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Tuesday 9 December 2014
CEO of Real Money Sports, Inc. Charged with Fraud, Racketeering, and ExtortionRead the Press Release
United States Attorney James L. Santelle of the Eastern District of Wisconsin announced today that Fort Lauderdale-area resident Adam H. Meyer (age: 42), the President and Chief Executive Officer of Real Money Sports, Inc., has been indicted on federal fraud, racketeering, extortion, and gun charges by a federal grand jury in Milwaukee, Wisconsin. According to the six-count indictment, which was unsealed earlier today, Real Money Sports is a “tout service” through which Meyer advises customers on which teams to bet on in National Football League, Major League Baseball, National Basketball Association, and National Collegiate Athletic Association games. He allegedly sells those picks for fees that sometimes run into the hundreds of thousands of dollars.
According to the indictment, Meyer promoted Real Money Sports by identifying himself as the “sports consultant to the stars” and by claiming to have an “unheard of win percentage” that was attributable to his employing a team of more than 130 experts, including former professional players and coaches. Meyer referred some of his tout-service customers to people and entities whom he falsely claimed were third-party bookmakers who could accept bets on sporting events. The purported third-party bookmakers were actually people working on behalf of Meyer.
One of Meyer’s tout service customers, identified in the indictment as “Victim A,” began purchasing picks from Meyer in 2007 and later was referred by Meyer to a party whom Meyer falsely claimed was an independent bookmaker. When Victim A eventually reduced his gambling activity, Meyer told him that they both were in danger. More specifically, Meyer falsely told Victim A that a bookie was threatening Meyer’s life over a large gambling debt. Meyer also falsely claimed that the bookie was holding Victim A and Meyer equally responsible for the debt.
According to the indictment, Meyer falsely told Victim A that a person named “Kent Wong” was attempting to collect the debt. “Kent Wong” actually was an alter-ego created by Meyer. Over the course of several years, Meyer—sometimes posing as Wong—repeatedly called Victim A to demand more money. In response to those demands, which often entailed threats that Victim A’s family would be harmed if he did not pay, Victim A transferred millions of dollars into bank accounts as directed by Meyer, who, in turn, used the money for his own personal purposes.
According to the charges in the indictment, in early 2012, after Victim A had refused to provide him with any further funds, Meyer arranged to meet with Victim A. Meyer set the meeting up under the false pretense that he was going to repay Victim A some portion of the millions of dollars in previous transfers.
According to the indictment, on April 16, 2012, Meyer and an associate flew from Florida to Fond du Lac, Wisconsin, for the meeting with Victim A. During the meeting, Meyer’s associate brandished a firearm and demanded that Victim A send Meyer more money to pay off a purported gambling debt. In response to that threat, Victim A agreed to pay Meyer $9.8 million and, over the course of the next week, wired that amount into accounts controlled by Meyer and Meyer’s agents. In total, between January 2009 and February 2013, Meyer and his associates obtained more than $25 million from Victim A.
Based on the conduct described above, the indictment charges three counts of wire fraud (Counts One through Three), one count of extortion (Count Four), one count of interstate travel in aid of a racketeering enterprise (Count Five), and one count of brandishing a firearm during and in relation to a crime of violence (Count Six). The three wire fraud counts, the extortion count, and the interstate travel in aid of racketeering count each carry a maximum penalty of 20 years of imprisonment, and the gun count carries a maximum term of life imprisonment. Each count also carries a maximum fine of $250,000.
In announcing the unsealing of the indictment, United States Attorney Santelle commented: “Conduct of the serious type and broad extent described in the indictment is not only violative of federal law prohibiting racketeering, extortion, and other violent behaviors but also trades on the sound, favorable image and positive public association with national sports entities and sporting events. It has been and remains the commitment of the United States Department of Justice to identify, investigate, and prosecute offense conduct of this sort thoroughly, exactingly, and effectively.” Santelle specifically commended the “outstanding efforts of Assistant United States Attorney James P. Loonam from the Office of United States Attorney for the Eastern District of New York, and the stellar investigative focus and work of the United States Postal Inspection Service, the Broward County Sheriff’s Office, and the New York City Police Department in bringing this defendant’s illegal activities to a close.”
Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service, said, “Mr. Meyer preyed on his victims with threats and intimidation, extorting funds to support a lavish lifestyle. Postal Inspectors and their law enforcement partners put an end to his racketeering reign of terror.”
This case is being prosecuted by First Assistant United States Attorney Gregory J. Haanstad.
An indictment is only a charge and is not evidence of guilt. A defendant is presumed innocent and is entitled to a fair trial at which the government must prove guilt beyond a reasonable doubt.
Buffalo Man Sentenced on Drug ChargesRead the Press Release
CONTACT: Barbara Burns
PHONE: (716) 843-5817
FAX: (716) 551-3051BUFFALO, N.Y. - U.S. Attorney William J. Hochul, Jr. announced today that Wallace D. Peace, 39, of Buffalo, N.Y., who was convicted of conspiracy to possess with intent to distribute more than 280 grams of crack cocaine, was sentenced to 262 months in prison by U.S. District Judge Richard J. Arcara.
Assistant U.S. Attorneys Mary Clare Kane and George C. Burgasser, who handled the case, stated that between January 2008 and July 29, 2008, the defendant was intercepted over New York State wiretaps, on numerous occasions, discussing cocaine-related transactions. These included conversations between Peace and co-defendant Patrick Perry during which they attempted to arrange to purchase cocaine from multiple sources of supply. Other conversations between the defendant and his customers involved the purchase and sale of crack cocaine.
On July 29, 2008, law enforcement officers executed a search warrant at Peace’s residence and seized digital scales, cell phones, packaging material, 129 grams of crack cocaine, small quantities of cocaine and marijuana, $1,157 in United States currency, and two firearms.
Peace was arrested along with 30 other defendants in July 2008. All 31 defendants now stand convicted.
The sentencing is the culmination of an investigation on the part of Special Agents of the Drug Enforcement Administration, under the direction of James J. Hunt, Special Agent in Charge, New York Region; Special Agents of the Bureau of Alcohol, Tobacco, Firearms and Explosives, under the direction of James S. Higgins, Acting Special Agent in Charge; and the Buffalo Police Department, under the direction of Commissioner Daniel Derenda.
Arizona Man Sentenced to Federal Prison for Assault Conviction in New MexicoRead the Press Release
ALBUQUERQUE – Antonio Yazzie, 22, an enrolled member of the Navajo Nation who resides in Lukachukai, Ariz., was sentenced this afternoon for his assault with a dangerous weapon conviction. Yazzie will serve 24 months in federal prison followed by three years of supervised release.
Yazzie and his sister Maraintoinette Lynn Yazzie, 26, also of Lukachukai, Ariz., were arrested in April 2014, on a criminal complaint alleging that they attacked a Navajo man at his home in Tohlakai, N.M., on Feb. 26, 2014. The two subsequently were indicted in May 2014, and charged with one count of assault with a dangerous weapon and two counts of robbery. According to court filings, Yazzie and his sister allegedly assaulted the victim by restraining him and striking him repeatedly in the face and head with a rock and a coffee mug. The two then allegedly robbed the victim of cash and his truck.
Yazzie pled guilty on Sept. 9, 2014, to Count 1 charging him with assault with a dangerous weapon. In his plea agreement, Yazzie admitted striking the victim in the head and the face with a rock and a coffee mug with the intent to do bodily harm.Mariantoinette Lynn Yazzie pled guilty on Sept. 17, 2014, to Count 1 of the indictment. She has been in federal custody since her arrest and remains detained pending her sentencing hearing, which is scheduled for Jan. 13, 2015. Mariantoinette Lynn Yazzie faces a statutory maximum sentence of ten years in prison when she is sentenced.
This case was investigated by the Crownpoint office of the Navajo Nation Division of Public Safety and is being prosecuted by Assistant U.S. Attorney Paul H. Spiers.Anthony, N.M., Man Sentenced to Seven Years for Unlawful Possession of a Firearm and AmmunitionRead the Press Release
ALBUQUERQUE – Javier Orozco, 30, of Anthony, N.M., was sentenced today in federal court in Las Cruces, N.M., to 84 months in prison followed by three years of supervised release for being a felon in possession of a firearm and ammunition. Orozco was sentenced based on a guilty plea entered on Feb. 11, 2014.
Orozco and his brother, Victor Manuel Carreon, 24, also of Anthony, N.M., were arrested on Sept. 5, 2013, on a criminal complaint charging them with being felons in possession of firearms and ammunition. The two were subsequently indicted on these charges on Dec. 11, 2013. The indictment alleges that Carreon and Orozco unlawfully possessed firearms and ammunition in Doña Ana County, N.M., on June 19, 2013. At the time, the brothers were prohibited from possessing firearms or ammunition because they were convicted felons. Carreon previously had been convicted for possession of a controlled substance and aggravated fleeing from a law enforcement officer, and Orozco had been convicted for shooting at a motor vehicle and aggravated assault.According to court filings, on June 19, 2013, Carreon and Orozco were arrested on state charges by Doña Ana County Sheriff’s deputies who were seeking to arrest Carreon on state warrants. The deputies detained Orozco in the vicinity of a truck parked outside a residence in Anthony, and arrested Carreon inside the residence. At the time of his arrest, Carreon was near a trash can that contained a loaded handgun; he admitted ownership of the handgun during a post-arrest interview. The deputies arrested Orozco after they allegedly found a large amount of cash and a plastic bag containing methamphetamine in Orozco’s pockets. During a search of the truck, which allegedly was driven primarily by Orozco, officers allegedly found additional currency and a loaded handgun.
On Jan. 7, 2014, Carreon pled guilty to Count 2 of the indictment charging him with being a felon in possession of a firearm and ammunition. He was sentenced on May 21, 2014, to 46 months in prison followed by three years of supervised release.
This case was investigated by the Las Cruces office of the FBI and the Doña Ana County Sheriff’s Office, with assistance from the 3rd Judicial District Attorney’s Office, and was prosecuted by Assistant U.S. Attorney Maria Y. Armijo of the U.S. Attorney’s Las Cruces Branch Office.Andrew R. Vara Is Appointed Acting U.S. Trustee for Delaware, New Jersey and PennsylvaniaRead the Press Release
WASHINGTON – Andrew R. Vara has been appointed by Attorney General Eric Holder as Acting U.S. Trustee for Delaware, New Jersey and Pennsylvania (Region 3), effective on January 1, 2015, the Executive Office for U.S. Trustees announced today. Mr. Vara replaces Roberta A. DeAngelis, who is retiring after more than 15 years with the U.S. Trustee Program (USTP), including more than eight years as Region 3 U.S. Trustee or Acting U.S. Trustee.
Mr. Vara has served as the Assistant U.S. Trustee in the USTP's Cleveland office since 2008. He also previously has headed the USTP's offices in Wilmington, Del., and Manhattan, as Assistant U.S. Trustee and Acting Assistant U.S. Trustee, respectively. He frequently serves as a faculty member and lecturer at the USTP’s National Bankruptcy Training Institute located in the National Advocacy Center in Columbia, S.C. Mr. Vara serves as co-chair of education for the American Bankruptcy Institute's (ABI) Ethics and Professional Compensation Committee and recently served as a member of the ABI's Ethics Task Force. Before joining the USTP more than 20 years ago, he clerked for Hon. Laurence Howard, Chief Judge of the U.S. Bankruptcy Court in the Western District of Michigan. Mr. Vara received his law degree with honors from Ohio State University Moritz College of Law in Columbus, Ohio, where he was awarded membership in the Order of the Coif, and his undergraduate degree magna cum laude from Duke University in Durham, N.C.
The USTP is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws. The USTP has 21 regions and 93 field office locations. Region 3 is headquartered in Philadelphia, with additional offices in Wilmington, Del.; Newark, New Jersey; and Harrisburg and Pittsburgh, Pa.
Contact:Jane Limprecht, Public Information Officer
Executive Office for U.S. Trustees
(202) 305-7411Amherst Man Convicted Following Jury Trial of Drug OffensesRead the Press Release
CONTACT: Barbara Burns
PHONE: (716) 843-5817
FAX: (716) 551-3051
BUFFALO, N.Y.--U.S. Attorney William J. Hochul, Jr. announced today that a federal jury in Buffalo has convicted Steven A. Knighton, 48, of conspiracy to possess with intent to distribute 500 grams or more of cocaine. The charge carries a mandatory minimum of 10 years in prison, a maximum of life and a $10,000,000 fine.
Assistant U.S. Attorney Thomas S. Duszkiewicz, who handled the prosecution of the case, stated that on March 13, 2009, the defendant was stopped by police in the parking lot of a local mall. New York State police had earlier stopped an individual in possession of seven kilograms of cocaine who then cooperated with the police and made phone contact with the defendant who was to pay for and receive two of the kilograms of cocaine. Inside the Knighton’s vehicle, officers located $41,000 in United States currency. It was determined that the money, which was shrink wrapped and found in the center console of the vehicle, was intended for the purchase of two kilograms of cocaine. Knighton was responsible for distributing more than 100 kilograms of cocaine in the Buffalo and Niagara Falls area between January 2008 and March 2009.
The verdict is the culmination of an investigation on the part of the New York State Police Community Narcotics Enforcement Team (CNET), under the direction of Major Wayne C. Olson, the Drug Enforcement Administration, under the direction of Special Agent in Charge James S. Higgins, New York Field Division, the Cheektowaga Police Department, under the direction of Chief David Zack, the Amherst Police Department, under the direction of Chief John Askey, and the Niagara Falls Police Department, under the direction of Chief Bryan DalPorto.
Sentencing is scheduled for March 22, 2015, at 2:00 p.m. before Chief U.S. District Judge William M. Skretny, who presided over the trial of the case.
Albuquerque Man Sentenced to Ten Years in Federal Prison for ATM Robbery Spree in Summer 2013Read the Press Release
Dickerson and Co-Defendant Perpetuated in Scheme to Rob Employees
Making ATM Deposits on Behalf of their Business EmployersALBUQUERQUE – Kelvin L. Dickerson, 36, of Albuquerque, N.M., was sentenced this afternoon to 121 months in federal prison followed by five years of supervised release for his conviction for robbing businesses engaged in interstate commerce.
Dickerson and his co-defendant, Dominique Dickens, 29, also of Albuquerque, were arrested in Dec. 2013, on an eight-count indictment charging them with conspiracy and seven Hobbs Act robberies. According to the indictment, between June 2013 and early Sept. 2013, Dickerson and Dickens engaged in a scheme to rob employees of businesses engaged in interstate commerce in Bernalillo County, N.M. Dickens would drive Dickerson to automatic teller machines (ATMs) where Dickerson would rob individuals who were making deposits. Dickens would pick Dickerson up after he committed the robberies and drive him away.On July 2, 2014, Dickerson entered a guilty plea to the indictment and admitted that he and his co-defendant conspired to rob individuals who were making deposits into ATMs between June 28, 2013 and Sept. 5, 2013. Dickerson also admitted robbing seven individuals during that time period. The victims of Dickerson’s criminal conduct were employed by One Main Financial, Loan Max Title Loans, Church’s Chicken, National Insurance, Sonic and Radio Shack, all of which are businesses engaged in interstate commerce.
Dickens pled guilty to a conspiracy charge and three Hobbs Act robbery charges on Aug. 6, 2014. In entering her guilty plea, Dickens admitted conspiring with Dickerson to interfere with interstate commerce by robbing individuals who were making deposits at ATMs on behalf of their business employers. Dickens specifically admitted aiding and abetting Dickerson in robbing the victims by driving him to the vicinity of the ATMs and then driving him away from the crime scenes on three occasions. Dickens faces a maximum statutory penalty of 20 years in prison on each charge to which she pleaded guilty. She remains in custody pending her sentencing hearing, which is scheduled for Dec. 16, 2014.
This case was brought as part of a law enforcement initiative launched in July 2012, by the FBI’s Violent Crimes and Major Offender Squad and the Albuquerque Police Department’s Armed Robbery Unit that targets suspects implicated in commercial armed robberies. This initiative is part of a federal anti-violence initiative that targets “the worst of the worst” offenders for federal prosecution. Under the worst of the worst anti-violence initiative, the U.S. Attorney’s Office and federal law enforcement agencies work with New Mexico’s District Attorneys and state, local and tribal law enforcement agencies to target violent or repeat offenders for federal prosecution with the goal of removing repeat offenders from our communities for as long as possible.This case was investigated by the Albuquerque office of the FBI and the Albuquerque Police Department and is being prosecuted by Assistant U.S. Attorney Jon K. Stanford.
Monday 8 December 2014
Utah County Man Faces January Trial Date on Federal Charges of Possession of 42 Stolen Firearms, Stealing Firearms from a Federal Firearms LicenseeRead the Press Release
SALT LAKE CITY - A Jan. 26, 2015, trial date has been set in U.S. District Court for Shawn Phillip Hansen, age 32, of Pleasant Grove, Utah, who has been charged in an indictment with stealing 42 firearms from a Federal Firearms Licensee (FFL) in Springville. Hansen was an employee of the FFL at the time the alleged thefts took place.
Hansen was charged in a two-count indictment returned in November. The first count of the indictment alleges that beginning on an unknown date and continuing through Sept. 24, 2014, Hansen had 42 stolen firearms in his possession. The second count of the indictment charges him with stealing the firearms from the FFL.
The 42 firearms include a variety of rifles, revolvers, pistols, handguns, and shotguns, including two Taurus International .410 caliber revolvers; two Winchester rifles; six Colt pistols; three U.S.A. Military Surplus .30-06 rifles; and two Browning shotguns. The estimated value of the stolen firearms is around $100,000.
The case came to law enforcement’s attention after the owner of the business determined that a firearm was missing from his inventory. Further investigation identified 42 missing firearms. The case is being investigated by the Springville Police Department and special agents of the ATF.
According to Acting U.S. Attorney Carlie Christensen, the case is being prosecuted federally as a part of the Utah Project Safe Neighborhood (PSN) initiative. PSN, which includes partnerships between local, state and federal police officers and prosecutors, is designed to create safer neighborhoods through a sustained reduction in crime associated with gang and gun violence.
“As the result of hard work by Springville detectives and agents from the Federal Bureau of Alcohol, Tobacco and Firearms, led by Springville Detective Jeff Ellsworth, over 40 weapons have been recovered and removed from the streets of Springville. Removing stolen guns from the streets reduces crime in our community, makes the dealer who had the guns stolen whole, and increases the safety of our citizens. We are pleased the U.S. Attorney’s Office is working with us to keep our communities safe,” Springville Police Chief K. Scott Finlayson said today.
The potential maximum penalty for each count in the indictment is 10 years in prison and a fine of $250,000. Hansen was released with conditions following an initial appearance on the charges.
An indictment is not a finding of guilt. Individuals charged in indictments are presumed innocent unless or until proven guilty in court.
Two Former Will County Bank Officials Plead Guilty to Concealing Loan Delinquencies of Two CustomersRead the Press Release
CHICAGO — A former officer and a former director of a bank in Will County have pleaded guilty to federal charges for fraudulently creating false reports that made it appear that the bank’s loan portfolio was in better shape than it actually was. The defendants together concealed delinquent loan payments on behalf of two customers whose multiple loans totaled approximately $2.8 million, and together caused the bank to lose more than $1.1 million, according to their guilty pleas that were announced today by federal law enforcement officials.
One defendant, MARTIN E. SCHMIDT, JR., was senior vice president for lending and a member of the board of directors of First Community Bank and Trust, which operates in Beecher and Peotone in Will County. Co-defendant, DONNA M. BARBER, was vice president for mortgage lending. First Community Bank and Trust cooperated with the federal investigation.
Schmidt, 57, of Beecher, pleaded guilty on Nov. 13 to making false bank reports and is free on his own recognizance pending sentencing on Feb. 26, 2015. Barber, 53, of Beecher, pleaded guilty to the same charge last Thursday and is free on her own recognizance pending sentencing on March 17, 2015. Both will be sentenced by U.S. District Judge Charles Kocoras in Federal Court in Chicago. They were charged together in a criminal information that was filed in late October.
Making false bank reports carries a maximum penalty of 30 years in prison and a $1 million fine. Schmidt’s plea agreement anticipates an advisory United States Sentencing Guidelines range of 41 to 51 months in prison. Barber’s plea agreement anticipates an advisory guidelines range of 33 to 41 months in prison, with the government recommending a sentencing of approximately 22 months provided she continues to fully cooperate.
In addition, Schmidt and Barber each face a 10-year prohibition on directly or indirectly participating in the affairs of any federally insured credit union or financial institution.
In pleading guilty, Schmidt and Barber admitted that they caused and made false entries in the bank’s past due accounts report for September 2009 by intentionally omitting to disclose as past due nine of Customer K’s loans and advances in the total principal amount of approximately $367,000, and 39 of Customer M’s loans in the total principal amount of approximately $2.5 million.
According to court documents, Schmidt was the point of contact for Customer K, and Barber was the point of contact for Customer M, and their compensation was based, in part, on the performance of the loans for which they were each responsible. By September 2008, Schmidt and Barber each knew that Customers K and M were unable to make payments to the bank on their various loans. They agreed that they needed to take action to prevent the delinquent accounts from appearing on the bank’s reports and began concealing their past due nature. The false entries extended from September 2008 until October 2009.
Barber, with Schmidt’s knowledge and approval, and Schmidt made and caused false entries in loan records allowing Customer M to skip payments without paying the interest due and extending notes without interest payments being current. Some false entries were made on a retroactive basis so the actual condition of the loans would not appear on the bank’s current monthly records.
Schmidt alone caused an unauthorized, undocumented advance of approximately $105,562 to be disbursed to Customer K to make payments on other delinquent loans. He also approved approximately $269,038 in loans to Customer K at a time when he knew that Customer K was unable to repay these loans. Schmidt also caused Barber to make entries in Customer K’s account records that allowed Schmidt to make unauthorized disbursements to Customer K.
Schmidt deceived the bank’s board of directors by leading them to believe that he and Barber were properly managing the bank’s loans, when they were actually fraudulently creating reports that made it appear that the loan portfolio was in better shape than it was.
Schmidt caused the bank to lose more than $1.18 million resulting from both customers’ delinquent loans, which would not have been extended and would have been called in default at an earlier time, as well as by issuing an authorized $80,000 letter of credit and improperly guaranteeing $22,500 in insufficient funds checks for Customer K. Schmidt and Barber were responsible for causing the bank to lose approximately $708,274 relating to Customer M’s loans, while Schmidt alone was responsible for the bank’s loss of approximately $475,100 resulting from Customer K’s loans.
The government is being represented by Assistant U.S. Attorney Brian Netols.
The guilty pleas were announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
Schmidt Plea Agreement
Barber Plea AgreementTwo Former Cay Clubs Executives Plead Guilty in Connection with $300 Million Ponzi Scheme Involving Sales of Vacation Rental UnitsRead the Press Release
Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Kelly R. Jackson, Special Agent in Charge, Internal Revenue Service, Criminal Investigation (IRS-CI), Alysa D. Erichs, Special Agent in Charge, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI), and Laura S. Wertheimer, Inspector General, Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG), announce that Barry J. Graham, 59, and Ricky Lynn Stokes, 54, both of Ft. Myers, Florida, pled guilty today to conspiracy to commit bank fraud, in violation of Title 18, United States Code, Section 371, before U.S. Magistrate Judge Lurana S. Snow in Key West. The charges stem from the defendants’ participation in a $300 million Ponzi scheme involving the sale of vacation rental units to approximately 1,400 investors in the Florida Keys and elsewhere.
Cay Clubs Resorts and Marinas (Cay Clubs) operated from 2004 through 2008, from offices in the Florida Keys and Clearwater. Cay Clubs marketed vacation rental units for 17 locations in Florida, Las Vegas and the Caribbean, to investors throughout the United States. Cay Clubs would promise to develop dilapidated properties into luxury resorts, and would promise investors an upfront “leaseback” payment of 15 to 20% of the sales price of the unit at the time of closing. Once an investor agreed to purchase a unit, Cay Clubs would arrange for a real estate closing and lender financing, but would not disclose the leaseback payment and other financial inducements to the borrowers on paperwork submitted to lending institutions.
According to court documents, Graham was the Director of Sales for Cay Clubs from 2004 through late 2007. Stokes was, from September 2005 to 2008, one of Cay Clubs’ highest-producing sales agents and was Cay Clubs’ Director of Investor Relations.
During this time, Graham and Stokes conspired with others to fraudulently inflate the prices of Cay Clubs units through insider sales. Graham, Stokes and other insiders purchased units from Cay Clubs without disclosing their affiliation with Cay Clubs. Thereafter, these insider sale prices were used on marketing materials to make it appear to investors that the Cay Clubs units were rapidly increasing in price. Furthermore, as Cay Clubs experienced financial difficulties, Graham, Stokes and others conspired to fraudulently market the Cay Clubs investment to new investors by making false and misleading statements, including by concealing Cay Clubs’ failure to convert dilapidated properties into luxury resorts.
Stokes, Graham, and also others created and distributed marketing materials that contained false and misleading statements in order to induce investors to purchase units. For example, Stokes created a sales script and power point presentation entitled “Retire Rich and Young in Paradise.” The sales script contained numerous false and fraudulent statements and was provided to investors and made available to the investing public on the internet.
Graham received approximately $6.5 million and Stokes received approximately $6.2 million disbursed as real estate commissions or referral fees from Cay Clubs’ affiliated accounts during the fraud.
Previously, Fred Davis Clark, Jr., and Cristal R. Clark, a/k/a Cristal R. Coleman, were charged by Superseding Indictment on September 16, 2014, with conspiracy to commit bank fraud and substantive counts of bank fraud, in connection with the alleged Cay Clubs Ponzi scheme. The defendants were ordered to be detained pretrial, and trial is set for March 16, 2015 before U.S. District Judge Jose E. Martinez in Key West.
Graham and Stokes are scheduled to be sentenced on March 23, 2015, at 1:30 p.m.
Mr. Ferrer commended the investigative efforts of IRS-CI, ICE-HSI and FHFA-OIG, and the assistance of the SEC Miami Regional Office in this matter. The matter is being prosecuted by Assistant U.S. Attorneys Jerrob Duffy and Thomas A. Watts-FitzGerald.
A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.
Two Florida Reptile Dealers Sentenced to Prison for Conspiring and Trafficking in Protected ReptilesRead the Press Release
Two Florida men were sentenced on charges of conspiracy and trafficking in protected timber rattlesnakes and endangered Eastern indigo snakes on Friday, Dec. 5. A federal judge in Philadelphia sentenced Robroy MacInnes, 55, of Inverness, Florida, and Robert Keszey, 48, of Bushnell, Florida, to 18 months and 12 months in prison respectively for their role in trafficking in state and federally protected reptiles. MacInnes and Keszey co-owned a well-known reptile dealership, Glades Herp Farm Inc., based in Florida, and Keszey formerly hosted the Discovery Channel show “Swamp Brothers.” The defendants will also serve three years of supervised release. MacInees was also sentenced to pay a $4,000 fine and Keszy will pay a $2,000 fine.
Between 2006 and 2008, the defendants collected protected snakes from the wild in Pennsylvania and New Jersey, purchased protected eastern timber rattlesnakes that had been illegally collected from the wild in New York, and transported eastern indigo snakes, which are listed under the federal Endangered Species Act, from Florida to Pennsylvania. The evidence at trial showed that the protected rattlesnakes were destined for sale at reptile shows in Europe, where a single timber rattlesnake can sell for up to $800. The eastern indigos were intended for domestic sale where a single snake is worth up to $1,000. In addition to trafficking in illegal animals, the defendants attempted to persuade a witness not to provide the government with information regarding their illegal dealings.
The eastern timber rattlesnake is a species of venomous pit viper native to the eastern United States, and is listed as threatened in New York. It is also illegal to possess an eastern timber rattlesnake without a permit in Pennsylvania. The eastern indigo snake, the longest native North American snake species, is listed as threatened by both Florida and federal law.
Both MacInnes and Keszey were convicted on Nov. 15, 2013 after a jury trial in Philadelphia. The case was investigated by the U.S. Fish and Wildlife Service, Office of Law Enforcement, with assistance from the New York Department of Environmental Conservation. The case was prosecuted by Trial Attorney Patrick M. Duggan of the Environmental Crimes Section of the Justice Department’s Environment and Natural Resources Division and Assistant U.S. Attorney Mary Kay Costello of the U.S. Attorney’s Office for the Eastern District of Pennsylvania.
Twenty-eight Alamance County and Two Guilford County Residents IndictedRead the Press Release
GREENSBORO, N.C. – Twenty-seven men and three women have been indicted by a federal grand jury in Greensboro, North Carolina on charges of drug trafficking and illegal weapons possession, announced Ripley Rand, United States Attorney for the Middle District of North Carolina. The defendants reside in Alamance and Guilford Counties.
The fifteen indictments allege violations under Title 21, United States Code, Sections 846, 841(a)(1) and 843(b), and Title 18, United States Code, Sections 922(g)(1) and 924(c)(1)(A)(i), to include: conspiracy to distribute cocaine base and marihuana, the distribution of cocaine hydrochloride, cocaine base and marihuana, the use of communications facilities to facilitate the conspiracy to distribute marihuana, possession of firearms in furtherance of drug trafficking activity and possession of firearms by convicted felons.
Indicted and in custody are:
Dennis Ray Bass, 32
Lashaun Christopher Bolton, 23
Jamar Levelle Bradley, 23
Kelly Denise Bradley, 30
Debra Edmunds Brown, 49
William Earl Brown, Jr., 29
Mandrell Edward Davis, 24
Walter Lewis Ferguson, 40
Joshua Gant, Jr., 31
Jesse Nicholas Gowing, 27
Derek Leon Hinton, 29
Brandon Tremayne Holman, 30
Harry Deangelo Lea, 25
Laquan Gavanete Love, 21
Vondrell Xavier Majette, 26
Danny Lee McCollum, 30
Tyler Corda McGee, 21
Bradley Lee McNeil, 27
Bobby Deshaun Page, 30
Terrance Romeck Page, 33
Michael Brian Poteat, 31
Anthony Mandrell Rogers, 28
Richard Lamar Ruffin, 34
Donte Luther Williamson, 24
Indicted, but not yet in custody are:
Brittney Michelle Brown, 27
Stanley Curtis Gillom, 29
Grayland Duran Graves, 37
Travis Dewayne Jeffries, 27
Thomas Delawrence Leath, 45
Kendrick Eugene Sellars, 26
The cases were investigated by the Alamance County Sheriff’s Office, Burlington Police Department, Graham Police Department, Federal Bureau of Investigation (FBI), and the FBI Safe Streets Task Force, which includes the Eden Police Department, Greensboro Police Department, Guilford County Sheriff’s Office, High Point Police Department, and the Winston-Salem Police Department, Bureau of Alcohol, Tobacco, Firearms and Explosives, United States Drug Enforcement Administration, and the United States Marshal’s Service.
The charges contained in the indictments are allegations. The defendants are presumed innocent unless and until each is proven guilty beyond a reasonable doubt in a court of law.
Suffolk Woman Sentenced to 65 Months in Prison for Conspiring to Commit Wire Fraud and Identity TheftRead the Press Release
NORFOLK, Va. – Sheila Clark Lewis, 56, of Suffolk, Va., was sentenced today to 65 months in prison, followed by four years of supervised release, and restitution in the amount of $99,875.97 for conspiracy to commit wire fraud and aggravated identity theft.
Dana J. Boente, United States Attorney for the Eastern District of Virginia, and Gary Barksdale, Inspector in Charge of the Washington Division of the United States Postal Inspection Service, made the announcement after sentencing by Senior United States District Judge Robert G. Doumar.
Lewis pleaded guilty on September 2, 2014. According to court documents, the defendant and co-conspirator, Shavika Thompson, acquired identity information of approximately 200 medical patients without authorization from Thompson’s employer, a telephone answering and messaging service that catered to doctors and medical service practices. They used the information to use and establish numerous store credit card accounts in victims’ names at Kmart, Sears, and Kohl’s department stores. At various times between November 2012 and September 2013, they made purchases using the victims’ accounts. Surveillance videos for the date, time, and locations of purchases show that the defendants were together at the time of purchase in most instances.
Co-defendant Shavika Thompson pleaded guilty on September 4, 2014 and is currently scheduled to be sentenced on January 12, 2015.
This case was investigated by U.S. Postal Inspection Service. Assistant United States Attorney Randy Stoker prosecuted the case on behalf of the United States.
A copy of this press release may be found on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 2:14-cr-88.Tweet
Stanislaus County Defendants Plead Guilty in Scheme to Send Methamphetamine to HawaiiRead the Press Release
FRESNO, Calif. — Miguel Leontapia, 33, and Gilberto Chavez Leon, age 29, both Delhi residents, pleaded guilty Monday to conduct relating to a scheme to send methamphetamine to Hawaii, United States Attorney Benjamin B. Wagner announced. Leontapia pleaded guilty to possession of methamphetamine with the intent to distribute and Leon pled guilty to conspiracy to bulk smuggle cash.
According to court documents, in August 2012, Leontapia and his co-defendants obtained approximately three pounds of methamphetamine that they attempted to ship to Hawaii. Instead, law enforcement seized it. Leon admitted that in August 2012, he and a co‑conspirator traveled from Stanislaus County to Hawaii where they obtained approximately $67,000 cash. Leon and the other person then attempted to take that cash, concealed on their persons and in their luggage, onto a flight to Oakland from Honolulu.
This case is the product of an investigation by the Drug Enforcement Administration, the Stanislaus Drug Enforcement Agency, and the Modesto Police Department. Assistant United States Attorney Kevin Rooney is prosecuting the case.
This case is part of an Organized Crime Drug Enforcement Task Force (OCDETF). The OCDETF program was established in 1982 to conduct comprehensive, multi-level attacks on major drug trafficking and money laundering organizations. The principal mission of the OCDETF program is to identify, disrupt, and dismantle the most serious drug trafficking and money laundering organizations and those primarily responsible for the nation’s drug supply.
Leontapia and Leon are scheduled to be sentenced by United States District Judge Lawrence J. O'Neill on March 2, 2015. Leontapia faces a maximum statutory penalty of life in prison and a $10 million fine. Leon faces a maximum statutory penalty of five years in prison and a $250,000 fine. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.
South Dakota U.S. Attorney's Office Collects over $3.6 Million in Fiscal Year 2014Read the Press Release
United States Attorney Brendan V. Johnson announced that the U.S. Attorney’s Office in South Dakota collected over $3.6 million in Fiscal Year (FY) 2014 from civil and criminal actions. Of this amount, over $2.3 million was collected in criminal actions and over $729,000 was collected in civil actions.
Additionally, the District of South Dakota worked with other U.S. Attorney’s Offices and components of the Department of Justice to collect an additional $625,000 in civil actions that were pursued jointly.
“Our collection figures represent an important component of the work done in the U.S. Attorney’s Office,” said Johnson. “In addition to protecting the public through prosecutions, we also collect money to help the victims of these crimes and recoup losses to the American taxpayer.”
Nationally, Attorney General Eric Holder announced that the Justice Department collected $24.7 billion in civil and criminal actions in the fiscal year ending Sept. 30, 2014. The more than $24 billion in collections in FY 2014 represents nearly eight and a half times the appropriated $2.91 billion budget for the 94 U.S. Attorneys’ offices and the main litigating divisions of the Justice Department combined in that same period.
The U.S. Attorneys’ Offices, along with the department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the U.S. and criminal debts owed to federal crime victims. The law requires defendants to pay restitution to victims of certain federal crimes who have suffered a physical injury or financial loss. While restitution is paid to the victim, criminal fines and felony assessments are paid to the department’s Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs.The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud or other misconduct or collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights, or environmental laws. In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, Internal Revenue Service, Small Business Administration, and Department of Education.
San Jose Man Charged with Violating the Endangered Species ActRead the Press Release
SAN JOSE – Ryan Lopez Bernardez was arraigned today on charges that he violated the Endangered Species Act by transporting two endangered Asian Arowana fish, announced United States Attorney Melinda Haag and United States Fish and Wildlife Service Special Agent in Charge Jill Birchell.
A grand jury returned an indictment against Bernardez on October 15, 2014, but it remained under seal until his arrest and subsequent arraignment today.
According to the indictment, Bernardez, 39, of San Jose, is alleged to have transported in the course of commercial activity, and sold, two fish. The fish are a species known as Asian Arowana, or Asian Bonytongue (scleropoges formosos). These fish are listed as endangered under the Endangered Species Act, and any sales or transportation of them are therefore illegal.
Bernardez was arrested in San Jose on Friday, December 05, 2014, and made his initial appearance in federal court in San Jose on Monday, December 8, 2014. Bernardez is currently out of custody. Bail was set at $100,000. His next scheduled appearance is at 1:30 on December 11, 2014, for a further detention hearing before the Honorable Howard R. Lloyd, United States Magistrate Judge.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant faces a maximum sentence of five years, and a fine of $250,000. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Gary G. Fry is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Legal Technician Laurie Worthen. The prosecution is one of several that resulted from an investigation by the United States Fish and Wildlife Service.
Rosebud Woman Charged with Concealing Person from ArrestRead the Press Release
United States Attorney Brendan V. Johnson announced that a Rosebud, South Dakota, woman has been indicted by a federal grand jury for Concealing Person From Arrest.
Samantha Spotted War Bonnet, age 24, was indicted on November 13, 2014. She appeared before U.S. Magistrate Judge Mark A. Moreno on December 4, 2014, and pled not guilty to the Indictment.
The maximum penalty upon conviction is up to 1 year in custody and/or a $100,000 fine, 1 year of supervised release, and $25 to the Federal Crime Victims Fund. Restitution may also be ordered.
The Indictment alleges that between June 12, 2014, and June 13, 2014, Spotted War Bonnet harbored and concealed a person who had an active warrant for arrest.
The charge is merely an accusation and Spotted War Bonnet is presumed innocent until and unless proven guilty.The investigation is being conducted by the U.S. Marshals Service and the Rosebud Sioux Tribe Law Enforcement Services. Assistant U.S. Attorney Timothy M. Maher is prosecuting the case.
Spotted War Bonnet was released on bond pending trial. A trial date has not been set.
Rosebud Man Sentenced for Failure to Register as A Sex OffenderRead the Press Release
United States Attorney Brendan V. Johnson announced that a Rosebud, South Dakota, man convicted of Failure to Register as a Sex Offender was sentenced on December 1, 2014, by U.S. District Judge Roberto A. Lange.
Patrick Black Spotted Horse, age 25, was sentenced to 15 months in custody, 5 years of supervised release, and a $100 special assessment to the Federal Crime Victims Fund.
Black Spotted Horse was indicted for Failure to Register as a Sex Offender by a federal grand jury on August 19, 2014. He pled guilty to the Indictment on September 22, 2014.
Black Spotted Horse had a prior sexual assault conviction in federal court in South Dakota and knew that under the Sex Offender Registration and Notification Act, he needed to properly register and update his registration. On July 12, 2014, Black Spotted Horse absconded from his residence in Rapid City and failed to return. He was apprehended on the Rosebud Sioux Indian Reservation on July 31, 2014, and arrested on outstanding tribal warrants. From the time he absconded from his Rapid City residence until he was apprehended on the Rosebud Reservation, Black Spotted Horse knowingly failed to register and update his registration.
This case was investigated by the U.S. Marshals Service, and the Rosebud Sioux Tribe Law Enforcement Services. Assistant U.S. Attorney Tim Maher prosecuted the case.
Black Spotted Horse was immediately turned over to the custody of the U.S. Marshals Service to begin serving his sentence.
Ring Leader of Credit Card Ring Arrested After More Than A Year as A FugitiveRead the Press Release
Tampa, FL – United States Attorney A. Lee Bentley, III announces that Michel Lermos-Hernandez, the alleged ring leader of a massive credit card fraud and identity theft conspiracy, has been arrested after more than a year as a fugitive. He was first charged by complaint on May 23, 2013, and was subsequently indicted on July 29, 2013, for conspiracy, credit card fraud, bank fraud, and aggravated identity theft. If convicted, he faces maximum penalties ranging from 5 to 30 years in federal prison on each conspiracy, fraud, and identity theft count, and a mandatory 2-year consecutive term in prison for each of the three aggravated identity theft counts. Lermos was released on a bond and fled on or about November 10, 2013.
According to court documents, Lermos allegedly led a credit card fraud ring in which conspirators obtained credit card numbers by placing key loggers on credit card terminals that intercepted and stored swiped credit and debit card account information at the International Mall in Tampa, including the Häagen-Dazs ice cream store. Lermos and others then created counterfeit credit cards using the stolen credit and debit card account numbers. Lermos obtained blank credit card stock, embossing machines, and magnetic stripe re-encoders and also sold stolen account numbers to his co-defendant, Viviana Reyes, and others.
After making the counterfeit credit cards, Lermos provided them to his co-conspirators, including his sister, Norma Cabezas-Hernandez, his girlfriend, Danay-Crespo Rodriguez, and at least two other individuals, including Lazaro Rodriguez and Abel Osorio-Cuok, who used the cards to purchase electronics and gift cards at Tampa area retailers. The conspirators then took these items to Reyes, who paid them in cash for the fraudulently obtained merchandise. Reyes then sold the items at a discounted price.
Agents estimate that the actions of the conspirators in this case have impacted more than 1,000 identity theft victims and the loss to date to the affected financial institutions exceeds $650,000.
Lermos’s co-defendants have all been adjudicated guilty and sentenced as follows:
- Viviana Reyes was sentenced to 12 years’ incarceration on May 14, 2014, after a four-day trial during which she was found guilty on all counts of conspiracy, credit card fraud, bank fraud, and identity theft charges.
- Danay Crespo-Rodriguez was sentenced to seven years in prison on July 1, 2014, after pleading guilty to credit card fraud conspiracy and aggravated identity theft charges.
- Norma Cabezas-Hernandez was sentenced to five years’ imprisonment on April 23, 2014, after pleading guilty to credit card fraud conspiracy and aggravated identity theft charges.
- Lazaro Rodriguez was sentenced to three years and one month in prison on January 24, 2014, after pleading guilty to credit card fraud conspiracy and aggravated identity theft charges.
- Abel Osorio-Cuok was sentenced to five years’ probation on February 25, 2014, after pleading guilty to one count of credit card fraud conspiracy.
An indictment is merely a formal charge that a defendant has committed a violation of one or more federal criminal laws, and every defendant is presumed innocent unless, and until, proven guilty.
This case was investigated by the Tampa Police Department, the Florida Department of Law Enforcement, and the United States Secret Service (USSS), all of which are members of the USSS’s credit card fraud and identity theft task force. It is being prosecuted by Assistant United States Attorneys Mandy Riedel and Suzanne Nebesky.
Lermos’s apprehension was made possible by the tireless efforts of the U.S. Secret Service, FDLE, TPD, and the U.S. Marshals Service.
Ridgeland Man Pleads Guilty to Bankruptcy FraudRead the Press Release
Jackson, Miss – William Marshall Wolfe, 45, of Ridgeland, pled guilty today in U.S. District Court to the fraudulent transfer of approximately $1.5 million in real property from the bankruptcy estate of Steadivest, LLC, announced U. S. Attorney, Gregory K. Davis, Acting U. S. Trustee Henry G. Hobbs, Jr. of Region 5, FBI Special Agent in Charge Donald Alway, IRS Criminal Investigation Special Agent in Charge Jerome R. McDuffie, and Inspector in Charge Robert B. Wemyss of the U. S. Postal Inspection Service.
William Marshall Wolfe placed Steadivest, LLC, in bankruptcy in the Southern District of Mississippi on March 23, 2009. On the eve of bankruptcy, Wolfe, as owner and managing officer of Steadivest, LLC, fraudulently transferred real property belonging to Steadivest, LLC, or its related entities, to another company, which he managed and solicited investors, in order to keep the properties from the bankruptcy estate, all in violation of Sections 152(7), Title 18, United States Code.
Wolfe will be sentenced on March 3, 2015 at 9:00 a.m. by U.S. District Judge Carlton W. Reeves. He faces a maximum sentence of five years in prison and a $250,000 fine.
The U. S. Trustee referred this matter to the U. S. Attorney for prosecution. The investigation was conducted by the FBI, IRS Criminal Investigation, and the U.S. Postal Inspection Service, with assistance from the U.S. Trustee.
Revere Woman Pleads Guilty to Defrauding Government Benefits ProgramsRead the Press Release
BOSTON – A Revere woman pleaded guilty today to fraudulently receiving over $88,000 in disability payments and rental assistance benefits.
Emily Lardiero, 64, pleaded guilty to theft of public money. In November 2014, Lardiero was charged in a felony information. U.S. District Court Judge Rya W. Zobel scheduled sentencing for March 11, 2015.
In 2003, Lardiero began receiving Supplemental Security Income disability benefits from the Social Security Administration (SSA). Recipients of these benefits are required to inform SSA if they return to work or if they acquire money or property that might make them financially ineligible to continue receiving benefits. Lardiero did not report any work or income to SSA and stated during a benefits review in November 2013 that she was still disabled and had no income aside from her SSA benefits. In reality, however, Lardiero was working at Action Emergency Services, a family business in Revere. She also drew income from the business, which she did not report to SSA. By failing to disclose her work and income to SSA, Lardiero received $47,671 in benefits to which she was not entitled.
Additionally, since 2001, Lardiero was illegally receiving rental assistance benefits from the U.S. Department of Housing and Urban Development (HUD). Under this program, HUD pays a significant portion of the monthly rent to the landlord, and the tenant pays the remainder. To receive this subsidy, tenants are not allowed to have any ownership interest in the housing in which they live. In 2007, Lardiero became the sole trustee of the trust that owned the house she was living in and as such she could control the property as if she were the legal owner. Despite signing annual acknowledgements that she knew she could not have any interest in her housing unit, Lardiero continued to participate in the subsidy program. From 2007 to 2010, an acquaintance of Lardiero’s received the monthly landlord’s payments from HUD, and then forwarded the money to her each month. In this manner, Lardiero illegally received $40,391 in HUD benefits.
This case was brought as part of an ongoing effort by the U.S. Attorney’s Office in partnership with the Social Security Administration to investigate and prosecute fraud pertaining to Social Security disability benefits.
In July 2014, Charles Flynn and Steven Grondell of Georgetown were each sentenced to three years of probation, including six months of home confinement, and were ordered to serve 105 hours of community service and to pay $105,158 in restitution to SSA. Flynn received SSA disability benefits while working under Grondell’s identity, and with his permission, to conceal the work from SSA.
Also in July 2014, Carl Lynch of Ware was sentenced to three years of probation, including six months of home confinement, and was ordered to pay $50,264 in restitution to SSA. Lynch received SSA disability benefits while working under another man’s identity to conceal the work from SSA.
In January 2014, Antonio Pulinario Brea of the Dominican Republic was sentenced to 10 months in prison and was ordered to pay $60,455 in restitution to SSA. Pulinario Brea used the identity of an American citizen to obtain SSA disability benefits that he would not have been entitled to receive under his true identity.
The charging statute in the Lardiero case provides a sentence of no greater than 10 years in prison, three years of supervised release, and a fine of $250,000 or twice the gross gain or loss, whichever is greater. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
United States Attorney Carmen M. Ortiz; Scott Antolik, Special Agent in Charge of the Social Security Administration, Office of Inspector General, Office of Investigations, Boston Field Division; and Christina Scaringi, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of the Inspector General, Northeast Regional Office, made the announcement today. The Lardiero case is being prosecuted by Special Assistant U.S. Attorney Timothy Landry of Ortiz’s Major Crimes Unit.
Rapid City Man Indicted for Assault and BurglaryRead the Press Release
United States Attorney Brendan V. Johnson announced that a Rapid City, South Dakota, man has been indicted by a federal grand jury for Assault with a Dangerous Weapon and Burglary.
Leroy Wayne Brown Bull Sr., age 24, was indicted on February 19, 2014. He appeared before U.S. Magistrate Judge Veronica L. Duffy on December 1, 2014, and pled not guilty to the Indictment.
The maximum penalty upon conviction is 25 years’ imprisonment and/or a $250,000 fine, 3 years of supervised release, and a $100 assessment to the Federal Crime Victims Fund. Restitution may also be ordered.
The Indictment charges that in November of 2013, Brown Bull and another person broke into a home near Kyle and assaulted a man.
The charges are merely accusations and Brown Bull is presumed innocent until and unless proven guilty.
The investigation was conducted by the Bureau of Indian Affairs, Office of Justice Services, and the Oglala Sioux Tribe Department of Public Safety. Assistant U.S. Attorney Sarah B. Collins is prosecuting the case.
Brown Bull was remanded to the custody of the U.S. Marshals Service. A trial date has not been set.
Plummer Man Pleads Guilty to Strangulation ChargeRead the Press Release
COEUR D’ALENE - James Andrew Samuels, Jr., 27, of Plummer, Idaho, pleaded guilty today in United States District Court to strangulation, U.S. Attorney Wendy J. Olson announced.
According to the plea agreement, on November 15, 2013, Samuels got into an argument with a woman he was dating. Samuels admitted that he grabbed the victim by the neck and strangled or attempted to strangler her. The woman was transported to the hospital and later released, having sustained bruises to her face and neck.
The charge is punishable by up to ten years in prison, a maximum fine of $250,000, and up to three years of supervised release.
Samuels is scheduled to be sentenced on March 3, 2015, by U.S. District Judge Edward J. Lodge at the federal courthouse in Coeur d’Alene.
The case was investigated by the Coeur d’Alene Tribal Police Department and the Federal Bureau of Investigation. The case was prosecuted in federal court because the crime occurred on the Coeur d'Alene Indian Reservation and the defendant is an enrolled member of the Coeur d’Alene tribe.
Otismed Corporation and Former CEO Plead Guilty to Distributing FDA-Rejected Cutting Guides for Knee Replacement SurgeriesRead the Press Release
Corporation to Pay More than $80 Million to Resolve Criminal and Civil Investigations
NEWARK, N.J. – OtisMed Corp. and its former chief executive officer admitted today to intentionally distributing knee replacement surgery cutting guides after their application for marketing clearance had been rejected by the Food and Drug Administration (FDA), and the corporation agreed to pay more than $80 million to resolve its related criminal and civil liability, the Justice Department announced today.
OtisMed and its CEO, Charlie Chi, 45, of San Francisco, pleaded guilty in Newark federal court. OtisMed pleaded guilty before U.S. District Judge Claire C. Cecchi to an information charging it with distributing, with the intent to defraud and mislead, adulterated medical devices into interstate commerce in violation of the Food, Drug, and Cosmetic Act (FDCA). Judge Cecchi also sentenced the company today, fining OtisMed $34.4 million and ordering $5.16 million in criminal forfeiture. In a separate civil settlement, OtisMed agreed to pay $40 million plus interest to resolve its civil liability. Chi pleaded guilty before U.S. Magistrate Judge Mark Falk to three counts of introducing adulterated medical devices in interstate commerce. Chi will be sentenced by Judge Cecchi on March 18, 2015.
“It is vital that products like the OtisKnee are subjected to the appropriate level of scrutiny,” U.S. Attorney Paul J. Fishman said. “Patients seeking medical care are vulnerable; they are often afraid, and in pain. They should be able to trust their doctors. And they should be entitled to trust that the devices their doctors are using are safe, effective, tested, and approved. OtisMed and Charlie Chi betrayed that trust.”
“Americans must be able to trust that they are treated with medical devices that have been shown to be safe and effective,” Deputy Assistant Attorney General Jonathan Olin for the Justice Department’s Civil Division said “The Department of Justice will not tolerate companies and individuals that cut corners when it comes to the public’s health.”
The civil settlement resolves claims filed under the whistleblower provisions of the False Claims Act, which permit private parties to file suit on behalf of the United States and obtain a portion of the government’s recovery. The civil lawsuit was filed in the District of New Jersey and is captioned U.S. ex rel. Adrian v. OtisMed Corp., et al.
OtisMed was a privately held company when OtisMed and Chi committed the criminal conduct, and was later acquired by Stryker Corp., a medical technology company based in Michigan, in November 2009. At the time the shipments were made in September 2009, Stryker executives were not aware that OtisMed and Chi had shipped cutting guides after the FDA had rejected the company’s application for marketing clearance for the device. Stryker, OtisMed’s parent corporation, cooperated with the government with regard to Otismed’s pre-acquisition conduct throughout the investigation. In addition to the criminal pleas and civil resolution, OtisMed also agreed to be excluded from participating in all federal health care programs for a period of 20 years and Stryker separately agreed to a series of compliance measures aimed at preventing future misconduct.
According to documents filed in this case and statements made in court:
Chi was among the founders of OtisMed in August 2005, and conceived of the OtisKnee orthopedic cutting guide, its primary product. Chi acted as OtisMed’s president, chief executive officer and board of directors’ chairman until OtisMed was acquired by Stryker in November 2009. The OtisKnee was used by surgeons during total knee arthroplasty (TKA), commonly known as knee replacement surgery. The surgical procedure requires a surgeon to remove the ends of the leg bones and to reshape the remaining bone to accommodate the implantation of an artificial knee prosthesis. The cuts to the bone must be made at precise angles because they are critical to the clinical result; failure to achieve the correct angle in TKA procedures can result in failure of the bones and/or the implanted prosthetic joint.
OtisMed marketed the OtisKnee cutting guide as a tool to assist surgeons in making accurate bone cuts specific to individual patients’ anatomy based on magnetic resonance imaging (MRI) performed prior to surgery. None of OtisMed’s claims regarding the OtisKnee device were evaluated by the FDA before the company used them in advertisements and promotional material.
Between May 2006 and September 2009, OtisMed sold more than 18,000 OtisKnee devices, generating revenue of approximately $27.1 million.
On Oct. 2, 2008, OtisMed submitted a pre-market notification to the FDA seeking clearance to market the OtisKnee. The company had not previously sought the FDA’s clearance or approval and had been falsely representing to physicians and other potential purchasers that the product was exempt from such pre-market requirements.
On Sept. 2, 2009, the FDA sent OtisMed a notice that its submission had been denied, noting that the company had failed to demonstrate that the OtisKnee was as safe and effective as other legally marketed devices. The letter warned OtisMed that distribution of the OtisKnee prior to approval would be an FDCA violation, and indicated the FDA viewed the product as a “significant risk device system,” which is defined as presenting a potential for serious risk to the health, safety or welfare of a subject. Chi and others at OtisMed received advice from legal and regulatory counsel confirming it would be unlawful for OtisMed to continue distributing the OtisKnee.
Though the board of directors unanimously decided to stop further shipments of the devices, Chi and others at OtisMed were concerned that inconveniencing surgeons planning to use the OtisKnee in scheduled surgeries would exacerbate the negative impact of the FDA letter on the reputation of OtisMed and the device. Chi directed OtisMed employees to organize a mass shipment of all OtisKnee devices that had been manufactured but had not yet been shipped and suggested ways for the employees to hide the shipments from FDA regulators.
At Chi’s direction, OtisMed shipped approximately 218 OtisKnee guides from California to surgeons throughout the United States, including 16 to surgeons in New Jersey. Both Chi and OtisMed admitted that Chi ordered the distribution a week after the FDA denied OtisMed’s request for clearance.
“Companies and individuals put the public health at risk by not complying with FDA regulatory requirements for the pre-market review of medical devices,” said Acting Director Philip J. Walsky for the FDA’s Office of Criminal Investigations. “We will continue to assure consumer confidence in FDA-regulated products by investigating and bringing to justice those who endanger patient safety by distributing unapproved surgical devices.”
“When OtisMed and its CEO, Charlie Chi, distributed medical devices that were not FDA-approved, they violated the trust that patients extend to health care professionals. This outrageous behavior triggered our agency to exclude OtisMed from participating in Medicare and Medicaid for 20 years,” Special Agent in Charge Thomas O’Donnell of the New York Regional Office of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) said. “We will continue to work with our law enforcement partners to protect federally funded health care programs and the patients who rely on those programs.”
The civil settlement resolves allegations arising from the marketing and distribution of the OtisKnee without receiving approval or clearance from the FDA for the device. Specifically, the settlement alleged that in May 2006, OtisMed, through co-promotion activities with Stryker Corporation, began commercially distributing the OtisKnee without having received clearance or approval from the FDA for the device. OtisMed continued to distribute the device while its application was pending and even after the FDA informed OtisMed that the product could not be lawfully distributed until FDA approved the device.
The settlement also alleged that OtisMed encouraged health care providers to submit claims for MRIs that were not reimbursable because they were not performed for diagnostic use, but rather solely to provide data for the creation of the OtisKnee. Except as admitted in the plea agreement, the claims settled by the civil settlement agreement are allegations only, and there has been no determination of liability as to those claims.The company will pay approximately $41.2 million, including interest, to resolve its civil liability for submitting false claims to the Medicare, TRICARE, Federal Employees Health Benefits and Medicaid programs. Of that amount, approximately $41 million will be paid to the federal government. Medicaid is funded jointly by the states and the federal government and participating Medicaid states will receive approximately $376,700 of the settlement amount. As part of today’s resolution, the relator will receive approximately $7 million.
In addition to agreeing to continue to cooperate with the government’s investigation and maintain a compliance program, Stryker agreed to conduct a review and audit regarding whether other marketed devices have the appropriate FDA approvals and share the results of that audit with the government. Stryker also agreed to annual certifications from the president of Stryker’s orthopedics group and from Stryker’s board of directors regarding the effectiveness of the compliance program.
Chi faces a statutory maximum sentence of one year in prison and a $100,000 fine, or twice the gain or loss from the offense, for each of the three counts of introducing adulterated medical devices in interstate commerce.
The guilty pleas and civil settlement are the culmination of a long-term investigation conducted jointly by the FDA’s Office of Criminal Investigations, under the direction of Special Agent in Charge Antoinette V. Henry, and HHS-OIG, under the direction of Special Agent in Charge O’Donnell. Counsel to the HHS-OIG and FDA’s Office of Chief Counsel to the FDA also assisted. The National Association of Medicaid Fraud Control Units, along with the Medicaid Fraud Control Unit of the Massachusetts Attorney General’s Office, assisted in coordinating the settlements with the various states.Additional assistance was provided by the Defense Health Agency and the Office of Personnel Management–Office of the Inspector General.
This resolution illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $23.2 billion through False Claims Act cases, with more than $14.9 billion of that amount recovered in cases involving fraud against federal health care programs.
The government is represented in the criminal case by Jacob T. Elberg, chief of the U.S. Attorney’s Office Health Care and Government Fraud Unit and Trial Attorney Ross S. Goldstein of the Justice Department’s Consumer Protection Branch, and in the civil settlement by Assistant U.S. Attorney Charles Graybow of the District of New Jersey’s Health Care and Government Fraud Unit, and Trial Attorney Charles Biro of the Justice Department’s Civil Division.
U.S. Attorney Fishman reorganized the health care fraud practice at the U.S. Attorney’s Office for the District of New Jersey shortly after taking office, including creating the stand-alone Health Care and Government Fraud Unit to handle both criminal and civil investigations and prosecutions of health care fraud offenses. Since 2010, the office has recovered more than $620 million in health care fraud and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the FDCA and other statutes.
14-428
Defense counsel:
OtisMed: Brien O’Connor Esq.; Joshua Levy Esq., Boston
Charlie Chi: Peter Harvey Esq., New YorkCounsel for Relator Richard Adrian: Joseph Callow Esq., Cincinnati, Ohio; Joel Hesch Esq., Lynchburg, Virginia
OtisMed Documents
OtisMed Corporation and Former CEO Plead Guilty to Distributing FDA-Rejected Cutting Guides for Knee Replacement SurgeriesRead the Press Release
OtisMed Corp. and its former chief executive officer (CEO) admitted today to intentionally distributing knee replacement surgery cutting guides after their application for marketing clearance had been rejected by the Food and Drug Administration (FDA), and the corporation agreed to pay more than $80 million to resolve its related criminal and civil liability, the Justice Department announced today.
OtisMed and its CEO, Charlie Chi, 45, of San Francisco, pleaded guilty in federal court in Newark, New Jersey. OtisMed pleaded guilty before U.S. District Judge Claire C. Cecchi to an information charging it with distributing, with the intent to defraud and mislead, adulterated medical devices into interstate commerce in violation of the Food, Drug, and Cosmetic Act (FDCA). Judge Cecchi also sentenced the company today, fining OtisMed $34.4 million and ordering $5.16 million in criminal forfeiture. In a separate civil settlement, OtisMed agreed to pay $40 million plus interest to resolve its civil liability. Chi pleaded guilty before U.S. Magistrate Judge Mark Falk to three counts of introducing adulterated medical devices in interstate commerce. Chi will be sentenced by Judge Cecchi on March 18, 2015.
“Americans must be able to trust that they are treated with medical devices that have been shown to be safe and effective,” said Deputy Assistant Attorney General Jonathan Olin for the Justice Department’s Civil Division. “The Department of Justice will not tolerate companies and individuals that cut corners when it comes to the public’s health.”
“It is vital that products like the OtisKnee are subjected to the appropriate level of scrutiny,” said U.S. Attorney Paul J. Fishman for the District of New Jersey. “Patients seeking medical care are vulnerable; they are often afraid, and in pain. They should be able to trust their doctors. And they should be entitled to trust that the devices their doctors are using are safe, effective, tested and approved. OtisMed and Charlie Chi betrayed that trust.”
The civil settlement resolves claims filed under the whistleblower provisions of the False Claims Act, which permit private parties to file suit on behalf of the United States and obtain a portion of the government’s recovery. The civil lawsuit was filed in the District of New Jersey and is captioned U.S. ex rel. Adrian v. OtisMed Corp., et al.
OtisMed was a privately held company when OtisMed and Chi committed the criminal conduct, and was later acquired by Stryker Corp., a medical technology company based in Michigan, in November 2009. At the time the shipments were made in September 2009, Stryker executives were not aware that OtisMed and Chi had shipped cutting guides after the FDA had rejected the company’s application for marketing clearance for the device. Stryker, OtisMed’s parent corporation, cooperated with the government with regard to Otismed’s pre-acquisition conduct throughout the investigation. In addition to the criminal pleas and civil resolution, OtisMed also agreed to be excluded from participating in all federal health care programs for a period of 20 years and Stryker separately agreed to a series of compliance measures aimed at preventing future misconduct.
According to documents filed in this case and statements made in court:
Chi was among the founders of OtisMed in August 2005, and conceived of the OtisKnee orthopedic cutting guide, its primary product. Chi acted as OtisMed’s president, CEO and board of directors’ chairman until OtisMed was acquired by Stryker in November 2009. The OtisKnee was used by surgeons during total knee arthroplasty (TKA), commonly known as knee replacement surgery. The surgical procedure requires a surgeon to remove the ends of the leg bones and to reshape the remaining bone to accommodate the implantation of an artificial knee prosthesis. The cuts to the bone must be made at precise angles because they are critical to the clinical result; failure to achieve the correct angle in TKA procedures can result in failure of the bones and/or the implanted prosthetic joint.
OtisMed marketed the OtisKnee cutting guide as a tool to assist surgeons in making accurate bone cuts specific to individual patients’ anatomy based on magnetic resonance imaging (MRI) performed prior to surgery. None of OtisMed’s claims regarding the OtisKnee device were evaluated by the FDA before the company used them in advertisements and promotional material.
Between May 2006 and September 2009, OtisMed sold more than 18,000 OtisKnee devices, generating revenue of approximately $27.1 million.
On Oct. 2, 2008, OtisMed submitted a pre-market notification to the FDA seeking clearance to market the OtisKnee. The company had not previously sought the FDA’s clearance or approval and had been falsely representing to physicians and other potential purchasers that the product was exempt from such pre-market requirements.
On Sept. 2, 2009, the FDA sent OtisMed a notice that its submission had been denied, noting that the company had failed to demonstrate that the OtisKnee was as safe and effective as other legally marketed devices. The letter warned OtisMed that distribution of the OtisKnee prior to approval would be an FDCA violation, and indicated the FDA viewed the product as a “significant risk device system,” which is defined as presenting a potential for serious risk to the health, safety or welfare of a subject. Chi and others at OtisMed received advice from legal and regulatory counsel confirming it would be unlawful for OtisMed to continue distributing the OtisKnee.
Though the board of directors unanimously decided to stop further shipments of the devices, Chi and others at OtisMed were concerned that inconveniencing surgeons planning to use the OtisKnee in scheduled surgeries would exacerbate the negative impact of the FDA letter on the reputation of OtisMed and the device. Chi directed OtisMed employees to organize a mass shipment of all OtisKnee devices that had been manufactured but had not yet been shipped and suggested ways for the employees to hide the shipments from FDA regulators.
At Chi’s direction, OtisMed shipped approximately 218 OtisKnee guides from California to surgeons throughout the United States, including 16 to surgeons in New Jersey. Both Chi and OtisMed admitted that Chi ordered the distribution a week after the FDA denied OtisMed’s request for clearance.
“Companies and individuals put the public health at risk by not complying with FDA regulatory requirements for the pre-market review of medical devices,” said Acting Director Philip J. Walsky for the FDA’s Office of Criminal Investigations. “We will continue to assure consumer confidence in FDA-regulated products by investigating and bringing to justice those who endanger patient safety by distributing unapproved surgical devices.” “When OtisMed and its CEO, Charlie Chi, distributed medical devices that were not FDA-approved, they violated the trust that patients extend to health care professionals,” said Special Agent in Charge Thomas O’Donnell of the New York Regional Office of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “This outrageous behavior triggered our agency to exclude OtisMed from participating in Medicare and Medicaid for 20 years. We will continue to work with our law enforcement partners to protect federally funded health care programs and the patients who rely on those programs.”
The civil settlement resolves allegations arising from the marketing and distribution of the OtisKnee without receiving approval or clearance from the FDA for the device. Specifically, the settlement alleged that in May 2006, OtisMed, through co-promotion activities with Stryker Corporation, began commercially distributing the OtisKnee without having received clearance or approval from the FDA for the device. OtisMed continued to distribute the device while its application was pending and even after the FDA informed OtisMed that the product could not be lawfully distributed until FDA approved the device.
The settlement also alleged that OtisMed encouraged health care providers to submit claims for MRIs that were not reimbursable because they were not performed for diagnostic use, but rather solely to provide data for the creation of the OtisKnee. Except as admitted in the plea agreement, the claims settled by the civil settlement agreement are allegations only, and there has been no determination of liability as to those claims.
The company will pay approximately $41.2 million, including interest, to resolve its civil liability for submitting false claims to the Medicare, TRICARE, Federal Employees Health Benefits and Medicaid programs. Of that amount, approximately $41 million will be paid to the federal government. Medicaid is funded jointly by the states and the federal government and participating Medicaid states will receive approximately $376,700 of the settlement amount. As part of today’s resolution, the relator will receive approximately $7 million.
In addition to agreeing to continue to cooperate with the government’s investigation and maintain a compliance program, Stryker agreed to conduct a review and audit regarding whether other marketed devices have the appropriate FDA approvals and share the results of that audit with the government. Stryker also agreed to annual certifications from the president of Stryker’s orthopedics group and from Stryker’s board of directors regarding the effectiveness of the compliance program.
Chi faces a statutory maximum sentence of one year in prison and a $100,000 fine, or twice the gain or loss from the offense, for each of the three counts of introducing adulterated medical devices in interstate commerce.
The guilty pleas and civil settlement are the culmination of a long-term investigation conducted jointly by the FDA’s Office of Criminal Investigations, under the direction of Special Agent in Charge Antoinette V. Henry, and HHS-OIG, under the direction of Special Agent in Charge O’Donnell. Counsel to the HHS-OIG and FDA’s Office of Chief Counsel to the FDA also assisted. The National Association of Medicaid Fraud Control Units, along with the Medicaid Fraud Control Unit of the Massachusetts Attorney General’s Office, assisted in coordinating the settlements with the various states.
Additional assistance was provided by the Defense Health Agency and the Office of Personnel Management–Office of the Inspector General.
This resolution illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $23.2 billion through False Claims Act cases, with more than $14.9 billion of that amount recovered in cases involving fraud against federal health care programs.
The government is represented in the criminal case by Chief Jacob T. Elberg of the U.S. Attorney’s Office Health Care and Government Fraud Unit and Trial Attorney Ross S. Goldstein of the Civil Division’s Consumer Protection Branch, and in the civil settlement by Assistant U.S. Attorney Charles Graybow of the District of New Jersey’s Health Care and Government Fraud Unit and Trial Attorney Charles Biro of the Civil Division.
U.S. Attorney Fishman reorganized the health care fraud practice at the U.S. Attorney’s Office for the District of New Jersey shortly after taking office, including creating the stand-alone Health Care and Government Fraud Unit to handle both criminal and civil investigations and prosecutions of health care fraud offenses. Since 2010, the office has recovered more than $620 million in health care fraud and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the FDCA and other statutes.
OtisMed Documents
Okeechobee County Woman Pleads Guilty to Social Security Fraud ChargesRead the Press Release
Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and Thomas Caul, Special Agent in Charge, Social Security Administration, Office of Inspector General (SSA-OIG), announce that Brenda Harden, 56, of Okeechobee, Florida, pled guilty today to charges of embezzlement and theft of government monies, in violation of Title 18, United States Code, Section 641.
According to statements made in open court and documents filed in the case, Harden is the daughter of the late Mary Beard, who died on November 20, 2012. Harden had a joint checking bank account with her mother, and she continued to withdraw and spend her mother’s social security widow’s survivor benefits, when they continued to be paid every month following Beard’s death. Until the discovery of the overpayments by the Social Security Administration, which ended all payments in April 2014, Harden had taken and spent for herself a total of $24,499.
Sentencing is scheduled for February 13, 2015, before U.S. District Judge Robin L. Rosenberg in Fort Pierce. At sentencing, Harden faces a possible maximum statutory sentence of up to ten years in prison.
Mr. Ferrer commended the investigative efforts of the SSA-OIG. This case is being prosecuted by Assistant U.S. Attorney Theodore Cooperstein.
A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.
Ocean County, N.J., Man Sentenced to One Year in Prison for His Role in Multi-Million Dollar Real Estate Investment SchemeRead the Press Release
TRENTON, N.J. – A Lakewood, New Jersey, man was sentenced today to one year and one day in prison for his part in a real estate investment fraud scheme that defrauded investors of more than $1 million, U.S. Attorney Paul J. Fishman announced.
Alex Schleider, 49, previously pleaded guilty before U.S. District Judge Joel A. Pisano to an information charging him with one count of wire fraud. Judge Pisano imposed the sentence today in Trenton federal court.According to documents filed in this case and statements made in court:
Schleider, Eliyahu Weinstein, 39, of Lakewood, and the other defendants persuaded victims to invest in the purported purchase of an apartment complex, “Belle Glade Gardens,” in Florida. They told the victims that Weinstein had the opportunity to purchase Belle Glade Gardens at a discounted price and immediately flip it at a substantial profit. Schleider and Weinstein further told the victims that Weinstein had already placed $2.5 million in the trust account of a Miami law firm for the transaction; that if the victims contributed another $2.5 million toward the transaction, those funds would remain in escrow at the Miami law firm until the deal closed; and that the victims would be repaid within 60 days. The victims wired $2.83 million to the Miami law firm in order to complete the Belle Glades Gardens transaction. Schleider and Weinstein did not use the money to purchase Belle Glades Gardens. Instead, they redirected the money from the law firm to accounts that they controlled, returned $1.8 million to the victims as a purported return on a prior Facebook investment, and used the remaining money for their own purposes.
In addition to the prison term, Judge Pisano Schleider to serve three years of supervised release and ordered him to pay restitution of $613,200 and forfeiture of $363,200.
Weinstein, 39, also pleaded guilty to charges related to his role in the scheme and is scheduled for sentencing on Dec. 15, 2014. Charges against a third conspirator, Aaron Muschel, 64, of Brooklyn, New York, who was charged in the criminal complaint filed against Weinstein and Schleider in May 2013, remain pending. The charges against him are merely accusations and he is presumed innocent until proven guilty.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Aaron T. Ford in Newark, for the investigation leading to today’s sentencing. He also thanked agents of IRS–Criminal Investigation, under the direction of Acting Special Agent in Charge Jonathan D. Larsen, for their role in the investigation.
The government is represented by Counsel to the U.S. Attorney Rachael A. Honig; Gurbir S. Grewal, Chief of the U.S. Attorney’s Office Economic Crimes Unit; Assistant U.S. Attorney Zach Intrater, Deputy Chief of the General Crimes Unit; and Evan S. Weitz of the Asset Forfeiture and Money Laundering Unit.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorney’s offices and state and local partners, it’s 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. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
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Defense counsel: Marc Agnifilo Esq., New YorkNew York Man Sentenced to 33 Months in Prison for Making Threats Against Member of CongressCommunicated Threats by Phone and E-MailRead the Press Release
WASHINGTON – Aniruddha Sherbow, 44, whose last known address was in Poughkeepsie, N.Y., was sentenced today to 33 months in prison for making a series of threats against Congresswoman Tulsi Gabbard, U.S. Representative for the 2nd District of Hawaii.
The sentencing was announced by Ronald C. Machen Jr., U.S. Attorney for the District of Columbia, Kim C. Dine, Chief of the United States Capitol Police, and Andrew G. McCabe, Assistant Director in Charge of the FBI’s Washington Field Office.
Sherbow entered a plea of nolo contendere on Feb. 21, 2014, in the U.S. District Court for the District of Columbia, to two counts of transmission of threats in interstate commerce. Under a nolo contendere plea, a defendant is convicted of the offense, accepts responsibility, and agrees that the government could prove him guilty beyond a reasonable doubt. However, the defendant in such a plea does not admit to the facts of the case.
The Honorable Reggie B. Walton accepted the plea and sentenced Sherbow today. Following his prison term, Sherbow will be placed on three years of supervised release. During that time, Sherbow is barred from any direct or indirect contact with Congresswoman Gabbard. Judge Walton also ordered Sherbow to pay $538,282 in restitution to the United States government, as reimbursement for security expenses incurred as a result of his threats. Finally, the judge ordered Sherbow to get a mental health evaluation and treatment, if necessary.
Sherbow was arrested on Aug. 28, 2013, in Tijuana, Mexico, by Policia Estatal Preventiva, Baja California State Police Fugitive Unit, pursuant to a federal arrest warrant issued in the U.S. District Court for the District of Columbia. He has been in custody ever since. In addition to New York, Sherbow has lived in California, Mexico, and Hawaii.
According to the government’s evidence, Sherbow had been harassing Congresswoman Gabbard since approximately February 2011, including making threats via email and telephone. The charges relate to two such threats, made in August of 2013.
On Aug. 1, 2013, Sherbow left a voicemail message on Congresswoman Gabbard’s phone in which he threatened to kill her. Congresswoman Gabbard was in Washington, D.C., when she received the threatening message. On Aug. 3, 2013, Sherbow, identifying himself by name, sent an e-mail to Congresswoman Gabbard and others, including the FBI. The subject and body of this e-mail also contained threats directed at Congresswoman Gabbard.
In announcing the sentence, U.S. Attorney Machen, Chief Dine, and Assistant Director in Charge McCabe commended the work of those who investigated the case from the U.S. Capitol Police and the FBI. They also expressed appreciation for the work of the Policia Estatal Preventiva, Baja California State Police Fugitive Unit; U.S. Customs and Border Protection, San Ysidro, and the San Diego and Honolulu Divisions of the FBI for their crucial work and joint collaboration in apprehending the defendant. Finally, they acknowledged the efforts of Assistant U.S. Attorneys Michael C. DiLorenzo and Christopher Kavanaugh, who investigated and prosecuted the case.
14-271New Orleans Woman Charged with Theft of Government FundsRead the Press Release
U.S. Attorney Kenneth A. Polite announced that LAVERNE ROSE, age 68, of New Orleans, was charged today with theft of government funds.
According to the bill of information, from 1990 to 2014, ROSE stole approximately $282,400 from the United States Social Security Administration. If convicted, ROSE faces up to ten years’ incarceration and a fine of up to twice the theft amount.
U.S. Attorney Polite reiterated that a bill of information 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 Social Security Administration in investigating this matter. Assistant U.S. Attorney Chandra Menon is in charge of this prosecution.
Navajo Man Pleads Guilty to Federal Sexual Abuse ChargeRead the Press Release
Defendant Prosecuted as Part of Federal Initiative to Address
the Epidemic Incidence of Violence Against Native WomenALBUQUERQUE – Lorin Nelson Dee, 74, an enrolled member of the Navajo Nation who resides in Shiprock, N.M., entered a guilty plea today to a federal abusive sexual contact charge.
Dee was arrested in April 2014, on a criminal complaint charging him with aggravated sexual abuse and abusive sexual contact. Dee subsequently was indicted on those two charges. According to court filings, Dee forced a Navajo woman to engage in a sexual act on April 23, 2014. The offense occurred within the Navajo Indian Reservation in San Juan County, N.M.
This morning, Dee pled guilty to Count 2 of the indictment, charging him with abusive sexual contact. In his plea agreement, Dee admitted intentionally touching and rubbing the victim’s breast by use of force on April 23, 2014.
Dee has been in federal custody since his arrest and remains detained pending sentencing, which has yet to be scheduled. At sentencing, Dee faces a statutory maximum penalty of ten years in prison.
This case was investigated by the Shiprock office of the Navajo Nation Division of Public Safety and is being prosecuted by Assistant U.S. Attorney Kyle T. Nayback.
The case was brought pursuant to the Tribal Special Assistant U.S. Attorney (Tribal SAUSA) Pilot Project in the District of New Mexico which is sponsored by the Justice Department’s Office on Violence Against Women under a grant administered by the Pueblo of Laguna. The Tribal SAUSA Pilot Project seeks to train tribal prosecutors in federal law, procedure and investigative techniques to increase the likelihood that every viable violent offense against Native women is prosecuted in either federal court or tribal court, or both. The Tribal SAUSA Pilot Project was largely driven by input gathered from annual tribal consultations on violence against women, and is another step in the Justice Department's on-going efforts to increase engagement, coordination and action on public safety in tribal communities.
Miami-Area Certified Nursing Assistant Sentenced to 150 Months in Prison for Role in $200 Million Medicare Fraud SchemeRead the Press Release
A Miami licensed nursing assistant was sentenced today to serve 150 months in prison for participating in a $200 million Medicare fraud scheme involving fraudulent billings by American Therapeutic Corporation (ATC), a mental health company headquartered in Miami.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge George L. Piro of the FBI’s Miami Field Office and Special Agent in Charge Derrick Jackson of the Health and Human Services Office of Inspector General’s (HHS-OIG) Florida region made the announcement.
Rodolfo Santaya, 55, of Miami, was convicted on July 18, 2014, after a six-day jury trial, of conspiracy to commit health care fraud and wire fraud, conspiracy to pay and receive bribes and kickbacks, and two counts of receipt of bribes and kickbacks in connection with a federal health care benefit program. In addition to the prison sentence, U.S. District Judge Jose E. Martinez of the Southern District of Florida ordered Santaya to pay more than $18.2 million in restitution.
Evidence at trial demonstrated that, between 2006 and 2010, Santaya was paid thousands of dollars a month in cash kickbacks in exchange for referring Medicare beneficiaries to ATC, which operated purported partial hospitalization programs (PHPs) in seven locations throughout South Florida and Orlando. A PHP is a form of intensive treatment for severe mental illness.
Evidence at trial also demonstrated that the Medicare beneficiaries Santaya sent to ATC did not need, qualify for, nor receive PHP treatment. Nevertheless, ATC submitted false and fraudulent bills to Medicare for services purportedly provided to each of Santaya’s patients. In order to justify ATC’s fraudulent billings, medical professionals, including doctors, fabricated and signed fraudulent medical documentation and patient files.
ATC, an associated management company, and more than 20 individuals, including ATC’s owners, have all previously pleaded guilty or been convicted at trial. Santaya has been in federal custody since his conviction.
The case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida. The case is being prosecuted by Assistant Chief Robert A. Zink and Trial Attorneys Nicholas E. Surmacz and Kelly Graves of the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Team (HEAT), go to: www.stopmedicarefraud.gov.
Miami-Area Certified Nursing Assistant Sentenced to 150 Months in Prison for Role in $200 Million Medicare Fraud SchemeRead the Press Release
A Miami licensed nursing assistant was sentenced today to serve 150 months in prison for participating in a $200 million Medicare fraud scheme involving fraudulent billings by American Therapeutic Corporation (ATC), a mental health company headquartered in Miami.
U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Special Agent in Charge George L. Piro of the FBI’s Miami Field Office and Special Agent in Charge Derrick Jackson of the Health and Human Services Office of Inspector General’s (HHS-OIG) Florida region made the announcement.
Rodolfo Santaya, 55, of Miami, was convicted on July 18, 2014, after a six-day jury trial, of conspiracy to commit health care fraud and wire fraud, conspiracy to pay and receive bribes and kickbacks, and two counts of receipt of bribes and kickbacks in connection with a federal health care benefit program. In addition to the prison sentence, U.S. District Judge Jose E. Martinez of the Southern District of Florida ordered Santaya to pay more than $18.2 million in restitution.
Evidence at trial demonstrated that, between 2006 and 2010, Santaya was paid thousands of dollars a month in cash kickbacks in exchange for referring Medicare beneficiaries to ATC, which operated purported partial hospitalization programs (PHPs) in seven locations throughout South Florida and Orlando. A PHP is a form of intensive treatment for severe mental illness.
Evidence at trial also demonstrated that the Medicare beneficiaries Santaya sent to ATC did not need, qualify for, nor receive PHP treatment. Nevertheless, ATC submitted false and fraudulent bills to Medicare for services purportedly provided to each of Santaya’s patients. In order to justify ATC’s fraudulent billings, medical professionals, including doctors, fabricated and signed fraudulent medical documentation and patient files.
ATC, an associated management company, and more than 20 individuals, including ATC’s owners, have all previously pleaded guilty or been convicted at trial. Santaya has been in federal custody since his conviction.
The case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida. The case is being prosecuted by Assistant Chief Robert A. Zink and Trial Attorneys Nicholas E. Surmacz and Kelly Graves of the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Team (HEAT), go to: www.stopmedicarefraud.gov.
A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.
- Mexican Citizen Pleads Guilty to Role in Organization Responsible for Flying Hundreds of Kilograms of Cocaine to the U.S. and Laundering Money from Its Sales
Member of Marijuana Conspiracy Sentenced to 15 Years in Prison on Drug and Gun ChargesRead the Press Release
Fled to California After 2010 Arrest in Baltimore
Greenbelt, Maryland – U.S. District Judge Roger W. Titus sentenced Joseph Jesus Guadagnoli, age 33, of Baltimore, Maryland, on December 5, 2014, to 15 years in prison, followed by five years of supervised release for conspiracy to distribute and possess with intent to distribute between 1,000 and 4,000 kilograms of marijuana, and possession of a firearm in furtherance of drug trafficking. Judge Titus ordered Guadagnoli to forfeit $6,000 in postal money orders and four guns and ammunition seized from his home, and ordered him to pay a money judgment in the amount of $2,370,000, the value of the property derived from or otherwise involved in the marijuana conspiracy.
The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Karl C. Colder of the Drug Enforcement Administration - Washington Field Division; U.S. Marshal Johnny Hughes; Chief James W. Johnson of the Baltimore County Police Department; Chief J. Thomas Manger of the Montgomery County Police Department; and Commissioner Anthony W. Batts of the Baltimore Police Department.
According to his plea agreement, from at least 2008, until September 27, 2012, Guadagnoli conspired with Andrew Sharpeta, and others to distribute and possess with intent to distribute 1,000 kilograms or more of marijuana. Initially, Guadagnoli participated in the conspiracy by unloading shipments of marijuana at various warehouses throughout Baltimore, leasing a warehouse for this purpose, and distributing the bulk marijuana. Guadagnoli also transported marijuana to various locations in the eastern United States.On March 18, 2009, DEA agents executed a search warrant at 3522 Hickory Avenue in Baltimore, Maryland, which was owned, leased, and utilized by members of the conspiracy, and which served as one center of operations for the narcotics trafficking organization. The items seized from the residence included more than 100 pounds of marijuana, $20,000 in cash, 31 cellular telephones, documents regarding the purchase of a Lancair IV-P aircraft for $450,000 by a co-conspirator, four money counters, tally sheets with balances over $1.5 million, and false identification documents. On the day the search warrant was executed, a member of the conspiracy came to the home of Guadagnoli and his then-girlfriend (now wife) Megan Veitch and asked them to go to the Hickory Avenue address to retrieve an airplane seat which had been removed from a plane that was being used to transport money and marijuana. Guadagnoli and Veitch went to the Hickory Avenue address and removed the airplane seat as well as some of the furniture.
On October 4, 2010, members of the Baltimore County Police Department executed a search warrant at a warehouse which had been leased by Guadagnoli. Guadagnoli and Veitch were arrested leaving the warehouse. Inside the warehouse, officers recovered approximately 600 pounds of marijuana in shipping containers which had been sent by a co-conspirator. Officers also discovered a sophisticated marijuana grow operation that involved over 400 marijuana plants.
After making bond, Guadagnoli and Veitch fled to California, where a co-conspirator assisted them in obtaining California driver’s licenses in false names to conceal their identities. Guadagnoli purchased a rural house in Mendocino, California, where he oversaw the cultivation of marijuana on the surrounding property. On September 27, 2012, Veitch and Guadagnoli were arrested on the Mendocino property. A search warrant was executed, and members of law enforcement recovered hundreds of marijuana plants and paraphernalia associated with the cultivation and harvesting of marijuana. In addition, from Guadagnoli’s home officers seized postal money orders totaling $6,000.00, a 9mm Ruger pistol, a Smith & Wesson A&P 15 semi-automatic .223 caliber rifle, a Marlin .22 caliber rifle, a Remington Arms Co. 12 gauge shotgun, a box of 9mm ammunition, a box of .22 caliber ammunition, marijuana, jars with concentrated cannabis, digital scales, five cellular telephones, a money counting machine and other drug paraphernalia.Megan Veitch, age 32, of Baltimore and Andrew Sharpeta, age 39, of Avondale, Pennsylvania, previously pleaded guilty and were sentenced to 34 months and 63 months in prison, respectively
United States Attorney Rod J. Rosenstein praised the DEA, Montgomery County Police Department, Baltimore County Police Department, and Baltimore City Police Department for their work in the investigation, and thanked the Mendocino County, California Sheriff’s Office for its assistance. Mr. Rosenstein thanked Assistant U.S. Attorneys Deborah A. Johnston and Mara Zusman Greenberg, who prosecuted the case.Member of Guinea Bissau-Based International Narcotics Trafficking Conspiracy Sentenced in Manhattan Federal Court to Five Years in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that TCHAMY YALA, a citizen of Guinea Bissau, was sentenced today in Manhattan federal court to five years in prison for participating in a conspiracy to import narcotics into the United States. YALA was arrested on April 2, 2013, by the Drug Enforcement Administration’s (“DEA”) Special Operations Division, Bilateral Investigative Unit Narco-Terrorism Group, and the DEA’s Foreign-deployed Advisory Support Team (“FAST”) off the coast of West Africa while onboard a vessel under DEA control in international waters. On April 28, 2014, YALA pled guilty before U.S. District Judge Richard M. Berman.
Manhattan U.S. Attorney Preet Bharara stated: “With his sentence today, Yala is being held responsible for his integral role in an international scheme to traffic narcotics into the United States. I would like to thank the Drug Enforcement Administration for their outstanding work on this case.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at YALA’s guilty plea and today’s sentencing:
Beginning in the summer of 2012, YALA and his co-defendants, former Guinea Bissau Naval Admiral Jose Americo Bubo Natchuto and Papis Djeme, engaged in a series of recorded meetings in Guinea Bissau with confidential sources (the “CSs”) working with the DEA, who purported to be representatives and associates of South American-based narcotics traffickers.
In an early meeting in which Nachuto and YALA discussed the shipment of ton-quantities of cocaine from South America to Guinea Bissau by sea, Nachuto noted that the Guinea Bissau government was weak in light of the recent coup d’etat, and that it was therefore an ideal time for the proposed cocaine transaction. YALA indicated that the boat carrying the cocaine would unload at a secure location in Guinea Bissau that could not be detected. At an October 2012 meeting at which YALA was present, Djeme advocated using “go-fast” boats to transport the cocaine into Guinea Bissau, because such boats could more easily navigate the waters of Guinea Bissau, and provided a photograph of the type of “go-fast” boat that could be used to transport the cocaine as well as information for the purchase of such boats.
In further meetings, YALA, Nachuto, and Djeme agreed to assist the CSs by receiving a two-ton load of cocaine that would be transported to Guinea Bissau by boat and stored in Guinea Bissau for distribution to Europe and the United States. In one November 2012 meeting, YALA and his co-defendants met with two of the CSs in Guinea Bissau and discussed importing large quantities of cocaine into the United States. During that meeting, Nachuto offered to utilize a company that he owned to facilitate the shipment of cocaine out of Guinea Bissau. Natchuto indicated that YALA and Djeme would be responsible for handling the security of the drugs while they remained in Guinea Bissau, with only Djeme, Nachuto, and YALA knowing the precise location of the drugs.
At a meeting the following day at which YALA was present, Nachuto confirmed that he would charge a fee of $1,000,000 per 1,000 kilograms of cocaine received in Guinea Bissau. In February 2013, YALA escorted one of the CSs to a location in Guinea Bissau where the narcotics were to be stored and hidden. The following month, YALA purchased two cisterns, which were intended to be filled with the narcotics and buried underground for safe-keeping, as well as additional equipment for the storage of the narcotics.
In addition to his prison term, YALA, 42, was sentenced to three years of supervised release and was ordered to pay a $100 special assessment.
On April 29, 2014, YALA’s co-defendant, Papis Djeme, pled guilty to participating in a conspiracy to import narcotics into the United States. On September 3, 2014, Djeme was sentenced by Judge Berman to 78 months in prison.
Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA. Mr. Bharara also thanked DEA’s FAST, Lisbon Country Office, and Bogota Country Office, as well as the U.S. Department of Justice’s Office of International Affairs.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorney Aimee Hector is in charge of the prosecution.
Manhattan U.S. Attorney Files Lawsuit Against Deutsche Bank and Other Entities for Engaging in an Abusive Scheme to Avoid Federal Income TaxesRead the Press Release
Suit Seeks to Recover More than $190 Million in Taxes, Penalties, and Interest
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed a lawsuit against DEUTSCHE BANK, A.G., DB U.S. FINANCIAL MARKETS HOLDING CORP., DEUTSCHE BANK SECURITIES, INC., BMY ACQUISITION CORP., BMY ACQUISITION LLC, BMY STATUTORY TRUST, and FIRST UNION NATIONAL BANK, now known as WELLS FARGO BANK, N.A., as trustee of BMY STATUTORY TRUST, alleging that these parties participated in a series of transactions that amounted to fraudulent conveyances done with the purpose and effect of leaving the United States Treasury with a significant, uncollectable tax bill. The lawsuit seeks to recover those funds, along with appropriate penalties and interest.
Manhattan U.S. Attorney Preet Bharara said: “Through fraudulent conveyances involving shell companies, Deutsche Bank tried to make its potential tax liabilities disappear. This was nothing more than a shell game. This lawsuit seeks to hold Deutsche Bank and the other defendants liable for $190 million in taxes, penalties, and interest owed to the United States taxpayers.”
The following allegations are based on the Complaint filed today in Manhattan Federal court:
Deutsche Bank acquired a corporation in the fall of 1999 that held stock with a very low cost-basis, such that the sale of this stock would trigger more than $100 million in taxable gain as a result of the appreciation in value of the stock. In order to avoid paying taxes on the stock’s built-in gain, Deutsche Bank entered into an arrangement with a firm that created three shell companies: defendants BMY Acquisition Corp. (“BMY Corp.”), BMY Acquisition LLC (“BMY LLC”), and BMY Statutory Trust (“BMY Trust” and, collectively with BMY Corp. and BMY LLC, “BMY”). These shell corporations collectively served as an underfunded special-purpose vehicle with no function other than to be stuck with a tax bill that it could never pay.
To carry out the scheme, the Deutsche Bank and BMY entities executed a series of pre-planned transactions in the spring of 2000. First, a Deutsche Bank entity sold the corporation holding the appreciated stock to BMY for a price that did not represent fair value for it in light of, at a minimum, the tens of millions of dollars of tax liabilities on the built-in gains. BMY paid for the stock using a short-term loan conditioned on the completion of the pre-planned transaction. Immediately after purchasing the stock, BMY sold it to a different Deutsche Bank entity. At the time of this sale, the tax liability on the built-in gains of the stock was triggered on the part of BMY. BMY then paid back its loan and other expenses, leaving it with insufficient funds to pay the tax liability. Meanwhile, Deutsche Bank profited from this transaction by selling the stock with a stepped-up cost basis and without paying the resulting tax liability.
The Internal Revenue Service (“IRS”) has determined that as a result of these transactions the current unpaid federal tax liability, with penalties and interest that resided with the BMY shell company, is greater than $190 million.
The Complaint seeks recovery of the full amount of the unpaid federal tax liability.
The case is being handled by the Tax and Bankruptcy Unit of the Office’s Civil Division. Assistant U.S. Attorneys Robert William Yalen and Ellen London are in charge of the litigation.
U.S.. v. Deutsche Bank (Tax Case) 14 Civ 9669 Complaint
Man Sentenced to Prison for Illegal Re-EntryRead the Press Release
A man who re-entered the United States illegally after being removed as a felon was sentenced on November 21, 2014, to 5 months’ imprisonment.
Francisco Ramirez-Duran, age 42, from Mexico, received the prison term after an August 15, 2014, guilty plea to one count of illegal re-entry as a felon.
At the guilty plea, Ramirez-Duran admitted he had re-entered the United States without permission after being removed from the country on August 19, 2005. Ramirez-Duran came to the attention of Homeland Security Investigations’ (HSI) on July 6, 2014, after he was arrested for in Webster County, Iowa, for fishing without a license.
Ramirez-Duran was sentenced in Sioux City by United States District Court Judge Mark W. Bennett. Ramirez-Duran was sentenced to 5 months’ imprisonment. He must also serve a 1-year term of supervised release. There is no parole in the federal system.
The case was prosecuted by Assistant United States Attorney Kevin C. Fletcher and investigated by HSI and the Enforcement and Removal Office of the Immigration and Customs Enforcement Bureau.
Court file information is available at https//ecf.iand.uscourts.gov/cgi-bin/login.pl. The case file number is 14-CR-3040.
Man Pleads Guilty in Multi-Agency Investigation into Heroin TraffickingRead the Press Release
PITTSBURGH – Donnell Morris, of Allegheny County, Pennsylvania, was convicted of conspiring to distribute at least one kilogram of heroin, United States Attorney David J. Hickton announced today.
Morris, age 30, pled guilty before United States District Judge Nora Barry Fischer. Judge Fischer scheduled sentencing to occur on April 10, 2015, at 9 a.m.
In support of the guilty plea, the Court was informed that, between 2011 and 2013, Morris invested thousands of dollars into the interstate heroin re-supply ventures of a large-scale heroin trafficking organization with several members from or associated with Pittsburgh’s Larimer neighborhood. In doing so, Morris obtained hundreds of bricks of heroin at a time. He then repeatedly supplied other dealers in Western Pennsylvania with heroin.
The law provides for a maximum total sentence of at least 10 and up to life in prison, a fine of up to $10,000,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed would be based upon the seriousness of the offense and the prior criminal history, if any, of the defendant.
Assistant United States Attorney Craig W. Haller is prosecuting this case on behalf of the United States.
The Drug Enforcement Administration in Pittsburgh and New York, the Pennsylvania State Police, the Pittsburgh Bureau of Police, the United States Marshals Service, the Allegheny County Police Department, the Pennsylvania Attorney General's Office, the Wilkins Township Police Department, the East Pittsburgh Police Department, the New York Police Department, the Blair County District Attorney's Office and the Allegheny County District Attorney's Office conducted the investigation leading to the conviction in this case.
M.D.B Gang Member Sentenced on Drug and Weapons ChargesRead the Press Release
CONTACT: Barbara Burns
PHONE: (716) 843-5817
FAX: (716) 551-3051ROCHESTER, N.Y.--U.S. Attorney William J. Hochul, Jr. announced today that Kevin Feliciano, a/k/a “Nash,” 20, who was convicted of conspiracy to distribute more than 280 grams of crack cocaine and possession of a firearm in furtherance of drug trafficking activities, was sentenced to 195 months in prison by U.S. District Judge Frank P. Geraci.
“As we’ve said in the past, this Office will not tolerate any group or gang attempting to hold residents hostage to their criminal activities,” said U.S. Attorney Hochul. “As this case demonstrates, punishment for federal crime is both certain and substantial once a conviction is obtained.”
Assistant U.S. Attorney Douglas E. Gregory, who is handling the case, stated that Feliciano was part of a violent, street level drug trafficking organization that referred to themselves as “M.D.B.” or “The Broezel Boys.” From 2010 until June 2013, members and associates of M.D.B. controlled the open air drug market in a multi block area near the intersection of Dewey and Lexington Avenues, including all of Broezel Street, the north end of Maryland Street, portions of Driving Park and portions of Lakeview Park, in Rochester. M.D.B. members and associates also maintained and operated several drug houses at locations in Rochester including the duplex residence at 325/327 Lexington Avenue, the upstairs apartment at 171 Maryland Street, the upstairs apartment at 316 Lakeview Park and 672 West Main Street, each for the purpose of possessing, manufacturing, distributing, and using controlled substances.
In his plea before the court, Felciano also admitted that he possessed firearms in furtherance of his drug trafficking activities and that he used violence and threats of violence against unaffiliated persons who attempted to sell illegal controlled substances within their territory and against certain witnesses who were viewed as hostile to the interests of M.D.B.
Feliciano was arrested in June 2013 along with two other defendants.
The sentencing is the culmination of an investigation on the part of the Special Agents of the Bureau of Alcohol, Tobacco, Firearms and Explosives, under the direction of Acting Special Agent in Charge James S. Higgins, New York Field Office, the Rochester Police Department, under the direction of Acting Chief Michael Ciminelli, the Federal Bureau of Investigation, and the Drug Enforcement Administration, under the direction of Jamie J. Hunt, Special Agent in Charge, New York Field Division.
Leader of Fraudulent Internet Firm and Longtime International Fugitive Sentenced to 10 Years in Federal PrisonRead the Press Release
SANTA ANA, California – A former Newport Beach resident who was a fugitive for well over a decade was sentenced today to 120 months in federal prison for running a fraudulent Internet company that bilked hundreds of victims out of approximately $13 million.
James Eberhart, 73, was sentenced this morning by United States District Judge Cormac J. Carney. In addition to the prison term, Judge Carney ordered Eberhart to pay $12,838,045 in restitution to more than 800 victims across the United States.
Eberhart pleaded guilty in September to two counts of mail fraud. His prosecution in United States District Court follows Eberhart's arrest in Malaysia in 2012 after he was a fugitive for more than 12 years.
In the late 1990s, Eberhart and co-defendant Eugene M. Carriere operated a fraudulent Newport Beach company called YES Entertainment Network, Inc. According to court documents, they used dozens of “boiler room” telemarketing firms and a Hollywood celebrity spokesman to raise millions of dollars by telling investors that YES was creating an 18-channel, multimedia, family-oriented website that would carry various forms of entertainment programs.
Investors were told that YES would generate profits through the sale of advertising on the website, and that their investment funds would be used to build and market the website. Eberhart and Carriere also told investors that the company planned an initial public offering of its stock for the fall of 1999, which would potentially make early investments worth millions of dollars.
These claims were false. Only 1 percent of investor funds were used to build the YES website, which was little more than a façade used to reassure investors. No money was used for advertising, but approximately 45 percent of the funds were used to pay sales commissions to the telemarketers. Most of the rest of the money was wired to bank accounts in Hong Kong and Singapore that Eberhart had formed with the help of an attorney.
In late 1999, while Eberhart was under investigation by the U.S. Securities and Exchange Commission for an earlier investment fraud scheme, and shortly after FBI agents had executed search warrants at the offices of telemarketing companies affiliated with YES, Eberhart, Carriere, and another employee destroyed company documents and fled the country. Carriere was a fugitive for six years before being arrested in Thailand in April 2005. In 2007, Carriere pleaded guilty to two counts of mail fraud and was sentenced to three years in federal prison and ordered to pay $12,838,045 in restitution.
In addition to Carriere, five other defendants – including the owners of telemarketing operations used by YES – were indicted, pleaded guilty, and were sentenced to as much as 142 months in federal prison.
Eberhart remained a fugitive until May 2012, when the FBI Legal Attaché in Kuala Lumpur, acting on a tip that Eberhart was residing in Malaysia, coordinated with Malysian authorities to arrest him. At the time of his arrest, Eberhart was living on a custom-built, 58-foot yacht, which he has entered into sailboat races. Prosecutors said that after Eberhart fled, he asked a Costa Rican family to legally adopt him – at age 58 – so that he could become a Costa Rican citizen, which would prevent the Costa Rican government from extraditing him to the United States.
The criminal case against Eberhart and the other defendants is the result of an investigation by the Federal Bureau of Investigation and the U.S Postal Inspection Service. The SEC provided substantial assistance on the case.
Release No. 14-158
KC Truck Driver Sentenced to 21 Years for $1 Million Conspiracy to Steal Trucks and Trailers, CargoRead the Press Release
KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that a Kansas City, Mo., truck driver was sentenced in federal court today for his role in a 14-year-long conspiracy to steal more than $1 million worth of trucks and trailers and their cargo.
Kenneth Ray Borders, 43, of Kansas City, Mo., was sentenced by U.S. Chief District Judge Greg Kays to 21 years and10 months in federal prison without parole. The court also ordered Borders to pay $1,270,089 in restitution to 27 victims. Borders’ sentence takes into account his previous criminal history of theft of a truck, trailer and cargo in this district and the District of Nebraska. He also has numerous instances of driving without a license or with a suspended license and was under a criminal sentence for driving while revoked during the conspiracy.
On Feb. 28, 2014, Borders was found guilty at trial of participating in a conspiracy that involved the theft of commercial trucks and trailers and their cargo in Missouri, Kansas, Florida, Arkansas, Oklahoma, and Nebraska from 1998 to December 2013. Co-defendants Jon Dirk Dickerson, 56, of Raytown, Mo., and his son, Kyle Wayne Dickerson, 32, of Holden, Mo., were also convicted for their roles in the conspiracy and await sentencing. They worked together to steal trucks, trailers, and cargo and then dispose of them. Sometimes they used the trucks and trailers themselves to make money by hauling loads for customers and sometimes they sold the stolen trucks and trailers.
In addition to the conspiracy, Borders was found guilty of four counts of aiding and abetting the possession of stolen goods, one count of aiding and abetting the transportation of stolen goods and one count of aiding and abetting the possession of stolen vehicles.
Evidence presented at trial focused on the thefts of five Freightliner trucks and 17 trailers between 2005 and 2011. The stolen trailers included refrigerated trailers containing such cargo as 39,000 pounds of meat, 565 boxes of beef valued at $149,790, $125,000 worth of frozen ribs, and several refrigerated trailers that each contained tens of thousands of dollars’ worth of frozen chicken, including a load of frozen chicken wings valued at $59,706. Also stolen were utility trailers containing such cargo as Budweiser beer valued at $16,657, Nike shoes valued at $217,353 and 21,018 pounds of Little Sizzler sausages.
Hundreds of thousands of dollars of stolen cargo was sold cheaply to anyone who would buy it. Some of the cargo was sold out of the back of the trailer; some of it was sold to a tow truck driver or a convenience store operator to resell. For example, co-defendant Myron Piggie, 53, of Kansas City, Mo., pleaded guilty to possessing stolen property. Piggie admitted that he accepted 12 pallets of stolen Budweiser beer products (valued at approximately $7,566). Piggie agreed to sell the beer at his store, MP Convenience Store in Kansas City, and split the profits with conspirators. Piggie, however, learned that the police were aware he had the stolen beer, so he gave it all away, selling little or none of it, because he did not want to be found to be in possession of the stolen beer. Several additional co-defendants have pleaded guilty in this case and in related cases.
Borders was involved in stealing the trucks, trailers, and cargo. He sold the cargo to others to resell, sometimes fronting the money by allowing his “customer” to pay him after they sold the product. Borders used some of the stolen trucks and trailers himself to make money by delivering cargo.
Jon Dickerson often had the first right to purchase stolen trucks and trailers. In fact, Borders actually had a “shopping list” from Dickerson listing the trucks and trailers that he wanted, so that Borders could keep an eye out for them and steal them if the opportunity presented itself.
Jon Dickerson and his son, Kyle Dickerson, also were involved in stealing trucks and trailers. They used them in their own trucking business, sometimes just for replacement parts with the remains sold for scrap. Kyle Dickerson had the tools, ability, and willingness to disguise the stolen nature of the trucks and trailers by altering their Vehicle Identification Numbers (VINs) so that they could be used in their trucking business without alerting authorities when they were stopped or inspected.
Jon Dickerson was also found guilty of three counts of aiding and abetting the possession of stolen goods and one count of aiding and abetting the possession of stolen vehicles.
Kyle Dickerson was also found guilty of one count of aiding and abetting the transportation of stolen vehicles, two counts of aiding and abetting the possession of stolen goods and one count of aiding and abetting the possession of stolen vehicles.
This case is being prosecuted by Senior Litigation Counsel Gregg R. Coonrod and Assistant U.S. Attorney Cindi S. Woolery. It was investigated by the Department of Agriculture – Office of Inspector General, the FBI, the Kansas City, Mo., Police Department, the National Insurance Crime Bureau, the National White Collar Crime Center, the Mid-States Organized Crime Information Center, Travelers Investigative Services, the Missouri State Highway Patrol, the Florida State Highway Patrol, and the U.S. Department of Transportation, Federal Motor Carrier Safety Administration.Jury Convicts Former Detroit City Treasurer,Pension Officials of Conspiring to DefraudPensioners Through BriberyRead the Press Release
The former Treasurer of the City of Detroit and two former pension officials were convicted by a federal jury of conspiring to defraud retirees through bribery and kickbacks, U.S. Attorney Barbara L. McQuade announced today.
Joining McQuade in the announcement was Paul M. Abbate, Special Agent in Charge of the Federal Bureau of Investigation in Detroit, Jarod Koopman, Special Agent in Charge of the Internal Revenue Service, Criminal Investigations, and James Vanderberg, Special Agent in Charge, Department of Labor, Office of Labor Racketeering and Fraud Investigations, Chicago Regional Office.
Jeffrey Beasley, 45, of Chicago, Illinois, the former Treasurer of the City of Detroit, Ronald Zajac, 70, of Northville, Michigan, the former General Counsel of Detroit's two pension systems for more than 30 years, and Paul Stewart, 57 of Detroit, a trustee of Detroit's Police and Fire Retirement System, were convicted following a two-month jury trial before U.S. District Judge Nancy G. Edmunds. All three defendants were convicted of conspiring to defraud the city's pensioners of the honest services to which they were entitled by accepting bribes. In addition, Beasley was convicted of two counts of extortion and one count of bribery. Beasley was acquitted on three other counts of extortion.
The evidence at trial showed that Detroit’s two retirement systems lost more $97 million on pension deals corrupted by bribes and kickbacks taken or paid by the defendants. Beasley, Zajac, and Stewart conspired with each other and with former Detroit Mayor Kwame Kilpatrick and others to take bribes and kickbacks in return for votes on investment decisions made by the boards of trustees of Detroit’s two pension systems.
Beasley forced investment sponsors and consultants to pay Bernard Kilpatrick hundreds of thousands of dollars in exchange for his support of their proposed pension investments. Beasley also accepted tens of thousands of dollars in cash from investment sponsors and consultants in exchange for his support of their pension deals.
As part of the conspiracy, Zajac organized so-called “birthday parties” for Beasley, Stewart, and another trustees. At the parties, people having business before the pension systems gave each trustee thousands of dollars in cash. Zajac also directed investment sponsors and pension consultants to give thousands of dollars in cash and entertainment to Beasley and Stewart. Zajac also demanded that an investment sponsor pay for a trip to London for Zajac and a pension trustee in exchange for a $10 million investment in Detroit pension money.
During the conspiracy, Stewart accepted more than $48,000 in cash, trips, meals, drinks and other things of value in return for his support on pension deals proposed by the givers of the bribes. Among other things, Stewart accepted a Christmas basket stuffed with cash, a $5,000 Greektown casino chip, and a $4,000 trip to the Ritz-Carlton in Naples, Florida.
McQuade said, “These defendants breached their duties to retirees by basing their investment decisions on bribes. Their greed cost retirees almost $100 million in losses to pension funds. In light of all of the sacrifices made by Detroit retirees, we are gratified that the jury has brought these corrupt pension officials to justice.”
“The perpetrators in this case criminally conspired with one another to sell their influence over the city’s pension systems,” stated Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office. “Their breach of the public’s faith and their fiduciary responsibilities to Detroit retirees resulted in nearly $100 million in losses. The FBI, along with its law enforcement partners, will continue to aggressively pursue and bring to justice those who abuse the public’s trust and enrich themselves at the cost of our communities.”
Based on the jury’s guilty verdicts for conspiring to engage in honest services mail and wire fraud, Beasley, Zajac, and Stewart each face a maximum of twenty years in prison and a fine of up to $250,000. In addition, Beasley also faces an additional twenty years in prison and a fine of $250,000 for each of his two convictions for extortion, and an additional ten years in prison and a fine of $250,000 for his bribery conviction. Their sentences will be based on sentencing guidelines and other statutory factors.
In addition, a number of other defendants have been convicted in relation to the pension fund investigation, including:
- Roy Dixon, an investment sponsor convicted of conspiring with Beasley, Zajac, and Stewart to pay bribes;
- Monica Conyers, a former Trustee of the General Retirement System and former member of the Detroit City Council, for conspiracy to take bribes, including bribes relating to a proposed multi-million dollar pension fund investment in Wireless Resources and a $10,000 extortion payment relating to the Police and Fire Retirement System's investment in the Romulus Deep Injection Waste Well;
- Samuel L. Riddle, Conyers' Chief of Staff, for conspiracy to commit bribery and extortion relating to the Wireless Resources and Romulus Deep Injection Well investments;
- DeDan Milton, a former Trustee of Detroit's two pension funds;
- Andrew Park, an owner of Asian Village, who paid a bribe to obtain a $2.75 million loan from Detroit's General Retirement System;
- Derrick Miller, former Chief Information Officer of Detroit, who accepted the bribe from Park and who took a kickback of more than $500,000 on a $44 million investment by Detroit's two pension funds;
- Chauncey Mayfield, for conspiracy to commit bribery with Treasurer Beasley by supplying Beasley and Kwame Kilpatrick with tens of thousands of dollars in hotel, entertainment, and private jet flights, as well as a job for Beasley's paramour and significant contributions to the Kilpatrick Civic Fund, all in return for maintaining Mayfield's position as an investment advisor controlling more than $200 million in pension fund money; and
- George Stanton, the former Chief of Staff of a pension trustee, who accepted a $15,000 cash bribe from Dixon relating to a proposed investment in the Turks and Caicos Islands.
The case was investigated by agents of the Federal Bureau of Investigation, the Internal Revenue Service, and the Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations. It is being prosecuted by Assistant United States Attorneys Robert Cares, David A. Gardey, and Stephanie Dawkins Davis.
Joint Statement from the Office of the Attorney General and the Office of the Director of National Intelligence on the Declassification of Renewal of Collection Under Section 501 of the Foreign Intelligence Surveillance ActRead the Press Release
Earlier this year in a speech at the Department of Justice, President Obama announced a transition that would end the Section 215 bulk telephony metadata program as it previously existed, and that the government would establish a mechanism that preserves the capabilities we need without the government holding this bulk data. As a first step in that transition, the President directed the Attorney General to work with the Foreign Intelligence Surveillance Court (FISC) to ensure that, absent a true emergency, telephony metadata can only be queried after a judicial finding that there is a reasonable, articulable suspicion that the selection term is associated with an approved international terrorist organization. The President also directed that the query results must be limited to metadata within two hops of the selection term instead of three. These two changes have been in effect since February 2014.
In addition, the President also directed the Intelligence Community and the Attorney General to develop options for a new approach to match the capabilities and fill gaps that the Section 215 program was designed to address without the government holding this metadata. After carefully considering the available options, the President announced in March that the best path forward is that the government should not hold this data in bulk, and that the data should remain at the telephone companies with a legal mechanism in place that would allow the government to obtain data pursuant to individual orders from the FISC approving the use of specific numbers for such queries. The President also noted that legislation would be required to implement this option, and he has called on Congress to enact this important change.
The Administration welcomes the opportunity to work with the new Congress to implement the changes the President has called for. Given that legislation has not yet been enacted, and given the importance of maintaining the capabilities of the telephony metadata program, the government has sought a 90-day reauthorization of the existing program, as modified by the changes the President directed in January.
Consistent with prior declassification decisions and in light of the significant and continuing public interest in the telephony metadata collection program, Director of National Intelligence James R. Clapper declassified the fact that the government filed an application with the FISC to reauthorize the existing program for 90 days, and that the FISC issued an order approving the government’s application. The order issued on Dec. 4, 2014, expires on Feb. 27, 2015. The Administration is undertaking a declassification review of this most recent court order, and when complete, the Office of the Director of National Intelligence will post the document to its website and icontherecord.tumblr.com.
Johnstown Man Sentenced to 2 Years in Prison for Filing False Income Tax ReturnRead the Press Release
JOHNSTOWN, Pa. - A resident of Johnstown, Pa., has been sentenced in federal court to 24 months incarceration and ordered to pay restitution to the Internal Revenue Service in the amount of $132,868.00, on his conviction of filing a false tax return, United States Attorney David J. Hickton announced today.
United States District Judge Kim R. Gibson imposed the sentence on Keith D. Nash.
According to information presented to the court, Nash filed an individual income tax return for the calendar year 2009, whereby he failed to report $161,267 in taxable income, resulting in an underpayment of $52,466 in income tax owed to the United States.
Assistant United States Attorney John J. Valkovci, Jr., prosecuted this case on behalf of the government.
U.S. Attorney Hickton commended the Internal Revenue Service - Criminal Investigation for the investigation leading to the successful prosecution of Nash.
Fresno Man Sentenced to 25 Years in Prison for Child Pornography TraffickingRead the Press Release
FRESNO, Calif. — United States District Judge Lawrence J. O’Neill today sentenced Bradley Allen Vaine, 28, of Fresno, to 25 years in prison, to be followed by a lifetime term of supervised release, for receiving and distributing child pornography, United States Attorney Benjamin B. Wagner announced.
According to the plea agreement, on October 25 and 27, 2012, Vaine received and distributed images of child pornography over the Internet. He transmitted more than 600 images of child pornography, some of the images depicted prepubescent minors, and some were of violence or sadistic or masochistic conduct. He has been detained as a danger to the community and a flight risk since his arrest on November 6, 2012.
This case is the product of an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI). Assistant United States Attorney David Gappa prosecuted the case.
“Individuals involved in receiving and distributing child pornography cause severe and lasting damage to their vulnerable victims,” said Michael J. Toms, the acting assistant special agent in charge who oversees HSI Fresno. “Fortunately, the lengthy sentence imposed today virtually assures that no additional children will be harmed by this defendant.”
This case was brought as part of Operation Sunflower, an international enforcement action, which ran from November 1 through December 7, 2012, spearheaded by HSI and aimed at rescuing victims and targeting individuals who own, trade, and produce child pornography. Operation Sunflower commemorated the one-year anniversary of a Kansas preteen victim who was located based upon a sunflower-shaped highway sign in the background of a picture. The prosecution was also part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute those who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.justice.gov/psc. Click on the “resources” tab for information about Internet safety education
Former IRS Employee Convicted of Tax FraudRead the Press Release
PHILADELPHIA – A federal jury, today, found Sherelle Pratt, 41, of Philadelphia, PA, guilty of filing false tax returns, aiding and assisting other individuals in preparing and filing false tax returns, theft of government property. Pratt was an IRS employee at the time of her crimes. She prepared federal income tax returns for a number of individuals during tax years through 2006 through 2008. She caused the refunds, and stimulus payments that the filers were supposed to receive, to be deposited into her personal bank account. In some cases, Pratt gave the filers a portion of the refunds and stimulus payments. In other instances, she kept the refund and stimulus payments.
Pratt faces a maximum possible sentence of 28 years in prison, a fine of up to $1.75 million dollars, a special assessment of $700, and two years of supervised release. U.S. District Court Judge Cynthia Rufe will schedule a sentencing hearing at a later date.
The case was investigated by the Treasury Inspector General for Tax Administration, Philadelphia Field Office and the Internal Revenue Service’s Criminal Investigations and is being prosecuted by Assistant United States Attorney Floyd J. Miller.
UNITED STATES ATTORNEY'S OFFICE, EASTERN DISTRICTof PENNSYLVANIA
Suite 1250, 615 Chestnut Street, Philadelphia, PA 19106
PATTY HARTMAN, Media Contact, 215-861-8525Former Director of Operations for Bernard L. Madoff Investment Securities, Daniel Bonventre, Sentenced in Manhattan Federal Court to 10 Years in Prison for His Role in the Massive FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DANIEL BONVENTRE, the former Director of Operations for Bernard L. Madoff Investment Securities LLC, was sentenced in Manhattan federal court today to 10 years in prison for his role in Madoff’s multibillion-dollar Ponzi scheme, the largest in history. BONVENTRE was also ordered to forfeit more than $155.5 billion. After a nearly six-month trial before U.S. District Judge Laura Taylor Swain, BONVENTRE was convicted in March 2014 of 22 counts of securities fraud, bank fraud, tax fraud, falsifying the books and records of Madoff Securities, making false filings with the United States Securities and Exchange Commission, and conspiracy.
Manhattan U.S. Attorney Preet Bharara said: “Daniel Bonventre was Bernard Madoff’s Director of Operations, and his partner in crime. For decades, Bonventre used his skills to help hide Madoff’s massive Ponzi scheme, and to funnel stolen customer money out of the fraudulent investment business. Today, Bonventre was sentenced to 10 years in prison and financial penalties that will rob him of his ill-gotten wealth – a punishment that fits Bonventre’s central role in the biggest financial fraud in history.”
According to the allegations in the Superseding Indictment filed in Manhattan federal court, other court documents, and the evidence presented at trial:
BONVENTRE was employed at Bernard L. Madoff Investment Securities (“Madoff Securities”) for 40 years and served as its Director of Operations since approximately 1978. BONVENTRE was responsible for maintaining and supervising the production of the principal internal accounting documents for Madoff Securities, including its general ledger, financial statements, and stock record. BONVENTRE directed that false entries be made in the general ledger that concealed the scope of Madoff Securities’ fraudulent investment advisory operations and understated Madoff Securities’ liabilities by billions of dollars. For example, from 1997 to 2008, more than $750 million of investment advisory investor funds were used to support Madoff Securities’ Market Making and Proprietary Trading operations, but were not accounted for on Madoff Securities’ books and records, including the general ledger, so as to conceal the true source of the funds. Moreover, as BONVENTRE knew, the general ledger did not accurately reflect the assets contained in the bank and brokerage accounts into which investment advisory investor funds were deposited, and likewise did not reflect the liability of Madoff Securities to its investment advisory clients that arose from the custody of investment advisory client funds in those accounts. The assets and associated liabilities of Madoff Securities’ investment advisory operations, which were omitted from the general ledger, ranged from millions to billions of dollars.
As a registered broker-dealer, Madoff Securities was required to file Financial and Operational Combined Uniform Single Reports (“FOCUS Reports”) with the SEC. Those FOCUS Reports require the production of basic information that amounts to a condensed version of a broker-dealer’s general ledger. Because the general ledger was inaccurate, as BONVENTRE well knew, the FOCUS Reports were likewise false because they failed to accurately reflect Madoff Securities’ assets and liabilities. For example, one such report, for the month of April 2006, in the midst of a liquidity crisis in the Ponzi scheme, failed to reflect at least $299 million in Madoff Securities liabilities related to $154 million of an investment advisory client’s bonds and the $145 million that Madoff Securities had borrowed using those bonds as collateral.
During one of those liquidity crises, in late 2005, BONVENTRE used falsified financial statements, false FOCUS Reports, and other fraudulent documents to obtain hundreds of millions of dollars in loans and lines of credit from federally insured financial institutions. Madoff Securities used the proceeds of those fraudulently obtained loans to pay back redemptions to customers of the investment advisory business, thereby prolonging the Ponzi scheme.
Further, between 2004 and 2008, Madoff Securities was subject to at least five reviews by the United States Securities and Exchange Commission (“SEC”) and a European accounting firm which was conducting a review of Madoff Securities’ operations on behalf of investment advisory clients. As part of a concerted effort overseen by Madoff to deceive both the SEC and the European accounting firm, BONVENTRE participated in creating numerous false and fraudulent books and records, including counterfeit Depository Trust Company (“DTC”) reports, which falsely reflected billions of dollars in non-existent securities held on behalf of Madoff Securities clients at the DTC, a third-party clearinghouse.
In addition, between 2004 and 2007, in connection with audits of Bernard L. Madoff’s U.S. Individual Income Tax Returns, Forms 1040, BONVENTRE created false, backdated Madoff Securities records to show the tax auditors. Because Madoff had under-reported his income by tens of millions of dollars each year, BONVENTRE created false documents that appeared consistent with Madoff’s tax returns for the purposes of maintaining the falsity of Madoff’s tax returns and deceiving the auditors.
Likewise, BONVENTRE filed false Income Tax Returns on his own behalf, in which he failed to report cash and other benefits he received from Madoff Securities. Specifically, BONVENTRE was convicted of failing to report millions of dollars in cash and other benefits, including payments on his behalf for his membership in a country club, his son’s private high school tuition, common charges for his Upper East Side cooperative apartment, thousands of dollars in cigars and other luxury items charged to BONVENTRE’s personal credit card, and cash.
In addition to the millions of dollars of off-the-books income that BONVENTRE took from Madoff Securities, he also had his own investment advisory account, through which he received the benefit of more than $1.8 million in at least three fictitious backdated trades that appeared in his account between 2002 and 2006. The trade that appeared in BONVENTRE’s account in 2002 included a purchase that was backdated 12 years, to 1990, and generated fraudulent long-term capital gains of nearly $1 million. The trade that appeared in BONVENTRE’s account in 2006 was entered following his handwritten instructions directing another Madoff Securities employee to generate a fraudulent long-term capital gain of $449,000.
In imposing the 10-year sentence, Judge Swain observed that by “agree[ing] to facilitate the conduct of business ‘Madoff-style,’” BONVENTRE committed “despicable” and “literally, devastatingly serious crimes,” that were “at all times a key to [Madoff’s] success,” and which caused “financial devastation of unprecedented magnitude.” Bonventre was denied bail pending appeal and has been ordered to surrender and begin serving his term on February 19, 2015.
BONVENTRE, 67, was also ordered to forfeit $155.5 billion, including specific bank accounts and real estate, representing property traceable to the massive Ponzi scheme, as well as a related $457 million bank fraud. Judge Swain also imposed a term of two years of supervised release following BONVENTRE’s completion of this sentence.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission, the Internal Revenue Service and the U.S. Department of Labor for their assistance.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 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’s 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 the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
Assistant United States Attorneys Matthew L. Schwartz, John T. Zach, and Randall W. Jackson are in charge of the prosecution. Assistant United States Attorneys Matthew L. Schwartz and Paul M. Monteleoni are in charge of the forfeiture aspects of the case.
Former Chippewa Cree Tribal Chairman Pleads Guilty to Bribery, Embezzlement, Obstruction of Justice and Tax EvasionRead the Press Release
GREAT FALLS – Former Chippewa Cree Tribal Chairman John Chance Houle, 50, of Box Elder, pleaded guilty today to four felonies involving bribery, embezzlement, obstruction of justice, and tax evasion, according to the United States Attorney’s Office. Houle had been charged in four indictments handed down by a federal Grand Jury investigating corruption in Indian Country. Houle appeared before U.S. District Judge Brian Morris in Great Falls to enter the guilty pleas.
Houle’s sentencing on the four felonies is set for March 19, 2015, at the Missouri River Courthouse in Great Falls.
Houle pleaded guilty to accepting kick-back payments from Hunter Burns Construction in exchange for facilitating the award and payment on tribal contracts. In an offer of proof filed by the United States Attorney’s Office, prosecutors told the court that if they had taken the case to trial the evidence would have shown that in the 28 month period between July 28, 2009, through November 30, 2011, Houle received $306,987 from the construction company and James Eastlick, Jr., a clinical psychologist with the Rocky Boy Health Clinic who was a 49% owner of the construction business.
In another indictment Houle pleaded guilty to embezzling hundreds of thousands of dollars from the Chippewa Cree Rodeo Association. As President of the Rodeo Association, prosecutors told the court, Houle arranged to have payments made to nominee vendors with the understanding that a large portion of the payment would be kicked back to Houle. According to court records, the government would have proven that in 2009, Mark Leischner, Eastlick’s brother-in-law received $135,000 in checks from Houle and Colliflower, and kicked back to Eastlick approximately $53,000. For 2010, Leischner received $133,000 in checks from Houle and the CCRA, from which $62,000 was provided to Tony Belcourt for purchase of a residence in Box Elder. Leischner’s “cut,” as agreed to by Houle, was to be $45,000. In 2010, and then in 2011, Houle also used Bear Paw Indian Rodeo Association President Wade Colliflower as a beneficiary of Chippewa Cree Tribe Rodeo Association payments, a portion of which were then paid back to Houle in cash. Colliflower is scheduled to enter a guilty plea tomorrow for his role in the embezzlement scheme.
In that same indictment Houle was also charged with and pleaded guilty to obstruction of a federal grand jury investigation. The offer of proof filed by the government indicated that when investigation into the payments to Leischner began, Houle, Eastlick and Mark and Tammy Leischner met on several occasions to manufacture documents that would give the appearance of legitimacy to the payments to Leischner. In 2013, a federal grand jury subpoenaed Leischner’s records and he provided the fraudulent documents in response to the subpoena.
In the third indictment, Houle pleaded guilty to one of four counts of tax evasion. As part of his plea agreement with the United States, Houle agreed to pay the taxes on his undeclared income from Hunter Burns Construction, Eastlick, Leischner, and Colliflower. In the four tax years 2009 through 2012, Houle had over $412,000 in undeclared income from those sources, and agreed to pay $121,219 to the Internal Revenue Service as part of the plea agreement. The United States advised the court that there was almost $230,000 in undisclosed income from other sources on which tax liability may have been evaded, but that the investigation was halted when the agreement was reached.
The case was brought by the federal agents of the Guardians Project and was investigated by the agents of the Offices of Inspector General of the Departments of Interior, Health and Human Services, and Environmental Protection Agency, as well as by the Internal Revenue Service Criminal Investigation Division.
Florida Man Sentenced to 160 Months in Prison for Drug ConspiracyRead the Press Release
NORFOLK, Va. – Ronald Lamont Wilson, a/k/a “Papa Ron,” 41, a longtime resident of Norfolk, Virginia, who was recently living in Orlando, Florida, was sentenced today to 160 months in prison, followed by five years of supervised release for conspiracy to distribute and possess with intent to distribute five kilograms or more of cocaine.
Dana J. Boente, United States Attorney for the Eastern District of Virginia and Royce E. Curtin, Special Agent in Charge of the Federal Bureau of Investigation’s Norfolk Field Office, made the announcement after sentencing by United States District Judge Raymond A. Jackson.
Wilson pleaded guilty to the drug conspiracy charge on May 20, 2014. According to court documents,Wilson conspired with others to distribute hundreds of kilograms of cocaine transported from Atlanta, Georgia to the Tidewater area between approximately 2002 and 2013. The cocaine was transported in hidden compartments in vehicles and cash proceeds were sent back to Atlanta using the same method. Wilson used the proceeds of his drug trafficking sales to purchase and make subsequent payments on a residence in Dacula, Georgia. He also used the proceeds to purchase vacation property in Florida, a 2004 Hummer, a 2008 Maserati and a 2002 Porsche. The Florida property and vehicles will be forfeited.
This case was investigated by the Federal Bureau of Investigation. Assistant United States Attorney Sherrie S. Capotosto and Special Assistant United States Attorney Amy Cross-Rochefort prosecuted the case on behalf of the United States.
A copy of this press release may be found on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 2:11-cr-180.Tweet
Florida Dealer Enters Guilty Plea to Illegally Trafficking in Marine LifeRead the Press Release
Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Ed Grace, Deputy Associate Director, U.S. Fish & Wildlife Service (FWS), Office of Law Enforcement, and Tracey Dunn, Assistant Director, NOAA Fisheries Office of Law Enforcement, announce that Curtis W. Waters, 53, of Weeki Wachee, Florida, pled guilty today in U.S. District Court in Key West for engaging in conduct that involved the sale and purchase of, and intent to sell and purchase, wildlife with a market value in excess of $350.00, that is, approximately 150 specimens of Ricordea florida, and did knowingly sell said wildlife in interstate commerce, knowing it was taken, possessed, transported, and sold in violation of and in a manner unlawful under the laws of the State of Florida, specifically, Florida Statute Section 379.361(2)(f), in violation of the Lacey Act, Title 16, United States Code, Sections 3372(a)(2)(A) and 3373(d)(1)(B), and Title 18, United States Code, Section 2.
Waters entered his plea before U.S. Magistrate Judge Lurana Snow, who was assigned to conduct the hearing by U.S. District Court Judge James Lawrence King. Magistrate Judge Snow announced that she would issue a Report and Recommendation to Judge King urging the acceptance of the guilty plea and the adjudication of the defendant.
According to the allegations of the Information filed against him, and a Joint Factual Statement submitted by the parties, at the relevant times, Waters was a resident of Hernando County, Florida, and the holder of a Saltwater Products License (SPL) issued by the Florida Fish & Wildlife Conservation Commission (FWCC). The SPL authorized him, among other things, to harvest live Ricordea florida, a corallimorph species native to the salt water reefs of South Florida.
In August 2013, Waters called an individual in Colorado and advised the individual that Waters would be in the Florida Keys collecting marine specimens and offering to sell “more” Ricordea florida. At the direction of FWS agents, the cooperator ordered 150 ricordea. Waters advised he planned to ship the ricordea by September 3, 2013, at a price of $4.00 each.
Based on surveillance and information provided by witnesses, the investigating agents determined that in order to conduct the harvest of ricordea, Waters employed a white, 16’ open, center-console Boston Whaler, FL1900AK, which he towed from his residence to the Keys.
On September 2, 2013, Waters called the buyer, confirming the order of 150 ricordea would be sent via Federal Express. On September 4, the package of ricordea from Waters was delivered to the Colorado address. Included in the shipment was an invoice for 150 ricordea at $4.00 each, for a total of $600.00, and a pre-completed bank deposit slip for Waters’ bank account for a deposit of $600.00. FWS Agents deposited $600.00 cash into the bank account associated with the deposit slip.
Waters is scheduled to be sentenced on March 10, 2015 at 1:30 p.m. Waters faces a possible sentence of up to 5 years imprisonment, a term of supervised release of up to three years, and a criminal fine of up to $250,000. He also faces forfeiture of the vessel, engine, trailer, tackle, and gear used in the commission of the Lacey Act violation.
Mr. Ferrer commended the joint investigative efforts of the Special Agents of the FWS Office of Law Enforcement and the NOAA Office of Law Enforcement who participated in the long-term investigation into the illegal harvesting and sale of marine life resources from the Florida Keys known as Operation Rock Bottom. This matter is being prosecuted by Assistant U.S. Attorneys Thomas Watts-FitzGerald and Antonia Barnes.
A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.