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Tuesday 11 October 2011
Justice Department Statement on US Airways/Delta Airlines Acquisition of Slots at Washington's Reagan National and New York's Laguardia AirportsRead the Press Release
WASHINGTON – The Department of Justice issued the following statement today after the Department of Transportation (DOT) issued its order involving US Airways’ and Delta Airlines’ acquisition of slots at Washington’s Ronald Reagan National Airport and New York’s LaGuardia Airport:
“The Antitrust Division has been conducting an investigation of US Airways’ acquisition of Delta Airlines’ slots at Washington’s Ronald Reagan National Airport to determine the transaction’s impact on competition and traveling consumers. The division will continue its investigation with a focus on the increase in US Airways’ share and use of slots at Reagan National and the resulting decrease in Delta’s share of slots at this slot-constrained airport, at which passengers pay among the highest fares in the country. The division will not continue to investigate the acquisition of slots at New York’s LaGuardia Airport because the division has concluded that acquisition does not raise competitive concerns.
“While the Antitrust Division works closely with DOT on airline issues, the two agencies act under substantially different statutory and regulatory frameworks. The role of the Antitrust Division is to protect competition and to ensure that companies do not raise prices to harm consumers in violation of the antitrust laws. Under the antitrust laws, the division can and will take appropriate action, if warranted, at the conclusion of its investigation.”
Fifth Guilty Plea in Connection with Scheme to Fraudulently Control Condominium Homeowners' AssociationsRead the Press Release
WASHINGTON – A Las Vegas woman pleaded guilty today for her role in a scheme to fraudulently gain control of condominium homeowners’ associations (HOA) in the Las Vegas area so that the HOAs would direct business to a certain law firm and construction company, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, Special Agent in Charge Kevin Favreau of the FBI Las Vegas Field Office, Sheriff Doug Gillespie of the Las Vegas Metropolitan Police Department and Special Agent in Charge Paul Camacho of the Internal Revenue Service-Criminal Investigation (IRS-CI).
Angela Esparza, 24, pleaded guilty before U.S. District Judge Philip M. Pro in the District of Nevada to one count of conspiracy to commit mail and wire fraud. Esparza is the fifth person to plead guilty in connection with the scheme to defraud HOAs in the Las Vegas area.
Esparza admitted that from approximately July 2006 until February 2009, she participated in a scheme to control various HOA boards of directors so that the HOA boards would award the handling of construction-related lawsuits and remedial construction contracts to a law firm and construction company designated by Esparza’s co-conspirators.
According to plea documents, to accomplish the scheme, co-conspirators used straw purchasers to obtain mortgage loans for units within HOA communities. In October 2006, Esparza agreed to act as a straw purchaser at Terrasini, an HOA community. In fact, Esparza’s co-conspirators provided the down payments and monthly payments, including HOA dues and mortgage payments, for this property and were the true owners. Esparza admitted that she signed and submitted a false and fraudulent loan application and closing document to a financial institution to finance and close on this property on behalf of her co-conspirators. Esparza admitted that at the direction of co-conspirators, she used her position at a mortgage company to help process other co-conspirators’ loan applications.
Court documents indicate that the straw purchasers and those who acquired an interest in a unit agreed to run for election to the respective HOA boards. These co-conspirators were paid in cash, check or promised things of value for their participation, all of which resulted in a personal financial benefit to the co-conspirators. Esparza admitted that in November 2007, she ran for election to the Terrasini HOA board, although she was not elected.
Esparza admitted that she and her co-conspirators employed deceitful tactics in their attempts to win the board elections, including creating false phone surveys to gather information about homeowners’ voting intentions, using mailing lists to vote on behalf of out-of-town homeowners unlikely to participate in the elections, and submitting fake and forged ballots. Co-conspirators also hired private investigators to find “dirt” on the bona fide candidates in order to create smear campaigns. Esparza admitted that she created fake ballots and campaign flyers for co-conspirator candidates. Esparza also admitted that she assisted in mailing and tracking forged ballots for out-of-town homeowners.
According to plea documents, c o-conspirators also attempted to create the appearance that the elections were legitimate by hiring independent attorneys, or “special election masters,” to run the HOA board elections. However, these individuals were paid in cash, check and promised things of value, by or on behalf of Esparza’s co-conspirators for their assistance in rigging the elections. Esparza admitted that on several occasions, she was provided access to the special election master’s office to preview the election ballots, and that she also took several ballots that had been mailed by bona fide homeowners so that they were not counted during the election.
Court documents indicate that, once elected, the co-conspirator board members would meet with other co-conspirators to manipulate board votes, including the selection of property managers, contractors and general counsel for the HOA and attorneys to represent the HOA. The co-conspirators created and submitted fake bids for “competitors” to make the process appear to be legitimate while ensuring co-conspirators were awarded contracts.
Esparza admitted that, at the direction of her co-conspirators, she worked at two property management companies. Esparza and other co-conspirator property managers breached their fiduciary duties by receiving and accepting cash, checks or things of value for using their positions to gain inside information and recommend that the HOA board hire a co-conspirator for remediation and construction defect repairs and another co-conspirator for the construction defect litigation.
Esparza’s sentencing is scheduled for Jan. 23, 2011. The maximum sentence for conspiracy to commit mail fraud and wire fraud is 30 years in prison.
The case is being prosecuted by Deputy Chief Charles La Bella and Trial Attorneys Nicole H. Sprinzen and Mary Ann McCarthy of the Criminal Division’s Fraud Section. The case is being investigated by the FBI, IRS-CI and the Las Vegas Metropolitan Police Department, Criminal Intelligence Section.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.
Friday 7 October 2011
New York Resident and His Company Plead Guilty to Conspiracy to Export Computer-Related Equipment to IranRead the Press Release
WASHINGTON – Jeng “Jay” Shih, 54, a U.S. citizen, and his Queens, N.Y., company, Sunrise Technologies and Trading Corporation, pleaded guilty today in the District of Columbia to conspiracy to illegally export U.S.-origin computers from the United States to Iran through the United Arab Emirates (UAE).
The guilty pleas were announced by Lisa Monaco, Assistant Attorney General for National Security; Ronald C. Machen Jr., U.S. Attorney for the District of Columbia; John Morton, Director of U.S. Immigration and Customs Enforcement (ICE); David W. Mills, Assistant Secretary of Export Enforcement, U.S. Department of Commerce; and Adam Szubin, Director of the Office of Foreign Assets Control (OFAC), U.S. Department of the Treasury.
At a hearing today before U.S. District Judge James E. Boasberg, Shih and his company each pleaded guilty to conspiracy to violate the International Emergency Economic Powers Act (IEEPA) and to defraud the United States. The maximum sentence is five years in prison and $1 million in criminal fines. Sentencing has been scheduled for Jan. 13, 2012.
Under the terms of the plea and related civil settlements with the U.S. Department of Commerce’s Bureau of Industry and Security and OFAC, Shih and his company have agreed to forfeiture of a money judgment in the amount of $1.25 million. In addition, Shih and Sunrise are denied export privileges for 10 years, although this penalty will be suspended provided that neither Shih nor Sunrise commits any export violations.
Shih was arrested on a criminal complaint on April 6, 2011. He and his company were later indicted on April 21, 2011. According to court documents filed in the case, beginning as early as about 2007, Shih conspired with a company operating in Dubai, UAE, and Tehran, Iran, to procure U.S.-origin computers through Sunrise and export those computers from the United States to Iran, through Dubai, without first obtaining a license or authorization from OFAC.
Specifically, in April 2010, the defendants caused the illegal export of 368 units of computer-related goods to Dubai, which were later sent to Iran. Later that month, the defendants caused the illegal export of 158 additional units of computer-related goods to Dubai, which were later sent to Iran. The defendants subsequently caused an additional 185 units of computer-related goods to be illegally exported to Iran via Dubai.
This investigation was conducted by the ICE-Homeland Security Investigations (HSI) field offices New York and San Diego and the Department of Commerce Office of Export Enforcement field offices in New York and Los Angeles, with assistance from ICE-HSI offices in Chicago, Newark, N.J., Los Angeles and Orange County, Calif. The Department of Homeland Security’s U.S. Customs and Border Protection and OFAC’s Office of Enforcement also assisted in the investigation.
Chief Counsel Attorney Gregory Michelsen and Attorney-Advisor Elizabeth Abraham from the U.S. Department of Commerce and Assistant Director of Enforcement Michael Geffroy and Enforcement Officer Elizabeth Fruzynski of the U.S. Department of Treasury handled the civil settlements for their respective agencies.
The prosecution is being handled by Assistant U.S. Attorneys T. Patrick Martin and Anthony Asuncion, from the U.S. Attorney’s Office for the District of Columbia, and Trial Attorney Jonathan C. Poling from the Counterespionage Section of the Justice Department’s National Security Division.
Man Pleads Guilty to Civil Rights Violations in Connection with Arson at Planned Parenthood and Vandalism of Mosque in Madera, CaliforniaRead the Press Release
WASHINGTON – Donny Eugene Mower, 38, of Madera, Calif., pleaded guilty in federal court today to one count of arson, one count of damaging religious property and one count of violating the Freedom of Access to Clinic Entrances (FACE) Act, which makes it a federal crime to damage the property of a reproductive health services facility. These charges stem from Mower’s lighting a fire inside a Planned Parenthood clinic and throwing a brick at a mosque in Madera.
During his plea, Mower admitted that in the early morning hours of Sept. 2, 2010, he constructed a Molotov cocktail by stuffing a fuel-soaked cloth into a beer bottle. He then drove to Madera Planned Parenthood Clinic, lit the Molotov cocktail, and threw it through a ground-floor window of the clinic. As a result of the ensuing fire, the clinic sustained more than $26,000 of damage and had to close for two days.
Mower also acknowledged that on Aug. 20, 2010, two days after placing a sign in front of Masjid Madera, a local mosque, that read “No temple for the god of terrorism at ground zero. ANB,” he threw a brick at the front of the mosque and damaged its facade. On Aug. 24, 2010, Mower left additional signs at the mosque, stating “Wake up America, the enemy is here” and “American Nationalist Brotherhood.” Mower admitted that he threw the brick at Masjid Madera because of the race, color or ethnic characteristics of the individuals associated with the mosque.
“Interference with the lawful work of reproductive health clinics will not be tolerated; nor will attacks directed at places of worship because of the perceived ethnicity of those who worship there,” said Thomas E. Perez, Assistant Attorney General for Civil Rights Division. “The Department of Justice will aggressively prosecute those who carry out these acts.”
“We will vigorously safeguard the right of Muslim Americans to practice their religion free from the fear of intimidation, and the right of reproductive health centers to conduct their activities free from violence,” said U.S. Attorney Ben Wagner for the Eastern District of California. “Donny Mower’s campaign of hate and intimidation is over, but the work of the U.S. Justice Department in protecting constitutional rights is unending.”
Sentencing is scheduled for Jan. 6, 2012. Mower faces a prison sentence of five to 20 years and a fine of up to $250,000 on the arson charge. He also faces sentences of up to one year in prison, a fine of up to $100,000, or both, on the damaging religious property and FACE Act charges.
This case was investigated by the FBI, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Madera Police Department and the Madera County Sheriff’s Department. The case is being prosecuted by Assistant U.S. Attorney Elana Landau for the Eastern District of California and Trial Attorney Chiraag Bains from the Justice Department’s Civil Rights Division.
Justice Department Announces Agreement with Lorain County, Ohio, on Protecting the Rights of Spanish-Speaking Puerto Rican VotersRead the Press Release
WASHINGTON — The Justice Department announced a settlement today with Lorain County, Ohio, to protect the rights of Spanish-speaking Puerto Rican voters under Section 4(e) of the Voting Rights Act. Today’s agreement is intended to resolve concerns that limited-English proficient Puerto Rican voters were being denied their full voting rights because the county failed to provide language assistance as required by law.
The county has agreed that, starting with the Nov. 8, 2011, election, it will provide county-wide bilingual ballots on the voting machines at the polls, as well as bilingual poll workers in targeted precincts. The agreement includes additional steps that the county will take to achieve full compliance with Section 4(e) by the first election held in 2012.
The parties have also agreed to seek a federal court order authorizing federal observers to monitor Election Day activities in polling places in Lorain County and to create a community-based Spanish-language advisory committee, which will include participation and feedback from the local Puerto Rican community.
“The right to vote is the cornerstone of our democracy,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “Today’s agreement will ensure that Spanish-speaking voters have equal access to the ballot box and receive critical language assistance as the law requires so their votes will count. I greatly appreciate the cooperation of county officials in working closely with us to reach this resolution.”
“The citizens of Lorain County should be proud of their Board of Elections. Quietly, competently and collaboratively, they’ve protected the interests of Lorain County citizens,” said Steve Dettelbach, U.S. Attorney for the Northern District of Ohio. “Protecting the rights of all our citizens is at the core of our democracy and the core of the United States Attorney’s Office’s mission.”
Section 4(e) of the Voting Rights Act requires that jurisdictions with significant Puerto Rican populations cannot deny an individual’s voting rights based on their ability to read, write, understand or interpret any election matter in English. The 2000 Census found more than 13,000 Puerto Ricans resided in Lorain County , and that 32.5 percent of the county’s voting-age Puerto Ricans were limited-English proficient. Recently-issued 2010 Census data found that there are now more than 17,000 Puerto Ricans in Lorain County, and that the county’s Puerto Rican population has increased by nearly 60 percent since 1990.
To file complaints about discriminatory voting practices, voters may call the Voting Section of the Civil Rights Division at 1-800-253-3931. More information about the Voting Rights Act and other federal voting rights laws is available on the Justice Department website at www.justice.gov/crt/voting/index.php.
Homebuilder Ryland Group Inc. to Pay $625,000 Clean Water Act Penalty and Implement Company-Wide Stormwater ControlsRead the Press Release
WASHINGTON – The Ryland Group Inc., one of the nation’s largest homebuilders, will pay a civil penalty of $625,000 to resolve alleged Clean Water Act violations at its construction sites, including sites located in the Chesapeake Bay Watershed, the Department of Justice and the U.S. Environmental Protection Agency (EPA) announced today. Ryland will also invest in compliance programs to improve employee training and increase management oversight at all current and future construction sites. The company is required to inspect its current and future construction sites routinely to minimize stormwater runoff from sites.
“This settlement will help protect communities in states across the nation from harmful pollutants in stormwater runoff,” said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice. “Polluted stormwater runoff can contaminate rivers, lakes and sources of drinking water, and it can be easily prevented with the system-wide management controls and training that this settlement now requires Ryland to implement.”
“Protecting America’s water resources, like the Chesapeake Bay, by keeping contaminated stormwater from flowing unchecked into our waterways is one of EPA’s top priorities,” said Cynthia Giles, Assistant Administrator for EPA’s Office of Enforcement and Compliance and Assurance. “Today’s settlement will improve Ryland’s oversight of stormwater runoff at its construction sites nationwide and protect our nation’s water resources.”
EPA estimates the settlement will prevent millions of pounds of sediment from entering U.S. waterways every year, including sediment that would otherwise enter the Chesapeake Bay, North America’s largest and most biologically diverse estuary. The bay and its tidal tributaries are threatened by pollution from a variety of sources and are overburdened with nitrogen, phosphorus and sediment that can be carried by stormwater.
The government complaint, filed simultaneously with the settlement agreement in the U.S. District Court in Charlotte, N.C., alleges a pattern of violations that was discovered through site inspections and by reviewing documentation submitted by Ryland. The alleged violations include failure to obtain permits until after construction began, failing to obtain permits at all, or failing to comply with permit requirements at sites where Ryland did obtain permits. Alleged permit violations include not developing complete stormwater pollution prevention plans, failure to conduct adequate inspections, and failure to install or implement adequate stormwater controls or practices.
The Clean Water Act requires permits for the discharge of stormwater runoff. In general, Ryland’s permits require that construction sites have controls in place to prevent pollution from being discharged with stormwater into nearby waterways. These controls include common-sense safeguards such as silt fences, phased site grading and sediment basins to prevent common construction contaminants from entering the nation’s waterways.
The settlement requires Ryland to obtain all required permits; develop site-specific pollution prevention plans for each construction site; conduct additional site inspections beyond those required by stormwater regulations; and document and promptly correct any problems detected. The company must properly train construction managers and contractors on stormwater requirements and designate trained staff for each site. Ryland must also submit national compliance summary reports to EPA based on its quarterly management oversight inspections and reviews.
This settlement is the latest in a series of enforcement actions to address stormwater violations from residential construction sites around the country. Keeping contaminated stormwater out of America’s waters is one of EPA’s national enforcement initiatives. Construction projects have a high potential for environmental harm because they disturb large areas of land and significantly increase the potential for erosion. Without onsite pollution controls, sediment-laden runoff from construction sites can flow directly to the nearest waterway and degrade water quality. In addition, stormwater can pick up other pollutants, including concrete washout, paint, used oil, solvents and trash. Polluted runoff can harm or kill fish and wildlife, degrade aquatic habitats and affect drinking water quality.
Seven states have joined the settlement. The states of Colorado, Florida, Illinois, Indiana, Maryland, Nevada and the commonwealth of Virginia will receive a portion of the $625,000 penalty. The settlement also includes sites in the states of California, Georgia, Kentucky, Minnesota, North Carolina, South Carolina and Texas.
The consent decree, lodged in the U.S. District Court for the Western District of North Carolina, is subject to a 30-day public comment period and approval by the federal court. Once notice is published in the Federal Register, a copy of the consent decree will be available on the Justice Department website at www.justice.gov/enrd/Consent_Decrees.html.
More information on EPA stormwater enforcement at: www.epa.gov/oecaerth/data/planning/priorities/cwastorm.html
Former Hickman County, Tennessee, Deputy Sheriff Sentenced to 24 Months in Prison for Civil Rights and False Statement ChargesRead the Press Release
WASHINGTON – Former Hickman County Deputy Sheriff Kenneth H. Smith, 43, was sentenced today by Chief U.S. District Judge Todd J. Campbell to 24 months in prison for civil rights and false statement charges, the Justice Department announced today.
On June 21, 2011, Smith pleaded guilty in federal court to violating the civil rights of two women for photographing parts of their unclothed bodies under the false pretense that those photographs were necessary for an official investigation. Smith also pleaded guilty to making material false statements to federal investigators.
While working as a deputy sheriff, Smith was assigned to investigate two domestic violence complaints. During interviews, Smith told the victims that he needed to take photographs of their exposed bodies to document injuries, including intimate areas of their bodies where no injury had occurred. Smith, abusing his power and position, lied to the victims and claimed these photographs were necessary for the police investigation and prosecution, when in fact they were not for legitimate law enforcement purposes, but for his own purposes. The victims, trusting a law enforcement officer to protect them and believing it to be necessary, acquiesced to Smith’s authority.
Smith also lied to federal agents about sending text messages to a former female inmate in which he requested the former inmate send him nude pictures of herself in return for Smith’s help in dismissing or reducing the outstanding criminal charges against her. When Smith was confronted with photographs of the explicit text messages coming from his personal cell phone number, Smith continued to lie to the agents claiming that he had not sent them.
“Law enforcement officers are in a position of authority and power. When an officer abuses his power for his personal gratification as this officer did, it erodes public trust and confidence,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “ His conduct was completely intolerable and has no place in law enforcement.”
“The U.S. Attorney’s office will not stand for such abuse by a law enforcement officer who was sworn to protect the rights of all individuals, but chose instead to victimize them further by his criminal acts when they were in a vulnerable situation,” said U.S. Attorney Jerry E. Martin of the Middle District of Tennessee. “The public should not allow the crime of an individual like this to tarnish the reputation of great law enforcement officers who help to bring these cases to justice.”
The case was investigated by the FBI and the Tennessee Bureau of Investigation. The case was prosecuted by Assistant U.S. Attorney Hal McDonough and Civil Rights Division Trial Attorney Saeed Mody.
Detroit-Area Clinic Owner Sentenced to 10 Years in Prison for Role in $9.1 Million Medicare Fraud SchemeRead the Press Release
WASHINGTON – Martin Tasis was sentenced today to 10 years in prison for his leading role in a $9.1 million Detroit-area Medicare fraud scheme, announced the Department of Justice, the FBI and the Department of Health and Human Services (HHS).
Tasis was sentenced by U.S. District Judge Arthur Tarnow in the Eastern District of Michigan. In addition to his prison term, Tasis was sentenced to three years of supervised release and was ordered to pay $6 million in restitution, jointly and severally with his co-conspirators.
Martin Tasis and co-defendants Joaquin Tasis and Leoncio Alayon were convicted by a jury in May 2011 after a five-day trial. Evidence presented at trial showed that the Tasis brothers and their co-conspirators helped relocate a highly lucrative infusion therapy fraud scheme to Michigan from South Florida after increased law enforcement scrutiny there.
According to evidence presented at trial, Martin and Joaquin Tasis were the owners of a Detroit-area clinic called Dearborn Medical Rehabilitation Center (DMRC). Evidence at trial showed that Medicare beneficiaries were not referred to DMRC by their primary care physicians, or for any other legitimate medical purpose, but rather were recruited to come to the clinic through the payment of cash kickbacks. DMRC then billed Medicare for expensive and exotic medications, purportedly administered to treat HIV and Hepatitis-C. However, the medications were never administered.
Once Medicare started paying the co-conspirators, Martin Tasis enlisted Alayon, a family friend, to help him launder the proceeds of the fraud through a shell corporation in Florida called Infinity Research Corp. Evidence at trial showed that Infinity Research Corp. had no employees, did no research and was based at Alayon’s residence. Alayon, after taking a commission for himself, distributed the laundered proceeds to Martin and Joaquin Tasis and their co-conspirators.
Between November 2005 and March 2007, DMRC billed approximately $9.1 million in claims to Medicare for injection therapy services that were never provided and/or were not medically necessary. Medicare paid approximately $6 million of those claims. Evidence at trial showed that DMRC purchased only $36,000 in medication and medical supplies.
Martin Tasis was convicted of one count of conspiracy to commit health care fraud, one count of conspiracy to pay health care kickbacks, three counts of health care fraud, one count of conspiracy to commit money laundering and one count of money laundering.
Today’s sentence was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Andrew G. Arena of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the HHS Office of Inspector General’s (HHS-OIG) Chicago Regional Office.
The case was prosecuted by Trial Attorney Gejaa T. Gobena of the Criminal Division’s Fraud Section and Assistant U.S. Attorney for the Eastern District of Michigan Philip Ross. The FBI and HHS-OIG conducted the investigation.
Since its inception in March 2007, Medicare Fraud Strike Force operations in nine locations have charged more than 1,140 individuals and organizations that collectively have billed the Medicare program for more than $2.9 billion. In addition, HHS’s Centers for Medicare and 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 Action Team (HEAT), go to: www.stopmedicarefraud.gov
Thursday 6 October 2011
State Department Employee Indicted on Domestic Battery Charges for Assault with a Dangerous WeaponRead the Press Release
WASHINGTON – Michael Makalou, 40, a State Department employee, was indicted by a federal grand jury on one count of assault with a dangerous weapon with intent to do bodily harm, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney for the Eastern District of Virginia Neil H. MacBride.
The indictment was returned yesterday in the Eastern District of Virginia. According to court documents, Makalou resided with his wife and children in Dakar, Senegal, and worked as a political officer at the U.S. Embassy in Dakar. A publically filed affidavit alleges that on the morning of Aug. 13, 2011, an argument erupted between Makalou and his wife. According to the affidavit, Makalou then began to physically assault his wife, which included choking her, striking her head with closed fists and stomping on her back with his feet. As a result of the attack, Makalou’s wife suffered a concussion as well as lacerations to her gums, multiple contusions and bruising.
If convicted, Makalou faces a maximum penalty of 10 years in prison.
This case was investigated by the Diplomatic Security Service of the U.S. Department of State. Trial Attorney Sarah Chang of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorney Rebeca H. Bellows of the Eastern District of Virginia are prosecuting the case on behalf of the United States.
An indictment is merely a charge and defendants are presumed innocent until and unless proven guilty.
Oracle Agrees to Pay U.S. $199.5 Million to Resolve False Claims Act LawsuitRead the Press Release
WASHINGTON – Oracle Corp. and Oracle America Inc. have agreed to pay $199.5 million plus interest for failing to meet their contractual obligations to the General Services Administration (GSA), the Justice Department announced today. This is the largest False Claims Act settlement that the GSA has ever obtained. Oracle, which is based in Redwood City, Calif., develops, manufactures, markets, distributes and services database and middleware software, applications software and hardware systems.
This settlement relates to a contract Oracle entered into in 1998 to sell software licenses and technical support to government entities through GSA’s Multiple Award Schedule (MAS) program. The MAS program provides the government and other GSA-authorized purchasers with a streamlined process for procurement of commonly used commercial goods and services. To be awarded a MAS contract, and thereby gain access to the broad government marketplace and the ease of administration that comes from selling to hundreds of government purchasers under one central contract, contractors must agree to disclose commercial pricing policies and practices, and to abide by the contract terms.
The settlement resolves allegations that, in contract negotiations and over the course of the contract’s administration, Oracle knowingly failed to meet its contractual obligations to provide GSA with current, accurate and complete information about its commercial sales practices, including discounts offered to other customers, and that Oracle knowingly made false statements to GSA about its sales practices and discounts. The settlement further resolves allegations that Oracle knowingly failed to comply with the price reduction clause of its GSA contract by not disclosing to GSA discounts Oracle gave to its commercial customers when they were higher than the discounts that Oracle had disclosed to GSA, and by failing to pass those discounts on to government customers. Because of these allegedly fraudulent dealings, the United States alleges that it accepted lower discounts and ultimately paid far more than it should have for Oracle products.
“Companies that in engage in unlawful or fraudulent practices to secure government business undermine the integrity of the procurement process and create an unfair advantage against the majority of companies that are playing by the rules,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “Resolutions like this one – the largest GSA false claims settlement in history – demonstrate our commitment to ensure taxpayers are not overpaying for the products and services they receive.”
“To get access to hundreds of government purchasers, companies participating in the Multiple Award Schedule program must disclose their best prices,” said Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia. “Today’s agreement shows that we are committed to protecting taxpayer money by ensuring that these companies live up to their end of the bargain.”
“It’s more important now than ever before to make sure that taxpayer dollars are not wasted on higher prices,” said U.S. GSA Inspector General Brian Miller. “We will not let contractors victimize the taxpayers by hiding their best prices.”
The settlement resolves a lawsuit filed on behalf of the U.S. government by former Oracle employee, Paul Frascella, who will receive $40 million as his share of the recovery in the case. Under the whistleblower provisions of the False Claims Act, private citizens can bring lawsuits on behalf of the United States and share in any recovery obtained by the government.
This settlement was the result of a coordinated effort by the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Eastern District of Virginia and GSA’s Office of Inspector General in investigating the allegations and litigating the case.
The Justice Department’s total recoveries in False Claims Act cases since January 2009 exceed $7.8 billion.
Member of United Aryan Brotherhood Pleads Guilty to a Hate Motivated Assault of Jewish Inmate in TexasRead the Press Release
WASHINGTON – The Justice Department announced today that Timothy Lee York, a 35 year-old, self-proclaimed member of the United Aryan Brotherhood, pleaded guilty to violently assaulting a Jewish inmate at a federal correctional facility in Texas.
York, of Fountain Valley, Calif., pleaded guilty to assault with a dangerous weapon before U.S. Magistrate Judge Irma C. Ramirez in federal court in Dallas, Texas.
York admitted in court that on Dec. 28, 2007, he attacked Stuart Rosoff, his Jewish cellmate, while Rosoff was sleeping. York admitted that he used a dangerous weapon, a ligature that he placed around Rosoff’s neck, to forcibly pull Rosoff to the floor where he lost consciousness. Once Rosoff was on the floor, York repeatedly kicked Rosoff in the head and punched him in the head and body. York acknowledged that he attacked Rosoff because he was Jewish.
“The Department of Justice will not hesitate to prosecute those who assault others because of their race or religion,” said Thomas E. Perez, Assistant Attorney General for Civil Rights Division.
Sentencing is scheduled for Feb. 6, 2012, before Judge Sam A. Lindsay. The case was investigated by the Dallas Division of the FBI, and is being prosecuted by Trial Attorneys Jared Fishman and Ryan Murguía of the Department of Justice’s Civil Rights Division.
Massachusetts Man Pleads Guilty to Receiving and Possessing Child PornographyRead the Press Release
WASHINGTON – A Springfield, Mass., man pleaded guilty today to receiving and possessing child pornography, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division.
Robert Rosenbeck, 48, pleaded guilty before U.S. District Judge Denise J. Casper in Boston to one count of receipt of child pornography and two counts of possession of child pornography. He was indicted on those charges on Dec. 10, 2009.
According to court documents, Rosenbeck possessed two different computers containing child pornography in 2007. Additionally, from approximately July 22, 2007, to July 25, 2007, Rosenbeck received computer files containing child pornography from an Internet website.
At sentencing, scheduled for Dec. 5, 2011, Rosenbeck faces a maximum statutory sentence of 20 years in prison for the receipt of child pornography count and 10 years in prison for each count of possession of child pornography. Rosenbeck also faces a term of supervised release of at least five years and up to life.
The case is being prosecuted by Trial Attorneys Alecia Riewerts Wolak and Michael W. Grant of the Criminal Division’s Child Exploitation and Obscenity Section (CEOS). The investigation was conducted by the FBI with assistance provided by the Springfield Police Department.
Former Columbus County, N.c., Detention Center Sergeant Pleads Guilty to Civil Rights ViolationRead the Press Release
WASHINGTON – A former Columbus County, N.C., Sherriff’s Office sergeant pleaded guilty today in federal court in Greenville, N.C., to a civil rights charge related to the assault of a detainee, the Justice Department announced.
Danny Ray Duncan, 63, pleaded guilty to willfully depriving a pretrial detainee of his constitutional right not to be deprived of liberty without due process of law by placing a detainee at risk of serious harm from other inmates knowingly and with reckless disregard for his safety.
“When corrections officers knowingly place the people they are charged with protecting at risk of serious harm, they undermine the very fabric of our legal system,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division of the Justice Department. “The Civil Rights Division will aggressively prosecute these violations of our laws.”
“The public has placed a great trust in law enforcement, and we must do everything we can to ensure that trust is not broken,” said Thomas G. Walker, U.S. Attorney for the Eastern District of North Carolina. “Our office remains committed to promoting a high standard of professionalism throughout the law enforcement community in this district.”
During his guilty plea, Duncan admitted that on Aug. 2, 2010, while working the overnight shift as a sergeant in the Columbus County Detention Center in Whiteville, N.C., he placed a pretrial detainee into a cell knowing there was a substantial risk that the inmates in the cell would assault the detainee. Duncan further admitted that he acted with deliberate indifference to the risk of assault, and that the detainee suffered bodily injury as a result of the assault.
Sentencing for Duncan is expected to be scheduled for January 2012. He faces up to 10 years in prison and a maximum fine of $250,000.
On Aug. 24, 2011, a federal grand jury in Wilmington, N.C., returned an indictment, charging former inmate Terry Lashavious McMillian, 26, for his role in assaulting the detainee. The trial of McMillian is set to begin in Greenville on Nov. 8, 2011.
This case was jointly investigated by the Wilmington office of the FBI Charlotte Division and the North Carolina State Bureau of Investigation. The case is being jointly prosecuted by Assistant U.S. Attorney Toby W. Lathan from the U.S. Attorney's Office for the Eastern District of North Carolina and Trial Attorney Ryan R. McKinstry from the Civil Rights Division of the U.S. Department of Justice.
Wednesday 5 October 2011
Superseding Indictment Filed in $670 Million Fraud SchemeRead the Press Release
WASHINGTON –A Costa Rican company, its president and its auditor were charged in a superseding indictment filed yesterday in U.S. District Court in Richmond, Va., for their alleged roles in a $670 million fraud scheme involving victims throughout the United States and abroad. The company allegedly sold reinsurance bonds to life settlement companies.
The charges were announced today by U.S. Attorney for the Eastern District of Virginia Neil H. MacBride and Assistant Attorney General Lanny A. Breuer of the Criminal Division.
The superseding indictment charges Costa Rican-based Provident Capital Indemnity Ltd. (PCI), Minor Vargas Calvo, 60, and Jorge Castillo, 56, each with one count of conspiracy to commit mail and wire fraud, three counts of mail fraud and three counts of wire fraud. In addition, Vargas is charged with three counts of money laundering. The superseding indictment also seeks forfeiture of more than $40 million from all three defendants. Vargas was arrested on Jan. 19, 2011, at the John F. Kennedy International Airport in New York, and Castillo was arrested on Jan. 20, 2011, in New Jersey. Vargas and Castillo have been incarcerated pending a scheduled Feb. 13, 2012, trial.
According to the superseding indictment, Vargas, a citizen and resident of Costa Rica, is the president and majority owner of PCI, an insurance and reinsurance company registered in the Commonwealth of Dominica and doing business in Costa Rica. Castillo, a resident of New Jersey, is the purported independent auditor for PCI. If convicted, Vargas and Castillo face up to 20 years in prison on each fraud count and up to 10 years in prison on each money laundering count.
The defendants allegedly engaged in a scheme to defraud clients and investors by making misrepresentations and omissions designed to mislead PCI’s clients and potential clients regarding its ability to pay claims when due on the financial guarantee bonds that PCI issued. PCI issued these bonds to companies that sold life settlements or securities backed by life settlements to investors. These companies then allegedly used PCI’s bonds to claim that they had eliminated one of the primary risks of investing in life settlements, namely the possibility that the individual insured by the underlying life insurance policy will live beyond his or her life expectancy.
The superseding indictment alleges that from 2004 through 2010, PCI sold approximately $670 million of bonds to life settlement investment companies located in various countries, including the United States, the Netherlands, Germany, Canada and elsewhere. PCI’s clients, in turn, sold investment offerings backed by PCI’s bonds to thousands of investors around the world. Purchasers of PCI’s bonds were allegedly required to pay up-front payments of six to 11 percent of the underlying settlement as “premium” payments to PCI before the company would issue the bonds.
This continuing investigation is being conducted by the U.S. Postal Inspection Service, Internal Revenue Service and FBI, with assistance from the Virginia State Corporation Commission, the Texas State Securities Board and the New Jersey Bureau of Securities. This case is being prosecuted by Assistant U.S. Attorneys Michael S. Dry and Jessica Aber Brumberg of the Eastern District of Virginia and Trial Attorney Albert B. Stieglitz Jr. of the Criminal Division’s Fraud Section.
The U.S. Securities and Exchange Commission (SEC) conducted a parallel investigation and in January 2011 filed a parallel civil enforcement action against PCI, Vargas and Castillo. The department thanks the SEC for its assistance in this matter.
An indictment is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless and until convicted.
The investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia specifically. The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force, an interagency national task force.
President Obama established the Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
Repeat Sex Offender Sentenced to Life in Prison in Delaware for Child Exploitation OffensesRead the Press Release
WASHINGTON – A Delaware man was sentenced today to life plus 10 years in prison for child exploitation offenses, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney for the District of Delaware Charles M. Oberly, III.
Paul Edward Pavulak, 67, of New Castle, Del., was sentenced by U.S. District Judge Sue L. Robinson in Wilmington, Del. On Sept. 27, 2010, Pavulak was convicted by a federal jury of one count of attempted production of child pornography, one count of attempted enticement and coercion of a minor to engage in sexual activity, one count of possession of child pornography, one count of failure to register and update a registration as a sex offender, and one count of committing a felony offense involving a minor while being required to register as a sex offender. Pavulak was indicted on these five counts on April 16, 2009.
According to evidence presented at trial, from September 2008 to January 2009, Pavulak developed an online relationship with a young woman in the Philippines who had a two-year-old daughter. In December 2008, Pavulak traveled to the Philippines and met the woman and her daughter. Using his digital camera, Pavulak produced a sexually explicit movie of himself and the woman, and described the movie as the two-year-old girl’s “training video.” Following his return to the United States in January 2009, Pavulak attempted to produce child pornography of the two-year-old girl via a web camera during an online instant chat message exchange with the woman.
On Jan. 19, 2009, the Delaware State Police executed a search warrant at a concrete company’s office in New Castle, where Pavulak had been living and working. During the search, Delaware State Police seized digital media evidence, including computers, a camera and a mobile phone. Upon review of the seized materials, investigators discovered thousands of images depicting the sexual abuse of minors on the computers. These images included depictions of children ranging in age from infancy to mid-teens engaging in sexual acts with adult males. On a mobile phone and a computer, the investigators also found sexually explicit communications between Pavulak and the woman regarding her daughter, in which they discussed having the woman prepare the child to engage in sexual activity with Pavulak when he returned to the Philippines.
Evidence at trial established that Pavulak was convicted in 1998 and 2005 of second degree unlawful sexual contact with minors. As a result of these convictions, federal and state law required Pavulak to register as a sex offender and to provide the registry with the address of his employer and his residence. Between July 2008 and January 2009, Pavulak consistently reported to the Delaware State Police that he was unemployed and that he lived in a motel. Evidence at trial showed that Pavulak worked for a concrete company owned by his children and also resided in a room at the company’s office.
This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by U.S. Attorneys’ Offices and the Criminal Division's Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.
The case was prosecuted by Trial Attorneys Bonnie L. Kane and Andrew McCormack of the Criminal Division’s CEOS and Assistant U.S. Attorney Edward J. McAndrew of the District of Delaware. The case was investigated by the Delaware State Police’s Child Predator Task Force and High Technology Crimes Unit, and U.S. Immigration and Customs Enforcement, Homeland Security Investigations.
New Mexico Man to Receive Life Prison Sentence After Conviction on Kidnapping Charge Related to Death of 16-Year-OldRead the Press Release
WASHINGTON – Larry Lujan, 33, will receive a life prison sentence for a kidnapping that resulted in the death of a 16-year-old, after a federal jury today announced it could not reach a unanimous decision on whether to impose the death penalty, announced U.S. Attorney Kenneth J. Gonzales for the District of New Mexico and Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.
Lujan, originally from Chamberino, N.M., was charged with the capital offense of kidnapping resulting in death. The guilt or innocence phase of the capital trial began on July 18, 2011, and concluded on Aug. 9, 2011, when the jury found Lujan guilty of kidnapping and fatally stabbing Dana Joseph “Joe” Grauke Jr., after deliberating two-and-a-half hours. The “eligibility” stage of the penalty phase of the trial was conducted on Aug. 11, 2011, and the jury found Lujan eligible for a death sentence in less than two hours. The “selection” stage of the penalty phase began on Aug. 29, 2011, and concluded today when the jury said it was unable to reach a unanimous verdict on whether Lujan should be sentenced to death. Because the jury did not unanimously reach a decision on the death penalty, Lujan will receive a sentence of life of prison. The court has not yet scheduled a date for the imposition of the sentence.
According to the evidence and testimony presented at trial, Lujan targeted 16-year-old Grauke for attack because he failed to pay a $600 “tax” to Lujan for selling marijuana in a neighborhood in San Antonio that Lujan considered his “turf.” The evidence established that on March 7, 2005, Lujan led a group of teenagers in breaking into Grauke’s home in San Antonio, where they ransacked the residence; beat and tortured Grauke for several hours; and then transported Grauke, who was bound, gagged and blindfolded, in the luggage compartment of a sport utility vehicle to Anthony, N.M. Approximately 36 hours after kidnapping Grauke, Lujan stabbed the teenager nine times in the back and cut his throat so deeply that his head was almost severed from his body. Grauke’s body was found on March 20, 2005, in an irrigation ditch.
During the penalty phase of the trial, the jury heard testimony about Lujan’s role in the stabbing deaths of a Chamberino couple in 1998. The double homicides also were related to a drug dealing dispute. Lujan faces first degree murder charges for that double homicide in a separate state case.
The case was investigated by the FBI; the Dona Ana County, N.M., Sheriff’s Office and the San Antonio Police Department. It is being prosecuted by Assistant U.S. Attorneys Maria Y. Armijo and Mark A. Saltman for the District of New Mexico, and Trial Attorney Michael S. Warbel of the Criminal Division’s Capital Case Unit.
Justice Department Announces More Than $130 Million in Cost Saving and Efficiency Measures to Utilize Resources More EffectivelyRead the Press Release
WASHINGTON – As part of Attorney General Eric Holder’s call for cost-cutting measures to streamline operations and reduce spending during a time of constrained funding, the Department of Justice today announced that it will realign functions in various offices, lower lease costs by consolidating or reducing office space and continue to look for ways to more effectively utilize the department’s resources. The measures respond to the President’s and the Attorney General’s directives to reduce spending and to develop operational efficiencies. The total cost savings for the actions announced today total more than $130 million.
In January 2011, Attorney General Holder issued a memorandum ordering a department-wide temporary hiring freeze and also instructed all components to limit travel, training and conference spending to only those needs that are essential. The department’s efforts have yielded significant reductions in conference spending in the first three quarters of Fiscal Year 2011, with conference spending down by $14 million over the same period last year. The Attorney General’s order, which is still in place, was designed to keep the department operating effectively within constrained funding levels.
“The Department of Justice is seeking ways to do more with less while we maintain our commitment to our critical law enforcement mission and our most important public safety priorities,” said Attorney General Holder. “These cost-saving and efficiency measures have assisted us in utilizing our limited resources in the most effective way possible. We will continue to identify additional areas where we can achieve savings and efficiencies to streamline our operations.”
Deputy Attorney General James M. Cole provided further guidance to component heads in a February 2011 memorandum seeking operational and programmatic efficiencies in order to ensure sufficient funding for the department’s essential public safety missions, including protecting Americans against terrorism and threats to national security, and protecting against violent crimes.
The department highlighted the success of the Attorney General’s Advisory Council for Savings and Efficiencies (SAVE Council), which thus far, has provided more than $51 million in savings to the department. The SAVE Council, which was created in July 2010, provides a framework to identify and implement best practices for saving taxpayer money, realizing efficiencies, and monitoring the department’s savings progress. The following are examples of additional SAVE Council actions:
Administrative Notices on Forefeiture.gov – An initiative is underway to publish administrative asset forfeiture notices on the Internet instead of in newspapers. This initiative will reduce costs by $4.5 million annually, simplify the noticing process, and increase the availability of information to the public – ensuring that more of the ill-gotten gains from criminal activities will be available to fight crime.
Permanent Change of Station Reform – The department has revised a longstanding policy that provides benefits to employees when they are reassigned from one duty station to another. The new policy limits the number of days an employee may be reimbursed for temporary quarters expenses to 60 days from 120 days. This change will save the department approximately $10.3 million per year.
Debt Collection – The department administers a Nationwide Central Intake Facility where federal agencies can refer delinquent debt in accordance with the Debt Collection Improvement Act, for judgment or enforced collection. The department is the collector of last resort, and most claims referred to the NCIF have undergone multiple collection attempts. The department has negotiated an agreement with the Internal Revenue Service that will increase our efficiency in locating debtors and collecting the money that is owed to the Treasury and various federal agencies.
In addition to the SAVE Council actions, more than $50.4 million in other savings and efficiency measures have been implemented or are proposed:
- Eliminate the Drug Enforcement Administration’s (DEA) Mobile Enforcement Teams and reassign the 145 positions associated with the teams to fill vacancies with the DEA fee-funded Diversion Control Program to better support DEA’s mission. This results in a savings of up to $39 million.
- Consolidate Antitrust Division field office space in Atlanta, Cleveland, Dallas and Philadelphia into the Chicago, New York and San Francisco field offices as well as the division’s Washington, D.C.-based section. Ninety-four positions will be reassigned to the remaining field offices and to the Washington, D.C., section in order to provide additional staffing resources to larger investigations. A savings of nearly $8 million is expected.
- Merge the Justice Management Division’s strategic planning and management functions to increase efficiency and effectiveness. This results in a savings of $1.3 million.
- Reduce the department’s physical footprint by consolidating sub-regional office locations, better use existing workspace and enhance information sharing. The department has been actively reviewing the leasing plans to reduce the scope of both current and prospective projects, and several planned office moves have been cancelled. The department is also reducing office, parking and warehouse facility floor space. Office locations are still to be determined. Actions underway include the following:
· FBI – Twelve sub-regional offices will be reduced or consolidated resulting in a $674,000 savings.
· DEA – Up to seven sub-regional offices will be consolidated resulting in a $395,000 savings.
· U.S. Marshals Service – Sub-regional office space will be reduced or consolidated resulting in a $381,000 savings.
· Bureau of Alcohol, Tobacco, Firearms and Explosives – Five sub-regional offices will be consolidated resulting in a $292,000 savings.
· U.S. Attorneys – Field office space will be reduced and consolidated resulting in a $200,000 savings.
· U.S. Trustee Program – Four sub-regional offices will be reduced or consolidated resulting in an $180,000 savings.
“Consolidating and eliminating unnecessary office space complies with President Obama’s order to dispose of unneeded federal real estate, which saves American taxpayer dollars,” Attorney General Holder added.
The department said that some of these cost savings may be immediate while others may not be realized until future fiscal years.
Johnson & Johnson Subsidiary Scios Pleads Guilty to Misbranding Heart Failure Drug NatrecorRead the Press Release
SAN FRANCISCO – Scios Inc., a subsidiary of pharmaceutical giant Johnson & Johnson, pleaded guilty today to a misdemeanor violation of the Food, Drug and Cosmetic Act (FDCA) for introducing into interstate commerce its heart failure drug, Natrecor, for a use that was not approved by the Food and Drug Administration (FDA), the Justice Department announced. The district court also sentenced Scios, which is based in Fremont, Calif., to pay an $85 million criminal fine in accordance with the plea agreement between Scios and the United States.
Under the FDCA, a company must specify the intended uses of a drug in its new drug application to the FDA. Before approval, the FDA must determine that the drug is safe and effective for the uses proposed by the company in its application. Once the drug is approved, if the manufacturer intends a different use and then introduces the drug into interstate commerce for that unapproved use, the drug becomes misbranded and the introduction into commerce is a criminal violation. The unapproved use is also known as an “off-label” use because it is not included in the drug’s FDA-approved labeling.
In 2001, FDA approved Natrecor for “the intravenous treatment of patients with acutely decompensated congestive heart failure [CHF] who have dyspnea [shortness of breath] at rest or with minimal activity.” The approved labeling for Natrecor did not list any other use, and the drug was not approved by FDA for any other use. Natrecor must be administered intravenously to patients. It is a vasodilator and opens up the blood vessels, which reduces the heart’s workload and may help to improve the acutely decompensated patient’s shortness of breath.
As part of its plea today, Scios admitted that it intended Natrecor to be used off-label for infusing chronic (non-acute) CHF patients on a scheduled, serial basis and that it understood that this was not an approved use of the drug. Scios also admitted that the FDA-approved labeling for Natrecor did not contain any directions for this scheduled, serial use to treat chronic (non-acute) patients.
“Putting misbranded drugs into interstate commerce is serious because it undercuts the FDA’s role in keeping our medicines safe and effective,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “This criminal plea by a major pharmaceutical company and the significant criminal fine imposed demonstrate the Justice Department’s commitment to fighting health care fraud wherever we find it.”
In addition to this criminal matter, the United States has sued Scios and Johnson & Johnson in an on-going related civil case under the False Claims Act in the Northern District of California (U.S. ex rel. Strom v. Scios Inc. and Johnson & Johnson, No. C 05-3004 CRB). In that action, the United States alleges that the companies’ promotion of the scheduled, serial use of Natrecor to treat non-acute heart failure patients caused false claims to be submitted to Medicare and other federal healthcare programs for this unapproved use of Natrecor because it was not a medically accepted and effective use of the drug.
The criminal case was prosecuted by the Justice Department’s Civil Division and the U.S. Attorney’s Office for the Northern District of California, with the assistance of the FDA Office of Chief Counsel. The case was investigated by FDA’s Office of Criminal Investigation, the FBI, the Office of Inspector General of the Department of Health and Human Services, the Department of Veterans Affairs and the Office of Personnel Management.
Former New Orleans Police Officer Sentenced in Danziger Bridge CaseRead the Press Release
WASHINGTON - Former New Orleans Police Department (NOPD) Officer Ignatius Hills was sentenced today by U. S. District Court Judge Martin L.C. Feldman to 78 months in prison. Hills pleaded guilty in federal court on June 4, 2010, to misprision of a felony and to conspiring with fellow officers to obstruct justice by covering up the police shooting that occurred on the Danziger Bridge on Sept. 4, 2005, immediately following Hurricane Katrina.
Hills had previously testified for the United States as a witness in the trial which resulted in convictions of the five NOPD Danziger defendants on civil rights homicide and obstruction-related charges.
On Sept. 4, 2005, just four days after Hurricane Katrina, Hills was one of several officers present during two shooting incidents which left two people dead and four others seriously injured.
In both the factual basis supporting his guilty plea and his testimony at trial, Hills admitted that he signed a sworn statement justifying the arrest of Lance Madison with no first-hand information about any wrongdoing by Madison. Hills also admitted that he conspired with other officers and supervisors to give false statements about the shooting during the investigation of this incident, and he provided false statements to NOPD investigators and to the state grand jury who initially investigated the matter. He additionally admitted and testified that he knew that his fellow officers had knowingly falsified reports and given false statements, in violation of federal law, and failed to report those crimes.
In a separate related matter, U.S. District Court Judge Sarah Vance denied a motion by the government to reduce the eight-year sentence for former NOPD Officer Michael Hunter, who also pleaded guilty and cooperated with the government in the Danziger Bridge case.
The case was investigated by the New Orleans Field Office of the FBI, and was prosecuted by Deputy Chief Bobbi Bernstein and Trial Attorney Forrest Christian of the Justice Department’s Civil Rights Division, along with Assistant U.S. Attorney Theodore Carter for the Eastern District of Louisiana.
Department of Justice Awards More Than $243 Million to Hire New OfficersRead the Press Release
WASHINGTON –Attorney General Eric Holder today joined Cincinnati Mayor Mark Mallory and Director of the Office of Community Oriented Policing (COPS) Bernard Melekian to announce more than $15 million in grant awards to agencies in Ohio through the 2011 COPS Hiring Program. In total, more than $243 million in grants will be awarded nationwide to 238 law enforcement agencies and municipalities to hire new officers and deputies.
The COPS Hiring Program is a competitive grant program that provides funding directly to state, local and tribal law enforcement agencies to hire police officers dedicated to addressing specific crime and disorder challenges confronting communities. The grants provide 100 percent funding for the entry-level salaries and benefits of newly-hired, or rehired, full-time officer positions over a three-year period.
“Block by block – city by city, department by department, the administration is determined – absolutely determined – to help build capacity, to enable our law enforcement partners to make the most of precious resources and to encourage their most promising and effective public safety efforts,” said Attorney General Holder.
For the 2011 COPS Hiring Program, 2,712 applications were received requesting more than $2 billion and 8,999 positions. Funding decisions were based on an agency’s commitment to community policing, crime rates, changes in law enforcement budgets and other local fiscal data (poverty, unemployment, foreclosure rates, etc.).
“Cities across the country are dealing with numerous challenges and we are pleased to be able to assist their public safety efforts,” said Director Melekian. “Creating and maintaining jobs is a key part of this program. This funding helps support local departments in their efforts to increase their ranks, enhance their relationship with the community and directly address their public safety concerns.”
The 2011 COPS Hiring Program awards will create or help preserve 1,021 sworn law enforcement positions. The jobs created, preserved, or refilled with COPS Hiring Program funds will advance community policing at the local level and contribute greatly to the quality of life of the citizens in each community.
The COPS Office is a federal agency responsible for advancing community policing nationwide. For additional information about the COPS Hiring Program, and to view a list of municipalities that received grants, visit the COPS website at www.cops.usdoj.gov.
Tuesday 4 October 2011
Rhode Island Jewelry Store Owner Pleads Guilty to Filing a False Tax ReturnRead the Press Release
WASHINGTON - Karen St. Pierre of Barrington, R.I., pleaded guilty before Judge John J. McConnell Jr. in the District of Rhode Island to one count of willfully filing a false individual tax return, the Department of Justice and the Internal Revenue Service (IRS) announced today.
According to court documents, St. Pierre owned and operated the House of Windsor, a jewelry store in Newport, R.I. In 2004, the House of Windsor generated approximately $632,522 in gross receipts. On April 15, 2005, St. Pierre filed a false individual income tax return that reported, in part, that the gross receipts generated by the store were only $281,780. As a result of this material false statement, St. Pierre failed to pay approximately $64,595 in taxes.
St. Pierre faces a maximum sentence of three years in prison, one year of supervised release and a fine of up to $250,000. The court set sentencing for Jan. 6, 2012.
IRS-Criminal Investigation investigated this case and Tax Division Trial Attorneys Tiwana L. Wright and Andrew P. Young are prosecuting the case.
More information about the Tax Division and its enforcement efforts can be found at www.justice.gov/tax .
Niagara Falls, New York, Financial Advisor Sentenced to Prison for Promoting and Using Abusive Tax SheltersRead the Press Release
WASHINGTON – Richard Muto was sentenced to 36 months in prison followed by one year of supervised release for corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue laws, the Justice Department and Internal Revenue Service (IRS) announced today. Muto pleaded guilty to the charge in January 2011 after a two-count indictment was filed against him in December 2005.
According to court documents, including the plea agreement, between February 1996 and March 200, Muto was a financial advisor, owning and operating his own business called Tax and Investment Strategies in Niagara Falls, N.Y. Muto admitted that he sold and promoted multi-layered abusive trust schemes on behalf of American Asset Protection based in Palm Beach County, Fla., and later The Aegis Company, based in Palos Hills, Ill.
The scheme as promoted by Muto required the user to purchase and create a series of domestic and foreign trusts and internal business corporations (IBC). The user would subsequently divert personal income into, and place assets into, the purported independent trusts and IBCs to create the impression that the user was relinquishing control of the income and assets through a series of sham paper transactions. The trusts and IBCs, however, secretly remained under the complete control of the user and thus the income and assets diverted into the trusts remained the income and assets of the user. Muto admitted that he knew that the use of the multi-layered trust schemes would cause his clients to file false federal income tax returns with the IRS. He also admitted that he misrepresented to clients and potential clients that, by using the multi-layered abusive trust scheme the clients could legitimately reduce or eliminate their federal income taxes.
According to the plea agreement, Muto also counseled clients to submit frivolous correspondence to the IRS in response to audit notices as a way to intimidate IRS revenue agents and thwart IRS audits of the trusts he was promoting. In addition to promoting the trusts, Muto used the abusive trusts himself, which resulted in his filing of false individual income tax returns for the tax years 1996, 1997 and 1998.
According to the plea agreement, Muto’s scheme caused a tax loss to the United States of more than $1.7 million.
In May 2008, a federal jury in Chicago convicted the six Aegis principals who ran the nationwide scheme out of Palos Hills, and with whom defendant had a business relationship to promote the trusts.
Principal Deputy Assistant Attorney General John A. DiCicco commended the IRS Special Agents who investigated the case, as well as Tax Division Assistant Chief John Kane and Trial Attorneys Jeffrey Shih and Thomas Flynn who prosecuted the case.
More information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax .
Justice Department Prevails in Three Tax Shelter Cases on Same DayRead the Press Release
WASHINGTON – Three federal courts have issued decisions in favor of the United States in three separate cases involving abusive tax shelters, the Justice Department announced today. All of the court opinions were issued on Sept. 30, 2011.
In Southgate Master Fund LLC v. United States, the U.S. Court of Appeals for the Fifth Circuit, based in New Orleans, affirmed a lower court ruling that a company formed by billionaire Dallas banker D. Andrew Beal and others was a sham partnership that must be disregarded for federal income tax purposes. In an opinion authored by Judge Patrick E. Higginbotham, the court of appeals disallowed the company’s attempt to allocate approximately $200 million in income tax deductions to Beal. The deductions allegedly resulted from Beal’s acquiring (through a company that was treated as a partnership for tax purposes) a portfolio of non-performing Chinese debt for less than $20 million, disposing of the portfolio and generating more than $1 billion in artificial paper losses approximately equivalent to the debt’s face value. The court of appeals also affirmed the lower court’s disallowance of monetary penalties that the Internal Revenue Service (IRS) had sought to impose, while noting that the penalty issue was “a close one.”
In Pritired 1 LLC v. United States, Judge John A. Jarvey of the U.S. District Court for the Southern District of Iowa prohibited Principal Life Insurance Co. from claiming more than $20 million in foreign tax credits that the company had sought based on a complex transaction involving a $300 million payment to two French banks. The court determined that the transaction, which was designed by Citibank, was actually a loan rather than an equity investment, lacked economic substance, lacked a business purpose beyond using foreign tax credits and violated a Treasury Department “anti-abuse” regulation. Throughout its detailed opinion, the court emphasized the inability of Principal or Citibank to articulate any business purpose for the key aspects of the transaction, except to garner tens of millions of dollars in tax credits.
Finally, in WFC Holdings Corporation v. United States, Judge John R. Tunheim of the U.S. District Court for the District of Minnesota disallowed a tax refund claim for more than $80 million filed by a subsidiary of Wells Fargo & Co. The claim was based on an alleged capital loss deduction of more than $420 million stemming from a transaction involving the transfer of “underwater” commercial leases to a Wells Fargo subsidiary and a related sale of stock to Lehman Brothers, Inc. The court concluded that the transaction was actually a sham tax shelter that Wells Fargo had purchased from accounting firm KPMG LLP for $3 million and that it had no business purpose other than tax avoidance.
“These three significant decisions are further evidence that the courts will not countenance abusive tax shelters, no matter who designs them or how complicated they are,” said John A. DiCicco, Principal Deputy Assistant Attorney General of the Justice Department’s Tax Division. “Large corporations and wealthy individuals should think twice before pouring money into these sham arrangements.”
Principal Deputy Assistant Attorney General DiCicco thanked all of the Tax Division and IRS attorneys and investigators involved in these cases for their efforts.
More information about the Tax Division’s enforcement efforts can be found on the Division’s website .
Former EPA-CID Special Agent in Texas Pleads Guilty to Perjury and Obstruction of JusticeRead the Press Release
WASHINGTON — A former special agent with the Environmental Protection Agency (EPA), Criminal Investigation Division (CID) in Dallas has pleaded guilty to lying under oath and obstructing justice, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and Inspector General Arthur A. Elkins Jr. of the EPA’s Office of the Inspector General (OIG).
Keith Phillips, 61, of Kent, Texas, pleaded guilty yesterday before U.S. District Judge Richard T. Haik Sr. in the Western District of Louisiana to a two-count indictment charging him with obstruction of justice and perjury. The charges stemmed from his sworn testimony in relation to a case that was pending in the Western District of Louisiana.
According to the indictment, from September 1996 to Dec. 14, 1999, Phillips and a special agent from the FBI participated in a criminal investigation that led to the indictment of Hubert Vidrine Jr. and several others. The criminal charges against Vidrine were ultimately dismissed, and Vidrine, in turn, filed a civil lawsuit against the United States for malicious prosecution. In pleading guilty, Phillips admitted that during a deposition taken in the course of Vidrine’s civil suit, Phillips falsely testified that he did not have an affair with the FBI special agent, when, in fact, he did. Phillips admitted that he was aware the proceedings in the civil case were pending on the day he testified and that the existence of the extramarital affair was material to the civil lawsuit. According to a ruling in the civil case on Sept. 30, 2011, the court found that the “inappropriate affair” was highly relevant and material to those proceedings.
In addition, according to court documents, Phillips contacted the FBI special agent on at least three occasions to ensure the special agent knew that Phillips had testified that their relationship was purely professional, when in fact, it was not.
Specifically, Phillips admitted that he testified knowingly and dishonestly about the affair with the specific intent to undermine the due administration of justice. Phillips also admitted that he tried to influence, obstruct and impede the civil suit by testifying falsely that he did not have an extramarital affair with the FBI special agent.
Phillips faces a maximum of 10 years in prison and a fine of $250,000 on the obstruction of justice count, and five years in prison and a fine of $250,000 on the perjury count. A sentencing date has not yet been scheduled by the court.
The case is being prosecuted by Marquest J. Meeks and Richard Evans of the Criminal Division’s Public Integrity Section. The case was investigated by the EPA OIG, Office of Investigations.
Danfoss Group Subsidiary Agrees to Plead Guilty for Role in Price-Fixing Conspiracy Involving Refrigerant CompressorsRead the Press Release
WASHINGTON — Danfoss Flensburg GmbH, formerly Danfoss Compressors GmbH, has agreed to plead guilty and to pay a $3 million criminal fine for its role in an international conspiracy to fix the prices of light commercial compressors, a type of refrigerant compressor used in devices such as water coolers and vending machines, the Department of Justice announced today.
According to a one-count felony charge filed today in U.S. District Court in Detroit, Danfoss Flensburg GmbH, a German subsidiary of the Danfoss Group, a Danish corporation, participated in a conspiracy to fix the prices of light commercial compressors sold in the United States and elsewhere from as early as Oct. 14, 2004, and continuing until about Sept. 6, 2007. According to the plea agreement, which is subject to court approval, Danfoss agreed to cooperate with the department’s ongoing refrigerant compressor investigation.
Refrigerant compressors take in low-pressure refrigerant, compress it and then pump out a high-pressure vapor, which condenses and subsequently cools devices such as water coolers and vending machines.
“The department’s investigation into the international conspiracy to fix the prices of refrigerant compressors is ongoing,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “We are committed to ensuring open and fair competition in the refrigerant compressors market.”
According to the charge, Danfoss and co-conspirators carried out the conspiracy by agreeing during meetings and conversations to coordinate prices of light commercial compressors sold in the United States and elsewhere. As a part of the conspiracy, Danfoss and co-conspirators exchanged information on sales of light commercial compressors to monitor and enforce adherence to the agreed-upon prices.
Danfoss is charged with price fixing in violation of the Sherman Act, which carries a maximum $100 million fine for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
Danfoss is the third company to be charged in the department’s investigation of the international conspiracy to fix the prices of refrigerant compressors. On Nov. 15, 2010, Panasonic Corporation pleaded guilty and was sentenced to pay a $49.1 million criminal fine and on Dec. 16, 2010, Embraco North America Inc. pleaded guilty and was sentenced to pay a $91.8 million criminal fine. In addition, on Sept. 27, 2011, three former executives – Ernesto Heinzelmann of Empresa Brasileira de Compressores S.A.; Gerson Verissimo of Tecumseh do Brasil Ltda.; and Naoki Adachi of Panasonic – were charged with participating in a conspiracy to coordinate price increases for refrigerant compressors to customers in the United States and elsewhere.
The department’s ongoing investigation into the worldwide refrigerant compressors market is being conducted by the Antitrust Division’s Cleveland Field Office and the FBI’s Detroit Field Office, Ann Arbor, Resident Agency. Anyone with information concerning price fixing in the refrigerant compressor industry should call the Antitrust Division’s Cleveland Field Office at 216-687-8400 or visit www.justice.gov/atr/contact/newcase.htm.
Chicago Lawyer Barred from Promoting Tax Shelters Generating $370 Million in Sham DeductionsRead the Press Release
WASHINGTON – A federal court has permanently barred John E. Rogers and two of his companies, Sugarloaf Fund LLC and Jetstream Business Limited, from promoting tax shelters that allegedly use distressed Brazilian debt to lower customers’ reported income improperly, the Justice Department and Internal Revenue Service (IRS) announced today. Judge Samuel Der-Yeghiayan of the U.S. District Court for the Northern District of Illinois signed the civil injunction order, to which Rogers consented without admitting the allegations against him.
According to the government complaint , Rogers, a Chicago tax lawyer and former partner at Seyfarth Shaw LLP, designed and promoted three similar scams – the Distressed Asset Debt (DAD), Distressed Asset Trust (DAT) and 743(f) tax shelters – that used hundreds of millions of dollars of low-value, “distressed” debt owed to Brazilian retail companies. In all three of the schemes, according to the injunction suit, Rogers falsely told U.S. customers that the distressed Brazilian debt was highly valuable, that the Brazilian retail companies were real “partners” in Sugarloaf, that hundreds of entities Rogers formed and used in the transactions were genuine companies, and that the customers – after paying Rogers – could claim huge purported losses from the Brazilian debt. The losses were allegedly used to offset the customers’ unrelated U.S. income, with the resulting tax savings far exceeding what the customers had paid Rogers.
In fact, the complaint alleges, the debt was virtually worthless when it was purchased; the retail companies were never genuine partners but simply sold Sugarloaf the distressed debt for pennies on the dollar; the hundreds of companies that Rogers formed and controlled were sham entities that performed no business functions; and the supposed tax losses never existed.
The suit alleged that Rogers’s DAD and DAT schemes generated more than $370 million in improper tax deductions. The IRS listed the DAT and similar tax shelters as tax avoidance transactions in 2008, which required all material advisors of such schemes to disclose their activities to the IRS, obtain IRS reportable-transaction numbers for those transactions, and furnish the reportable-transaction numbers to their customers. Customers would then know they were participating in a reportable transaction and that the reportable-transaction number had to be disclosed on their next-filed tax return. Under federal tax law, customers who fail to include a reportable-transaction number with their returns as required are subject to substantial monetary penalties. Under the injunction order, Rogers, whom the complaint alleges failed to comply with the listed-transaction requirements, must now mail copies of the injunction order to all persons who engaged in any of the three transactions described in the complaint during or after 2003.
“The Justice Department is committed to exposing and shutting down fraudulent tax shelters and their promoters, and injunctions are an important tool in that effort,” said D. Patrick Mullarkey, Acting Deputy Assistant Attorney General for Civil Trial Matters at the Justice Department’s Tax Division. “At the same time,” Mullarkey noted, “taxpayers should be keenly aware that if the tax benefits from a transaction seem too good to be true, they almost always are.”
“Today’s injunction sends the clear message that the IRS aggressively pursues those who allegedly invent new ways to cheat the tax system,” said IRS Deputy Commissioner Steve Miller. “Using sham offshore losses to eliminate income and evade taxes is exactly the type of abusive scheme that we’re committed to combat.”
Mullarkey and Miller thanked Justice Department trial attorneys Nathan Clukey, Gregory Seador, and Mark Milton, who handled the case, and praised the IRS Large Business and International Division for its investigative work and assistance, including IRS Revenue Agent Kimberlee Loren.
In the last decade, the Justice Department’s Tax Division has obtained hundreds of injunctions to stop the promotion of abusive or fraudulent tax schemes. Information about these cases is available on the Justice Department website .
Australian Man Pleads Guilty to Accepting Payment as Reward for Steering $15 Million in U.S.-Funded Contracts in AfghanistanRead the Press Release
WASHINGTON - A former senior construction manager who worked as an agent for an intergovernmental organization pleaded guilty today to seeking $190,000 in payments as a reward for steering U.S.-funded contracts in Afghanistan, announced U.S. Attorney Ronald C. Machen Jr. of the District of Columbia; Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Agency for International Development (USAID) Inspector General Donald A. Gambatesa; Acting Special Inspector General for Afghanistan Reconstruction (SIGAR) Steven J Trent; and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office.
Neil P. Campbell, 61, of Queensland, Australia, pleaded guilty today before Judge Rosemary M. Collyer in U.S. District Court for the District of Columbia to one count of accepting an illegal payment as an agent of an organization receiving federal funds. Campbell was originally charged on Aug. 19, 2010. He was arrested in New Delhi, India, in October 2010, and extradited to the United States in February 2011. Campbell’s sentencing is scheduled for Dec. 14, 2011.
According to court records, starting in January 2009, Campbell worked in Afghanistan as a contractor and acted as an agent for the International Organization on Migration (IOM). The IOM has received more than $260 million from USAID since 2002 to construct hospitals, schools and other facilities.
In his plea, Campbell admitted that in July 2010, while in Afghanistan, he solicited a one-time cash payment of $190,000 from a subcontractor in Afghanistan as a reward for funneling more than $15 million in reconstruction projects to that subcontractor to build a hospital and a provincial teaching college. In August 2010, Campbell met an undercover USAID investigator posing as the subcontractor’s representative and accepted a $10,000 cash payment. Campbell counted the money and requested that the remaining funds come to him in one payment. In October 2010, Campbell traveled to New Delhi, India, where he believed he would be receiving the remaining $180,000. He was arrested at the New Delhi International Airport by agents of the Indian Central Bureau of Investigation.
“This conviction of an Australian citizen who was extradited from India for corruptly steering the use of U.S. federal dollars in Afghanistan shows the seriousness of our commitment to protecting the American taxpayer,” said U.S. Attorney Machen. “We will continue to deploy investigative resources around the world to ensure that criminals who exploit our generosity are held accountable in an American courtroom.”
“Mr. Campbell steered millions of dollars in taxpayer funds to a subcontractor in Afghanistan and sought illegal riches in return,” said Assistant Attorney General Breuer. “In the name of U.S. reconstruction efforts, he decided to try and cash in. The Justice Department will not tolerate this kind of flagrant corruption, and will continue to hold criminals like Mr. Campbell to account.”
“We will continue in our partnership with other law enforcement agencies to bring the full force of the government against those who seek private gain in the midst of such hard economic times,” said Inspector General Gambatesa. “There is zero tolerance for such abuse of federal funds.”
“ Crimes like this divert money from legitimate uses and undermine the U.S. reconstruction effort,” said Acting SIGAR Trent. “SIGAR agents are proud to have participated in this case, which shows that those who defraud the United States in Afghanistan will be found and brought to justice.”
“In this case an overseas contractor thought that fraudulent activity would go unnoticed, permitting an illegal profit from the American people,” said FBI Assistant Director McJunkin. “Today’s plea is a reminder that taking fraudulent payments and misrepresenting U.S. interests has its consequences.”
Campbell faces a maximum penalty of 10 years in prison and a $250,000 fine. Campbell also agreed in his plea to forfeiture of $10,000, which represents the one illegal payment he received.
The case is being prosecuted by Assistant U.S. Attorney Matthew C. Solomon of the District of Columbia and Trial Attorney Ryan S. Faulconer of the Criminal Division’s Fraud Section. Substantial assistance was provided by former Assistant U.S. Attorney Vasu B. Muthyala, the Department of Justice Criminal Division’s Office of International Affairs, the FBI Legal Attaché and the Judicial Attaché Office in Kabul. The case is being investigated by the USAID Office of Inspector General, the Special Inspector General for Afghanistan Reconstruction, the FBI’s Washington Field Office, and members of the International Contract Corruption Task Force (ICCTF).
The ICCTF is a joint law enforcement agency task force that seeks to detect, investigate, and dismantle corruption and contract fraud resulting from U.S. Overseas Contingency Operations worldwide, including in Kuwait, Afghanistan and Iraq.
Monday 3 October 2011
Virginia Man Pleads Guilty to Trafficking in Illegally-Imported Sperm Whale TeethRead the Press Release
WASHINGTON – Richard M. Ertel, of Spotsylvania, Va., pleaded guilty today in U.S. District Court in Richmond, Va., to the illegal importation and illegal trafficking of sperm whale teeth, the Department of Justice announced.
Ertel pleaded guilty to two felony violations of the Lacey Act for trading in endangered marine mammal parts. Sperm whales are classified as “endangered” under the Endangered Species Act (ESA), and are listed on Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora. It is illegal to import parts of sperm whale teeth into the United States without the requisite permits and certifications, and without declaring the merchandise at the time of importation to U.S. Customs and the U.S. Fish and Wildlife Service.
Sperm whale teeth are commonly used for scrimshaw and can fetch large sums of money from collectors and tourists. Scrimshaw, as defined by the ESA, is any art form which involves the substantial etching or engraving of designs upon, or the substantial carving of figures, patterns or designs from, any bone or tooth of any whale, dolphin or porpoise.
As part of the plea, Ertel admitted that from April 2002 to June 2007, he was in the business of buying and selling sperm whale teeth that he purchased from sources in the Ukraine, and then sold to customers in Virginia and elsewhere in the United States. He admitted to conducting much of his business via the Internet.
As a result of the felony conviction, Ertel could be sentenced up to five years in prison and fined up to $250,000 for each count. Sentencing is scheduled for Jan. 9, 2012.
The case was investigated by agents from the Law Enforcement Offices of the National Oceanic and Atmospheric Administration and U.S. Customs and Boarder Protection. The case is being prosecuted by Assistant U.S. Attorney Dave Maguire of the U.S. Attorney’s Office for the Eastern District of Virginia and Trial Attorney Gary N. Donner of the Environmental Crimes Section of the Environment and Natural Resources Division at the Department of Justice.
Special Master Sheila L. Birnbaum Announces Opening of September 11th Victim Compensation FundRead the Press Release
NEW YORK – September 11th Victim Compensation Fund (VCF) Special Master Sheila L. Birnbaum today announced that the fund is officially open for claimants. With today’s opening, potential claimants can now register online, receive a checklist of documents and information that they will need to accompany their claim submission, and access newly updated Frequently Asked Questions. Special Master Birnbaum announced that the VCF will begin accepting claims through its website next month and that the fund’s staff will offer a series of seminars on how to submit claims.
“ Over the past several months, we have laid the foundation for a claims process that is fair, transparent and easy to navigate for those whose lives have been most affected by September 11th, and today I’m pleased to announce that the fund is open for business,” said Special Master Birnbaum. “In the weeks ahead, seminars and resources will be available to assist claimants and their families with the process. The fund will begin accepting claims next month.
“We wanted to get the fund up quickly, but we wanted to do it right. We have done that, and the fund has been made stronger as a result of the constructive suggestions and insights of the hundreds of first responders, area residents and workers I have spoken with during this process.”
Special Master Birnbaum noted in an email to potential claimants and interested parties that they are not required to submit claims on the first day that claim forms are available, and that pro bono counsel are volunteering to assist claimants. Claimants who currently suffer from a covered condition have until Oct. 3, 2013, to file a claim, and others will have two years from the date on which they know or should have known of the condition for which they seek compensation, until the VCF stops accepting claims in 2016.
Birnbaum was appointed as special master by Attorney General Eric Holder on May 18, 2011, and has spent several months meeting with, and receiving feedback from, hundreds of New York-area residents, workers and first responders at town hall meetings held in New York and New Jersey.
The James Zadroga 9/11 Health & Compensation Act reactivated the September 11th Victim Compensation Fund that operated from 2001-2004. The act expands the pool of claimants to include first responders and other individuals in the community who experienced latent physical injuries associated with the attacks or with debris removal.
Additional information about the VCF is available at: www.vcf.gov . To learn more about the eligibility criteria, please visit: www.vcf.gov/faq.html#eli1 . Individuals who wish to receive future communications regarding the VCF should register at www.claims.vcf.gov/welcome.aspx or call 855-885-1555.
Montgomery, Alabama, Woman Pleads Guilty to Using Stolen Identities to Obtain Tax RefundsRead the Press Release
WASHINGTON – Melinda Clayton of Montgomery, Ala., pleaded guilty today to charges of conspiring to defraud the United States by filing false claims, wire fraud and aggravated identity theft, the Justice Department and the Internal Revenue Service (IRS) announced.
According to the plea agreement, Clayton admitted that between January and April 2011, she conspired with others to defraud the United States by obtaining or aiding to obtain the payment of false, fictitious and fraudulent claims, in particular by filing false tax returns using stolen identities. Clayton admitted that she and others filed at least 155 fraudulent tax returns using stolen identities and sought at least $494,242 in tax refunds.
Clayton further admitted that she unlawfully obtained and stored at her home tens of thousands of unlawfully obtained names and social security numbers of actual persons from HP Enterprise Services (formerly known as EDS), prisons and health clinics and used these means of identification to prepare and file false tax returns. According to the plea agreement, Clayton admitted that the fraud loss is between $400,000 and $1 million and that the offense involved 250 or more victims. She further agreed to pay restitution in the amount of $494,424.
Sentencing has not yet been scheduled. Clayton faces up to 32 years in prison, three years of supervised release, restitution and a maximum fine of $750,000, or twice the loss caused by the offense.
The case was investigated by Special Agents of the IRS - Criminal Investigation. Trial attorneys Jason H. Poole and Michael Boteler of the Justice Department’s Tax Division and Assistant U.S. Attorney Todd Brown are prosecuting the case.
Additional information about the Justice Department's Tax Division and its enforcement efforts may be found at www.justice.gov/tax.
Minnesota Man Charged with Sexual Exploitation of MinorsRead the Press Release
WASHINGTON - A Minnesota man was charged in an indictment unsealed today in Minneapolis with two counts of aggravated sexual abuse and two counts of abusive sexual contact of a child, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; Brig. Gen. Kevin Jacobsen of the U.S. Air Force, Office of Special Investigations; and John Morton, Director of U.S. Immigration and Customs Enforcement (ICE).
According to the indictment, which was returned by a federal grand jury on Sept 20, 2011, Joshua Gardner, 29, sexually abused two boys under the age of 12 on the Kadena U.S. Air Force Base in Okinawa, Japan, between September 1997 and May 2002. During that time period, Gardner resided in Okinawa.
Gardner, who currently lives in Minnesota, was arrested on Sept. 30, 2011, and made his initial appearance today in federal court in Minneapolis. A detention hearing has been scheduled for Oct. 4, 2011.
Gardner faces a maximum penalty of life in prison and a $250,000.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov .
This case is being prosecuted by Trial Attorney Mi Yung Park of CEOS. This case is a result of investigative efforts by the U.S. Air Force, Office of Special Investigations at Moody Air Force Base, Ga., and ICE Homeland Security Investigations (HSI) in Minneapolis.
The details contained in the indictment are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
Justice Department Sues to Shut Down New Jersey Tax PreparerRead the Press Release
WASHINGTON - The United States has filed a lawsuit seeking to stop Luvander Hollaway from preparing federal tax returns for others, the Justice Department announced today. The civil injunction complaint alleges that Hollaway of Newark, N.J., fails to comply with due-diligence requirements imposed by federal law on tax preparers who claim the earned income tax credit (EITC) on their customers’ returns. According to the complaint, Hollaway also falsifies reported income and lists fake dependents on his customers’ returns in order to claim the maximum EITC for them.
For example, the complaint alleges that, on one customer’s tax return, Hollaway claimed three purported dependents: two grandchildren and a brother. But according to the complaint, Hollaway knew that the listed individuals were not the customer’s grandchildren and that the customer had paid for other persons’ Social Security numbers to use in falsely claiming the supposed grandchildren as dependents. The complaint also alleges that the person listed on the return as a brother was actually the customer’s fiancé, who could not be claimed as a dependent.
According to the complaint, the Internal Revenue Service (IRS) assessed penalties against Hollaway in 2006 for failing to comply with due-diligence requirements, and a follow-up IRS investigation in 2011 revealed continuing failures and fraudulent claims. The government now seeks to bar Hollaway permanently from preparing federal tax returns for others.
The IRS listed return-preparer fraud as one of its “Dirty Dozen” tax scams for 2011. In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of tax return preparers and tax fraud promoters. Information about these cases is available on the Justice Department website .
Justice Department Reaches Agreement with the City of Williamsburg, Virginia, on Bailout Under the Voting Rights ActRead the Press Release
WASHINGTON – The Justice Department filed a consent decree today in the U.S. District Court for the District of Columbia after reaching an agreement with the city of Williamsburg, Va., that will allow for the city’s bailout from its status as a “covered jurisdiction” under the special provisions of Voting Rights Act. If approved by the court, the bailout will exempt the city from the preclearance requirements of Section 5 of the act.
Covered jurisdictions, as determined according to Section 4 of the Voting Rights Act, are required under Section 5 of the act to seek preclearance for any changes in voting qualifications, standards, practices or procedures from the U.S. District Court in the District of Columbia or from the U.S. Attorney General, prior to their implementation. Section 4 of the act provides that a covered jurisdiction may seek to “bailout,” or remove itself from coverage, and therefore be exempted from the preclearance requirements, by seeking a declaratory judgment before a three-judge panel in federal district court. A bailout judgment can only be issued if the court determines that the jurisdiction meets certain eligibility requirements for bailout contained in the statute, including a 10-year record of nondiscrimination in voting-related actions. The act also provides that the attorney general can consent to entry of a judgment of bailout if, based upon investigation, the attorney general is satisfied that the jurisdiction meets the eligibility requirements.
The city of Williamsburg, Va., filed its bailout action in U.S. District Court in Washington, D.C. on Aug. 4, 2011. City officials had contacted the attorney general prior to filing its action, indicating that the city was interested in seeking bailout. The city provided the Justice Department with substantial information, and the department conducted an investigation to determine the city’s eligibility. Based on that investigation, the department is satisfied that the city meets the Voting Rights Act’s requirements for bailout.
“In this case, the department carefully evaluated the information the city provided and conducted its own investigation. After close review, the department is now satisfied that the city is eligible for a bailout,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “I appreciate the city's cooperation and the substantial information it provided. It has enabled us to reach a resolution in a manner envisioned by the Voting Rights Act.”
The consent decree details the legal and factual basis for a bailout determination and, if approved, will grant the city’s request. The court will retain jurisdiction for 10 years. The action can be reopened upon motion of the attorney general or any aggrieved person where the party alleges conduct by the city that would have originally precluded the city from bailing out if it had occurred during the 10 year period preceding entry of the consent decree.
Information about bailout, the Voting Rights Act, and other federal voting laws is available on the Department of Justice website at www.justice.gov/crt/voting/. Complaints may be reported to the Voting Section of the Justice Department’s Civil Rights Division at 1-800-253-3931.
Justice Department Reaches Agreement with James City County, Virginia, on Bailout Under the Voting Rights ActRead the Press Release
WASHINGTON – The Justice Department filed a consent decree today in the U.S. District Court for the District of Columbia after reaching an agreement with James City County, Va., that will allow for the county’s bailout from its status as a “covered jurisdiction” under the special provisions of Voting Rights Act. If approved by the court, the bailout will exempt the county from the preclearance requirements of Section 5 of the act.
Covered jurisdictions, as determined according to Section 4 of the Voting Rights Act, are required under Section 5 of the act to seek preclearance for any changes in voting qualifications, standards, practices or procedures from the U.S. District Court in the District of Columbia or from the U.S. Attorney General, prior to their implementation. Section 4 of the act provides that a covered jurisdiction may seek to “bailout,” or remove itself from coverage, and therefore be exempted from the preclearance requirements, by seeking a declaratory judgment before a three-judge panel in federal district court. A bailout judgment can only be issued if the court determines that the jurisdiction meets certain eligibility requirements for bailout contained in the statute, including a 10-year record of nondiscrimination in voting-related actions. The act also provides that the attorney general can consent to entry of a judgment of bailout if, based upon investigation, the attorney general is satisfied that the jurisdiction meets the eligibility requirements.
James City County, Va., filed its bailout action in U.S. District Court in Washington, D.C. on Aug. 5, 2011. County officials had contacted the attorney general prior to filing its action, indicating that the county was interested in seeking bailout. The county provided the Justice Department with substantial information, and the department conducted an investigation to determine the county’s eligibility. Based on that investigation, the department is satisfied that the county meets the Voting Rights Act’s requirements for bailout.
“In this case, the department thoroughly reviewed all the information submitted and we conducted our own investigation which has satisfied the department that the county is eligible for a bailout,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “I appreciated the county officials’ cooperation in providing the department with substantial information, and moving this matter toward a resolution consistent with vision of the Voting Rights Act.”
The consent decree details the legal and factual basis for a bailout determination and, if approved, will grant the county’s request. The court will retain jurisdiction of the action for 10 years and can reopen the action upon the motion of the attorney general or any aggrieved person alleging conduct by the county that would have originally precluded the county from bailing out if it had occurred during the 10 year period preceding entry of the consent decree.
Information about bailout, the Voting Rights Act, and other federal voting laws is available on the Department of Justice website at www.justice.gov/crt/voting/ . Complaints may be reported to the Voting Section of the Justice Department’s Civil Rights Division at 1-800-253-3931.
Friday 30 September 2011
Virginia Real Estate Businessman Sentenced to 10 Years in Prison for Mortgage and Investment Fraud SchemesRead the Press Release
WASHINGTON – Alexander Otis Matthews, a Virginia real estate businessman, was sentenced today to 10 years in prison in connection with mortgage and investment schemes to obtain more than $12 million in fraudulent loans.
The sentencing was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Neil H. MacBride of the Eastern District of Virginia, U.S. Attorney Rod J. Rosenstein of the District of Maryland, Assistant Director James W. McJunkin of the FBI’s Washington Field Office and Special Agent in Charge Richard McFeely of the FBI’s Baltimore Field Office.
Matthews, 46, of Dunn Loring, Va., also was ordered by U.S. District Judge Liam O’Grady to forfeit $7.9 million, which represented the proceeds of the mortgage fraud schemes. In addition, Judge O’Grady ordered Matthews to pay $5,055,250 in restitution to his victims, including three lending entities and 12 private investors, and to serve five years of supervised release following his prison term.
Matthews pleaded guilty on July 15, 2011, in U.S. District Court in the Eastern District of Virginia to one count of bank fraud and one count of wire fraud. Matthews was charged with bank fraud on Nov. 17, 2010, in an indictment filed in the District of Maryland and charged with wire fraud on Feb. 17, 2011, in an indictment filed in the Eastern District of Virginia.
In his guilty plea, Matthews admitted that between November 2005 and May 2011, he orchestrated at least three mortgage fraud schemes in which he used “straw borrowers” with good credit scores to apply for and obtain nearly $11.5 million in fraudulent loans relating to three northern Virginia residential properties. Matthews did so by causing lenders to receive false and inflated income information about the straw borrowers, and Matthews submitted forged and fraudulent documentation to lenders purporting to verify that false information. After attempting to refinance the loans and forestall foreclosure, Matthews ultimately defaulted on the loans for each of the three properties.
According to court documents, from approximately September 2006 through July 2011, Matthews also engaged in a fourth, related scheme to obtain more than $1 million in fraudulent loans from at least 11 residents of Maryland and Virginia. Matthews obtained the loans by promising those individuals high rates of return over short periods of time in exchange for money that Matthews claimed he would invest in various property ventures. Matthews later defaulted on each of those loans, generally paying back no more than 10 percent of the borrowed amounts.
Matthews perpetrated his schemes through various purported real estate entities, including American Investments Real Estate Corporation (AIREC), AIREC Realty, Kibra Construction, Ezana Corporation and Farmville Group LLC.
According to court documents, Matthews continued his criminal behavior after his arrest and while under court supervision. In December 2010, Matthews mailed $1,000 to known witnesses he had been ordered not to contact, and in March 2011, Matthews filed a fraudulent bankruptcy petition using an alias. Similarly, in December 2010 and May 2011, Matthews submitted fraudulent documents to one of the lenders for his northern Virginia properties in which he forged the straw purchaser’s signature without authorization. In June 2011, Matthews was arrested and detained for these violations of his pretrial release conditions.
The case is being prosecuted by Trial Attorneys Ryan S. Faulconer and Peter A. Frandsen of the Criminal Division’s Fraud Section, as well as Assistant U.S. Attorney Jack Hanly for the Eastern District of Virginia. The case is being investigated by the FBI’s Washington and Baltimore Field Offices, with substantial assistance from the Montgomery County, Md., State’s Attorney’s Office and the Alexandria, Va., Office of the U.S. Trustee.
President Obama established the Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
Two Individuals Sentenced in Virginia for Roles in Matching Charitable Funds Fraud SchemeRead the Press Release
WASHINGTON – Stephan Bekale and Jamal Ibraheem were sentenced today in U.S. District Court in Alexandria, Va., for conspiring to commit wire fraud as part of a matching funds scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Neil H. MacBride of the Eastern District of Virginia and Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office.
U.S. District Judge T.S. Ellis III sentenced Bekale, 31, of Indianapolis, and Ibraheem, 38, of Bethesda, Md., to 30 months and 12 months in prison, respectively. Additionally, Bekale and Ibraheem were ordered to pay $276,600 in restitution, jointly and severally. Bekale was also ordered to forfeit a BMW vehicle. Bekale and Ibraheem pleaded guilty on July 14, 2011, to one count of conspiracy to commit wire fraud.
According to the indictment and information presented in court, Bekale fraudulently obtained matching funds from Bank of America’s charitable arm after he falsely certified that charitable contributions had been made to his nonprofit organization, “Hoops for Africa,” by Bank of America employees. Ibraheem is a former Bank of America employee who admitted that he falsely certified donations made in his name and that he recruited additional bank employees to participate in Bekale’s fraud scheme.
According to court documents, from approximately March 2007 through May 2009, approximately 31 bank employees, located at three different banking locations, logged onto Bank of America’s website for its Matching Gifts Program and certified that they donated money to “Hoops for Africa.” The fraudulent employee donations to “Hoops for Africa” ranged from $1,300 to $7,500 per donation, and a total of 57 matching gift requests were received by Bank of America’s charitable arm. As a result of those falsely registered donations, Bank of America eventually processed 55 of the transactions and disbursed through its charitable foundation a total of approximately $276,600 in matching gifts to “Hoops for Africa.”
Bekale and Ibraheem were charged in a 10-count indictment unsealed on April 5, 2011, along with three other defendants. Irma DeMartini, of Sterling, Va., pleaded guilty and is scheduled to be sentenced on Oct. 21, 2011. Charges are still pending against co-defendants Reynaldo “Christian” Villarroel and Maritza Villarroel, and they are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
This case is being prosecuted by Assistant U.S. Attorney Mark D. Lytle of the Eastern District of Virginia and Trial Attorney Eric L. Gibson of the Criminal Division’s Public Integrity Section. The case is being investigated by the FBI’s Washington Field Office.
Two California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure AuctionsRead the Press Release
WASHINGTON – Two California real estate investors have agreed to plead guilty today for their roles in a conspiracy to rig bids and to commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.
Charges were filed today in U.S. District Court for the Northern District of California in Oakland, Calif., against Eric Larsen of San Leandro, Calif., and Timothy Powers of Alamo, Calif., for their participation in bid-rigging and mail-fraud conspiracies at public real estate foreclosure auctions in Contra Costa and Alameda counties, Calif. Powers is charged with participating in the conspiracy in Contra Costa County from as early as May 2009 until about December 2010, and Larsen is charged with participating in the conspiracy in Alameda County from as early as February 2009 until about January 2010.
“The Antitrust Division will vigorously pursue fraudulent schemes that eliminate competition from the marketplace and cause financial harm to victims,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The collusion taking place at these auctions preyed on the misfortune caused by the unprecedented rate of foreclosures and lined the pockets of colluding real estate investors with funds that otherwise would have gone to lenders and, at times, homeowners.”
“The FBI and the Antitrust Division are partners in the fight to bring to justice those who engage in fraudulent anticompetitive practices at foreclosure auctions,” said FBI Special Agent in Charge Stephanie Douglas. “We are committed to holding those individuals accountable for the damage they have done to the real estate market and to unsuspecting victims.”
The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in auction records in order to obtain selected real estate offered at public foreclosure auctions in Alameda and Contra Costa counties at noncompetitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.
According to court documents, Larsen and Powers conspired with others not to bid against one another, but instead designate a winning bidder to obtain the title to selected real estate offered at public real estate foreclosure auctions in Contra Costa and Alameda counties. Larsen and Powers also were charged with conspiracies to use the mail to carry out a fraudulent scheme to divert money to co-conspirators away from mortgage holders and others by holding private auctions open only to members of the conspiracy and awarding the selected real estate to the conspirators who submitted the highest bids. These private auctions took place at or near the courthouse steps where the public auctions were held. The department said that Larsen and Powers also took steps to conceal the payoffs to conspirators for not bidding competitively and caused false and misleading statements to be made on records of public auctions regarding the total purchase price of the selected real estate.
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. Each count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the $1 million statutory maximum.
The charges against Larsen and Powers are the latest cases filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in Contra Costa County and Alameda County. To date, as a result of the investigation, 10 individuals have agreed to plead guilty.
The investigation into fraud and bid rigging at certain real estate foreclosure auctions in Northern California is being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm or call the FBI tip line at 415-553-7400.
Today’s charges are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.
**The fraud charge(s) referenced in this press release were subsequently dismissed on the government’s motion.**
Louisiana-Based LHC Group Inc. Agrees to Pay U.S. $65 Million to Resolve False Claims Act AllegationsRead the Press Release
WASHINGTON - LHC Group Inc. has agreed to pay $65 million, plus interest, to the federal government to resolve allegations that it violated the False Claims Act for false home healthcare billings to the Medicare, TRICARE and Federal Employees Health Benefits programs, the Justice Department announced today. The company also agreed to be bound by the terms of a Corporate Integrity Agreement with the Department of Health and Human Services – Office of Inspector General (HHS-OIG).
LHC, which is based in Lafayette, La., is one of the nation’s largest home health providers. The settlement resolves allegations that, between 2006 and 2008, LHC improperly billed for services that were not medically necessary and for services rendered to patients who were not homebound. Under the False Claims Act, private citizens, known as relators, can bring suit on behalf of the United States and share in any recovery. The relator, Judy Master, will receive over $12 million as her share of the government’s recovery.
“Billing for unnecessary home health services misuses taxpayer dollars because it wastes resources that should be available for patients who are truly in need,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “As we work hard to spend our public health care dollars efficiently, settlements like this help us maintain critical health care programs.”
“The U.S. Attorney’s Office is committed to investigating and aggressively pursuing healthcare providers who seek public funds through unlawful means. This settlement should send a message to all healthcare providers in the Western District of Louisiana, particularly home health providers, that violations of the False Claims Act will continue to receive this office’s full attention and resources,” said Stephanie A. Finley, U.S. Attorney for the Western District of Louisiana.
“Let this case warn health care providers of the risks of failing to adopt effective compliance plans. When providers submit false claims to Medicare, the government will hold them accountable,” said Daniel R. Levinson, HHS Inspector General. “OIG will oversee an integrity agreement with LHC that requires a review of how LHC corrects problems uncovered by audits to prevent future fraud.”
The United States’ investigation was conducted by the U.S. Attorney’s Office for the Western District of Louisiana, the Civil Division of the Department of Justice, HHS-OIG and the Office of Personnel Management’s Office of Inspector General with additional assistance provided by the Department of Defense’s Office of Inspector General.
This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of HHS in May 2009. 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 that effort is the False Claims Act, which the Justice Department has used to recover more than $6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are more than $7.8 billion.
The case is docketed as United States ex rel. Master v. LHC Group, Inc., No. 07-1117 (W.D. La.).
Justice Department Seeks to Bar Former Owner of Brooklyn, N.Y., Tax Firm from Preparing Federal Tax ReturnsRead the Press Release
WASHINGTON - The United States has filed a lawsuit against Annie P. Williams to bar her from preparing federal tax returns for others, the Justice Department announced today. The government complaint in the civil injunction suit alleges that Williams, the former proprietor of tax preparation firm PPH Tax & Realty Inc. in Brooklyn, N.Y., employed part-time tax preparers who had little or no tax experience and fostered an environment in which fraudulent return preparation was encouraged.
According to the complaint, Williams’ preparers claimed false expense and charitable contribution deductions, bogus dependents, unallowable child and childcare tax credits, and other improper tax credits on customers’ federal income tax returns. The complaint also alleges that firm employees sold other persons’ names and Social Security numbers to customers so that the customers could falsely report that those individuals were their childcare providers for purposes of falsely claiming the childcare tax credit. Employees also allegedly sold fake charitable contribution letters to customers to present to the Internal Revenue Service (IRS) during audits to substantiate false deductions.
According to the complaint, the amount of tax loss resulting from Williams’ improper tax-preparation activities could be as much as $78 million from 2006 through 2009.
The complaint alleges that Williams’ involvement in illegal tax preparation practices spans more than a decade, beginning in Mississippi where she allegedly trained employees of a tax preparation firm operated by her son, Lenardo Carzette Brown, to prepare fraudulent tax returns. The complaint also states that in 2005 a federal court in the Northern District of Mississippi permanently enjoined Brown’s business and its owners from preparing returns. The complaint also alleges that in March 2010 Williams pleaded guilty to federal tax evasion and was sentenced to six months in prison.
In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of tax return preparers and tax fraud promoters. Information about these cases is available on the Justice Department website .
Justice Department Requires Morgan Stanley to Disgorge $4.8 Million in Profits from Anticompetitive AgreementRead the Press Release
WASHINGTON – The Department of Justice today announced a settlement with Morgan Stanley that requires Morgan to pay $4.8 million for violating the antitrust laws by entering into an agreement with KeySpan Corporation that restrained competition in the New York City electricity capacity market. The department said the agreement likely resulted in a price increase for electricity retailers, which, in turn, led to increased electricity prices for consumers.
The department’s Antitrust Division today filed a civil antitrust complaint in U.S. District Court for the Southern District of New York and submitted a proposed settlement that, if approved by the court, would resolve the lawsuit. The settlement provides for disgorgement of profits for a violation of the antitrust laws and requires Morgan to pay $4.8 million to the United States. The department previously entered into a settlement with KeySpan that required the company to disgorge $12 million in profits for its role in the agreement, which was approved by the court in February 2011.
“This settlement with a major financial institution will signal to the financial services community that use of derivatives for anticompetitive ends will not be tolerated,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “Disgorgement of ill-gotten gains, as was paid here, is an effective Antitrust Division tool to remedy harm to competition.”
According to the complaint, in January 2006, KeySpan and Morgan executed a financial derivative for New York City capacity while Morgan simultaneously entered into an off-setting derivative with Astoria Generating Company, KeySpan’s largest competitor in the capacity market. The agreements effectively transferred to KeySpan a financial interest in Astoria’s capacity, thereby ensuring that KeySpan would withhold substantial output from the capacity market and increase prices. For its part, Morgan earned revenues by retaining the spread between the fixed prices of the two derivative agreements. The anticompetitive effects of the Morgan/KeySpan agreement lasted until March 2008, when regulatory conditions eliminated KeySpan’s ability to affect the market price of electricity capacity.
New York City’s electricity generating capacity market was created to ensure that sufficient generation capacity exists to meet expected electricity needs. Electricity retailers serving consumers in the city are required to purchase capacity from generators in amounts related to their expected peak energy demand. Electricity generators offer to sell their capacity to electricity retailers in regularly held auctions.
Morgan Stanley is a Delaware corporation with its principal place of business in New York City. Morgan provides diversified financial services, operating a global asset management business, investment banking services and a global securities business, including a commodities trading division.
The proposed settlement, along with the department’s competitive impact statement, will be published in The Federal Register, as required by the Antitrust Procedures and Penalties Act. Any person may submit written comments concerning the proposed settlement within 60 days of its publication to William Stallings, Chief, Transportation, Energy and Agriculture Section, Antitrust Division, U.S. Department of Justice, 450 5th St. N.W., Suite 8000, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.
Justice Department Reaches Settlement with C&F Mortgage Corporation to Resolve Allegations of Lending DiscriminationRead the Press Release
WASHINGTON – The Justice Department announced today that C&F Mortgage Corporation of Midlothian, Va., will revise its pricing policies, conduct employee training and pay $140,000 as part of a settlement to resolve allegations that it engaged in a pattern or practice of discrimination on the basis of race and national origin.
The settlement, which is subject to court approval, was filed in conjunction with the Justice Department’s complaint in U.S. District Court for the Eastern District of Virginia. The complaint alleges that C&F charged greater interest rate markups (overages) and gave lesser discounts (underages) on home mortgage loans made to African-American and Hispanic borrowers, in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA).
“Fair and equal access to credit is critical and lenders have a responsibility to have protocols in place that ensure all of their lending programs comply with the law and don’t discriminate,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Civil Rights Division is committed to fair lending enforcement that stops abuses across the entire spectrum of credit markets and to compensating the victims of discriminatory lending. We commend C&F for working cooperatively with the Justice Department in reaching an appropriate resolution of this case.”
“Racial and ethnic bias have no place in the lending market,” said Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia. “We are pleased that C&F is taking steps to compensate the victims and to ensure fair and equal access to credit in the future.”
“The FDIC is committed to ensuring its supervised banks and their subsidiaries comply with fair lending laws,” said Mark Pearce, Director of the Federal Deposit Insurance Corporation’s (FDIC) Division of Depositor and Consumer Protection. “Banks must effectively monitor their subsidiaries to avoid allowing impermissible discrimination to occur. We appreciate the Department of Justice’s efforts to investigate and resolve this matter.”
According to court documents, in 2007, C&F used rate sheets to calculate a “par” or standard interest rate for each borrower based on objective factors related to the borrower’s credit risk and the loan terms; however, C&F then gave its employees wide discretion to charge borrowers more (overages) or less (underages) than the par rate without having in place objective criteria for setting the overages and underages. Prior to 2010, C&F also did not require employees to document the reasons for charging overages or providing underages to borrowers, did not monitor whether these overages and underages resulted in discrimination based on race or national origin, and did not offer detailed fair lending training to its employees. The Justice Department’s complaint alleges that this policy had a disparate impact on African-American and Hispanic borrowers.
The department alleged that in 2010, C&F began to develop uniform policies for all aspects of its loan pricing and to phase out the practice of charging overages to home mortgage borrowers. As part of this settlement, C&F revised these and other pricing policies further to ensure that the interest rates charged for its home mortgage loans are set in a non-discriminatory manner consistent with the requirements of the FHA and the ECOA. The settlement also requires the lender to pay $140,000 to African-American and Hispanic victims of discrimination, monitor its loans for potential disparities based on race and national origin, and provide equal credit opportunity training to its employees. The agreement also prohibits the lender from discriminating on the basis of race or national origin in any aspect of a credit transaction.
The lawsuit originated from a referral by the FDIC to the Justice Department’s Civil Rights Division.
The Civil Rights Division, the U.S. Attorney’s Office for the Eastern District of Virginia, and the FDIC are members of the Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.
A copy of the complaint, as well as additional information about fair lending enforcement by the Justice Department, can be obtained from the Justice Department’s website at www.justice.gov/fairhousing.
Justice Department Files Lawsuit Alleging Disability-Based Housing Discrimination at Salem, Oregon, Apartment ComplexRead the Press Release
WASHINGTON – The Justice Department filed a lawsuit today against the developers, builders and designers of the Gateway Village Apartments, a 275-unit apartment complex in Salem, Ore., for violations of the Fair Housing Act. The lawsuit alleges that the defendants violated the law when they designed and constructed the complex with barriers that make it inaccessible to persons with disabilities.
“Since 1991, the Fair Housing Act has required that when new multifamily housing is built it be accessible to persons with disabilities, so that all persons have equal opportunities to live in multifamily housing across the nation,” said Thomas E. Perez, Assistant Attorney General for the Justice Department’s Civil Rights Division. “When builders build apartment complexes with steps and other barriers, they deny that equal housing opportunity for those with disabilities.”
The suit, filed in U.S. District Court in Portland, Ore., alleges that various barriers at Gateway Village deny persons with disabilities equal access to the 112 ground floor units and their associated public and common use areas. Such barriers include inaccessible building entrances; doors within apartments that are too narrow for wheelchair users; and kitchens and bathrooms that are configured so that persons using wheelchairs cannot use them.
Named in the suit are the developers and builders of the property – Montagne Development Inc., David A. Montagne, William David Jones, Dav II Investment Group LLC and Gateway II LLC – and the firm that designed the property, Multi/Tech Engineering Services Inc. The suit seeks a court order requiring the defendants to retrofit Gateway to bring it into compliance with the Fair Housing Act and monetary damages for persons harmed by the lack of accessibility at the complex.
The lawsuit arises out of a complaint filed with the Department of Housing and Urban Development (HUD) by the Fair Housing Council of Oregon (FHCO), a private nonprofit corporation whose mission is to ensure compliance with fair housing laws for all persons in Oregon and southwest Washington. FHCO inspected Gateway Village and observed accessibility barriers at the property. After conducting an investigation, HUD issued a charge of discrimination and referred the case to the Justice Department.
“T he Fair Housing Council of Oregon has been a steadfast partner in the enforcement of our federal fair housing laws,” said U.S. Attorney for the District of Oregon Dwight Holton. “Their investigations concerning accessible housing play an important role in the civil rights of the people of Oregon.”
“Accessible features are essential to helping people with physical challenges enjoy their home, “said John Trasviña, HUD Assistant Secretary for Fair Housing and Equal Opportunity. “HUD is committed to working with the Justice Department to ensure that developers and builders meet their responsibility to comply with the accessibility requirements of the Fair Housing Act.”
The federal Fair Housing Act prohibits discrimination in housing on the basis of race, color, religion, sex, familial status, national origin and disability. Among other things, the Act requires all multifamily housing constructed after March 12, 1991, to have basic accessibility features, including accessible routes without steps to all ground floor units. More information about the Civil Rights Division and the laws it enforces is available at www.usdoj.gov/crt . Individuals who believe that they may have been victims of housing discrimination at Gateway Village Apartments should contact the U.S. Attorney’s Office for the District of Oregon at 503-471-5577, 855-474-5577 (toll free) or [email protected]. Individuals who believe they may have been victims of housing discrimination elsewhere may contact the Justice Department at 1-800-896-7743 or [email protected] or the Department of Housing and Urban Development at 1-800-669-9777.
The complaint is an allegation of unlawful conduct. The United States bears the burden of proving its case in federal court.
Justice Department Files Lawsuit Against Truman, Minnesota, to Protect the Employment Rights of U.S. Army ReservistRead the Press Release
WASHINGTON - The Department of Justice filed a lawsuit today on behalf of Michael Schutz, a member of the U.S. Army Reserves, against the city of Truman, Minn. The lawsuit alleges that Truman violated the Uniformed Services Employment and Reemployment Rights Act (USERRA) by failing to properly reemploy Schutz and unlawfully moving to terminate his employment as a full-time police officer after he returned from military service in Kuwait.
Subject to certain conditions, USERRA requires employers to promptly reemploy returning service members in the positions they would have held had their employment been not interrupted by military service or in a position of like seniority, status and pay. In addition, employers may not retaliate against servicemember employees seeking to exercise their rights under USERRA.
According to the complaint filed in the U.S. District Court for the District of Minnesota, upon Schutz’s honorable discharge from military service, Truman did not reemploy him in his pre-service position as a full-time police officer. The complaint also alleges that Truman retaliated against Schutz after he filed his USERRA claim by placing him on administrative leave for approximately three weeks and issuing him a notice of intent to terminate his employment shortly thereafter.
In representing Mr. Schutz, the Justice Department is seeking the lost wages and benefits that Schutz would have received if Truman had reemployed him in his pre-service position as the law requires and injunctive relief relating to Truman’s retaliation against Schutz for exercising his USERRA rights.
The complaint also seeks double damages because the defendants’ actions constituted a willful violation of USERRA. The case will be litigated by the U.S. Attorney’s Office based in Minneapolis.
“The men and women who wear our nation’s uniform need to know that they do not have to sacrifice their job at home in order to serve our country,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Civil Rights Division is committed to aggressive enforcement of USERRA to protect the rights of those who, through their bravery and sacrifice, secure the rights of all Americans.”
“Just as our dedicated men and women of the military protect our freedoms overseas, we must protect their interests here at home,” said U.S. Attorney for the District of Minnesota B. Todd Jones. “These soldiers have made many sacrifices, and we cannot allow the loss of a career or appropriate pay when they return home.”
The Justice Department’s Civil Rights Division has given high priority to the enforcement of service members’ rights under USERRA. Additional information about USERRA can be found on the Justice Department’s websites at www.justice.gov/crt/emp and www.servicemembers.gov , as well as on the Labor Department’s website at www.dol.gov/vets/programs/userra/main.htm .
Justice Department Files Lawsuit Against California Healthcare Provider Alleging DiscriminationRead the Press Release
WASHINGTON – The Justice Department filed a lawsuit today against Generations Healthcare, a healthcare provider with skilled nursing facilities throughout California , alleging that it engaged in a pattern or practice of discrimination by imposing unnecessary documentary requirements on naturalized U.S. citizens and non-U.S. citizens in order to work in the U.S. The Immigration and Nationality Act’s (INA) anti-discrimination provision prohibits employers from placing additional burdens on work-authorized employees during the process of hiring or to verify their employment eligibility based on their citizenship status or national origin.
In February 2010, an applicant for employment, who is authorized to work legally in the United States, applied to work for Generations Healthcare at its St. Francis Pavilion facility in Daly City, Calif. According to the department’s investigation, the company demanded that the applicant produce a permanent resident card, also known as a “green card.” The applicant did not have a green card and instead presented an employment authorization document, which was legal documentation of her authority to work in the United States. The company rejected her valid documentation because it had a future expiration date and told her that it could not hire her unless she presented a green card. As a result, the applicant was unable to obtain employment with the company.
The department’s investigation revealed that Generations Healthcare required all newly hired non-U.S. citizens and naturalized U.S. citizens at its St. Francis Pavilion facility to present specific and extra work authorization documents beyond those required by federal law to prove their status — a burden that was not placed on native-born U.S. citizens.
“Employers are not allowed to impose more burdensome employment eligibility verification procedures on certain workers based on their citizenship status,” said Thomas E. Perez, Assistant Attorney General in charge of the Civil Rights Division. “The Justice Department is committed to vigorously enforcing the anti-discrimination provisions of the Immigration and Nationality Act, including those protecting employees from discriminatory documentary requirements.”
The Office of Special Counsel for Immigration Related Unfair Employment Practices (OSC) is responsible for enforcing the anti-discrimination provision of the INA, which protects work authorized individuals against employment discrimination on the basis of citizenship status or national origin discrimination, including discrimination in hiring and in the employment eligibility verification (Form I-9) process. For more information about protections against employment discrimination under federal immigration law, call OSC’s worker hotline at 1-800-255-7688 (1-800-237-2515, TDD for hearing impaired); OSC’s employer hotline at 1-800-255-8155 (1-800-237-2515, TDD for hearing impaired); e-mail [email protected]/ or visit OSC’s website at www.justice.gov/crt/about/osc
The lawsuit charging Generations Healthcare with discriminatory practices, filed before the Office of the Chief Administrative Hearing Officer within the Executive Office for Immigration Review, is being prosecuted by Phil Telfeyan and A. Baltazar Baca, OSC Trial Attorneys.
Japanese Freight Forwarding Company Agrees to Plead Guilty to Criminal Price-Fixing ChargeRead the Press Release
WASHINGTON – A Japanese freight forwarder has agreed to plead guilty and to pay a $1.84 million criminal fine for its role in a conspiracy to fix certain fees in connection with the provision of freight forwarding services for air cargo shipments from Japan to the United States, the Department of Justice announced today.
According to a charge filed today in U.S. District Court for the District of Columbia, MOL Logistics (Japan) Co. Ltd. engaged in a conspiracy with others to fix and impose certain freight forwarding service fees, including fuel surcharges and various security fees, charged to customers for services provided in connection with air freight forwarding shipments of cargo shipped by air from Japan to the United States from about September 2002 until at least November 2007.
Under the plea agreement, which is subject to court approval, MOL Logistics has also agreed to cooperate with the department’s ongoing antitrust investigation.
The department said that MOL Logistics and its co-conspirators carried out the conspiracy by, among other things, agreeing during meetings and discussions to coordinate and impose certain freight forwarding service fees and charges on customers purchasing freight forwarding services for cargo shipped by air from Japan to the United States. As part of the conspiracy, MOL Logistics and its co-conspirators levied freight forwarding service fees in accordance with the agreements reached and engaged in meetings and discussions for the purpose of monitoring and enforcing adherence to the agreed-upon freight forwarding service fees.
Freight forwarders manage the domestic and international delivery of cargo for customers by receiving, packaging, preparing and warehousing cargo freight, arranging for cargo shipment through transportation providers such as air carriers, preparing shipment documentation, and providing related ancillary services.
MOL Logistics is charged with price fixing in violation of the Sherman Act, which carries a maximum $100 million fine for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
Including MOL Logistics, 13 companies have agreed to plead guilty and nearly $100 million in criminal fines have been obtained as a result of the Antitrust Division’s ongoing freight forwarding investigation. On Sept. 28, 2011, six companies – Kintetsu World Express Inc.; Hankyu Hanshin Express Co. Ltd.; Nippon Express Co. Ltd.; Nissin Corporation; Nishi-Nippon Railroad Co. Ltd.; and Vantec Corporation – agreed to plead guilty for their roles in a conspiracy to fix and impose certain freight forwarding service fees charged to customers for services provided in connection with air freight forwarding shipments of cargo shipped by air from Japan to the United States from about September 2002 until at least November 2007.
Today’s charge is the result of a joint investigation into the freight forwarding industry being conducted by the Antitrust Division’s National Criminal Enforcement Section, the FBI’s Washington Field Office and the Department of Commerce’s Office of Inspector General. Anyone with information concerning the price fixing or other anticompetitive conduct in the freight forwarding industry is urged to call the Antitrust Division’s National Criminal Enforcement Section at 202-307-6694 or visit www.justice.gov/atr/contract/newcase.htm or call the FBI’s Washington Field Office at 202-278-2000.
Hitachi-LG Data Storage Inc. Agrees to Plead Guilty to Participating in Bid-Rigging and Price-Fixing Conspiracies Involving Optical Disk DrivesRead the Press Release
WASHINGTON – Hitachi-LG Data Storage Inc. has agreed to plead guilty and to pay a $21.1 million criminal fine for its participation in a series of conspiracies to rig bids and fix prices for the sale of optical disk drives, the Department of Justice announced today. This is the department’s first charge resulting from its ongoing investigation into the optical disk drive industry.
A 15-count felony charge was filed today in U.S. District Court in San Francisco against Hitachi-LG Data Storage, a joint venture between Hitachi Ltd., a Japanese corporation, and LG Electronics Inc., a Republic of Korea corporation. Of the 14 counts, seven charge Hitachi-LG Data Storage with conspiring with others to suppress and eliminate competition by rigging bids on optical disk drives sold to Dell Inc.; six counts charge Hitachi-LG Data Storage with rigging bids on optical disk drives sold to Hewlett-Packard Company (HP); and one count charges Hitachi-LG Data Storage with conspiring with others to fix the prices of optical disk drives sold to Microsoft Corporation. The final count charges Hitachi-LG Data Storage for its participation in a scheme to defraud HP in an April 2009 optical disk drive procurement event.
“The bid-rigging and price-fixing conspiracies involving optical disk drives undermined competition and innovation in the high tech industry,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The Antitrust Division is committed to prosecuting those who harm competition in the optical disk drive industry.”
Under the plea agreement, which is subject to court approval, Hitachi-LG Data Storage has agreed to assist the department in its ongoing investigation into the optical disk drive industry.
Optical disk drives are devices such as CD-ROM, CD-RW (ReWritable), DVD-ROM and DVD-RW (ReWritable) that use laser light or electromagnetic waves to read and/or write data and are often incorporated into personal computers and gaming consoles.
According to the court document, Dell hosted optical disk drive procurement events in which bidders would be awarded varying amounts of optical disk drive supply depending on where their pricing ranked. From approximately June 2004 to approximately September 2009, Hitachi-LG Data Storage and co-conspirators participated in a series of conspiracies involving meetings and conversations to discuss bidding strategies and the prices of optical disk drives. As part of the conspiracies, Hitachi-LG Data Storage and co-conspirators bid on optical disk drives at collusive and noncompetitive prices and exchanged information on sales, market share and the pricing of optical disk drives to monitor and enforce adherence to the agreements.
The department said that from approximately June 2007 to approximately March 2008, Hitachi-LG Data Storage and co-conspirators participated in meetings and conversations in Taiwan and the Republic of Korea to discuss and fix the prices of optical disk drives sold to Microsoft. As part of the conspiracy, Hitachi-LG Data Storage and co-conspirators issued price quotations in accordance with the agreements reached and exchanged information on the sales of optical disk drives to monitor and enforce adherence to the agreed-upon prices.
According to the court document, HP also hosted optical disk drive procurement events in which participants would be awarded varying amounts of optical disk drive supply depending on where their pricing ranked. The department said that from approximately November 2005 to approximately March 2009, Hitachi-LG Data Storage and co-conspirators participated in a series of conspiracies involving meetings and discussions to predetermine pricing and rank order, and submitted collusive and noncompetitive bids for the procurement event.
Hitachi-LG Data Storage is also charged with one count of wire fraud for devising a scheme to subvert HP’s competitive bidding process for an April 2009 procurement event. According to the charge, Hitachi-LG Data Storage executed the scheme through interstate communications, including an email sent by one of its employees to co-conspirators in San Jose, Calif., and the Republic of Korea, that contained first round bidding results and non-public, competitively sensitive information relating to the April 2009 event.
Hitachi-LG Data Storage is charged with multiple violations of the Sherman Act and one violation of the wire fraud statute. Sherman Act violations carry a maximum penalty of a $100 million criminal fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims, if either of those amounts is greater than the statutory maximum fine. The wire fraud violation carries a maximum penalty of the greatest of a $500,000 fine, twice the gain a person derived from the offense or twice the loss suffered by the victims.
The ongoing joint investigation is being conducted by the Antitrust Division’s San Francisco Office and the FBI in San Francisco and Houston. Anyone with information concerning illegal or anticompetitive conduct in the optical disk drive industry is urged to call the Antitrust Division’s San Francisco Field Office at 415-436-6660 or visit www.justice.gov/atr/contact/newcase.htm.
Harris County, Texas, Commissioner Pleads Guilty to Making a False Statement to FBI; Real Estate Developer Pleads Guilty to False Tax StatementRead the Press Release
WASHINGTON – Harris County Commissioner Gerald R. Eversole and Houston-based real estate developer Michael D. Surface both pleaded guilty today in federal court in Houston to making false statements, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, Special-Agent-In-Charge (SAC) Stephen L. Morris of the FBI’s Houston Field Office and SAC Rodney E. Clarke of the Internal Revenue Service-Criminal Investigation (IRS-CI) Houston Field Office.
Eversole pleaded guilty to lying to the FBI by falsely denying that he had received items of value from Surface, including $63,000 provided to Eversole to help purchase a new home, and $16,975 provided to Eversole in the form of landscaping expenses on that home.
Surface pleaded guilty to claiming a false tax deduction for the landscaping expenses at Eversole’s home on both his corporate and personal income tax return. U.S. District Judge David Hittner accepted both pleas and set a sentencing date of Jan. 4, 2012.
In a separate case, Surface pleaded guilty to making a false statement to the FBI about his relationship with a former city of Houston official. In that case, Surface pleaded guilty to lying about whether he had provided things of value to Monique McGilbra, the former head of the city’s Building Services Department. U.S. District Judge Lynn Hughes accepted Surface’s plea in this case and set sentencing for Jan. 3, 2011.
“Mr. Eversole lied to the FBI about receiving money and other items of value that Mr. Surface admitted he provided,” said Assistant Attorney General Breuer. “Mr. Surface, in turn, lied on his tax returns about the money he provided to Mr. Eversole to gain influence, and lied to the FBI about providing things of value to a separate Houston city official. The public must be able to trust that its elected officials are fulfilling their duties honestly and without influence from individual favor-seekers. Public officials who are not truthful about the funds they receive must face the consequences of their actions.”
“The FBI will continue to ensure that our public officials are held to a higher standard,” said FBI SAC Morris. “Without honesty, there can be no trust in our democracy.”
“Mr. Surface took an income tax deduction for moneys that he paid to influence a public official - a deduction that he was clearly not entitled to,” said IRS-CI SAC Clarke. “ IRS-CI helps ensure that all Americans, including public officials and others are held to the same standard as regular taxpayers. This action today is an important victory for America’s taxpayers who play by the rules and have no tolerance for those who make up their own rules.”
As part of their guilty pleas, Eversole and Surface both admitted that beginning in 1999, Surface sought and obtained at least five lucrative Harris County contracts to build and house county offices and to provide construction maintenance, among others. Both defendants also admitted Eversole repeatedly voted to approve and renew Surface’s projects and used his official position to ensure funding for these contracts. Eversole also repeatedly recommended and voted to appoint Surface as chairman of the board of the Harris County Sports and Convention Corporation, a quasi-governmental organization charged with overseeing Reliant Stadium and Reliant Park.
Eversole and Surface also admitted that in March 2003, Surface gave $63,000 for the purchase and construction of Eversole’s new home. Both defendants also admitted that in April 2004, Surface gave Eversole $16,975 for residential landscaping expenses at Eversole’s new home.
Eversole admitted that, when interviewed in December 2007 by FBI agents and asked about things of value he had received from Surface, he falsely stated that two birthday gifts were the only items he had received from Surface, when in fact he had received the $63,000 and the $16,975, among other things. Surface admitted that he gave Eversole the $63,000 and the $16,975 with the intent to influence Eversole in connection with the county projects Eversole voted to award to Surface. Surface also admitted that in providing the landscaping expenses, he instructed the landscaper to bill Eversole for $10,000 and send the bill for the remaining $16, 975 to one of Surface’s corporations. Surface then caused that corporation to falsely list the payment as a business expense, which caused his own personal income tax return to under-state his taxable income for the 2004 calendar year.
As part of his plea agreement, Eversole agreed to resign from office and agreed not to seek elected or appointed office for a period of 10 years. Surface, who had previously resigned from the Harris County Sports and Convention Corporation, agreed not to seek any federal, state or local contracts for a period of five years.
As part of his plea agreement in the case involving the city of Houston official, Surface admitted that beginning in 1999, McGilbra supervised the administration of a multi-million dollar contract awarded to The Keystone Group Inc., a corporation owned by Surface and Andrew Schatte, his co-defendant in that case. McGilbra also supervised negotiations between Keystone and the city on another planned contract. Surface admitted that he and others provided McGilbra with free drinks and meals while she was responsible for the existing contract, despite a city prohibition against such gifts. Surface also admitted that he and others caused Keystone to hire McGilbra’s boyfriend, Garland Hardeman, as a “consultant” to Keystone, and that Hardeman provided a portion of these consulting fees back to McGilbra. Surface also admitted that he provided a $1,000 gift certificate to McGilbra for a department store, as well as football tickets. Surface admitted that when he was interviewed by FBI agents, he falsely stated that he had provided nothing other than football tickets to McGilbra. McGilbra previously pleaded guilty for her role in the scheme.
Schatte is currently pending trial, and is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
Eversole faces a maximum penalty of five years in prison and a $250,000 fine. Surface faces a maximum penalty of three years prison and a $100,000 fine on the false tax statement charge and five years in prison and a $250,000 fine on the false statement charge.
This case is being prosecuted by Senior Trial Attorney Mary K. Butler and Trial Attorneys John P. Pearson and Peter Mason of the Criminal Division’s Public Integrity Section. The case was investigated by the FBI and IRS-CI.
Former Colombian Maritime Training Instructor and Co-Conspirator Sentenced to Prison on U.S. Drug ChargesRead the Press Release
WASHINGTON – A former Colombian maritime training instructor and a co-conspirator were sentenced to federal prison today for conspiring to transport thousands of kilograms of cocaine from various ports along the coast of Colombia to waiting vessels that transported the cocaine to the United States and other countries, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.
Wilson Jesus Torres-Torres, a Colombian maritime training instructor, and Baudilio Vivero-Cardenas, were sentenced to 144 months and 96 months in prison, respectively. They pleaded guilty on Dec. 30, 2010, before U.S. District Judge Ellen S. Huvelle in the District of Columbia to one count of conspiracy to violate the Maritime Drug Law Enforcement Act.
Torres-Torres and Vivero-Cardenas were charged in a one-count indictment returned in the District of Columbia on Feb. 24, 2009. They were arrested in Colombia on Sept. 30, 2009. Vivero-Cardenas was extradited to the United States on Sept. 2, 2010, and Torres-Torres was extradited to the United States on Sept. 23, 2010.
According to court documents, from September 2005 to February 2009, Torres-Torres and Vivero-Cardenas were members of a Colombian drug trafficking organization based in Buenaventura, Colombia, that transported large quantities of cocaine for various other drug trafficking organizations. The defendants admitted that they used fishing vessels and “go-fast” boats to transport thousands of kilograms of cocaine from various ports along the coast of Colombia to waiting transport vessels on the high seas, which would transport the cocaine to the United States and other countries. According to court documents, the vessels involved in the conspiracy were equipped with high frequency radios, global positioning system devices, satellite telephones, large amounts of fuel, and multiple outboard motors to facilitate the transport of cocaine over long distances on the high seas until the destination or off-loading rendezvous point was reached.
The case was prosecuted by Trial Attorneys Charles D. Griffith Jr., Meredith A. Mills and Tritia L. Yuen of the Criminal Division’s Narcotic and Dangerous Drug Section. The investigation was led by the Drug Enforcement Administration’s Miami Field Division; Washington, D.C., Office; Cartagena, Colombia, Resident Office; and the Special Operations Division. Significant assistance was provided by the U.S. Coast Guard in interdicting and recovering more than 21,000 kilograms of cocaine.
Florida Man Sentenced for Filing False Liens Against Federal Law Enforcement EmployeesRead the Press Release
WASHINGTON – Mark D. Leitner was sentenced to 30 months in prison after pleading guilty in July to filing false liens against federal law enforcement employees and corruptly endeavoring to impede and impair the Internal Revenue Service (IRS), the Justice Department announced today. Northern District of Florida Senior District Court Judge Lacey A. Collier presided over the hearing at the U.S. District Court in Pensacola, Fla.
According to court documents, Leitner apologized for filing false liens against the former U.S. attorney for the Northern District of Florida, the former clerk of court and numerous assistant U.S. attorneys, department trial attorneys and an IRS Criminal Investigation special agent involved in a 2010 tax fraud prosecution against Leitner.
According to the documents filed in the court proceeding, Leitner was previously a defendant in a criminal trial, United States v. Hirmer, et. al., in the Northern District of Florida in March 2010. During that jury trial and after the jury returned the guilty verdict, Leitner publicly filed false maritime liens against the property of the prosecutors, investigators and court personnel involved in the criminal trial. The liens falsely claimed that Leitner was owed $48.489 billion from each individual. On five of the seven false liens, Leitner publicly disclosed individuals’ correct social security numbers and other personal identifying information. Leitner also filed and mailed numerous harassing and frivolous documents to the courts and personnel involved in this case.
Leitner will serve this prison sentence consecutive to the five-year prison sentence he received for his 2010 tax fraud conviction.
The case was investigated by Treasury Inspector General for Tax Administration – Department of Treasury.
Additional information about the Justice Department’s Tax Division and its enforcement efforts can be found at www.usdoj.gov/tax .
Eight California Residents Indicted for Their Roles in Scheme Claiming More Than $19 Million in Fraudulent Tax RefundsRead the Press Release
WASHINGTON – Osman Norales, Genaro De La Fuente, Francisco Ramirez and Ulises Linares were indicted on charges of conspiring to defraud the United States, the Justice Department and Internal Revenue Service (IRS) announced today. The indictment was unsealed in the Central District of California today.
According to the allegations in the indictment, in 2009, Norales, De la Fuente, Ramirez and Linares conspired to defraud the United States by filing more than 400 false Forms 1099-OID claiming more than $80 million in fictitious federal income tax withholdings and by filing more than 35 false individual income tax returns, Forms 1040 and Forms 1040X, that claimed more than $19 million in fictitious federal income tax withholding.
According to the indictment, IRS Forms 1099 are used to report income and withholding to the IRS and are typically issued by employers or other payors such as banks. Original Issue Discount (OID), reported on IRS Form 1099-OID, is a form of interest income typically realized on debt instruments that were issued at a discount or purchased for less than the ultimate redemption value of the debt instrument, such as a bond or certificate of deposit.
According to the indictment, the defendants operated the fraudulent scheme using a partnership based in Rancho Cucamonga, Calif., called “De la Fuente and Ramirez and Associates” (DLFRA). Norales, De La Fuente and Ramirez recruited customers into the fraudulent scheme through seminars and one-on-one consultations, charged individuals up to $3,000 to become customers. Linares prepared the false Forms 1040 claiming large fraudulent refunds based on the fictitious withholding amounts reported on the false Forms 1099-OID and Norales, De la Fuente, Ramirez and Linares then caused the false individual income tax returns to be filed with the IRS. Norales and Ramirez transmitted more than 450 fictitious Forms 1099-OID to the IRS falsely claiming that customers had receive more than $81 million in income that had been turned over to the IRS as federal income tax withholdings.
All four defendants are charged with a conspiracy to defraud the United States and with various counts of filing false claims against the United States. In addition, Norales, De la Fuente and Ramirez are also charged with filing false individual income tax returns for themselves using the 1099-OID scheme.
In addition, four other individuals, Maribel Rincon, Arturo Villarreal, Christine Rincon, as well as tax return preparer Angela Molina of Riverside, Calif., were also each indicted separately for aiding and assisting the filing of false individual income tax returns for themselves and/or others that claimed fraudulent tax refunds ranging from approximately $90,000 to more than $1.5 million.
An indictment is merely an allegation and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law. If convicted, Norales, De La Fuente, Ramirez and Linares each face up to 10 years in prison for the conspiracy charge. All of the defendants face up to five years in prison for each false claim charge. In addition, the defendants face fines of up to $250,000 for each count charged in the indictment.
The case was investigated by IRS-Criminal Investigation and is being prosecuted by Justice Department Tax Division Trial Attorney Ignacio Perez de la Cruz and Assistant U.S. Attorney Charles Pell in the Central District of California.