an initial appearance at a date to be determined.
According to documents filed in this case and statements made in court:
The Port Authority operates Newark Airport, one of United’s largest hubs. In September 2011, several months after Samson became the chairman of the Port Authority, Samson and Fox met with representatives of United for dinner at a restaurant in New York. During that dinner and following a discussion of certain of United’s priorities for Newark Airport, Samson told the United representatives that Continental Airlines Inc., a predecessor of United, used to have non-stop flight route between Newark Airport and Columbia Airport and that the route had made his travel from New Jersey to his home in South Carolina more convenient. A United representative responded that United generally stopped flying routes because they were not profitable, but told Samson that United would look into reinstating the Newark/Columbia route.
Subsequent to this dinner and additional inquiries from Fox on Samson’s behalf, United concluded that reinstating the Newark/Columbia route would not be profitable and communicated United’s lack of interest to Fox. Samson and Fox used Samson’s official position and authority as chairman of the Port Authority’s Board of Commissioners – which included control over the board’s agenda – to pressure United to reinstate the Newark/Columbia route. In November 2011, Samson and Fox were aware that an agreement between United and the Port Authority relating to United’s construction of a wide-body maintenance hangar at Newark Airport was to be presented to the Port Authority Board for its consideration at its Nov. 5, 2011, meeting. In an email exchange between Samson and Fox on Nov. 2, 2011, Samson and Fox discussed using Samson’s official authority to remove from the agenda the hangar agreement for the purpose of pressuring United to reinstate the Newark/Columbia route. Samson wrote Fox that he was “reviewing current Board agenda items of interest.” Referring to the hangar agreement, Fox suggested to Samson that “[m]aybe it needs further review!!!!!,” to which Samson responded “[y]es, it’s already off this month’s agenda: I hate myself.” Following through on this exchange with Fox, Samson caused the hangar agreement to be removed from the Port Authority Board’s agenda.
In advance of the board’s next meeting on Dec. 8, 2011, Samson and Fox continued to use Samson’s official authority to pressure United. On multiple occasions, Fox communicated to United that its failure to reinstate the route had made Samson angry and was having a negative impact on United’s relationship with the Port Authority. Samson and Fox also discussed further using Samson’s official authority over the board’s agenda to pressure United. On Dec. 7, 2011, the day before the Port Authority Board’s meeting, Samson sent Fox an email telling him that Samson had given instructions to remove the hangar agreement from the agenda. Fox responded that he thought it was a good time to put the agreement back on the agenda and Samson agreed to do so. The Port Authority Board then considered the hangar agreement on Dec. 8, 2011, and approved it. Fox later emailed Samson: “Finally have their [United’s] attention. Having item off/on this week worked,” referring to the hangar agreement.
As a result of the repeated use of Samson’s official authority to pressure United by Samson and Fox, United decided to reinstate the Newark/Columbia route. Based on Samson’s preferred travel schedule to South Carolina, which Fox communicated to United, the airline implemented a weekly schedule that only included flights from Newark Airport to Columbia Airport departing at 6:00 p.m. on Thursdays (with a returning flight the same night) and from Columbia Airport to Newark Airport departing at 6:20 a.m. on Mondays (after a flight to Columbia Airport the evening before). United began flying the Newark/Columbia route in September 2012 and operated the route until March 2014. Samson used the Newark/Columbia route on 27 occasions between October 2012 and January 2014. Samson and others referred to the Newark/Columbia route as the “Chairman’s Flight” and Fox referred to it as “Samson Air.”
Samson faces a maximum statutory penalty of 10 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. Pursuant to the terms of the plea agreement between Samson and the U.S. Attorney’s Office, the maximum prison term that can be imposed on Samson is 24 months. The count with which Fox is charged carries a maximum potential penalty of five years in prison and a fine of $250,000 or twice the gross gain or loss from the offense.
United has entered into an agreement with the U.S. Attorney’s Office regarding its conduct and the conduct of its employees in relation to the Newark/Columbia route. United personnel understood that Samson wanted the route reinstated for his own personal use and that failing to reinstate it could adversely affect United’s business interests. United’s decision to reinstate the route departed from its standard process for adding a route to United’s network, which included forecasts on how the route could be expected to perform, multiple levels of review and presentation to a group of senior United executives. Consistent with analyses performed both before and after the decision to reinstate the route, United lost money by operating the route. United has acknowledged that at no time prior to reinstating the route did United consult with any legal counsel or compliance personnel and United failed to report discussions about the Newark/Columbia route to law enforcement.
In addition to the monetary penalty, United agreed to cooperate with the U.S. Attorney’s Office, to report periodically to the office during a two-year period concerning United’s compliance efforts and to continue to implement an enhanced compliance program designed to prevent and detect bribery and corruption violations. If United abides by the terms of the agreement, the office has agreed not to prosecute United for its conduct relating to the Newark/Columbia route.
The agreement acknowledges United’s extensive, thorough, timely and voluntary cooperation, including disclosing all non-privileged information regarding the conduct of its employees and agents related to the Newark/Columbia route, conducting an internal investigation, making its employees available for interviews, producing documents and other materials and making multiple presentations to the office. United has engaged in early and extensive remediation, including improving its Ethics and Compliance Office, enhancing its global code of conduct and anti-bribery/anti-corruption policies, conducting extensive anti-bribery/anti-corruption training, separating from certain employees involved in the conduct relating to the Newark/Columbia route and developing a third-party due diligence process and compliance audit.
U.S. Attorney Fishman credited criminal investigators of the Port Authority, Office of Inspector General, under the direction of Inspector General Nestor; special agents of the FBI, under the direction of Special Agent in Charge Gallagher and criminal investigators of the U.S. Attorney’s Office, for the investigation leading to today’s charges and guilty plea.
The government is represented by Assistant U.S. Attorneys Vikas Khanna and Lee M. Cortes Jr. and Senior Litigation Counsel J Fortier Imbert of the U.S. Attorney’s Office Special Prosecutions Division and Assistant U.S. Attorney Steven G. Sanders, Deputy Chief of the Appeals Division.
The charge and allegations contained in the federal criminal complaint against Fox are merely accusations and the defendant is presumed innocent unless and until proven guilty.
Former New Jersey Attorney General and Chairman of the Port Authority Board of Commissioners Pleads Guilty to BriberyRead the Press Release
Former New Jersey Transportation Commissioner Also Charged in Bribery Scheme
United Continental Holdings Inc. Agrees to Reforms, Will Pay $2.25 Million Penalty
NEWARK, N.J. – David Samson, the former chairman of the Board of Commissioners of the Port Authority of New York and New Jersey, today pleaded guilty to bribery for using his official authority to pressure the parent company of United Airlines Inc. to institute a non-stop flight from Newark to South Carolina for his personal benefit.
Jamie Fox, who at the time was a paid consultant and lobbyist for United Continental Holdings Inc. (United), the Chicago-based parent company of United Airlines Inc., was charged in a separate criminal complaint with conspiring to commit bribery. United, which operated the route between Newark Liberty International Airport and Columbia Metropolitan Airport in South Carolina solely because Samson wanted it to travel to his house in South Carolina, entered into an agreement with the U.S. Attorney’s Office to cooperate, to institute substantial reforms to its compliance program, and to pay a $2.25 million penalty.
These matters were announced today by U.S. Attorney Paul J. Fishman, Inspector General Michael Nestor of the Port Authority of New York and New Jersey, Office of Inspector General, and Special Agent in Charge Timothy Gallagher of the FBI’s Newark Division.
“This kind of case shakes public confidence in our institutions of government when people who are so accomplished, and who have occupied so many positions of public trust, misuse their authority to get something for themselves,” U.S. Attorney Fishman said. “It’s a betrayal of our trust and what we have the right to expect from those in public life and it makes the job of every honest public employee just that much harder.”
“This case should serve as a strong wake-up call and warning to those public servants at all levels, who might consider abusing their official positions for their personal benefit, or the benefit of others,” Inspector General Nestor said. “They should focus their efforts on fulfilling their agency’s mission without any consideration for how the agency can be misused for personal and other improper purposes.”
“The FBI’s stance on public corruption is that of zero tolerance and therefore one of our highest priorities,” Special Agent in Charge Gallagher said. “We in the FBI believe that public corruption is among the most serious of criminal violations. It is a betrayal of the public’s sacred trust. If allowed to grow, public corruption permeates all aspects of society and affects all other criminal priorities. And if allowed to spread unchecked, public corruption can threaten the very foundation of democracy. These charges reflect the FBI’s commitment to fighting public corruption and we will continue to aggressively pursue those that participate in these types of crimes.”
Samson, 76, of Aiken, South Carolina, who served as New Jersey Attorney General from 2002 to 2003 and was the founding member and chairman of the law firm Wolff & Samson PC, pleaded guilty today before U.S. District Judge Jose L. Linares in Newark federal court to an information charging him with one count of bribery. Fox, 61, of Lambertville, New Jersey, who was the commissioner of the N.J. Department of Transportation from September 2014 to October 2015, was charged separately with conspiring with Samson to commit bribery. Fox will have an initial appearance at a date to be determined.
According to documents filed in this case and statements made in court:
The Port Authority operates Newark Airport, one of United’s largest hubs. In September 2011, several months after Samson became the chairman of the Port Authority, Samson and Fox met with representatives of United for dinner at a restaurant in New York. During that dinner and following a discussion of certain of United’s priorities for Newark Airport, Samson told the United representatives that Continental Airlines Inc., a predecessor of United, used to have non-stop flight route between Newark Airport and Columbia Airport, and that the route had made his travel from New Jersey to his home in South Carolina more convenient. A United representative responded that United generally stopped flying routes because they were not profitable, but told Samson that United would look into reinstating the Newark/Columbia route.
Subsequent to this dinner and additional inquiries from Fox on Samson’s behalf, United concluded that reinstating the Newark/Columbia route would not be profitable and communicated United’s lack of interest to Fox. Samson and Fox used Samson’s official position and authority as chairman of the Port Authority’s Board of Commissioners – which included control over the board’s agenda – to pressure United to reinstate the Newark/Columbia route. In November 2011, Samson and Fox were aware that an agreement between United and the Port Authority relating to United’s construction of a wide-body maintenance hangar at Newark Airport was to be presented to the Port Authority Board for its consideration at its Nov. 5, 2011, meeting. In an email exchange between Samson and Fox on Nov. 2, 2011, Samson and Fox discussed using Samson’s official authority to remove from the agenda the hangar agreement for the purpose of pressuring United to reinstate the Newark/Columbia route. Samson wrote Fox that he was “reviewing current Board agenda items of interest.” Referring to the hangar agreement, Fox suggested to Samson that “[m]aybe it needs further review!!!!!,” to which Samson responded “[y]es, it’s already off this month’s agenda: I hate myself.” Following through on this exchange with Fox, Samson caused the hangar agreement to be removed from the Port Authority Board’s agenda.
In advance of the board’s next meeting on Dec. 8, 2011, Samson and Fox continued to use Samson’s official authority to pressure United. On multiple occasions, Fox communicated to United that its failure to reinstate the route had made Samson angry and was having a negative impact on United’s relationship with the Port Authority. Samson and Fox also discussed further using Samson’s official authority over the board’s agenda to pressure United. On Dec. 7, 2011, the day before the Port Authority Board’s meeting, Samson sent Fox an email telling him that Samson had given instructions to remove the hangar agreement from the agenda. Fox responded that he thought it was a good time to put the agreement back on the agenda and Samson agreed to do so. The Port Authority Board then considered the hangar agreement on Dec. 8, 2011, and approved it. Fox later emailed Samson: “Finally have their [United’s] attention. Having item off/on this week worked,” referring to the hangar agreement.
As a result of the repeated use of Samson’s official authority to pressure United by Samson and Fox, United decided to reinstate the Newark/Columbia route. Based on Samson’s preferred travel schedule to South Carolina, which Fox communicated to United, the airline implemented a weekly schedule that only included flights from Newark Airport to Columbia Airport departing at 6:00 p.m. on Thursdays (with a returning flight the same night) and from Columbia Airport to Newark Airport departing at 6:20 a.m. on Mondays (after a flight to Columbia Airport the evening before). United began flying the Newark/Columbia route in September 2012 and operated the route until March 2014. Samson used the Newark/Columbia route on 27 occasions between October 2012 and January 2014. Samson and others referred to the Newark/Columbia route as the “Chairman’s Flight” and Fox referred to it as “Samson Air.”
Samson faces a maximum statutory penalty of 10 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. Pursuant to the terms of the plea agreement between Samson and the U.S. Attorney’s Office, the maximum prison term that can be imposed on Samson is 24 months. The count with which Fox is charged carries a maximum potential penalty of five years in prison and a fine of $250,000 or twice the gross gain or loss from the offense.
United has entered into an agreement with the U.S. Attorney’s Office regarding its conduct and the conduct of its employees in relation to the Newark/Columbia route. United personnel understood that Samson wanted the route reinstated for his own personal use and that failing to reinstate it could adversely affect United’s business interests. United’s decision to reinstate the route departed from its standard process for adding a route to United’s network, which included forecasts on how the route could be expected to perform, multiple levels of review, and presentation to a group of senior United executives. Consistent with analyses performed both before and after the decision to reinstate the route, United lost money by operating the route. United has acknowledged that at no time prior to reinstating the route did United consult with any legal counsel or compliance personnel, and United failed to report discussions about the Newark/Columbia route to law enforcement.
In addition to the monetary penalty, United agreed to cooperate with the U.S. Attorney’s Office, to report periodically to the Office during a two-year period concerning United’s compliance efforts, and to continue to implement an enhanced compliance program designed to prevent and detect bribery and corruption violations. If United abides by the terms of the agreement, the Office has agreed not to prosecute United for its conduct relating to the Newark/Columbia route.
The agreement acknowledges United’s extensive, thorough, timely, and voluntary cooperation, including disclosing all non-privileged information regarding the conduct of its employees and agents related to the Newark/Columbia route, conducting an internal investigation, making its employees available for interviews, producing documents and other materials, and making multiple presentations to the Office. United has engaged in early and extensive remediation, including improving its Ethics and Compliance Office, enhancing its global code of conduct and anti-bribery/anti-corruption policies, conducting extensive anti-bribery/anti-corruption training, separating from certain employees involved in the conduct relating to the Newark/Columbia route, and developing a third-party due diligence process and compliance audit.
U.S. Attorney Fishman credited criminal investigators of the Port Authority, Office of Inspector General, under the direction of Inspector General Nestor; special agents of the FBI, under the direction of Special Agent in Charge Gallagher, and criminal investigators of the U.S. Attorney’s Office, for the investigation leading to today’s charges and guilty plea.
The government is represented by Assistant U.S. Attorneys Vikas Khanna and Lee M. Cortes Jr. and Senior Litigation Counsel J Fortier Imbert of the U.S. Attorney’s Office Special Prosecutions Division and Assistant U.S. Attorney Steven G. Sanders, Deputy Chief of the Appeals Division.
The charge and allegations contained in the federal criminal complaint against Fox are merely accusations and the defendant is presumed innocent unless and until proven guilty.
Defense counsel:
Samson: Michael Chertoff Esq., Washington, D.C., & Justin Walder Esq., Hackensack, N.J.
Fox: Michael Critchley Esq., Roseland, N.J.
United Continental Holdings Inc.: Jenner & Block LLP, Chicago
Former Law Enforcement Official Convicted of Drug TraffickingRead the Press Release
McALLEN, Texas – A jury has found a former Drug Enforcement Administration (DEA) task force officer/Mission Police Department investigator guilty of conspiracy to possess with intent to distribute and possession with intent to distribute cocaine, announced U.S. Attorney Kenneth Magidson. The federal jury sitting in McAllen convicted Hector Mendez, 46, this afternoon following a six-day trial and approximately three hours of deliberation.
During trial, the jury heard that Mendez conspired to steal approximately 14.9 kilograms of cocaine and stage a seizure of sham, or diluted cocaine, to cover the theft.
On July 25, 2012, Reynol Chapa, 42, of Mission, had received a quantity of cocaine at a residence in Mission. Shortly thereafter, Mendez arrived at Chapa’s residence and collected the bundles of cocaine. Mendez and Chapa had agreed the cocaine would be diluted or cut, then repackaged and staged for a seizure sometime later. The remaining cocaine would then be sold.
On July 28, 2012, a Ford Taurus was staged with the diluted bundles of cocaine in Mission. Mendez and other Mission Police Department officers seized the Taurus and drugs. Chapa made recorded calls to the person who had originally provided the drugs to conceal the fact that the cocaine had been cut and make it seem the bundles had been seized by law enforcement during the supposed transport.
Testimony of witnesses established that Mendez intentionally concealed facts about the seizure in DEA reports and statements to federal prosecutors, presented false statements to multiple judges in sworn court filings and intentionally altered transcripts of recorded calls in evidence.
U.S. District Judge Randy Crane presided over the trial and set sentencing for Sept. 27, 2016. At that time, Mendez faces no less than 10 and up to life on each count of conviction. Mendez was remanded to custody pending that hearing.
Chapa pleaded guilty and is set for sentencing Aug. 9, 2016.
The FBI, Department of Justice - Office of Inspector General (OIG), Department of Homeland Security – OIG and the DEA conducted the investigation. Assistant U.S. Attorneys James H. Sturgis and Kristen J. Rees prosecuted the case.
Former Del Rio Police Officer Sentenced to Seven Years in Federal PrisonRead the Press Release
In Del Rio, a federal judge has sentenced 43-year-old former Del Rio police officer Raymond Villarreal to seven years in federal prison for drug distribution announced United States Attorney Richard L. Durbin, Jr., and Homeland Security Investigations (HSI) Special Agent in Charge Shane Folden.
At sentencing yesterday afternoon, United States District Judge Alia Moses also ordered that Villarreal pay a $3,000 fine and be placed on supervised release for a period of five years after completing his prison term.
“While some may mistakenly view smuggling and trafficking in narcotics as a path to a quick profit, the sentencing of Raymond Villarreal demonstrates that serious consequences await those who engage in this criminal activity,” said Special Agent in Charge Shane Folden, HSI San Antonio. “HSI will continue to work closely with its law enforcement partners to bring narcotics traffickers to justice, even those in the position of public trust.”
On May 21, 2015, Villarreal pleaded guilty to one count of conspiracy to possess with intent to distribute a controlled substance. By pleading guilty, Villarreal admitted that from January 2012 to December 2013, he distributed cocaine throughout the Del Rio area from his business, Raul’s Body Shop.
This case was investigated by HSI agents out of Del Rio, TX, with the support of the Texas Department of Public Safety, Drug Enforcement Administration, Val Verde County Sheriff’s Office and the Del Rio Police Department. The case was prosecuted by Assistant United States Attorneys Todd R. Keagle and Michael Galdo.
Former CEO of Scranton Area Federal Credit Union Pleads Guilty to Bank FraudRead the Press Release
SCRANTON – The United States Attorney’s Office for the Middle District of Pennsylvania announced today that Sean E. Jelen, age 33, the former Chief Executive Officer (“CEO”) of Scranton-based Valor Federal Credit Union (“Valor”), formerly known as Tobyhanna Federal Credit Union, pleaded guilty before United States Magistrate Judge Karoline Mehalchick in Scranton, to bank fraud and attempted bank fraud.
According to United States Attorney Peter Smith, Jelen committed and attempted to commit a series of fraudulent activities from July 2014 to August 2015. During the majority of that time, Jelen served as the CEO of Valor. Valor is a federal credit union, its assets are insured by the National Credit Union Administration which also supervises and regulates it. Valor terminated Jelen’s employment in August 2015.
The fraudulent activities involved forged and altered documents created by Jelen.
Jelen admitted to executing the scheme to defraud Valor of approximately $718,000, some of which went to pay for his personal credit card, his graduate tuition, his spouse’s birthday party, and a golf tournament sponsorship.
Jelen also admitted to rigging elections held for the Valor Board of Directors, whereby he elected and impersonated fictitious members of the Board and its Supervising Committee.
Jelen further admitted that he attempted to obtain an additional approximate $1,146,000 through fraudulent means, and by creating a forged severance contract that would be triggered by his termination.
Valor is a federal credit union, its assets are insured by the National Credit Union Administration (NCUA) which also supervises and regulates it.
The Information seeks forfeiture of property obtained as a result of the fraud, including a residence located in New York. Jelen’s guilty plea was entered pursuant to a The government also filed a plea agreement that was filed by the government in conjunction with the charges in a criminal information on June 15, 2016.with Jelen to the alleged charges, which is subject to approval of the court. Valor terminated Jelen’s employment in August.
Judge Mehalchick allowed Jelen to remain on pre-trial release, subject to travel restrictions and the surrender of his passport. When scheduled, Jelen will be sentenced by United States District Court Judge Richard P. Conaboy.
The investigation was conducted by the Federal Bureau of Investigation (FBI). The case is being prosecuted by Assistant United States Attorneys John Gurganus, Evan Gotlob and Phil Caraballo. Valor’s current management is cooperating with the FBI and the U.S. Attorney’s Office.
A sentence following a finding of guilt is imposed by the Judge after consideration of the applicable federal sentencing statutes and the Federal Sentencing Guidelines.
The maximum penalty under federal law for the charges is 60 years of imprisonment, a term of supervised release following imprisonment, and a fine. Under the Federal Sentencing Guidelines, the Judge is also required to consider and weigh a number of factors, including the nature, circumstances and seriousness of the offense; the history and characteristics of the defendant; and the need to punish the defendant, protect the public and provide for the defendant’s educational, vocational and medical needs. For these reasons, the statutory maximum penalty for the offense is not an accurate indicator of the potential sentence for a specific defendant.
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Florida Man Sentenced in Manhattan Federal Court in Connection with Two Multimillion-Dollar Fraud SchemesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOSEPH DEL VALLE, an owner and partner of various investment companies, was sentenced yesterday in Manhattan federal court to 98 months in prison for wire fraud and aggravated identity theft charges for operating two fraudulent schemes that resulted in more than $5 million in investor losses. DEL VALLE pled guilty on February 8, 2016, and was sentenced yesterday by United States District Judge Richard M. Berman.
Manhattan U.S. Attorney Preet Bharara stated: “Joseph Del Valle defrauded investors out of millions of dollars, taking money meant for investments and instead spending it on himself on luxury vacations, fine dining, and personal expenses. To fool investors who thought they were investing in wine, restaurant and hotel businesses, Del Valle fabricated emails purported to be from well-known chefs and business people.”
According to the allegations contained in the Superseding Indictment, the underlying criminal Complaint, and other statements made during court proceedings:
The Project Miami Scheme
Beginning in 2005, JOSEPH DEL VALLE, a co-conspirator (“CC-1”), and an employee of Vanquish Acquisition Partners LLC, began soliciting investors for a real estate development project in the Little Havana neighborhood of Miami (referred to herein as “Project Miami”). Project Miami involved two high-rise buildings in which the bottom floors would house retail shops and the top floors would be residential condominiums. Project Miami was designed to provide affordable housing to middle-income individuals and included an arrangement for financing so that purchasers of the condominiums would receive government-subsidized mortgages. From 2005 through 2007, DEL VALLE, CC-1, and the employee obtained approximately $6.4 million from investors for Project Miami.
Prior to making any investments, investors were told that the investment was solely for Project Miami. Investors were provided with various materials that specified the investments were for Project Miami, and provided that DEL VALLE and his company would take only a five percent management fee. However, almost immediately after investors transferred funds for Project Miami, almost all of which were sent to banks in Manhattan, New York, DEL VALLE and CC-1 transferred amounts far greater than five percent to other bank accounts and began using the funds for other purposes, including investments in a wine magazine and for DEL VALLE’s personal use. For example, in October 2007, DEL VALLE used $30,000 of investor money in Europe for, among other things, hotels, restaurants, a cruise, and cash withdrawals. In total, DEL VALLE and CC-1 used over $3 million for other investments or personal expenses.
When investors became suspicious and requested financial statements for their investments and a return of their money, DEL VALLE represented to investors in phone calls and email communications that the investment funds were secure when, in fact, a large portion of the investors’ money had already been misappropriated and/or diverted to other uses. DEL VALLE also falsely told investors that financial statements were in the process of being prepared and would be mailed to them shortly, but in fact, DEL VALLE and CC-1 had not provided any financial information to the accountant responsible for the preparation of financial statements of the relevant entities.
The Project WT/Bistro, Project Chateau, & Project Rioja Scheme
From in or about 2009 through in or about 2014, DEL VALLE conducted a second scheme in which he solicited investors to wire investments to various bank accounts for the purpose of investing in three purported investment projects, Project WT (later named Project Bistro), Project Rioja, and Project Chateau, all of which DEL VALLE controlled. According to DEL VALLE, Project WT/Bistro was created for the purpose of raising money to expand two restaurants, Project Chateau was created for the purpose of raising money to invest in the high-end segment of the hospitality industry, and Project Rioja was created for the purpose of raising money to invest in the high-end segment of the wine industry. DEL VALLE raised more than $2 million from investors for these projects.
Among other things, DEL VALLE falsely represented to investors that their money would be used solely to fund the specific projects in which the investors had decided to invest. However, almost immediately after investors transferred funds to bank accounts controlled by DEL VALLE, DEL VALLE withdrew money from the bank accounts (often through debit card purchases, ATM withdrawals, and wire transfers) and spent approximately all of the funds on restaurants, hotels, clothing, mortgage payments and payments to DEL VALLE’s family members and his fiancée, among other things. In addition, to induce investors to invest money in the specific projects, DEL VALLE frequently sent investors multiple fabricated emails that purported to come from well-known chefs and businesspeople.
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In addition to the prison sentence, DEL VALLE, 61, of Aventura, Florida, was sentenced to five years of supervised release. The Court further ordered that DEL VALLE forfeit $5,333,722 and pay $5,333,722 in restitution.
Mr. Bharara praised the work of the FBI.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Aimee Hector and Damian Williams are in charge of the prosecution.