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19 December 2012
Amgen Inc. Pleads Guilty to Federal Charge in Brooklyn, NY.;Pays $762 Million to Resolve Criminal Liability and False Claims Act AllegationsRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, New York, U.S. District Judge Sterling Johnson, Jr. accepted a guilty plea by American biotechnology giant Amgen Inc. (Amgen) for illegally introducing a misbranded drug into interstate commerce. The plea is part of a global settlement with the United States in which Amgen agreed to pay $762 million to resolve criminal and civil liability arising from its sale and promotion of certain drugs. The settlement represents the single largest criminal and civil False Claims Act settlement involving a biotechnology company in U.S. history.
The announcement was made by Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division; Marshall L. Miller, Acting U.S. Attorney for the Eastern District of New York; Jenny A. Durkan, U.S. Attorney, Western District of Washington; Carmen M. Ortiz, U.S. Attorney for the District of Massachusetts; Thomas O’Donnell, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG), New York Regional Office; John Roth, Director, U.S. Food and Drug Administration (FDA), Office of Criminal Investigations; Eric Schneiderman, New York State Attorney General; and George Venizelos, Assistant Director in Charge of the FBI’s New York Field Office; along with numerous law enforcement and regulatory partners.
As part of the plea agreement and criminal settlement, Amgen entered a guilty plea yesterday before U.S. District Judge Sterling Johnson of the Eastern District of New York to a criminal information charging the company with illegally introducing a misbranded drug, Aranesp, into interstate commerce. Under the Food, Drug and Cosmetic Act, it is illegal for drug companies to introduce into the marketplace drugs that the company intends will be used “off-label,” i.e., for uses or at doses not approved by the FDA. Aranesp is an erythropoiesis-stimulating agent (ESA) that was approved by the FDA at calibrated doses for particular patient populations suffering from anemia. In order to increase sales of Aranesp and reap the resulting profits, Amgen illegally sold the drug with the intention that it be used at off-label doses that the FDA had specifically considered and rejected, and for an off-label treatment that the FDA had never approved. Under the terms of the criminal plea agreement, Amgen will pay a criminal fine of $136 million and criminal forfeiture in the amount of $14 million.
As part of the civil settlement, Amgen has agreed to pay $612 million ($587.2 million to the United States and $24.8 million to the states) to resolve claims that it caused false claims to be submitted to Medicare, Medicaid and other government insurance programs. The federal civil settlement agreement encompasses allegations that Amgen: (1) promoted Aranesp and two other drugs that it manufactured, Enbrel and Neulasta, for off-label uses and doses that were not approved by the FDA and not properly reimbursable by federal insurance programs; (2) offered illegal kickbacks to a wide range of entities in an effort to influence health care providers to select its products for use, regardless of whether they were reimbursable by federal health care programs or were medically necessary; and (3) engaged in false price reporting practices involving several of its drugs. As part of the global settlement, Amgen has also agreed to enter into a Corporate Integrity Agreement (CIA) with HHS-OIG that will govern its conduct, and ensure careful oversight of its branding and marketing practices.
“Today’s resolution reinforces the Department of Justice’s commitment to cracking down on unlawful conduct by pharmaceutical companies,” said Civil Division Principal Deputy Assistant Attorney General Delery. “When drug companies improperly misbrand their products, they not only could put individual patients at risk, but they also undermine the federal health care system that protects all of us.”
“Instead of working to extend and enhance human lives, Amgen illegally pursued corporate profits while jeopardizing the safety of vulnerable consumers suffering from disease. Americans expect - and the law requires - much more. Today’s settlement demonstrates our vigilance in protecting America’s healthcare consumers and pursuing any corporation that seeks to profit by violating U.S. law,” said Acting U.S. Attorney of the Eastern District of New York Miller. “To all who might consider introducing misbranded drugs into the marketplace, you are on notice: we remain steadfastly committed to prosecuting such violations of law.” Mr. Miller also expressed his appreciation to the Offices of Inspector General for the Department of Defense, the Office of Personnel Management and the Veterans Administration for their assistance.
“The public has been well served by this investigation and the FDA commends the efforts of the U.S. Attorney’s Office in the Eastern District of New York, the Department of Justice and the other law enforcement agencies that worked with us to vigorously pursue this matter,” said John Roth, Director of the FDA’s Office of Criminal Investigations in the FDA’s Office of Regulatory Affairs. “Today’s settlement demonstrates our continued scrutiny of any illegal practices used by pharmaceutical and biotechnology companies.”
“Promoting drugs for unapproved purposes is beyond wrong; it jeopardizes the health and safety of the public,” said FBI Assistant Director Venizelos. “Preserving the integrity of the pharmaceutical industry is important work, and the FBI will continue working with our colleagues in law enforcement to investigate and charge those who inappropriately market drugs for scurrilous profits.”
“This sends a powerful message to pharma companies: you must not put profits ahead of patients' health and doctors' trust. Drugs should be prescribed because they make people better, not because they make companies money," said Western District of Washington U.S. Attorney Durkan. "The coordination by our office, the U.S. Attorney’s Offices in the Eastern District of New York and Massachusetts and Main Justice also shows that there is no corner of the country where these actors can hide.”
“Today’s resolution is a testament to coordination and cooperation throughout the Department of Justice to ensure drug manufacturers are held to account and fraud is properly addressed,” said Massachusetts U.S. Attorney Ortiz. “The District of Massachusetts is proud to have played a role in the resolution of this matter, and in ensuring that drug manufacturers’ claims regarding their products are truthful and properly supported.”
“There are no excuses for illegally marketing off label drugs, offering kickbacks to health care professionals and ripping off the taxpayers by defrauding Medicaid and other programs,” said New York State Attorney General Schneiderman. “With this settlement the message we are sending is clear: biotechnology giants are not above the law, and my office will continue to ensure that prescriptions be written based on medical judgment - not profit motive.”
The Criminal Plea Agreement
The information alleges the following:
Beginning at the launch of Aranesp in 2002 and extending until 2007, Amgen illegally introduced Aranesp for uses and at dosage levels that the FDA had specifically declined to approve due to insufficient clinical evidence to establish their safety and efficacy. In particular, Amgen illegally introduced Aranesp into the oncology and nephrology ESA markets, intending that it be used for patients suffering from anemia due to chronic kidney disease or chemotherapy at off-label, unapproved doses that were larger and less frequently administered than those approved by the FDA for these patient populations. Amgen also illegally introduced Aranesp into the oncology ESA market intending that it be used to treat anemia caused by cancer, irrespective of whether the patient had been prescribed chemotherapy - a use which the FDA had never approved and which the FDA subsequently determined caused an increased risk of death. In particular, in 2007, the FDA mandated that a “black box” label be added to Aranesp’s label, warning that Aranesp “increased the risk of death . . . in patients with active malignant disease [cancer] receiving neither chemotherapy nor radiation.” At approximately the time that the FDA issued the black box warning, Amgen ceased its promotion of Aranesp for the treatment of anemia caused by cancer rather than the cancer’s treatment.
Amgen’s internal sales and marketing materials made plain that Amgen’s misbranding of Aranesp was the company’s core business strategy to gain market share from its only ESA competitor, Procrit, sold by Johnson & Johnson. At the time of Aranesp’s 2002 launch, doctors typically prescribed Procrit to treat the anemic patient populations for which Aranesp was approved. To compete with Procrit, Amgen built the Aranesp commercial strategy around the unapproved, off-label approach of a less frequent dosing schedule, which Amgen sales representatives argued was more convenient for patients and more profitable for doctors. Amgen implemented this illegal commercial effort through its promotion of off-label doses from two to four times larger than those approved by the FDA, administered far less frequently than approved by the FDA.
When this unapproved, off-label dosing effort proved commercially successful, Amgen sales and marketing executives determined that capturing the population of anemic cancer patients who were not undergoing chemotherapy was “the next big thing” and would give Amgen a “51 percent [ESA] market share.” Accordingly, the company set about capturing the off-label market of patients suffering from anemia caused by cancer itself, rather than anemia caused by chemotherapy, and its sales representatives began marketing the safety and efficacy of Aranesp in that population. Ultimately, in 2007, the FDA determined that Aranesp increased the risk of death in that very population.
Aware that its misbranding of Aranesp was illegal, Amgen instructed its sales representatives to promote off-label uses through the guise of “reactive marketing.” This technique attempted to circumvent the law by inducing doctors to ask questions about an off-label use, to serve as a smokescreen to hide Amgen’s intentional effort to introduce the drug for unapproved, “off-label” uses. Amgen thus trained its sales representatives to intentionally elicit questions from doctors about off-label uses as legal cover to then provide the doctors with studies supporting the off-label use, thereby promoting the drug for that unapproved use. The studies Amgen provided to doctors to support off-label uses were often the very same studies that the FDA had rejected as insufficient to support the safety and efficacy of those off-label uses, when Amgen had applied to expand Aranesp’s label to encompass them.
The Civil Settlement Agreement
The $612 million dollar civil settlement encompasses broader allegations by the United States against Amgen than those contained in the Information. The civil settlement agreement resolves claims contained in ten lawsuits against Amgen that were brought under the qui tam, or whistle-blower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery. Seven of these cases currently are pending in the Eastern District of New York; two are pending in the District of Massachusetts and one in the Western District of Washington. The ten cases are: United States ex rel. Cantor v. Amgen, Inc., Civil Action No. CV-04-2511 (E.D.N.Y.), United States ex rel. Osiecki v. Amgen, Inc., Civil Action No. CV-05-5025 (E.D.N.Y.), United States ex rel. Westmoreland v. Amgen, Inc., Civil Action No. 06-CV-10972 (D. Mass.), United States ex rel. Arriazola v. Amgen, Inc., Civil Action No. CV 06-3232 (E.D.N.Y.), United States ex rel. Horwitz v. Amgen Inc., Civil Action No. C07-0248 (W.D. Wash.), United States ex rel. Kelly v. Amgen Corporation, Civil Action No. CV-08-4157 (E.D.N.Y.), United States ex rel. Hanks v. Amgen, Inc., Civil Action No. CV 08-3096 (E.D.N.Y.), United States ex rel. Ferrante v. Amgen, Inc., Civil Action No. CV-08-3931 (E.D.N.Y.), United States ex rel. Tucker v. Amgen, Inc., Civil Action No. CV-09-0887 (E.D.N.Y.), and United States ex rel. DJAE Partnership v. Amgen, Inc., Civil Action No. 11-CV- 11242 (D. Mass.).
Like the Information, the civil settlement contains allegations that Amgen improperly marketed Aranesp. More specifically, the United States contends that between September 2001 and September 2011, Amgen knowingly promoted the sale and use of Aranesp for dosing regiments and indications which were (a) not approved by the FDA, and (b) not medically accepted indications, including anemia caused by cancer, anemia caused by chronic disease, chronic anemia, and anemia caused by myelodysplastic syndrome. The United States further contends that Amgen used journal articles that were insufficient to support the safety and efficacy of the off-label uses at issue, and improperly obtained listings in medical compendia in an effort to establish that the off-label uses were medically accepted, and thereby eligible for coverage by federal health care programs. The United States contends that Amgen similarly promoted its drugs Enbrel and Neulasta for off-label indications that were not eligible for coverage by federal health care programs. The civil settlement agreement also covers claims that Amgen knowingly reported inaccurate pricing information such as Average Sales Prices, Best Prices and Average Manufacturer Prices for several drugs.
In a separate civil settlement, International Nephrology Network (INN), renamed Integrated Nephrology Network, a subsidiary of AmerisourceBergen Corporation, has also agreed to pay $15 million to resolve civil liability arising from its role in the marketing of Aranesp. The agreement encompasses claims that INN offered illegal kickbacks to influence health care providers’ selection of Aranesp for treatment of kidney disease and in so doing also caused false price reporting for Aranesp. This agreement resolves a single qui tam action.
The Corporate Integrity Agreement
In addition to the criminal and civil resolutions, Amgen also executed a CIA with HHS-OIG. The five-year CIA includes provisions designed to increase accountability of individuals and Board members, to increase transparency, and to strengthen Amgen’s compliance program. The CIA requires that a committee of Amgen’s board of directors annually review the effectiveness of the company’s compliance program and that executives in key areas certify to compliance. It also requires that Amgen post on its company website information about payments to doctors. Under the CIA, Amgen must establish and maintain a centralized risk assessment and mitigation program and policies relating to research, publications and Amgen’s interactions with federal payors. Amgen is subject to exclusion from federal health care programs for a material breach of the CIA and subject to monetary penalties for less significant breaches.
“We continue our two-pronged attack on alleged fraudulent corporate behavior,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services. “Our investigations expose wrongdoing, and our Corporate Integrity Agreements monitor companies’ compliance with controls designed to prevent future problems.”
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 the Department of Health and Human Services 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 $10.1 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 over $13.9 billion.
The government’s multi-year joint criminal and civil investigation and the negotiation of the global settlement were conducted on the criminal side by Assistant U.S. Attorneys Roger Burlingame and Winston Paes and on the civil side by Assistant U.S. Attorneys Deborah B. Zwany, Paul Kaufman and Erin Argo and Affirmative Civil Enforcement Auditor Emily Rosenthal from the Eastern District of New York. Assistant U.S. Attorney Zachary Cunha from the District of Massachusetts, Assistant U.S. Attorneys Harold Malkin and Peter Winn from the Western District of Washington, Trial Attorneys Jessica Champa, John Henebery and Doug Rosenthal from the Department of Justice’s Commercial Litigation Branch also assisted on the civil side. Assistant U.S. Attorney Susan Loitz of the United States Attorney’s Office for the Western District of Washington and Trial Attorney Sondra Mills of the Department of Justice’s Consumer Protection Branch also assisted on the criminal side. The Corporate Integrity Agreement was negotiated by Mary Riordan and Lisa Veigel from the Department of Health and Human Service’s Office of Inspector General. The state civil settlement agreement was negotiated by Jay Speers, Carolyn Ellis, Christopher Miller, and Laura Meehan of the New York State Office of the Attorney General on behalf of the National Association of Medicaid Fraud Control Units.
18 December 2012
Physical Therapy Assistant Pleads Guilty in Connection with Detroit Medicare Fraud SchemeRead the Press Release
WASHINGTON – Detroit-area resident Ankit Patel pleaded guilty today for his role in a $13.8 million home health care fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Robert D. Foley III of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Chicago Regional Office.
Patel, 28, of Westland, Mich., pleaded guilty today to one count of conspiracy to commit health care fraud before U.S. District Judge Gerald E. Rosen of the Eastern District of Michigan.
According to court documents, Patel was paid beginning in June 2009 to falsify medical documentation for Physicians Choice Home Health Care LLC, a home health agency owned by his alleged co-conspirators. Patel, a physical therapy assistant, pleaded guilty to creating evaluations, therapy revisit notes and other medical documentation memorializing purported physical therapy for patients he did not see or treat. According to court documents, an alleged co-conspirator instructed Patel on how to falsify medical documentation. Patel also signed therapy revisit notes as a physical therapy assistant for patients he did not see or treat. Patel admitted to knowing that the documents he falsified and the documents he signed would be used to support false claims to Medicare for home health services.
According to Patel’s plea agreement, he was subsequently paid to create and sign falsified medical documentation for First Care Home Health Care LLC, Quantum Home Care Inc. and Moonlite Home Care Inc., which were Detroit-area home health care companies also owned by alleged co-conspirators that billed Medicare.
From approximately June 2009 through September 2011, Medicare paid approximately $1,324,015 to Physicians Choice and Quantum for fraudulent physical therapy claims based on falsified files and notes signed by Patel.
At sentencing, scheduled for March 25, 2013, Patel faces a maximum penalty of 10 years in prison and a $250,000 fine.
Ten of Patel’s co-defendants have pleaded guilty, and one has been sentenced. Three co-defendants are fugitives, and five co-defendants await trial.
This case is being prosecuted by Trial Attorney Catherine K. Dick of the Criminal Division’s Fraud Section. It was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is 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.
Owner of Brooklyn, N.Y., Clinic Pleads Guilty <br /> in Connection with $71 Million Medicare Fraud SchemeRead the Press Release
WASHINGTON – The owner and manager of a Brooklyn, N.Y., health care clinic pleaded guilty today in federal court for her role in a $71 million Medicare fraud and money laundering scheme, announced Lanny A. Breuer, Assistant Attorney General of the Department of Justice Criminal Division; Loretta E. Lynch, U.S. Attorney for the Eastern District of New York; George Venizelos, Assistant Director in Charge, FBI, New York Field Office; and Thomas O’Donnell, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).
Irina Shelikhova, a Ukranian national and formerly a resident of Brooklyn and Staten Island, N.Y., pleaded guilty before U.S. District Judge Nina Gershon in the Eastern District of New York to one count of conspiracy to commit money laundering.
Shelikhova was an owner and manager of a clinic in Brooklyn that operated under three corporate names: Bay Medical Care PC, SVS Wellcare Medical PLLC and SZS Medical Care PLLC (Bay Medical Clinic). According to court documents, owners, operators and employees of Bay Medical paid cash kickbacks to Medicare beneficiaries and used the beneficiaries’ names to bill Medicare for more than $71 million in medical services and procedures that were medically unnecessary or never provided, including physician office visits, physical therapy and diagnostic tests.
According to the criminal complaint, the co-conspirators allegedly paid kickbacks to corrupt Medicare beneficiaries in a room at the clinic known as the “kickback room,” in which the conspirators paid approximately 1,000 kickbacks totaling more than $500,000 during a period of approximately six weeks from April to June 2010.
Shelikhova and her alleged co-conspirators used various companies to launder the proceeds of the health care fraud and to generate the cash needed to pay the kickbacks.
In July 2010, two days after numerous co-conspirators were arrested in connection with this matter and with an outstanding warrant for her arrest, Shelikhova fled to Ukraine. She voluntarily returned to the United States in June 2012.
At sentencing, Shelikhova faces a maximum penalty of 20 years in prison. Sentencing is scheduled for March 20, 2013.
In total, 16 individuals have been charged in the Bay Medical scheme, including two doctors, nine clinic owners/operators/employees and five external money launderers. To date, 12 defendants have pleaded guilty for their roles in the conspiracy. Four defendants await trial before Judge Gershon on Jan. 22, 2013. As to those defendants, they are presumed innocent unless and until proven guilty.
The case is being prosecuted by Assistant U.S. Attorney Shannon Jones of the Eastern District of New York and Trial Attorney Sarah Hall of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG.
The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is 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.
Manalapan, N.J., Woman Sentenced to 30 Years in Prison for Sexually Abusing Girl, Streaming Assault Live over the InternetRead the Press Release
WASHINGTON – A New Jersey woman was sentenced today to serve 30 years in prison for producing child pornography through the sexual exploitation of a five-year-old girl on more than one occasion and streaming footage of a sexual assault over the Internet, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney for the District of New Jersey Paul J. Fishman.
Jennifer Mahoney, 33, of Manalapan, N.J., was sentenced today by Judge Mary L. Cooper in the District of New Jersey. In addition to her prison term, Judge Cooper sentenced Mahoney to lifetime supervised release.“Jennifer Mahoney will serve 30 years in prison for sexually abusing a young girl and streaming the footage of her crime over the Internet,” said Assistant Attorney General Breuer. “No prison sentence can repair the damage Jennifer Mahoney has done, but today’s sentence is appropriate punishment for such heinous crimes, committed against a defenseless victim. The Justice Department is committed to partnering with its law enforcement partners to prevent, deter and punish child exploitation.”
“Today’s sentence is a just and fair punishment for a crime that illustrates just how despicable child pornography is,” said U.S. Attorney Fishman. “The victim in this case was a five-year-old girl that had been entrusted to the defendant’s care. Not only did Mahoney totally betray that trust by subjecting her to multiple sexual assaults, but that little girl’s nightmare will be available for others to watch over and over.”
Mahoney pleaded guilty on May 9, 2012, to a criminal information charging her with one count of the sexual exploitation of a child.
According to court documents, Mahoney admitted she sexually assaulted a five-year-old girl and streamed the assault live over the Internet via a video chat service. Mahoney also admitted that on another occasion last year, she abused the girl, recorded the abuse on her smartphone and emailed the video to at least one other person. Additionally, Mahoney admitted to viewing other videos of child sexual abuse streamed to her using Skype.
Special agents of the FBI and other law enforcement agents executed a search warrant at Mahoney’s home in Manalapan on Dec. 13, 2011. Law enforcement had previously seized a computer during a search of a man’s Texas home. Subsequent to both searches, law enforcement recovered from the Texas computer three videos of Mahoney having sexual contact with a child.
Two of the videos were of the video chat session, in which Mahoney is shown molesting the child while laughing and talking to someone, apparently the party on the other end of the chat session. The third video depicts Mahoney sexually abusing the child in a bathtub while filming it with her phone.
This case was investigated by the FBI Cyber Crimes Task Force and the Monmouth County, N.J., Prosecutor’s Office. The case is being prosecuted by Assistant U.S. Attorney John E. Clabby of the U.S. Attorney’s Office for the District of New Jersey and Trial Attorney Keith A. Becker of the Criminal Division’s Child Exploitation and Obscenity Section (CEOS).
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 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.
Justice Department Reaches Settlement with <br /> Penguin Group (USA) Inc. in E-Books CaseRead the Press Release
WASHINGTON – The Department of Justice announced today that it has reached a settlement with Penguin Group (USA) Inc.–one of the largest book publishers in the United States–and will continue to litigate against Apple Inc. and Holtzbrinck Publishers LLC, which does business as Macmillan, for conspiring to raise e-book prices to consumers.
Today’s proposed settlement was filed in the U.S. District Court for the Southern District of New York. If approved by the court, the settlement will resolve the department’s competitive concerns as to Penguin, ending Penguin’s role as a defendant in the civil antitrust lawsuit filed by the department on April 11, 2012.
The department’s Antitrust Division previously settled its claims against three book publishers–Hachette Book Group Inc., HarperCollins Publishers L.L.C. and Simon & Schuster Inc. The department said that the publishers eliminated retail price competition, resulting in consumers paying millions of dollars more for their e-books. The settlement with those three publishers was approved by the court in September 2012. A trial against Macmillan and Apple currently is scheduled to begin in June 2013.
“Since the department’s settlement with Hachette, HarperCollins and Simon & Schuster, consumers are already paying lower prices for the e-book versions of many of those publishers’ new releases and bestsellers,” said Jamillia Ferris, Chief of Staff and Counsel at the Department of Justice’s Antitrust Division. “If approved by the court, the proposed settlement with Penguin will be an important step toward undoing the harm caused by the publishers’ anticompetitive conduct and restoring retail price competition so consumers can pay lower prices for Penguin’s e-books.”
According to the complaint, the five publishers and Apple were unhappy that competition among e-book sellers had reduced e-book prices and the retail profit margins of the book sellers to levels they thought were too low. To address these concerns, the department said the companies worked together to enter into contracts that eliminated price competition among bookstores selling e-books, substantially increasing prices paid by consumers. Before the companies began their conspiracy, retailers regularly sold e-book versions of new releases and bestsellers for, as described by one of the publisher’s CEO, the “wretched $9.99 price point.” As a result of the conspiracy, consumers were typically forced to pay $12.99, $14.99, or more for the most sought-after e-books, the department said.Under the proposed settlement agreement, Penguin will terminate its agreements with Apple and other e-books retailers and will be prohibited for two years from entering into new agreements that constrain retailers’ ability to offer discounts or other promotions to consumers to encourage the sale of the Penguin’s e-books. The proposed settlement agreement also will impose a strong antitrust compliance program on Penguin, which will include a requirement that it provide advance notification to the department of any e-book ventures it plans to undertake jointly with other publishers and that it regularly report to the department on any communications it has with other publishers. Also for five years, Penguin will be forbidden from agreeing to any kind of most favored nation (MFN) agreement that could undermine the effectiveness of the settlement.
The department is currently reviewing the proposed joint venture announced by Penguin and Random House Inc., the largest U.S. book publisher. Should the proposed joint venture proceed to consummation, the terms of Penguin’s settlement will apply to it.
Penguin Group (USA) Inc. has its principal place of business in New York City. It publishes e-books and print books through publishers such as The Viking press and Gotham Books. Penguin Group (USA) Inc. is the U.S. subsidiary of The Penguin Group, a division of Pearson plc, which has its principal place of business in London.
Hachette Book Group USA has its principal place of business in New York City. It publishes e-books and print books through its publishers such as Little, Brown and Company and Grand Central Publishing.
HarperCollins Publishers, L.L.C. has its principal place of business in New York City. It publishes e-books and print books through publishers such as Harper and William Morrow.
Macmillan has its principal place of business in New York City. It publishes e-books and print books through publishers such as Farrar, Straus and Giroux, and St. Martin’s Press. Verlagsgruppe Georg von Holtzbrinck GmbH owns Holtzbrinck Publishers LLC, which does business as Macmillan, and has its principal place of business in Stuttgart, Germany.
Simon & Schuster Inc. has its principal place of business in New York City. It publishes e-books and print books through publishers such as Free Press and Touchstone.
Apple Inc. has its principal place of business in Cupertino, Calif. Among many other businesses, Apple distributes e-books through its iBookstore.
The proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register, consistent with the requirements of the Antitrust Procedures and Penalties Act. Any person may submit written comments concerning the proposed settlement within 60-days of its publication to John R. Read, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, NW, 4th Floor, Washington, DC 20530. These comments will be published either in the Federal Register or, with the permission of the Court, will be posted electronically on the department’s website. 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.
Individual Arrested in Connection withCosta Rica-based Business Opportunity Fraud VenturesRead the Press Release
A dual United States and Costa Rican citizen charged in connection with the operation of a series of fraudulent business opportunities was arrested today in Chicago following his indictment by a federal grand jury in Miami on Nov. 29, 2011, the Justice Department and the U.S. Postal Inspection Service announced today. Sean Rosales was arrested based on charges that he and his co-conspirators purported to sell beverage and greeting card business opportunities, including assistance in establishing, maintaining and operating such businesses. The charges in the indictment form part of the government’s continued nationwide crackdown on business opportunity fraud.
Prior to Rosales’ arrest, 11 other individuals were charged in connection with business opportunity fraud ventures based in Costa Rica. Seven of those other individuals have been convicted in the United States.
“Business opportunity fraud imposes significant financial hardship on innocent, hardworking victims who are simply trying to make better lives for themselves and their families ,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. “The Department of Justice will continue its push to prosecute those who defraud Americans to make a quick buck.”
Beginning in May 2005, Rosales and his coconspirators are alleged to have fraudulently induced purchasers in the United States to buy business opportunities in USA Beverages Inc., Twin Peaks Gourmet Coffee Inc., Cards-R-Us Inc., Premier Cards Inc., The Coffee Man Inc. and Powerbrands Distributing Company. According to the indictment, the business opportunities the defendant sold cost thousands of dollars each, and most purchasers paid at least $10,000. Each company operated for several months, and after one company closed, the next opened. The various companies used bank accounts, office space and other services in the Southern District of Florida and elsewhere, according to the indictment.
The indictment alleges that the defendant, using aliases, participated in a conspiracy that used various means to make it appear to potential purchasers that the businesses were located entirely in the United States. In reality, Rosales operated out of Costa Rica to fraudulently induce potential purchasers in the United States to buy the purported business opportunities, the indictment alleges.
According to the indictment, the companies made numerous false statements to potential purchasers of the business opportunities. Among the misrepresentations alleged in the indictment are that purchasers would likely earn substantial profits; that prior purchasers of the business opportunities were earning substantial profits; that purchasers would sell a guaranteed minimum amount of merchandise, such as greeting cards and beverages; and that the business opportunity worked with locators familiar with the potential purchaser’s area who would secure or had already secured high-traffic locations for the potential purchaser’s merchandise stands. The indictment alleges that potential purchasers also were falsely told that the profits of some of the companies were based in part on the profits of the business opportunity purchasers, thus creating the false impression that the companies had a stake in the purchasers’ success and in finding good locations.
The indictment also alleges that the companies employed various types of sales representatives, including fronters, closers, and references. A fronter spoke to potential purchasers when the prospective purchasers initially contacted the company in response to an advertisement. A closer subsequently spoke to potential purchasers to close deals. References spoke to potential purchasers about the financial success they purportedly had experienced since purchasing one of the business opportunities. According to the indictment, the companies also employed locators, who were typically characterized by the sales representatives as third parties who worked with the companies to find high-traffic locations for the prospective purchasers’ merchandise display racks.
The indictment alleges Rosales, using assumed names, was a fronter and reference for USA Beverages, a fronter and reference for Twin Peaks, a fronter, locator and reference for Cards-R-Us, a fronter, locator and reference for Premier Cards, a fronter, locator and reference for Coffee Man, and a locator for Powerbrands.
According to the allegations in the indictment, each of the companies was registered as a corporation and rented office space to make it appear to potential purchasers that its operations were fully in the United States. USA Beverages was registered as a Florida and New Mexico corporation and rented office space in Las Cruces, N.M. Twin Peaks was registered as a Florida and Colorado corporation and rented office space in Fort Collins, Colo., and Cards-R-Us was registered as a Nevada corporation and rented office space in Reno, Nev. Premier Cards was registered as a Colorado and Pennsylvania corporation and rented office space in Philadelphia, and The Coffee Man was registered as a Colorado corporation and rented office space in Denver. Powerbrands was registered as a Wisconsin corporation and rented office space in Glendale, Wis., and Palm Beach Gardens, Fla.
The defendant was charged with conspiracy to commit mail and wire fraud, and with committing this offense via telemarketing. In addition, the defendant was charged with seven counts of mail fraud and 13 counts of wire fraud. If convicted of conspiracy, Rosales faces a maximum statutory term of 25 years in prison, a possible fine and mandatory restitution on the conspiracy count. He also faces a maximum statutory term of imprisonment of 25 years on each of the mail and wire fraud counts, a possible fine and mandatory restitution.
“Fraudulent business opportunity sellers must realize that all financial fraud will be prosecuted vigorously, even if the schemers conduct their fraudulent operations from abroad,” said Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida . “Increased international law enforcement cooperation eliminates safe havens for those who cheat American citizens from overseas.”
“This international and domestic investigation illuminates the Postal Inspection Service’s resolve to protect the American public from business opportunity scams, and to ensure that the U.S. Mail is not used as a conduit for fraudsters to prey on the American public.” said Tony Gomez, Acting U. S. Postal Inspector in Charge in Miami.
Principal Deputy Assistant Attorney General Delery commended the investigative efforts of the Postal Inspection Service. The case is being prosecuted by trial attorneys Jeffrey Steger and Alan Phelps with the U.S. Department of Justice Consumer Protection Branch.
An indictment is merely an allegation, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Former Heber City, Utah Resident Convicted of Filing False Claims for Tax Refunds Totaling More Than $2.2 MillionRead the Press Release
April J. Rampton, 41, formerly of Heber City, Utah, was convicted yesterday in U.S. District Court in Salt Lake City of nine counts of filing false claims for income tax refunds, the Justice Department and Internal Revenue Service (IRS) announced. Rampton, who was indicted on Sept. 14, 2011, was released following the verdict. She is scheduled to be sentenced before U.S. District Judge Dee Benson on Feb. 27, 2013. The jury was unable to reach a verdict on six similar counts.
According to the indictment and the proof at trial, Rampton prepared at least nine false claims for tax refunds on behalf of others. The total amount of false tax refunds claimed for the counts of conviction was more than $2.2 million.
The evidence at trial further established that Rampton used false IRS Forms 1099-OID with fictitious amounts of income and withholdings as the basis for the false claims for tax refund.
For each false claim conviction, Rampton faces a maximum potential sentence of five years in prison and a fine of up to $250,000 or twice the gross gain or loss caused by the offense.
Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division, commended the special agents of IRS Criminal Investigation who investigated the case, and Tax Division Trial Attorneys Michael Romano and Stuart Wexler, who prosecuted the case.
Bogus refund claims based on false Forms 1099-OID is one of the IRS’s “ Dirty Dozen” tax scams for 2012.
Five Foreign Nationals Sentenced to Prison for Role in<br /> Trafficking Identities of Puerto Rican U.S. CitizensRead the Press Release
WASHINGTON – Five foreign nationals were sentenced to prison for their respective roles in trafficking the identities of Puerto Rican U.S. citizens and corresponding identity documents, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Rosa E. Rodríguez-Vélez for the District of Puerto Rico; Director John Morton of U.S. Immigration and Customs Enforcement (ICE), which oversees Homeland Security Investigations (HSI); Chief Postal Inspector Guy J. Cottrell of the U.S. Postal Inspection Service (USPIS); Scott P. Bultrowicz, Director of the U.S. State Department’s Diplomatic Security Service (DSS); and Internal Revenue Service-Criminal Investigation (IRS-CI) Chief Richard Weber announced today.
Daniel Aparicio-Lara, 29, a Mexican national formerly of Burlington, N.C., was sentenced today to 66 months in prison by U.S. District Judge Thomas D. Schroeder in the Middle District of North Carolina. In addition to his prison term, Aparicio-Lara was sentenced to serve three years of supervised release and ordered to forfeit $140,800 in proceeds. On Sept. 18, 2012, Aparicio-Lara pleaded guilty in front of Judge Schroeder to one count of conspiracy to commit identification fraud and one count of aggravated identity theft.
Manuel Guzman-Santos, 37, a Dominican national formerly of Worcester, Mass., and Marco Pena, 37, a Dominican national formerly of Dorchester, Mass., were sentenced yesterday by U.S. District Judge Joseph L. Tauro in the District of Massachusetts. Both Guzman-Santos and Pena was sentenced to serve 30 months in prison. On Aug. 2, 2012, Guzman-Santos and Pena each pleaded guilty in front of Judge Tauro to one count of conspiracy to commit identification fraud.
Adelfo Perez-Garcia, 36, a Mexican national formerly of Seymour, Ind., and Alma Yesenia Garcia-Ramirez, 29, a Mexican national formerly of Crystal Lake, Ill., were sentenced yesterday by U.S. District Judge Gustavo A. Gelpí in the District of Puerto Rico. Perez-Garcia was sentenced to serve 24 months and one day in prison and Garcia-Ramirez was sentenced to serve 24 months in prison. Judge Gelpí ordered the removal of both defendants from the United States after the completion of their sentences and ordered that Garcia-Ramirez forfeit $35,900 in proceeds. On Aug. 28, 2012, Perez-Garcia pleaded guilty to one count of conspiracy to commit identification fraud in the District of Puerto Rico in front of U.S. Magistrate Judge Silvia Carreño-Coll. On Sept. 4, 2012, Garcia-Ramirez pleaded guilty to one count of conspiracy to commit alien smuggling for financial gain in the District of Puerto Rico before U.S. Magistrate Judge Bruce J. McGiverin.
The five defendants were charged in a superseding indictment returned by a federal grand jury in Puerto Rico on Mar. 22, 2012. To date, a total of 53 individuals have been charged for their roles in the identity trafficking scheme, and 23 defendants have pleaded guilty.
Court documents allege that individuals located in the Savarona area of Caguas, Puerto Rico (Savarona suppliers), obtained Puerto Rican identities and corresponding identity documents. Other conspirators located in various cities throughout the United States (identity brokers) allegedly solicited customers and sold Social Security cards and corresponding Puerto Rico birth certificates for prices ranging from $700 to $2,500 per set. The superseding indictment alleges that identity brokers ordered the identity documents from Savarona suppliers, on behalf of the customers, by making coded telephone calls. The conspirators are charged with using text messages, money transfer services and express, priority or regular U.S. mail to complete their illicit transactions.
Court documents allege that some identity brokers assumed a Puerto Rican identity themselves and used that identity in connection with the trafficking operation. Their customers allegedly generally obtained the identity documents to assume the identity of Puerto Rican U.S. citizens and to obtain additional identification documents, such as legitimate state driver’s licenses. Some customers allegedly obtained the documents to commit financial fraud and attempted to obtain a U.S. passport.
According to court documents, various identity brokers were operating in Rockford, Ill.; DeKalb, Ill.; Aurora, Ill.; Seymour, Ind.; Columbus, Ind.; Indianapolis; Hartford, Conn.; Clewiston, Fla.; Lilburn, Ga.; Norcross, Ga.; Salisbury, Md.; Columbus, Ohio; Fairfield, Ohio; Dorchester, Mass.; Lawrence, Mass.; Salem, Mass.; Worcester, Mass.; Grand Rapids, Mich.; Nebraska City, Neb.; Elizabeth, N.J.; Burlington, N.C.; Hickory, N.C.; Hazelton, Pa.; Philadelphia; Houston; Abingdon, Va.; Albertville, Ala.; and Providence, R.I.
According to court documents, Aparicio-Lara admitted that he was an identity broker who operated in North Carolina and Missouri; Guzman-Santos and Pena admitted that they were identity brokers who operated in Massachusetts; and Perez-Garcia admitted that he was an identity broker who operated in Indiana. Garcia-Ramirez admitted to assisting an Illinois-based identity broker and transferring money on behalf of the organization. The five defendants used either a real Texan or Puerto Rican identity themselves to commit identification fraud and to facilitate their identity trafficking business.
The charges are the result of Operation Island Express, an ongoing, nationally-coordinated investigation led by the ICE-HSI Chicago Office and USPIS, DSS and IRS-CI offices in Chicago, in coordination with the ICE-HSI San Juan Office. The Illinois Secretary of State Police; Elgin, Ill., Police Department; Seymour, Ind., Police Department; and Indiana State Police provided substantial assistance. The ICE-HSI Assistant Attaché office in the Dominican Republic and International Organized Crime Intelligence and Operations Center (IOC-2) as well as various ICE, USPIS, DSS and IRS-CI offices around the country provided invaluable assistance.The case is being prosecuted by Trial Attorneys James S. Yoon, Hope S. Olds, Courtney B. Schaefer, and Christina Giffin of the Justice Department Criminal Division’s Human Rights and Special Prosecutions Section, with the assistance of Acting Deputy Chief Jeannette Gunderson of the Criminal Division’s Asset Forfeiture and Money Laundering Section, and the support of the U.S. Attorney’s Office for the District of Puerto Rico. The U.S. Attorney’s Offices in the Northern District of Illinois, Southern District of Indiana, District of Connecticut, District of Massachusetts, District of Nebraska, Middle District of North Carolina, Southern District of Ohio, District of Rhode Island, Southern District of Texas and Western District of Virginia provided substantial assistance.
Potential victims and the public may obtain information about the case at: www.justice.gov/criminal/vns/caseup/beltrerj.html. Anyone who believes their identity may have been compromised in relation to this investigation may contact the ICE toll-free hotline at 1-866-DHS-2ICE (1-866-347-2423) and its online tip form at www.ice.gov/tipline. Anyone who may have information about particular crimes in this case should also report it to the ICE tip line or website.
Anyone who believes that they have been a victim of identity theft, or wants information about preventing identity theft, may obtain helpful information and complaint forms on various government websites including the Federal Trade Commission ID Theft Website, www.ftc.gov/idtheft. Additional resources regarding identity theft can be found at www.ojp.usdoj.gov/ovc/pubs/ID_theft/idtheft.html; www.ssa.gov/pubs/10064.html; www.fbi.gov/about-us/investigate/cyber/identity_theft; and www.irs.gov/privacy/article/0,,id=186436,00.html.
Department of Justice Enters into Agreement to Reform the Juvenile Court of Memphis and Shelby County, TennesseeRead the Press Release
The Department of Justice today announced that it has entered into a comprehensive memorandum of agreement with the Juvenile Court of Memphis and Shelby County, Tenn., to resolve findings of serious and systemic failures in the juvenile court that violate children’s due process and equal protection rights. This agreement is the first time that the department has used its authority under the Violent Crime Control and Law Enforcement Act of 1994 to address constitutional violations within a juvenile justice system.
The agreement is designed to ensure that the juvenile court protects constitutional rights of children throughout their court proceedings. The agreement also requires the juvenile court to take steps to reduce racial disparities among similarly situated juveniles in different stages of the juvenile justice process.
“We commend the court, led by Juvenile Court Judge Curtis Person, for taking this bold step toward reform,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “This first of its kind agreement reflects a powerful commitment to upholding constitutional rights of all children appearing before the Juvenile Court. We hope that juvenile courts around the country review this agreement to ensure that they are protecting the constitutional rights of children.”
“This unprecedented agreement represents a collaborative effort to ensure that all children in Shelby County, Tennessee receive the full protections provided under our constitution,” said Edward L. Stanton III, U.S. Attorney for the Western District of Tennessee. “These reforms are designed to establish a pre-eminent juvenile court for Shelby County and will ultimately serve as a model for juvenile courts systems across the country.”
The agreement provides for comprehensive reforms in the areas of due process, equal protection, and other areas of court operations. Due process reforms provide procedural safeguards for children at critical phases of their cases, including requirements that the court:
- Establish a dedicated juvenile defender unit in the public defender’s office that will be independent of the court and have the structure and resources to provide independent, ethical, and zealous representation for children.
- Require procedural safeguards against self-incrimination, to provide notice of charges, and to hold transfer hearings.
- Appoint counsel before children appear before a magistrate judge for a probable cause determination and provide the probable cause determination within 48 hours for all warrantless arrests.
- Make written findings for key judicial decisions, including transfer hearings.
- Implement policies in the court’s detention facility that will prohibit use of restraints, ensure a suicide prevention plan and require staff to receive training on adolescent development.
The equal protection reforms in the agreement require that the court administer juvenile justice in a manner that is consistent with the Equal Protection Clause of the Fourteenth Amendment of the Constitution. These reforms require the juvenile court to:
- Assess where and why disproportionate minority contact (DMC) in the juvenile justice system occurs, including analysis of referrals and the court’s decisions at key stages of a child’s court case.
- Prohibit pre-adjudication detention for reasons that are not related to public safety or future appearance in court.
- Hire a DMC coordinator, who will be charged with gathering data, working with the court and other county agencies to develop alternatives to detention, and ensuring that children are not referred to juvenile court based on their race.
- Establish a pilot program allowing law enforcement to phone in information about a recently arrested youth and get guidance on whether the child should be immediately released and provided with an appearance summons or transported to juvenile court.
Additional reforms will provide for strengthening the juvenile court’s community engagement and accountability, including requirements that the court:
- Create a community oversight group comprised of juvenile justice stakeholders and six to nine citizens selected by the mayor and approved by the county commission. This group will include two parents of children who have had delinquency matters before Juvenile Court and a person under the age of 21 who has had direct contact with the juvenile justice system. Juvenile court officials will update this group and be required to answer its questions about any reform efforts.
- Provide bi-annual community updates and publish progress reports on its website and include a data dashboard of its progress with the agreement.
The investigation, opened in August 2009, was conducted by the Special Litigation Section of the Civil Rights Division under provisions of the Violent Crime Control and Law Enforcement Act of 1994. In April 2012, the department announced findings that the juvenile court failed to provide constitutionally required due process and equal protection to children appearing for delinquency proceedings. The department also found constitutional violations in the detention facility.
The department’s Civil Rights Division will host a conference call for local community members to hear directly from Assistant Attorney General Thomas E. Perez. The conference call will take place on Tuesday, Dec. 18, 2012, at 7:00 p.m. EST (6:00 p.m. CST). To participate in the call, please call (866) 843-0890 and use the entry number 3447017. For more information on the Justice Department’s Civil Rights Division, please visit www.justice.gov/crt
Related Materials:
Shelby Co., Tenn., Agreement
Convicted Fraudster Admits Obstructing Justice, Attempting to Corruptly Influence U.s. Attorney to Dismiss CaseRead the Press Release
WASHINGTON – A defendant who tried to escape fraud charges against him by exerting pressure on a U.S. Attorney’s spouse and candidate for office pleaded guilty today to obstruction of justice for perpetrating the scheme, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division announced today.
James F. Lagona, 52, of Snyder, N.Y., pleaded guilty to a criminal information, filed today, charging him with one count of endeavoring to influence, obstruct and impede the due administration of justice. Lagona entered his guilty plea in Buffalo federal court before Chief U.S. District Judge William M. Skretny. Lagona was arrested pursuant to a criminal complaint on Nov. 15, 2012, and has been detained since his arrest.
Lagona was found guilty of 27 counts of felony mail fraud on Feb. 23, 2011, following a jury trial in the Western District of New York. He was scheduled to be sentenced on Dec. 3, 2012, before being arrested on the obstruction of justice charge to which he pleaded guilty today.
During his guilty plea proceeding, Lagona admitted to obtaining a private meeting with a campaign staffer working for U.S. Representative Kathy Hochul of New York, who was then involved in a close race for reelection against her opponent. Lagona also admitted that during the Nov. 2, 2012, meeting – four days before the election – he identified himself as a clergyman, claimed that he had been involved in discussions with the political party of Rep. Hochul’s election opponent, and falsely claimed that the opponent’s party was interested in featuring him in an advertisement or rally to claim wrongful prosecution and religious persecution. He told the campaign staffer that he would instead publicly support Rep. Hochul, if her spouse, Western District of New York U.S. Attorney William J. Hochul Jr., dismissed the criminal case against him. The campaign staffer subsequently reported the meeting to the FBI.
Lagona admitted to meeting with the campaign staffer a second time on Nov. 3, 2012. During the meeting, which was covertly recorded by the campaign staffer under the FBI’s supervision, Lagona admitted to specifying that he sought a “quid pro quo” in exchange for refusing to campaign with the party of Rep. Hochul’s opponent and for publicly supporting her instead. Lagona admitted he told the staffer that in exchange he wanted his case dismissed and for no further charges to be brought against him. Following the meeting, Lagona made efforts to follow up with the staffer by phone.
The criminal complaint in which Lagona was originally charged with obstruction, unsealed on Nov. 15, 2012, notes that the criminal investigation revealed no evidence that the campaign staffer, Rep. Hochul, or her campaign ever intended to accept or considered accepting Lagona’s proposal, nor that the proposal was ever communicated to or considered by U.S. Attorney Hochul. The investigation has revealed no evidence that any member of the opposing party ever considered using Lagona during the campaign.
At sentencing, currently scheduled for March 20, 2013, before Chief U.S. District Judge Skretny, Lagona faces a maximum penalty of 10 years in prison and a $250,000 fine.
The case is being prosecuted by Trial Attorney J.P. Cooney of the Criminal Division’s Public Integrity Section and investigated by the FBI, Buffalo Division, under the direction of Special Agent in Charge Christopher M. Piehota.
AU Optronics Corporation Executive Convicted for Role in<br /> LCD Price-fixing ConspiracyRead the Press Release
WASHINGTON – Following a three-week trial, a federal jury in San Francisco today convicted an executive of the largest Taiwan liquid crystal display (LCD) producer for his participation in a worldwide conspiracy to fix the prices of thin-film transistor-liquid crystal display (TFT-LCD) panels sold worldwide, the Department of Justice announced.
Shiu Lung Leung, AU Optronics Corp.’s former senior manager in the Desktop Display Business Group, was found guilty today in U.S. District Court for the Northern District of California in San Francisco, of participating in a worldwide TFT-LCD price-fixing conspiracy from May 15, 2002 to Dec. 1, 2006.
AU Optronics Corp., based in Hsinchu, Taiwan, and its American subsidiary, AU Optronics Corp. America, headquartered in Houston, were found guilty on March 13, 2012, following an eight-week trial. Former AU Optronics Corp. president Hsuan Bin Chen and former AU Optronics Corp. executive vice president Hui Hsiung were also found guilty at that time. A mistrial was declared against Leung after that trial. Today’s verdict is the result of Leung’s retrial.
“This international price-fixing conspiracy impacted countless American consumers by raising the price of computer monitors, notebooks and televisions containing LCD panels,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program. “Today’s guilty verdict demonstrates that the Antitrust Division will continue to hold executives accountable for crimes that undermine a competitive marketplace.”
The indictment charged that AU Optronics Corp. participated in the worldwide price-fixing conspiracy from Sept. 14, 2001, to Dec. 1, 2006, and that its subsidiary joined the conspiracy as early as spring 2003. Today a jury found that Leung, along with the previously convicted companies and former executives, was guilty of fixing the prices of LCD panels sold in the United States. The conspirators fixed the prices of LCD panels during monthly meetings with their competitors, which were secretly held in hotel conference rooms, karaoke bars and tea rooms around Taiwan.
LCD panels are used in computer monitors and notebooks, televisions and other electronic devices. By the end of the conspiracy, the worldwide market for LCD panels was valued at $70 billion annually. The LCD price-fixing conspiracy affected some of the largest computer manufacturers in the world, including Hewlett Packard, Dell and Apple.
The company and its U.S. subsidiary were sentenced on Sept. 20, 2012, before Judge Susan Illston, to pay a $500 million criminal fine, matching the largest fine imposed against a company for violating U.S. antitrust laws. Chen and Hsiung were each sentenced to serve three years in prison and to each pay a $200,000 criminal fine.
As a result of this ongoing investigation, eight companies have pleaded guilty or been convicted to date and have been sentenced to pay criminal fines totaling more than $1.39 billion. Of the 22 charged executives, 13 have pleaded guilty or have been convicted and seven remain fugitives. The executives who have been sentenced have been ordered to serve a combined total of 4,871 days in prison.
The maximum penalty for a Sherman Act violation for an individual is 10 years in prison and a $1 million fine. 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 fine.
Today’s charges are the result of a joint investigation by the Department of Justice Antitrust Division’s San Francisco Field Office and the FBI in San Francisco. Anyone with information concerning illegal conduct in the TFT-LCD 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.
17 December 2012
Los Angeles-area Church Pastor Pleads Guilty to Money Laundering and Conspiring with Doctors, Others to Defraud Medicare of More Than $11 MillionRead the Press Release
WASHINGTON — A Los Angeles-area church pastor pleaded guilty today to conspiring with doctors, the operators of fraudulent medical clinics, street-level patient recruiters and others to defraud Medicare of more than $11 million, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney André Birotte Jr. of the Central District of California; Glenn R. Ferry, Special Agent in Charge for the Los Angeles Region of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG); Bill L. Lewis, Assistant Director in Charge of the FBI’s Los Angeles Field Office; and Joseph Fendrick, Special Agent in Charge of the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse.
Charles Agbu, 58, of Carson, Calif., pleaded guilty before U.S. District Judge George Wu in the Central District of California to one count of conspiracy to commit health care fraud and one count of money laundering.
In court documents, Agbu, a church pastor, admitted that he owned and operated Bonfee Inc., a fraudulent durable medical equipment (DME) supply company located in Carson. Agbu admitted that he paid patient recruiters or “marketers” to approach Medicare beneficiaries and convince them to provide their Medicare information in exchange for free DME that the beneficiaries did not need. Often, the marketers told the beneficiaries that they would receive highly-specialized power wheelchairs (PWCs) because PWCs were among the most expensive items that Agbu and his co-conspirators could bill to Medicare and generated the most profit.Agbu also admitted that he knew Medicare required him and his co-conspirators to maintain prescriptions and supporting medical documentation in their files for every PWC and item of DME that they billed to Medicare. To meet these Medicare requirements, Agbu admitted that he paid the operators of fraudulent medical clinics to provide him with prescriptions and supporting medical documentation for the PWCs and DME that he and his co-conspirators billed to Medicare. Agbu admitted that he knew these clinics used marketers to solicit Medicare beneficiaries, and that the prescriptions and medical documents that the clinics produced were fraudulent. Agbu admitted that on average, he paid between $400 and $700 for each prescription he bought from these clinics.
In addition to paying the operators of fraudulent medical clinics for prescriptions, Agbu admitted that he paid doctors to write and provide him and his co-conspirators with prescriptions and medical documents needed to submit PWC and DME claims to Medicare. Agbu admitted that he directed marketers to bring Medicare beneficiaries to the doctors or knew the doctors used marketers to solicit beneficiaries. Agbu admitted that he paid the doctors or members of their staff approximately $100 to $400 for every prescription that the doctors wrote for and provided to him. One of these doctors, Agbu’s co-defendant Dr. Juan Tomas Van Putten, pleaded guilty in November 2012 to conspiring to defraud Medicare and admitted that he accepted payment in exchange for writing medically-unnecessary PWC and DME prescriptions.
Agbu admitted that he and his co-conspirators submitted false claims to Medicare for PWCs and other DME by using the Medicare information obtained by marketers and the prescriptions and medical documentation that he purchased from doctors and operators of fraudulent medical clinics. Agbu and his co-conspirators submitted these claims through Bonfee and Ibon, Inc., a fraudulent DME supply company that was located in the same building as Bonfee and owned by one of Agbu’s alleged co-conspirators. Agbu admitted that with one exception, he and his co-conspirators supported every PWC claim that they submitted to Medicare with fraudulent or purchased prescriptions. Agbu admitted to knowing that the DME claims submitted to Medicare were often for PWCs that were not medically necessary or never provided to beneficiaries.According to court documents, Agbu and his co-conspirators submitted approximately $11,094,918 in false claims to Medicare and received approximately $5,788,725 on those claims. Agbu admitted that he engaged in money laundering when he transferred over $10,000 of these illegally-obtained Medicare funds between his various bank accounts.
At sentencing, scheduled for May 16, 2013, Agbu faces a maximum penalty of 20 years in prison and a $500,000 fine. Dr. Van Putten’s sentencing is scheduled for March 28, 2012. He faces a maximum penalty of 10 years in prison and a $250,000 fine.
Co-defendants Dr. Emmanuel Ayodele, Alejandro Maciel, Candalaria Estrada and Charles Agbu’s daughter Obiageli Agbu are scheduled for trial on Feb. 26, 2013, for their alleged roles in the conspiracy. They are presumed innocent until proven guilty at trial.
The case is being prosecuted by Trial Attorney Jonathan T. Baum of the Criminal Division’s Fraud Section. The case is being investigated by the FBI, HHS-OIG, the California Department of Justice and Internal Revenue Service-Criminal Investigation.
The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is 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.Leader of $63 Million Mental Health Fraud Scheme Pleads Guilty in MiamiRead the Press Release
WASHINGTON – The owner of a string of community mental health centers pleaded guilty today in connection with a health care fraud and money laundering scheme involving defunct health care provider Health Care Solutions Network Inc. (HCSN), announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Acting Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office.
Armando Gonzalez, 50, of Hendersonville, N.C., pleaded guilty before U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida to one count of conspiracy to commit health care fraud and one count of conspiracy to commit money laundering. Under the terms of his plea agreement, Gonzalez will also forfeit his interest in property valued at several million dollars, including $987,910 in currency seized in July 2012 as well as several vehicles and properties located in Hendersonville.
According to court documents, HCSN operated community mental health centers (CMHC) at three locations in Miami-Dade County, Fla., and one location in Hendersonville. HCSN purported to provide partial hospitalization program (PHP) services to individuals suffering from mental illness. A PHP is a form of intensive treatment for severe mental illness.
According to Gonzales’s plea agreement, HCSN obtained Medicare beneficiaries to attend HCSN for purported PHP treatment that was unnecessary and, in many instances, not even provided. HCSN obtained beneficiaries in Miami by paying kickbacks to owners and operators of assisted living facilities (ALF). According to court documents, HCSN routinely admitted patients in Miami who were ineligible for PHP treatment because they suffered from medical conditions – including mental retardation, dementia and Alzheimer’s disease – that could not be effectively treated by PHP services HCSN was purporting to provide.
According to Gonzalez’s plea agreement, his employees routinely fabricated patient census data and patient medical records that were then utilized to support false and fraudulent billing to government sponsored health care benefit programs, including Medicare and the Florida Medicaid program.
Gonzalez pleaded guilty to directing his employees in North Carolina to routinely submit fraudulent PHP claims for Medicare patients who were not even present at the CMHC or on days when the CMHC was closed due to snow. Similar to HCSN’s Florida operations, patients who were suffering from conditions such as mental retardation were improperly and routinely admitted to HCSN for purported treatment. To increase its patient base, HCSN Hendersonville employed “marketers” in North Carolina who recruited ineligible patients from surrounding counties. HCSN would then transport the patients daily and reward them for their attendance by giving them cigarettes.
In furtherance of the North Carolina fraud scheme, HCSN employees and licensed therapists routinely fabricated patient progress notes purportedly documenting intensive mental health therapy. In reality, patients were crowded into dysfunctional groups that often exceeded more than 20 people. HCSN therapists would then produce bogus therapy notes for sessions that had little therapeutic value and, in many cases, never even occurred.
According to Gonzales’s plea agreement, he was the president of Miami-based Psychiatric Consulting Network Inc., which he used as a shell corporation to launder HCSN health care fraud proceeds.
According to court documents, from 2004 through 2011, HCSN billed Medicare and the Florida Medicaid program approximately $63 million for purported mental health services. The false and fraudulent billing resulted in more than $28 million in payments from Medicare and Florida’s Medicaid programs.
In addition to Gonzalez, former HCSN employees John Thoen, Alexandra Haynes, Serena Joslin and Sarah Da Silva Keller have pleaded guilty to health care fraud and related charges. ALF owners Daniel Martinez, Raymond Rivero, Ivon Perez and Alba Serrano have pleaded guilty to health care fraud and related charges for their roles in the scheme. Alleged co-conspirators Paul Layman and Wondera Eason are scheduled for trial on Jan. 14, 2013, before judge Altonaga in the Southern District of Florida.
The cases are being prosecuted by Special Trial Attorney William J. Parente and Trial Attorneys Allan J. Medina and Steven Kim of the Criminal Division’s Fraud Section. The case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is 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.
Justice Department and the City of Portland, Ore., <br /> <br /> Jointly File Court Enforceable Agreement to Reform <br /> <br /> Portland Police Bureau’s Use of Force PracticesRead the Press Release
The United States and the city of Portland, Ore., have jointly filed in federal court a proposed court enforceable settlement agreement to remedy constitutional claims that the Portland Police Bureau (PPB) engages in a pattern or practice of unconstitutional uses of force in response to “low-level offenses” against persons with actual or perceived mental illness. The agreement addresses the allegations described in a civil action also filed today by the United States, under provisions of the Violent Crime Control and Law Enforcement Act of 1994 for alleged violations of the Fourth Amendment of the U.S. Constitution.
Specifically, the United States’ complaint alleges that PPB engages in a pattern or practice of using excessive force on individuals with actual or perceived mental illness by: (1) too frequently using a higher level of force than necessary; (2) using electronic control weapons (ECWs), commonly referred to as Tasers, in circumstances when such force is not justified, or deploying ECWs more times than necessary on an individual; and (3) using a higher degree of force than justified for low-level offenses.
Once approved by the court, the agreement will require changes in PPB’s policy, training, supervisory oversight, community-based mental health services, crisis intervention, employee information systems, officer accountability and community engagement and oversight. The agreement calls for an independent compliance officer and community liaison, who will be responsible for synthesizing data related to PPB’s use of force, reporting to the city council, the Justice Department and the public, and gathering input from the public related to PPB’s compliance with the agreement. The agreement also lays the framework for a community oversight advisory board, which will be a crucial mechanism for civil engagement in the reform process.
The United States and the city jointly filed a motion and other supporting documents requesting that the court approve the agreement and conditionally dismiss the civil action, while allowing the court to retain jurisdiction over the agreement for enforcement purposes if the city does not comply with the terms of the agreement. The agreement is the result of the Justice Department’s 14‑month investigation of PPB’s policies and practices and of subsequent negotiations with the city. The parties solicited and carefully considered extensive community feedback throughout this process.
The United States opened an investigation into PPB’s use of force in June 2011 and issued findings in September 2012. Shortly thereafter, the parties issued a statement of intent, describing their commitment to enter into a court-enforceable agreement regarding necessary reforms. Portland’s city council unanimously voted to approve the agreement on Nov. 14, 2012, following two public hearings.
“This agreement is the product of extensive negotiations between the city of Portland and the Justice Department and is reflective of the significant public feedback we received during our investigation, as well as throughout the settlement negotiation process,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “I am confident that the reforms mandated by this Agreement will result in a Portland Police Bureau that provides police services in a constitutional manner and that better protects the community.”
“I look forward to a continued partnership with the city, Chief Reese and the community in the implementation of this historic agreement,” said Amanda Marshall, U.S. Attorney for the District of Oregon. “The reforms required by this settlement agreement provide the building blocks for a stronger and safer Portland.”
For more information on the Justice Department’s Civil Rights Division, please visit www.justice.gov/crt . If you have any comments or concerns specific to this matter, please feel free to contact us at [email protected] or 1-877-218-5228.
Japanese-Based Toyo Ink and Affiliates in New Jersey and Illinois<br /> <br /> Settle False Claims Allegation for $45 MillionRead the Press Release
Japan-based Toyo Ink SC Holdings Co. Ltd. and various affiliated entities (collectively, Toyo Ink) have agreed to pay $45 million, plus interest, to settle allegations that they violated the False Claims Act by knowingly failing to pay antidumping and countervailing duties, the Justice Department announced today.
Toyo Ink, which has operations worldwide, is a leading provider of printing inks. The Toyo Ink parties to the agreement are the Japanese companies Toyo Ink SC Holdings Co. Ltd. (successor in interest to Toyo Ink Manufacturing Co. Ltd.), Toyocolor Co. Ltd., Toyo Ink Co. Ltd. and Toyochem Co. Ltd., and their United States affiliates Toyo Ink Mfg. America LLC (located in New Jersey), Toyo Ink International Corp. (located in New Jersey), and Toyo Ink America LLC (located in Illinois).
The Department of Commerce assesses antidumping and countervailing duties to protect United States businesses by offsetting unfair foreign pricing and government subsidies. The duties are collected by U.S. Customs, which is an agency of the Department of Homeland Security. Import duties may vary depending on a product’s country of origin, which is identified by determining the last country in which the product underwent a substantial transformation. The government alleged that Toyo Ink knowingly misrepresented, or caused to be misrepresented, the country of origin on documents presented to U.S. Customs and Border Protection to avoid paying duties, particularly antidumping and countervailing duties, on imports of the colorant carbazole violet pigment number 23 (CVP-23) between April 2002 and March 2010.
Specifically, the government alleged that Toyo Ink misrepresented Japan and Mexico as the countries of origin for its CVP-23 imports, rather than the People’s Republic of China (PRC) and India which were the company’s sources for raw CVP-23. Imports of CVP-23 from the PRC and India have been subject to these duties since 2004; there are no such duties on imports from Japan or Mexico. Although Toyo Ink’s CVP-23 from the PRC and India underwent a finishing process in Japan and Mexico before it was imported into the United States, the government alleged that this process was insufficient to constitute a substantial transformation to render these countries as the countries of origin.
“Importers seeking access to United States markets must comply with the law, including the payment of customs duties meant to protect domestic companies from unfair competition abroad,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. “This settlement demonstrates that the Department of Justice will zealously guard the public fisc – taking action not only against those who fraudulently obtain government funds, but also against those who inappropriately avoid paying money owed to the United States.”
Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina, stated that, “Fair and lawful trade requires importers to truthfully identify their products and pay the appropriate duties. Our office will vigorously investigate and prosecute importers who make false representations and claims designed to avoid the payment of lawful import duties.”
The allegations resolved by today’s settlement were initially alleged in a whistleblower lawsuit filed under the False Claims Act by John Dickson, president of a domestic producer of CVP-23. Under the False Claims Act, private citizens can sue on behalf of the United States and share in any recovery. Mr. Dickson will receive more than $7,875,000 as his share of the government’s recovery.
The investigation was handled by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Western District of North Carolina, the Department of Homeland Security’s U.S. Customs and Border Protection and the Department of Commerce’s International Trade Administration. The claims settled by this agreement are allegations only; there has been no determination of liability.
The False Claims Act suit was filed in the U.S. District Court for the Western District of North Carolina, and is captioned United States ex rel. Dickson v. Toyo Ink Manufacturing Co., Ltd., et al., No. 09-CV-438 (W.D.N.C.).
Bridgeport, Conn., Drug Dealer Sentenced to Death<br /> for Murdering Three People in 2005Read the Press Release
WASHINGTON – U.S. District Judge Janet Bond Arterton today sentenced Azibo Aquart to death for murdering three Bridgeport, Conn., residents on Aug. 24, 2005, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, David B. Fein, U.S. Attorney for the District of Connecticut and Kimberly K. Mertz, Special Agent in Charge of the FBI in New Haven.
“Azibo Aquart carried out heinous crimes, and committed horrific acts of violence,” said Assistant Attorney General Breuer. “There is no joy on this day – only the recognition that we must continue not only to seek justice for victims of violent crime, but also to do all we can to prevent and deter drug trafficking and the terror that so often accompanies it.”
“This defendant planned and carried out the brutal bludgeoning murders of three defenseless victims,” said U.S. Attorney Fein. “On this day, we remember the victims, their families and loved ones. I commend our law enforcement partners who tirelessly investigated this matter, notably the FBI, Bridgeport Police Department, Connecticut State Police, Connecticut Department of Correction’s Intelligence Unit, ATF, U.S. Marshals Service and the Bridgeport States Attorney’s Office, for their persistence and dedication to the cause of justice.”
“These types of investigations are extremely difficult to investigate for a variety of reasons, but especially because of the nature of the crimes and the level of violence involved,” said FBI Special Agent in Charge Mertz. “Our thoughts are with the victims of this horrible crime and their families. We are extremely proud of the local, state and federal agents and investigators assigned to this matter who have worked diligently to bring the defendant and his co-conspirators to justice. The importance of their collective efforts cannot be overstated.”
On May 23, 2011, after a month-long trial, a federal jury found Aquart, 31, of Bridgeport, guilty of the murders of Tina Johnson, her boyfriend James Reid and friend Basil Williams. According to the evidence disclosed during the trial, Aquart, also known as “Azibo Smith,” “Azibo Siwatu Jahi Smith,” “D,” “Dreddy” and “Jumbo,” was the founder and leader of a drug trafficking group that primarily sold crack cocaine out of an apartment building located at 215 Charles Street in Bridgeport. Aquart and his associates participated in acts of violence, such as threats and assaults, to maintain their control over the group’s drug distribution activities at the Charles Street Apartments. In the summer of 2005, Aquart and his associates became involved in a drug trafficking dispute with Johnson, a resident of 215 Charles Street who sometimes sold smaller quantities of crack cocaine without Aquart’s approval. On the morning of Aug. 24, 2005, Azibo Aquart, assisted by Azikiwe Aquart, Efrain Johnson and John Taylor, entered Apartment 101 at 215 Charles Street and murdered Johnson, Reid and Williams.
During the trials of Azibo Aquart and Efrain Johnson, the government offered extensive forensic evidence gathered from the apartment, including fingerprints and evidence that contained DNA from Azibo Aquart and his co-conspirators. Azibo Aquart’s fingerprint was found on a piece of duct tape recovered from the crime scene, and Johnson’s DNA was found on a torn piece of a latex glove that was stuck to the duct tape used to bind one of the victim’s wrists.
Azibo Aquart was found guilty of conspiring to commit murder in aid of racketeering and committing the racketeering murders of Johnson, Reid and Williams. The jury also found Azibo Aquart guilty of committing three counts of drug-related murder. In addition, Azibo Aquart was found guilty of one count of conspiracy to possess with intent to distribute 50 grams or more of crack cocaine.
On June 15, 2011, the jury unanimously determined that Azibo Aquart should be sentenced to death for committing both the racketeering and drug-related murders of Johnson and Williams, but could not reach a unanimous decision as to an appropriate penalty – life in prison or death – for the racketeering and drug-related murder of Reid. With respect to the murder of Reid, Judge Arterton imposed a term of life in prison.
This is the first time since the federal death penalty was reinstituted in 1988 that the death penalty has been imposed on a federal defendant in Connecticut.
Judge Arterton also sentenced Aquart today to 10 years in prison for conspiring to commit murder in aid of racketeering and life in prison for conspiring to possess with intent to distribute cocaine base. In addition, Aquart was ordered to pay $17,106 in restitution to the families of the three victims to cover funeral expenses.
On Aug. 26, 2011, Azibo Aquart’s brother, Azikiwe Aquart, also known as “Z” and “Ziggy,” pleaded guilty to three counts of murder in aid of racketeering. In pleading guilty, he admitted that agreed to participate in what he believed would be a robbery with his brother and others and, after entering the apartment, he committed the murder of James Reid while other participants in the crime murdered Tina Johnson and Basil Williams. On December 12, 2011, Azikiwe Aquart was sentenced by U.S. District Judge Stefan R. Underhill in Bridgeport to a mandatory term of life in prison.
On Feb. 24, 2012, a jury found Efrain Johnson, also known as “Pootney,” guilty of three counts of murder in aid of racketeering. When he is sentenced by Judge Arterton, he also faces a mandatory term of life in prison.
On Oct. 18, 2010, John Taylor pleaded guilty to three counts of murder in aid of racketeering. On April 16, 2012, he was sentenced to 108 months in prison. In sentencing Taylor, Judge Arterton credited him for his assistance to the prosecution of his three co-defendants, the extensive testimony he provided during two trials, and his sincere remorse.
This case was investigated by the FBI; Bridgeport Police Department; Connecticut State Police; Connecticut Department of Correction’s Intelligence Unit; Bureau of Alcohol, Tobacco, Firearms and Explosives; U.S. Marshals Service; Bridgeport States Attorney’s Office and the Connecticut U.S. Attorney’s Office.
This case is being prosecuted by Assistant U.S. Attorneys Tracy L. Dayton, Peter D. Markle, Alina P. Reynolds of the U.S. Attorney’s Office for the District of Connecticut, and Trial Attorney Jacabed Rodriguez-Coss of the Department of Justice’s Criminal Division, Capital Case Unit.
14 December 2012
Payment Processor for Scareware Cybercrime Ring Sentenced to 48 Months in PrisonRead the Press Release
WASHINGTON – A Swedish credit card payment processor was sentenced today to 48 months in prison for his role in an international cybercrime ring that netted $71 million by infecting victims’ computers with “scareware” and selling rogue antivirus software that was supposed to secure victims’ computers but was, in fact, useless, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney for the Western District of Washington Jenny A. Durkan and Special Agent in Charge Laura M. Laughlin of the FBI Seattle Division.
Mikael Patrick Sallnert, 37, a citizen of Sweden, was sentenced by Chief U.S. District Judge Marsha J. Pechman in the Western District of Washington. In addition to his prison term, Sallnert was ordered to pay $650,000 in forfeiture.
“Mikael Patrick Sallnert played an instrumental role in carrying out a massive cybercrime ring that victimized approximately 960,000 innocent victims,” said Assistant Attorney General Breuer. “By facilitating payment processing, Sallnert allowed the cybercrime ring to collect millions of dollars from victims who were duped into believing their computers were compromised and could be fixed by the bogus software created by Sallnert’s co-conspirators. Cybercrime poses a real threat to American consumers and businesses, and the Justice Department is committed to pursuing cybercriminals across the globe.”
“Payment processors like this defendant are the backbone of the cybercrime underworld,” said U.S. Attorney Durkan. “As an established businessman, this defendant put a stamp of legitimacy on cyber criminals. He was involved in defrauding thousands of victims, and his actions contributed to insecurities in e-commerce that stifle the development of legitimate enterprises and increase the costs of e-commerce for everyone.”
“Partnerships are central to the FBI in accomplishing its mission,” said Special Agent in Charge Laughlin. “This cyber crime ring spanned multiple countries—increasing the threat it posed and complicating the necessary law enforcement response. Thanks to the commitment of many foreign partners and FBI entities across the nation, we were able to dismantle that threat and ensure Mr. Sallnert faced justice. The FBI and its partners will continue to work tirelessly until we bring in the remaining perpetrators of this malicious scheme.”Sallnert was arrested in Denmark on Jan. 19, 2012, and extradited to the United States in March 2012. He pleaded guilty on Aug. 17, 2012, to one count of conspiracy to commit wire fraud and one count of accessing a protected computer in furtherance of fraud.
The prosecution of Sallnert is part of Operation Trident Tribunal, an ongoing, coordinated enforcement action targeting international cybercrime. The operation targeted international cybercrime rings that caused more than $71 million in total losses to more than one million computer users through the sale of fraudulent computer security software known as “scareware.” Scareware is malicious software that poses as legitimate computer security software and purports to detect a variety of threats on the affected computer that do not actually exist. Users are then informed they must purchase what they are told is anti-virus software in order to repair their computers. The users are then barraged with aggressive and disruptive notifications until they supply their credit card number and pay for the “anti-virus” product, which is, in fact, fake.
The scareware scheme used a variety of ruses to trick consumers into unknowingly infecting their computers with the malicious scareware products, including web pages featuring fake computer scans. Once the scareware was downloaded, victims were notified that their computers were infected with a range of malicious software, such as viruses and Trojans and badgered into purchasing the fake antivirus software to resolve the non-existent problem at a cost of up to $129. An estimated 960,000 users were victimized by this scareware scheme, leading to $71 million in actual losses.
According to Sallnert’s plea agreement, he agreed to establish and operate credit card payment processing services for the scareware ring, knowing that his co-conspirators were intentionally causing fake and fraudulent messages to display on victims’ computers that would fraudulently induce the victims into purchasing the rogue security software. According to court documents, between approximately August 2008 and October 2009, the payment processing mechanisms established by Sallnert processed approximately $5 million in credit card payments on behalf of the scheme.
This case is being investigated by the FBI Seattle Division Cyber Task Force and other FBI entities. The case is being prosecuted by Trial Attorneys Carol Sipperly and Ethan Arenson of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorneys Norman Barbosa and Kathryn Warma of the Western District of Washington. Substantial assistance was provided by the Criminal Division’s Office of International Affairs.
Critical assistance in the prosecution was provided by the Security Service of Ukraine, German Federal Criminal Police, Netherlands National High-Tech Crime Unit, London Metropolitan Police, Latvian State Police, Lithuanian Criminal Police Bureau, Swedish National Police Cyber Unit, French Police Judiciare, Royal Canadian Mounted Police, Romania’s Directorate for Combating Organized Crime, Cyprus National Police in cooperation with the Unit for Combating Money Laundering and the Danish National Police.
To avoid falling victim to a scareware scheme, computer users should avoid purchasing computer security products that use unsolicited “free computer scans” to sell their products. It is also important for users to protect their computers by maintaining an updated operating system and using legitimate, up-to-date antivirus software, which can detect and remove fraudulent scareware products.
Additional tips on how to spot a scareware scam include:
• Scareware advertising is difficult to dismiss. Scareware purveyors employ aggressive techniques and badger users with pop-up messages into purchasing their products. These fake alerts are often difficult to close and quickly reappear.
• Fake anti-virus products are designed to appear legitimate and can use names such as Virus Shield, Antivirus or VirusRemover. Only install software from trusted sources that you seek out. Internet service providers often make name-brand anti-virus products available to their customers for free.
• Become familiar with the brand, look and functionality of the legitimate anti-virus software that is installed on your computer. This will assist you in identifying scareware.
Computer users who think they have been victimized by scareware should file a complaint with the FBI’s Internet Crime Complaint Center, www.ic3.gov.
New Jersey Man Arrested for Illegally Importing Narwhal Tusksand Money LaunderingRead the Press Release
WASHINGTON— A New Jersey man was arrested today for crimes related to the illegal importation and illegal trafficking of narwhal tusks (whale tusk) and associated money laundering crimes, announced Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division.
On Nov. 14, 2012, a federal grand jury sitting in Bangor, Maine, returned an indictment that was partially unsealed today upon the arrest of Andrew L. Zarauskas of Union, N.J. The indictment also names Jay G. Conrad of Lakeland, Tenn., who was summoned to appear in the District of Maine on Jan. 3, 2013. The indictment charges Conrad and Zarauskas with conspiracy, money laundering conspiracy, smuggling and money laundering violations for buying narwhal tusks knowing the tusks had been illegally imported into the United States, as well as selling or attempting to sell the tusks after their illegal importation. Zarauskas was arrested this morning at his home in Union.
The indictment alleges that from 2007 to 2010, Conrad and Zarauskas each knowingly purchased narwhal tusks that each knew were illegally imported into the United States in violation of federal law. A narwhal is a medium-sized whale with an extremely long tusk that projects from its upper left jaw. A narwhal is a marine mammal that is protected by the Marine Mammal Protection Act and is listed on Appendix II of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). It is illegal to import parts of marine mammals into the United States without the requisite permits/certifications, and without declaring the merchandise at the time of importation to U.S. Customs and the U.S. Fish and Wildlife Service. Narwhal tusks are commonly collected for display purposes and can fetch large sums of money.
The indictment further alleges that Conrad and Zarauskas each conspired with persons located in Canada to illegally import the protected tusks for re-sale in the United States. Conrad and Zarauskas also each conspired with persons located in Canada to launder the funds used to purchase the narwhal tusks by transporting, transmitting, or transferring checks and money orders from Tennessee and New Jersey to Canada, intending that the money be used for further illegal imports of narwhal tusks.The charges contained in the indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty in a court of law. If convicted of these charges, Conrad and Zarauskas each face up to twenty years in prison on each of the most serious charges, as well as fines up to $250,000.
The case was investigated by agents from National Oceanic and Atomospheric Administration - Office of Law Enforcement and the U.S. Fish and Wildlife Service - Office of Law Enforcement. The case is being prosecuted by Trial Attorney Todd S. Mikolop of the Justice Department’s Environmental Crimes Section.Former Lincoln County, Missouri, Sheriff’s Office Detective Sentenced on Sexual Abuse ChargesRead the Press Release
Scott Edwards, a former Lincoln County, Mo., Sheriff’s Department detective, was sentenced today to 10 years in prison followed by three years supervised release for violating the constitutional rights of five women through acts of aggravated sexual abuse and sexual contact while serving as their “drug court tracker,” when the women were participants in the Lincoln County Drug Court program. The crimes occurred from in February 2009 through November 2010.
“The victims in this case were under the court-ordered supervision of the defendant, who used his official position to commit awful acts of sexual assault,” said Assistant Attorney General Thomas E. Perez. “These violations of the constitutional right to bodily integrity severely undermine the credibility of our criminal justice system, make it more difficult for law enforcement officers to do their jobs, and will not be tolerated. The sentence in this case reflects the vigorous action that the Department of Justice and the Civil Rights Division will continue to take to investigate and prosecute such incidents, and is a testament to the courage of the victims who reported these crimes.”
According to court documents, Edwards was a Detective for the Lincoln County Sheriff’s Department and served as a “drug court tracker” for the Lincoln County Drug Court until his termination in December, 2010. The Lincoln County Drug Court is a program to which drug offenders are sentenced for the purpose of obtaining intense treatment, counseling and rehabilitation. The Lincoln County Drug Court contracts with the Lincoln County Sheriff’s Office to employ law enforcement officers to serve as part-time “drug court trackers” who monitor the whereabouts and curfews of drug court participants. While engaged as a “drug court tracker,” both on duty and off duty, Edwards abused his position of authority and engaged in sexual acts with five female drug court participants without their consent. These sexual assaults resulted in bodily injury to one or more of the victims, and included aggravated sexual abuse and sexual contact with the female victims.
Edwards, 50, Troy, Mo, pleaded guilty in July to two felony counts of deprivation of rights under color of law including aggravated sexual abuse; one felony count of deprivation of rights under color of law including kidnapping; and two misdemeanor counts of deprivation of rights under color of law including sexual contact, and appeared today for sentencing before U.S. District Judge Audrey G. Fleissig.
This case was investigated by the St. Louis Division of the FBI and the Troy Police Department, with the assistance of the Lincoln County Sheriff’s Office. The case was prosecuted by Assistant U.S. Attorney Hal Goldsmith and Trial Attorney Fara Gold of the Civil Rights Division of the U.S. Department of Justice.
Former Alabama State Employee Sentenced for Identity Theft and Tax FraudRead the Press Release
Natacia Webster of Montgomery, Ala., was sentenced today to 50 months in prison for conspiracy, wire fraud and aggravated identity theft, the Justice Department and Internal Revenue Service (IRS) announced. Webster had pleaded guilty to those charges in September 2012. She was also ordered to pay $113,000 in restitution and will serve three years on supervised release following her release from federal prison.
According to her plea agreement, Webster had been an employee in the central records office of an Alabama state agency, which allowed her access to the personal identifying information of numerous individuals. Webster stole identifying information from state databases and provided them to a co-conspirator, Melinda Clayton. Clayton would then use those stolen identities to file false federal tax returns that fraudulently claimed refunds. Clayton was sentenced earlier in the year to 61 months in prison.
Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division, commended the efforts of special agents of IRS - Criminal Investigation, who investigated the case, and Tax Division Trial Attorneys Jason H. Poole and Michael Boteler, who prosecuted the case with assistance from Assistant U.S. Attorney Todd Brown and the U.S. Attorney’s Office for the Middle District of Alabama.
Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax .
Department of Justice Forfeits Nearly $7 Million in Proceeds of Unlawful Offshore Gambling and Money Laundering Following Guilty Plea by William Paul ScottRead the Press Release
The U.S. District Court for the District of Columbia issued a consent order of forfeiture today ordering the civil forfeiture of $6,976,924 traced to international money laundering of the proceeds from an offshore Internet gambling operation that illegally targeted U.S. residents, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and Richard Weber, Chief of the Internal Revenue Service-Criminal Investigation (IRS-CI). The civil forfeiture action was resolved in connection with the criminal prosecution and recent conviction of William Paul Scott for violations of the Wire Act and money laundering statutes.
On Dec. 15, 2003, the U.S. government filed a civil forfeiture action against approximately $7 million held by Soulbury Limited, a shell company controlled by Scott and used to conceal the profits he gained through his illegal offshore Internet gambling operations. The government alleged that the $7 million held by Soulbury were proceeds of Wire Act violations and were subject to forfeiture as property involved in or traceable to money laundering transactions.
According to the civil forfeiture complaint, between 1997 and 2002, Scott and an associate operated World Wide Tele-Sports (WWTS), an Internet gambling operation located in Antigua. WWTS and related entities offered online sports betting services that had been heavily marketed to U.S. gamblers via the Internet and print and broadcast media. U.S. residents, who made up the vast majority of WWTS’s clientele, purchased “credit” for their Internet gambling accounts over the phone or online, and sent hundreds of millions of U.S. dollars out of the United States to WWTS’s offshore bank accounts. The U.S. gamblers then used these credits to place bets on popular professional and collegiate sporting events such as the Super Bowl and the National Collegiate Athletic Association’s men’s basketball tournament. Soliciting sports wagers over the Internet violates the Wire Act.
Based on the significant formal legal assistance provided by relevant authorities in the Bailiwick of Guernsey, the United States filed the civil forfeiture complaint against WWTS criminal proceeds physically located in Guernsey, but seized $6,976,924 from a correspondent bank account in the United States held by the Royal Bank of Scotland International (Guernsey). The seizure marked the United States’ first use of a legal provision that Congress designed to overcome situations that might prevent full cooperation in forfeiture matters even where both jurisdictions wish to completely fulfill their legal forfeiture assistance obligations under the applicable bilateral and UN assistance treaties (18 U.S.C. § 981(k).
In March 1998, over five years before the civil forfeiture complaint was filed, Scott was charged in U.S. District Court in the Southern District of New York, by criminal complaint, with conspiring to violate the Wire Act, relating to his operation of WWTS. But because Scott resided in Antigua, the United States could not execute the warrant issued for his arrest and he remained at large. Even as the criminal complaint against Scott remained outstanding, Soulbury filed a claim on March 1, 2004, answered the civil forfeiture complaint and proceeded to contest the civil forfeiture action.
In April 2004, Scott was indicted in U.S. District Court in the Southern District of New York on the conduct that formed the basis for the 1998 criminal complaint. In April 2005, Scott was indicted in the District of Columbia based on different criminal conduct, charging him with money laundering, violations of the Wire Act and other offenses relating to WWTS. In February 2012, the indictment in the Southern District of New York was transferred to the District of Columbia so that it could be resolved by a plea agreement that covered both pending criminal cases. Scott returned to the United States to enter a guilty plea in both cases in U.S. District Court for the District of Columbia on Sept. 25, 2012.
Scott was convicted of one count of conspiracy to violate the Wire Act and three counts of international money laundering. As part of his plea agreement, Scott consented to the civil forfeiture of the $6,976,924 in proceeds traced to Royal Bank of Scotland International (Guernsey).
Scott is scheduled to be sentenced on Jan. 7, 2013. He faces a maximum penalty of 20 years in prison for each money laundering count and a maximum of two years in prison for the conspiracy count.
The civil forfeiture case was litigated by Assistant Deputy Chief Jack de Kluiver and Trial Attorney Robert Stapleton of the Criminal Division’s Asset Forfeiture and Money Laundering Section, and the related criminal cases in the District of Columbia were prosecuted by Trial Attorneys Robert Stapleton and Brian Harrison of the Asset Forfeiture and Money Laundering Section. The criminal case in the Southern District of New York was prosecuted by Assistant U.S. Attorney Arlo Devlin-Brown. The criminal cases were investigated by the FBI in New York and the IRS-CI’s International Grand Jury Task Force out of the Washington, D.C., Field Office.
13 December 2012
U.S., Pennsylvania and Scranton, Pa., Sewer Authority Settle Violations of Sewage OverflowsRead the Press Release
WASHINGTON – The United States and the Commonwealth of Pennsylvania announced today a settlement with the Scranton Sewer Authority (SSA) resolving alleged Clean Water Act violations involving sewer overflows to the Lackawanna River and its tributaries.
In a proposed consent decree, the Scranton Sewer Authority has agreed to implement a 25-year plan to control and significantly reduce overflows of its sewer system, thereby helping improve water quality of the Lackawanna River and local streams. The plan is estimated to cost $140 million to implement.
The proposed settlement was filed in federal court today in Scranton by the U.S. Department of Justice on behalf of the Environmental Protection Agency (EPA) and by the Pennsylvania Department of Environmental Protection (PADEP). The settlement also requires SSA to pay a $340,000 civil penalty, which will be split evenly between the United States and Pennsylvania.
“This settlement achieves a long term solution to reduce millions of gallons of contaminated stormwater overflows into the Lackawanna River,” said Ignacia S. Moreno, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “The terms of this agreement will bring much needed improvements to Scranton’s water treatment system, including the completion of an advanced biological treatment system to reduce nitrogen and phosphorus discharges, that will benefit the area's water quality and environment for many years to come.”
“EPA is committed to protecting public health and our environment by reducing discharges of raw sewage and contaminated stormwater to our nation’s rivers, lakes and streams,” said EPA Regional Administrator Shawn M. Garvin. “Achieving this settlement puts another municipality on a more sustainable path for managing stormwater in ways that benefit the health and quality of its communities and local waters for years to come.”
The settlement addresses problems with SSA’s combined sewer system, which when overwhelmed by stormwater, frequently discharges raw sewage, industrial waste, nitrogen, phosphorus and polluted stormwater into the Lackawanna River and its tributaries, part of the Chesapeake Bay Watershed. The volume of combined sewage that overflows from the system is approximately 700 million gallons annually.
In addition to the 25-year control plan, the proposed settlement also requires the installation of a state-of the-art biological treatment system at the SSA wastewater treatment plant to reduce discharges of nitrogen and phosphorus pollution.
The proposed consent decree is subject to a 30-day public comment period and court approval after it is published in the Federal Register. It will be available for viewing on the department’s website: www.justice.gov/enrd/Consent_Decrees.html.
For more information about CSOs: http://cfpub.epa.gov/npdes/home.cfm?program_id=5
Owner of Louisiana-Based Health Care Company Convicted in Texas for Role in $6.7 Million Medicare Fraud SchemeRead the Press Release
WASHINGTON – The owner and operator of a Louisiana-based durable medical equipment (DME) company was convicted today by a federal jury in Houston for his role in a $6.7 million Medicare fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; and Special Agent in Charge Mike Fields of the Dallas Regional Office of the U.S. Department of Health and Human Service’s Office of the Inspector General (HHS-OIG).
Kenny Msiakii, 44, of Houston, was convicted of eight counts of health care fraud.
According to court documents, Msiakii was the owner and operator of Joy Supply and General Services, a company based in Shreveport, La., that purported to provide orthotics and other DME, including power wheelchairs, to Medicare beneficiaries.Msiakii used Joy Supply’s Medicare provider number to submit claims to Medicare for DME, including orthotic devices, that was medically unnecessary and, in some cases, never provided. Many of the orthotic devices were components of “arthritis kits” and purported to be for the treatment of arthritis-related conditions; however, the devices were neither medically necessary nor appropriate for such conditions. The arthritis kit generally contained a number of orthotic devices including braces for both sides of the body and related accessories such as heat pads.
According to court documents, from November 2007 through September 2009, Msiakii submitted claims of approximately $6.7 million to Medicare and was paid approximately $3.6 million for devices that were not medically necessary and, in some cases, never provided.
At sentencing, scheduled for Feb. 28, 2013, Msiakii faces a maximum sentence of 80 years in prison.
This case is being prosecuted by Trial Attorneys Laura M.K. Cordova and Ben O’Neil of the Criminal Division’s Fraud Section. The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
Louisiana Man Arrested on Charges of Receiving Illegal Kickbacks in AfghanistanRead the Press Release
WASHINGTON – The former vice president of a construction company doing work in Afghanistan was arrested today on allegations of accepting tens of thousands of dollars in gratuities from subcontractors during his employment in Afghanistan, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.
A criminal complaint filed in U.S. District Court in the Eastern District of Louisiana and unsealed today charges Elton Maurice “Mark” McCabe III, 53, of Slidell, La., with one count of receiving illegal kickbacks and one count of wire fraud.According to court documents, McCabe worked for a construction company that received subcontracts from prime contractors to the U.S. government for reconstruction efforts in Kandahar, Afghanistan. In mid- to late-2009, McCabe allegedly solicited and accepted cash payments and a wire transfer of approximately $53,000 to his wife’s bank account from subcontractors in exchange for awarding subcontracts in connection with U.S. reconstruction projects in Kandahar.
Additionally, in approximately late-2009, McCabe allegedly accepted cash payments and arranged for a contractor’s consultant to wire $20,000 to McCabe’s wife’s bank account in exchange for construction material that belonged to McCabe’s company and that McCabe did not have the authority to sell for his personal benefit.
According to court documents, McCabe used the kickbacks he received from subcontractors to pay for personal family expenses.
This case is being prosecuted by Trial Attorney Daniel Butler of the Criminal Division’s Fraud Section, on detail from the Special Inspector General for Afghanistan Reconstruction (SIGAR). The case is being investigated by the Defense Criminal Investigative Service, SIGAR, FBI, U.S. Army Criminal Investigation Command, Air Force Office of Special Investigations and Internal Revenue Service-Criminal Investigation.
A criminal complaint is only an accusation, and all defendants are presumed innocent until proven guilty.
Louisiana Corrections Officer Pleads Guilty to Making False Statements to FBI, Falsifying RecordsRead the Press Release
Kevin L. Groom Sr, 45, a correctional officer with the Louisiana State Penitentiary in Angola, La., pleaded guilty today before U.S. District Judge James J. Brady for the Middle District of Louisiana for his role in covering up an incident in which correctional officers used excessive force against an inmate. Groom admitted filing a false report and subsequently providing false information to the FBI about the incident. Investigation of the incident is ongoing.
“The vast majority of American law enforcement officers conduct themselves with honor,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “But the Department of Justice will continue to vigorously prosecute those officers responsible for the deprivation of the rights of inmates, including those officers who file false reports to actively obstruct investigations into the violation of inmate rights.”
According to the factual basis filed in connection with his guilty plea, on or about Jan. 24, 2010, Groom, then a major at the Louisiana State Penitentiary in Angola, West Feliciana Parish, La., was on duty when he heard over the radio that an inmate had escaped from his assigned location. Shortly thereafter, the inmate surrendered to prison officials. When Groom encountered him, the inmate was cuffed with his hands behind his back and in the custody of two officers. The inmate and the two officers were in the back of a pick-up truck. Three high-ranking prison officials were standing by the truck. One of these high-ranking officials grabbed the inmate’s head and slammed it against the truck. The two officers in the back of the truck also struck the inmate. At that time, one of the high-ranking prison officials ordered Groom to join the two officers on the back of the truck to escort the inmate to the medical unit. During the drive to the medical unit, the other two officers struck the inmate, who presented no threat and who was lying on his stomach, with his hands cuffed behind his back.
Groom, who had the highest rank among the three officers on the back of the truck, admitted that he did not stop the assault. Groom also admitted that during the prison’s investigation of this incident, he wrote and submitted a false report denying that officers assaulted the inmate, and that he provided that same false information to the Federal Bureau of Investigation.
Groom pleaded guilty to falsification of records in a federal investigation and to making a false statement to the FBI. As a result of his guilty pleas, Groom faces a maximum sentence of 25 years, a fine of up to $500,000, or both.
U.S. Attorney Donald J. Cazayoux, Jr., said, “Law enforcement officers often act as our heroes in protecting us every day; so when some violate their duties to the public, it is a sad day. They must and will be held accountable, and this plea is a step forward in securing justice in this case.”
The investigation in this matter was conducted by Special Agent Taneka Harris of the Federal Bureau of Investigation and prosecuted by Civil Rights Division Trial Attorney AeJean (Angie) Cha and Assistant U.S. Attorney Robert W. Piedrahita.
Houston-area Doctor Convicted in $17.3 Million Medicare Fraud Scheme Involving Fraudulent Claims for Home Health Care ServicesRead the Press Release
WASHINGTON – A federal jury in Houston today convicted Ben Harris Echols, 63, of Houston, for conspiring to commit healthcare fraud by falsifying plans of care for Medicare beneficiaries, including patients whom he did not treat. After a four day trial, the jury convicted Echols of one count of conspiracy to commit health care fraud and six counts of false statements relating to health care matters.
Today's verdict was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; Special Agent-in-Charge Stephen L. Morris of the FBI’s Houston Field Office; Special Agent in Charge Mike Fields of the Dallas Regional Office of HHS’s Office of Inspector General, Office of Investigations; and the Texas Attorney General’s Medicaid Fraud Control Unit.
According to evidence presented at trial, Echols was a physician practicing in the Houston area. The evidence showed that Echols signed plans of care for Medicare beneficiaries so that fraudulent claims could be billed by Family Healthcare Group Inc. and Houston Compassionate Care. Echols would sign plans of care for Medicare beneficiaries who were not under his care and about whose conditions he had no knowledge. In many instances, the evidence showed, Echols would sign plans of care even though other doctors were listed as the attending physician on the documents.Evidence presented at trial showed that Family Healthcare Group Inc. and Houston Compassionate Care fraudulently billed Medicare for home health services and were paid approximately $17.3 million by Medicare, including $5.5 million for beneficiaries for whom Echols signed a plan of care.
At trial, doctors in whose names claims were submitted to Medicare testified that they were treating the patients on plans of care signed by Echols, and that the patients did not need the care that had been billed to Medicare based on the plans. Two Medicare beneficiaries for whom Echols signed plans of care testified at trial that they had never seen Echols, that they had different primary care physicians, and they did not want or need home health care.
The conspiracy count carries a maximum potential penalty of 10 years in prison and a $250,000 fine; each of the false statements counts carries a maximum potential penalty of five years in prison and a $250,000 fine. Sentencing is scheduled for March 14, 2013.
The case was tried by Trial Attorneys Alexander H. Berlin, Abigail B. Taylor and Senior Trial Attorney Joseph S. Beemsterboer, with assistance from Trial Attorneys Kyle Maurer and Alison Anderson of the Criminal Division’s Fraud Section.
The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is 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
Former U.S. Customs and Border Protection Officer, His Girlfriend <br /> and Two of Their Associates Plead Guilty to Participating <br /> in Multi-year Bribery and Alien Smuggling Activities Along U.S./Mexico BorderRead the Press Release
WASHINGTON – A former U.S. Customs and Border Protection (CBP) officer, his girlfriend and two of their associates pleaded guilty today in federal court for their participation in multi-year bribery and alien smuggling activities along the U.S./Mexico border, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.Former CBP Officer Juan Carlos Guerrero, 39, of Mission, Texas, pleaded guilty before U.S. District Judge Andrew S. Hanen in the Southern District of Texas to one count of substantive bribery, one count of conspiracy to commit bribery and one count of alien smuggling conspiracy. Guerrero’s girlfriend Claudia Flores, 34, of Mission; Maribel Rivera, 43, of Mission; and Rodolfo Caballero Rojas, 40, of Oklahoma City, each pleaded guilty today before Judge Hanen to separate informations charging each of them with one count of conspiracy to commit bribery and alien smuggling.
The defendants were indicted on Oct. 5, 2012, in U.S. District Court for the Southern District of Texas in Brownsville. They each were charged with one count of conspiracy to commit bribery, one count of conspiracy to smuggle aliens for financial gain and various substantive counts of bribery and alien smuggling.
According to court documents, between approximately October 2008 and approximately January 2011, Guerrero worked the midnight shift at the Hidalgo Port of Entry (Hidalgo POE), Pharr Port of Entry (Pharr POE) and the Anzalduas Port of Entry (Anzalduas POE), where, among other things, he was responsible for vehicle inspections of northbound traffic traveling from Mexico to the United States.According to court documents, between approximately January 2009 and approximately May 2011, Guerrero and Flores organized a bribery and alien smuggling operation, whereby Guerrero, Flores, Rivera, Rojas, Guerrero’s nephew Jose Cantu and other co-conspirators arranged for undocumented aliens (UDAs) from Mexico to be smuggled into the United States through Guerrero’s inspection lanes at the Hidalgo POE, Pharr POE and Anzalduas POE, in exchange for bribe payments ranging from $500 to $3,000 per UDA. Guerrero admitted that he organized and directed a total of at least approximately 80 to 150 different smuggling events, in which he knowingly permitted approximately 80 to 165 UDAs to gain illegal entry into the United States.
According to court documents, Flores admitted that she helped Guerrero organize and direct a total of at least approximately 50 to 75 of the illegal crossings, in which approximately 50 to 100 UDAs gained illegal entry into the United States. Rivera admitted that she assisted Guerrero and Flores by identifying and soliciting UDAs, communicating smuggling prices and details of the illegal crossings to UDAs, and collecting bribe payments from the UDAs on Guerrero and Flores’s behalf. Rojas admitted, among other things, that he assisted Guerrero by personally driving UDAs through Guerrero’s inspection lane at the Anzalduas POE and that he paid Guerrero a bribe of approximately $1,500 as payment for Guerrero’s decision to permit a UDA to pass illegally through his inspection lane.
As part of his plea agreement, Guerrero resigned today from CBP.
On July 24, 2012, Guerrero’s nephew Jose Cantu pleaded guilty in U.S. District Court in the Southern District of Texas, to conspiracy to commit bribery and alien smuggling and a separate charge of conspiracy to import marijuana and cocaine.The charge of bribery carries a maximum penalty of 15 years in prison and a maximum fine of $250,000 or twice the gain or loss. The charge of conspiracy carries a maximum penalty of five years in prison and a maximum fine of $250,000 or twice the gain or loss. The charge of conspiracy to commit alien smuggling for private financial gain carries a maximum penalty of 10 years in prison and a maximum fine of $250,000 or twice the gain or loss. Sentencing for Guerrero, Flores, Rivera, Rojas and Cantu is scheduled for March 18, 2013
The case is being prosecuted by Trial Attorneys Edward J. Loya Jr. and J.P. Cooney of the Criminal Division’s Public Integrity Section. The case is being investigated by agents from the FBI’s South Texas Border Corruption Task Force, which includes agents from the FBI, U.S. Immigration and Customs Enforcement Office of Professional Responsibility, CBP Office of Internal Affairs, U.S. Department of Homeland Security Office of Inspector General, CBP U.S. Border Patrol and the Texas Rangers Division.
Former New Jersey Chiropractor Charged in Scheme to Extinguish Debt and to Obtain Fraudulent IRS Tax RefundsRead the Press Release
A federal grand jury in Trenton, N.J., returned an indictment charging David Moleski with 14 counts of mail fraud, one count of wire fraud, one count of corruptly impeding the due administration of the Internal Revenue laws and three counts of filing false claims for tax refunds, the Justice Department and the Internal Revenue Service (IRS) announced today.
According to the indictment, Moleski attempted to extinguish both public and private debts by mailing to creditors fake financial instruments, entitled “secured promissory notes,” that purported to draw against non-existent accounts at the U.S. Department of the Treasury. In addition, Moleski submitted three false tax returns with the IRS, in which he claimed tax refunds of approximately $1.2 million to which he was not entitled.
An indictment is merely an allegation and the defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted on all counts, Moleski faces a maximum potential sentence of 318 years in prison.
This case was investigated by special agents of IRS - Criminal Investigation. Trial Attorneys Tino M. Lisella and Yael Epstein of the Justice Department’s Tax Division are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax.
Florida Accountant Indicted for Stealing Client Money<br /> <br /> Intended for IRSRead the Press Release
An indictment was unsealed today in Fort Pierce, Fla., charging Joseph Rizzuti with one count of corruptly endeavoring to obstruct the Internal Revenue Service (IRS) and four counts of wire fraud, the Justice Department and the IRS announced. The indictment was returned by a grand jury on Nov. 29, 2012.
According to the indictment, Rizzuti, the owner of Beacon Accounting Services in Palm City, Fla., interfered with the IRS’s ability to collect taxes owed by two clients, stole payments from those clients intended for the IRS, and made misrepresentations to those clients and to the IRS. Rizzuti allegedly stole approximately $265,000 from one client and approximately $23,500 from another client, money that the clients gave him to pay to the IRS.
An indictment merely alleges that crimes have been committed and the defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Rizzuti faces a maximum potential sentence of 20 years in prison for each of the four wire fraud counts and a maximum potential sentence of 3 years for the obstruction count. He is also subject to fines and mandatory restitution if convicted.
This case was investigated by special agents of IRS - Criminal Investigation and Treasury Inspector General for Tax Administration. Trial Attorneys Justin Gelfand and Rebecca Perlmutter of the Justice Department’s Tax Division are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax .
Arizona Man Pleads Guilty to Illegally Selling Golden Eagle and Other Migratory Bird PartsRead the Press Release
WASHINGTON – A Tuba City, Ariz., man pleaded guilty in federal court in Phoenix to illegally selling golden eagle and other migratory bird parts, a felony criminal offense, announced Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division, and John S. Leonardo, U.S. Attorney for the District of Arizona.
According to the plea agreement filed in U.S. District Court in Phoenix yesterday, in January 2008, Patrick Scott, 46, used the Internet to illegally offer to sell a golden eagle fan for $950. An undercover law enforcement officer exchanged emails with Scott and ultimately agreed on a purchase price of $900. In February 2008, a second undercover law enforcement officer went to Scott’s house and bought the golden eagle fan by making an initial payment of $550 and later deposited the remainder directly into Scott’s bank account in two installments. Also according to the plea agreement, between July 2007 and February 2009, Scott sold, purchased, and/or offered to sell other migratory bird parts, from species including bald eagle, red-tailed hawk, golden eagle, crested caracara, anhinga and rough-legged hawk.
Golden eagles and other migratory birds are protected by federal laws and regulations. Under the Migratory Bird Treaty Act, it is unlawful to possess, offer to sell, sell, offer to purchase or purchase any migratory bird or migratory bird part, or any product that consists, or is composed in whole or part, of any such bird or bird part. It is a federal enforcement priority to prosecute those who violate federal laws by engaging in commercial activities involving federally protected bird feathers or other bird parts. The objective of these enforcement efforts is to reduce and eliminate the unlawful taking of federally protected birds by prosecuting not only individuals who kill protected birds but also individuals who seek to profit from the commercialization of federally protected birds or their feathers or other parts. This helps to ensure that golden eagle and other bird populations remain healthy and sustainable.
“The Department of Justice will not tolerate the commercial exploitation of federally protected birds, which are important not only as protected species but also as sacred elements of the religious and cultural traditions of many Native Americans,” said Ignacia S. Moreno, Assistant Attorney General of the Justice Department’s Environment and Natural Resources Division. “This is why the department recently published a policy to clarify that while the possession and use of migratory bird feathers and other bird parts is permissible for religious or cultural purposes by members of federally recognized tribes, it remains illegal to buy, sell, or trade in them for compensation.”
“While we recognize, and respect, that many Indian tribes and their members use federally protected birds in the practice of their religion and in the expression of their culture,” said U.S. Attorney Leonardo, “we will hold accountable through prosecution those who seek commercial gain by selling protected birds, their feathers, or their parts.”
“Protecting our nation’s wildlife from unlawful commercial exploitation of protected U.S. Species is a high priority for the U. S. Fish and Wildlife Service Office of Law Enforcement,” said Nicholas E. Chavez, Special Agent in Charge of the Southwest Region. “This case is also an example of how working with our tribal law enforcement partners can lead to a successful outcome.”
“The Navajo Nation Department of Fish and Wildlife is committed to protecting raptors, including golden eagles. These birds are not only biologically important but are also culturally significant to the Navajo people,” said Gloria Tom, Director of the Navajo Nation Department of Fish and Wildlife. “Commercializing these birds and their parts is illegal and is detrimental to our eagle populations on the Navajo Nation. The department is committed to fostering our partnership with the U.S. Fish and Wildlife Service to deter wildlife crimes on the Navajo Nation.”
The maximum penalties for the unlawful sale of migratory birds include two years of incarceration and a fine of $250,000. U.S. District Court Magistrate Judge Steven P. Logan set Scott’s sentencing for Feb. 26, 2013.
The investigation was conducted by the U.S. Fish and Wildlife Service’s Office of Law Enforcement in coordination with the Navajo Nation Department of Fish and Wildlife. The case was prosecuted by the Environmental Crimes Section of the Justice Department’s Environment and Natural Resources Division and the U.S. Attorney’s Office for the District of Arizona.
12 December 2012
Two Alabama Real Estate Investors and Their Company Plead Guilty to Conspiracies to Rig Bids and Commit Mail Fraud for the Purchase of Real Estate at Public Foreclosure AuctionsRead the Press Release
Two Alabama real estate investors and their company pleaded guilty today for their roles in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in southern Alabama, the Department of Justice announced.
Robert M. Brannon, of Laurel, Miss.; his son, Jason R. Brannon, of Mobile, Ala.; and their Mobile-based company, J & R Properties LLC, pleaded guilty today to an indictment originally returned on June 28, 2012 in the U.S. District Court for the Southern District of Alabama charging each of them with one count of bid rigging and one count of conspiracy to commit mail fraud. According to court documents, the Brannons and their company conspired with others not to bid against one another at public real estate foreclosure auctions in southern Alabama. After a designated bidder bought a property at a public auction, which typically takes place at the county courthouse, the conspirators would generally hold a secret, second auction, at which each participant would bid the amount above the public auction price he or she was willing to pay. The highest bidder at the secret, second auction won the property.
The Brannons and their company were also charged with conspiring to use the U.S. mail to carry out a fraudulent scheme to acquire title to rigged foreclosure properties sold at public auctions at artificially suppressed prices, to make and receive payoffs to co-conspirators, and to cause financial institutions, homeowners and others with a legal interest in rigged foreclosure properties to receive less than the competitive price for the properties. The Brannons and their company are charged with participating in the bid-rigging and mail fraud conspiracies from as early as October 2004 until at least August 2007.
“The conspirators subverted the competitive bidding process by engaging in a collusive scheme to artificially depress prices at real estate foreclosure auctions and to defraud financial institutions and homeowners out of money and property,” said Renata B. Hesse, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “Today’s guilty pleas send a strong message that the division is committed to prosecuting those who fraudulently subvert competition for their own financial gain.”
“The success of this investigation represents the FBI’s staunch commitment to target and investigate those who are willing to abuse and exploit illegal advantages during this legal process for personal gain at the expense of suffering citizens and businesses,” said Acting Special Agent in Charge of the FBI’s Mobile Division Stephen E. Richardson.
Including today’s pleas, to date, eight individuals—Harold H. Buchman, Allen K. French, Bobby Threlkeld Jr., Steven J. Cox, Lawrence B. Stacy, David R. Bradley and the Brannons—and two companies—M & B Builders LLC and J & R Properties— have pleaded guilty in the U.S. District Court for the Southern District of Alabama in connection with this ongoing investigation.
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals, and a $100 million fine for companies. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine. Each count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine of $250,000 for individuals, and a fine of $500,000 for companies. The fine may be increased to twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.
The investigation into fraud and bid rigging at certain real estate foreclosure auctions in southern Alabama is being conducted by the Antitrust Division’s Atlanta Field Office and the FBI’s Mobile Office, with the assistance of the U.S. Attorney’s Office for the Southern District of Alabama. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s Atlanta Field Office at 404-331-7100 or visit www.justice.gov/atr/contact/newcase.htm.
Today’s charges are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.StopFraud.gov.
Task Force on Children Exposed to Violence Presents Final Findings, Recommendations to Attorney GeneralRead the Press Release
Attorney General Eric Holder’s Task Force on Children Exposed to Violence today presented its final report and policy recommendations gathered from public hearings held across the country over the past year.
The task force report includes 56 recommendations and highlights the importance of identifying children who are victims or witnesses of violence and providing support and services to help them heal. It focuses on developing programs to help children access supportive and non-violent relationships with trusted adults in their homes and communities. The task force also calls for all children who enter the juvenile justice system to be screened for exposure to violence.
“I want to thank the task force for their diligent work on this important effort. This report will be carefully considered and used as the basis for action – and as a blueprint for strengthening our robust efforts to protect young people from exposure to violence,” said Attorney General Holder. “The findings of this task force will ensure that policymakers, criminal justice professionals, social service providers, and members of the public continue to regard preventing and remedying children's exposure to violence as far more than a professional obligation – but as a moral calling.”
As a key part of Attorney General Holder’s Defending Childhood initiative to address children’s exposure to violence, the task force is comprised of 13 leading experts, including practitioners, child and family advocates, academicians and licensed clinicians .
“ Every child we help recover from the impact of abuse is an investment in our nation’s future,” said task force co-chair Joe Torre, executive vice president of Major League Baseball and founder of the Joe Torre Safe At Home Foundation. “Our report calls for renewed and expanded efforts to protect our children from violence and psychological trauma, to heal families and communities, and to empower children to claim safe and productive futures. The time for action is now.”
During four hearings held in Baltimore, Albuquerque, N.M., Miami and Detroit from November 2011 to April 2012, the task force heard from people of all ages residing in 27 states and the District of Columbia, including survivors of violence, researchers, practitioners, advocates and community residents. These testimonials, along with additional research, provided the foundation for the report and recommendations.
“We have the power to end the damage to children from violence and abuse,” said task force co-chair Robert Listenbee, Jr., Chief of the Juvenile Unit of the Defender Association of Philadelphia. “We must mobilize resources on national and local levels to support teachers, health care professionals, police officers, juvenile justice professionals and others who work with children and their families. Our recommendations provide a path for effectively implementing policies, practices and procedures to keep kids safe from violence.”
The task force presented their recommendations today during a public meeting of the Coordinating Council on Juvenile Justice and Delinquency Prevention. The council, whose membership includes the cabinet officials and heads of 12 federal agencies and nine practitioners, coordinates federal programs for delinquency prevention, detention or care for unaccompanied juveniles, and missing and exploited children.
To view the task force’s report, please visit: www.justice.gov/defendingchildhood/cev-rpt-full.pdf .
For more information about the task force and Attorney General Holder’s Defending Childhood Initiative, please visit: www.justice.gov/defendingchildhood .The Defending Childhood Initiative is supported by the Office of Justice Programs (OJP). OJP is headed by Acting Assistant Attorney General Mary Lou Leary and provides federal leadership in developing the nation’s capacity to prevent and control crime, administers justice and assists victims. OJP has six components: the Bureau of Justice Assistance; the Bureau of Justice Statistics; the National Institute of Justice; the Office of Juvenile Justice and Delinquency Prevention; the Office for Victims of Crime; and the Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking. More information about OJP can be found at www.ojp.gov .
Related Materials:
Final Recommendations of the Task Force on Children Exposed to Violence
The Defending Childhood Initiative
Office of Justice Programs
Attorney General Eric Holder Speaks at the Introduction of the Presentation of the Final Report of the Task Force on Children Exposed to Violence
Attorney General Eric Holder Speaks at the Conclusion of the Presentation of the Final Report of the Task Force on Children Exposed to ViolencePfizer Agrees to Pay $55 Million for IllegallyPromoting Protonix for Off-Label UseRead the Press Release
Pfizer Inc. will pay $55 million plus interest to resolve allegations that Wyeth LLC illegally introduced and caused the introduction into interstate commerce of a misbranded drug, Protonix, between February 2000 and June 2001, the Justice Department announced today.
Wyeth manufactured and promoted Protonix tablets. Protonix is a proton pump inhibitor (PPI) that was used by physicians to treat various forms of gastro-esophageal reflux disease (GERD). Wyeth sought and obtained approval from the Food and Drug Administration (FDA) to promote Protonix for short-term treatment of erosive esophagitis–a condition associated with GERD that can only be diagnosed with an invasive endoscopy. However, the government alleges that Wyeth fully intended to, and did, promote Protonix for all forms of GERD, including symptomatic GERD, which was far more common and could be diagnosed without an endoscopy.
Under the Federal Food Drug and Cosmetic Act, manufacturers must obtain FDA approval for any indication for use for which a manufacturer intends to market a drug. A drug is misbranded if its labeling does not bear adequate directions for use by a layman safely and for the purposes for which it is intended. A prescription drug must be prescribed by a physician and is only exempt from the adequate directions for use requirement if a number of conditions are met, including that the manufacturer only intended to sell that drug for an FDA-approved use. A prescription drug marketed for unapproved off-label uses does not qualify for the exemption and is misbranded.
As alleged in the government’s complaint, Wyeth’s illegal promotional campaign for Protonix was multi-faceted. Before Wyeth even began promoting Protonix, the FDA warned Wyeth that its proposed promotional materials were misleading because Wyeth had “overstated” its “erosive esophagitis indication” by “suggesting that Protonix is safe and effective in the treatment of patients with . . . GERD. Protonix is not indicated for treatment of GERD symptoms that occur in the absence of esophageal erosions.” Despite the FDA’s admonishment, the government alleges that Wyeth trained its sales force to promote Protonix for all forms of GERD, beyond its limited erosive esophagitis indication, and that Wyeth sales representatives frequently promoted Protonix to physicians for unapproved uses, such as symptomatic GERD.
In addition, Wyeth allegedly promoted Protonix as the “best PPI for nighttime heartburn.” even though there was never any clinical evidence that Protonix was more effective than any other PPI for nighttime heartburn. The allegations in the complaint are that this superiority slogan was formulated at the highest levels of the company. Wyeth retained an outside market research firm, at the cost of tens of thousands of dollars, to ensure that sales representatives delivered that misleading superiority message.
Finally, the government alleges that Wyeth used continuing medical education (CME) programs to promote Protonix for unapproved uses. CME programs are sponsored by accredited independent providers, such as universities, nonprofit organizations, or specialty societies. Pharmaceutical companies are permitted to provide financial support for CME programs, but they are not permitted to use CME programs as promotional vehicles for off-label indications. According to the complaint, Wyeth spent millions of dollars providing “unrestricted educational grants” to CME providers, and these grants invariably included promises that Wyeth would not attempt to influence the content of the program in any way. Nevertheless, the government alleges that one of Wyeth’s core marketing tactics for Protonix was to use CME programs to drive off-label use of the drug. According to the complaint, the Protonix “brand team” influenced virtually every aspect of these CME programs: program topics, speaker selection, organization, and content. In addition, the government alleges that Wyeth even insisted that the CME program materials use the same color and appearance as Protonix promotional materials–a tactic that Wyeth and the vendor called “branducation.”
“Today’s settlement once again demonstrates our commitment to making sure drug manufacturers follow the rules,” said Stuart Delery, Principal Deputy Assistant Attorney General of the Department of Justice’s Civil Division. “Drug manufacturers should not be permitted to profit from misbranding their products; the disgorgement remedy here ensures that this does not happen in this case.”
“Wyeth tried to cheat the system by obtaining a limited FDA approval for Protonix, fully intending to promote this drug for additional, unapproved uses,” said U.S. Attorney Carmen M. Ortiz. “Wyeth ignored the FDA’s warning not to promote Protonix off-label, and then went so far as to contaminate CME programs that physicians rely on for unbiased, independent scientific information. Today’s settlement reinforces this office’s historic commitment to holding drug companies responsible for their misconduct.”
This case was litigated by Assistant U.S. Attorneys David Schumacher and Susan Winkler of Ortiz’s Health Care Fraud Unit, together with former Trial Attorney Kevin Larsen and Deputy Director Jill Furman in the Department of Justice Consumer Protection Branch. This case was investigated by the FDA’s Office of Criminal Investigations; the Office of Inspector General of the Department of Health and Human Services, the Department of Veterans’ Affairs, and the FBI.
This civil complaint and settlement resolve the United States’ investigation of Wyeth related to the promotion of Protonix for unapproved uses. The claims settled by this agreement are allegations only, allegations which Pfizer denies; there has been no determination of liability. Pfizer acquired Wyeth in October 2009. Since August 2009, Pfizer has been under a Corporate Integrity Agreement with the Department of Health and Human Services, which agreement remains in effect.
11 December 2012
Las Vegas Man Sentenced to 37 Months in Prison for <br /> Foreclosure Rescue Scam and Theft of Government FundsRead the Press Release
WASHINGTON – A Las Vegas man was sentenced today to 37 months in prison for operating a foreclosure rescue scam that defrauded distressed homeowners who were struggling to pay their mortgages, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Daniel G. Bogden of the District of Nevada.
Alex P. Soria, 65, was sentenced today by U.S. District Judge Lloyd D. George in the District of Nevada. In addition to his prison term, Soria was sentenced to serve three years of supervised release and ordered to pay $320,266 in restitution.
In August 2012, Soria pleaded guilty to one count of wire fraud in connection with his scheme to defraud distressed homeowners and one count of theft of government funds for defrauding the Social Security Disability Insurance benefits program.
According to court documents, Soria identified homeowners whose mortgage debt exceeded the value of their homes and charged them a fee purportedly to reduce the principal balance of their mortgages using money from the Department of the Treasury’s Troubled Asset Relief Program (TARP). Soria admitted in court that he lied to homeowners about his affiliation with several mortgage lenders and that he provided victims with fraudulent letters stating they had been approved for loans. Soria also admitted he falsely told victims that his loan program had been successful in the past and charged homeowners for loan modifications he knew he could not deliver. Court documents show that Soria concealed from homeowners the fact that the state of Nevada had issued a cease and desist order which legally prohibited him from working in the mortgage industry. Soria collected over $100,000 in fees from distressed homeowners, many of whom lost their homes to foreclosure after Soria failed to deliver the loan modifications he promised.
As part of the same case, Soria also admitted to stealing government funds by continuing to collect Social Security Disability Insurance benefits while at the same time receiving income from his foreclosure relief operation. The Social Security Disability Insurance program is a federal program that replaces the wages of individuals who become unable to work due to a disability. Soria admitted to collecting over $200,000 in disability benefits from 1990 to 2010 while at the same time receiving income that he concealed from the Social Security Administration.
This case is being prosecuted by Trial Attorneys Brian R. Young and Mary Ann McCarthy of the Criminal Division’s Fraud Section. The U.S. Attorney’s Office for the District of Nevada assisted with the investigation and prosecution. The case was investigated by the Offices of Inspector General for the Department of Housing and Urban Development and the Social Security Administration.
This prosecution is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
Justice Department and New York Attorney General <br /> File Antitrust Lawsuit Against New York City <br /> Tour Bus Joint Venture of Coach USA and City SightsRead the Press Release
WASHINGTON – The Department of Justice and New York State Attorney General filed a civil antitrust lawsuit today against a tour bus joint venture formed by Coach USA Inc. and City Sights LLC alleging that the joint venture, known as Twin America LLC, has resulted in higher prices for hop-on, hop-off bus tours in New York City. The department said that the formation of Twin America gave Coach and City Sights a monopoly over the more than $100 million New York City hop-on, hop-off bus tour market and enabled Coach and City Sights to increase prices to consumers by approximately 10 percent for tourists visiting some of New York City’s leading attractions, including the Empire State Building, Times Square and Central Park.The lawsuit, filed in the U.S. District Court for the Southern District of New York, seeks to dissolve the joint venture and impose other relief to restore competition and redress the anticompetitive effects of the parties’ conduct. In addition to the joint venture itself, the complaint names as defendants Coach and City Sights, and the subsidiaries through which they entered Twin America, International Bus Services Inc. and City Sights Twin LLC.
“The formation of Twin America eliminated intense head-to-head competition between Coach and City Sights and gave the parties an effective monopoly that enabled them to raise prices to consumers,” said Acting Assistant Attorney General Renata B. Hesse in charge of the Department of Justice’s Antitrust Division. “This lawsuit seeks to restore the competition eliminated by the joint venture and to ensure that the millions of visitors to New York City who take hop-on, hop-off bus tours each year enjoy the benefits of a competitive marketplace.”
“This lawsuit is an important step toward restoring competition and protecting tourists in New York City,” said New York Attorney General Eric T. Schneiderman. “The iconic double-decker Gray Line and City Sights buses are seen all over New York City but few people know they are run as a monopoly. The formation of Twin America has meant higher prices and less competition. Tourists who come to the Big Apple deserve better.”
New York City is one of the world’s premier tourist destinations, drawing approximately 50 million visitors annually. An estimated two million of these visitors spend more than $100 million each year on hop-on, hop-off bus tours. Hop-on, hop-off bus tours combine sightseeing and transportation by providing tourists with a professionally-guided tour of New York City’s leading attractions and neighborhoods, while giving them the ability to “hop off” the tour bus at various locations to further explore attractions of interest and later “hop on” another bus to continue along the tour route using the same ticket. The tours are offered on open-top double-decker buses, which enable passengers to view New York City’s attractions and neighborhoods from a heightened vantage point.
The department said that prior to the joint venture, two firms accounted for approximately 99 percent of the hop-on, hop-off bus tour market in New York City: Coach, the long-standing market leader through its “Gray Line New York” brand, and City Sights, a firm that commenced operations in 2005. From 2005 until the 2009 creation of the joint venture, the parties engaged in vigorous head-to-head competition on price and product offerings that directly benefitted consumers.
According to the complaint, by late 2008, Coach was concerned that City Sights was challenging Gray Line’s dominant position and set out to eliminate competition. To this end, Coach approached City Sights with a proposal to combine Coach’s “existing Gray Line New York business with [its] main competitor in the market, City Sights” by creating a joint venture that would be the “sole player” in the market. Coach anticipated that one of the benefits of the combination would be that the parties could implement a price increase of approximately 10 percent. The complaint states that in a board presentation a Coach executive advised that one of the key “benefits of combining businesses” was “[i]mproved profitability,” which was driven, in part, by “assum[ing] [a] 10% fare increase.” The presentation explained that without the transaction, there would be no fare increase “due to competition.”
The complaint states that during early 2009, Coach and City Sights executed the agreement forming Twin America and each implemented the price increase discussed during negotiations. Specifically, both Coach and City Sights increased base fares for their hop-on, hop-off bus tour products by $5, raising the retail price of an adult ticket for each company’s popular “all routes” tour from $49 to $54. By merging their hop-on, hop-off bus tour operations, the parties ended the fierce competition between them that had benefitted consumers. The department said that no other operator of hop-on, hop-off bus tours in New York City has entered or expanded their services to sufficiently replace the competition lost through the parties’ combination in the more than three years that Twin America has been operating.
The transaction forming Twin America was not required to be reported under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which requires companies to notify and provide information to the department and the Federal Trade Commission before consummating certain acquisitions. As a result, the department did not learn about the joint venture until after it had been consummated.
As explained in the complaint, however, the New York State Attorney General began investigating Twin America shortly after its March 2009 formation and issued subpoenas seeking information about the joint venture. Shortly after the subpoenas were issued, Coach and City Sights delayed the state’s antitrust investigation by asserting that the Twin America transaction was within the exclusive jurisdiction of the federal Surface Transportation Board (STB), whose approval would exempt the parties’ transaction from the antitrust laws. In early 2012, after more than two years of proceedings, the STB denied approval of the transaction as not in the “public interest” and directed the parties to either dissolve Twin America or terminate minimal interstate operations that provided the basis for STB jurisdiction. Coach and City Sights chose the latter option and continue to operate their illegal joint venture today.Coach USA is a Delaware corporation with its principal place of business in Paramus, N.J. Coach owns more than 20 companies that operate scheduled bus routes, motorcoach tours, charters and city sightseeing tours in the United States and Canada. Coach is a wholly-owned subsidiary of Stagecoach Group plc, a leading international public transport company based in the United Kingdom.
City Sights is a New York limited liability company with its principal place of business in New York, N.Y. City Sights is part of the New York Airport Service group of companies, one of New York City’s largest operators of ground transportation, tour and sightseeing services for leisure and corporate markets.
Twin America is a Delaware limited liability company with its principal place of business in New York, N.Y. In addition to offering hop-on, hop-off bus tours through the City Sights and Gray Line brands, Twin America operates City Experts NY, a full-service concierge company.Justice Department Sues Nevada CPA<br /> <br /> to Block Promotion of Alleged Tax Fraud SchemeRead the Press Release
The United States has sued a Las Vegas-based CPA and two others to stop an alleged tax-fraud scheme, the Justice Department announced today. Named as defendants in the civil injunction suit were CPA Wayne Reeves, Reeves’ wife, Diane Vaoga, and their alleged co-promoter, James Stoll. The government complaint was filed last month in Las Vegas with the U.S. District Court for the District of Nevada. Announcement of the court filing was delayed until Reeves was served with court papers this week.
The government complaint alleges that Reeves, Vaoga and Stoll, acting through various entities, sell a sham-trust scheme that improperly reduces or eliminates customers’ reported federal income taxes. According to the government complaint, Reeves, Vaoga and Stoll maintain offices in Las Vegas and Wyoming, and promote their scheme to customers throughout the United States. The suit also seeks to bar the defendants from preparing federal income tax returns and to require them to turn over their customer lists to the government.
According to the government complaint, Reeves, touting his experience as a CPA, solicits customers to participate in the defendants’ illegal income/asset sheltering scheme. According to the complaint Stoll refers to himself as a “highly specialized paralegal” and creates the trusts, corporations and limited-liability partnerships needed to further the scheme. Vaoga allegedly serves as an officer of one of the entities at issue. The government alleges that the defendants’ scheme “enables participants to illegally shelter income and to hide assets from the Internal Revenue Service (IRS) through a series of bogus entities designed to disrupt and interfere with IRS tax assessment and collection efforts.”
The IRS lists misuse of trusts as one of its “Dirty Dozen” tax scams . The Justice Department has obtained injunctions against hundreds of tax-return preparers and tax-fraud promoters in the past decade. Information about these cases is available on the Justice Department website .
Justice Department Announces Consent Decree Regarding Orleans Parish Prison in New OrleansRead the Press Release
The Justice Department announced today that it has reached a proposed consent decree with class plaintiffs and Orleans Parish Prison (OPP) Sheriff Marlin Gusman following a comprehensive investigation and extensive settlement negotiations regarding unlawful conditions at the prison. The consent decree outlines remedial measures to address the allegations in the complaints filed by class plaintiffs and by the United States in Jones v. Gusman, i ncluding deficiencies in prisoner safety from physical and sexual assaults, medical and mental health care, suicide prevention, environmental and life safety and limited English proficiency (LEP) services for Spanish-speaking prisoners.
“Conditions at the Orleans Parish Prison have been dangerous and unacceptable for far too long,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “Arrest for a criminal offense should not subject anyone to a sentence of physical and sexual assaults, inadequate medical care, and risks of suicide and mental health decompensation.”
The Justice Department initiated a comprehensive investigation in February 2008, pursuant to the Civil Rights of Institutionalized Persons Act (CRIPA), with the assistance of experts in the fields of corrections, correctional medical and mental health care, and environmental safety and sanitation. The department issued comprehensive findings regarding its investigation in September 2009, with an emergency update to its findings in April 2012 after conditions had not improved for inmates. In September 2012, the department intervened in the Jones case, a pattern or practice lawsuit filed on behalf of current and future prisoners by the Southern Poverty Law Center.
Today’s agreement comprehensively addresses the deficiencies outlined in the department's findings by specifically targeting the systemic problems that caused the unconstitutional conditions at the jail. The agreement requires:
- Development and implementation of policies, procedures and training regarding all aspects of correctional management, including use of force, investigations of serious incidents, prevention of prison rape, and contraband prevention and detection.
- Tracking of facility data to determine where in the facility dangerous incidents are happening and what can be done to prevent further incidents.
- The provision of adequate medical and mental health care, including access to necessary medications and treatment, as well as appropriate supervision and intervention for individuals who are or become suicidal.
- Improvements in sanitation and fire safety, up until and after the new jail facility is built.
- Ensuring that Spanish-speaking inmates with limited English proficiency have access to Spanish language translations to enable them to access medical and other basic services.
- The appointment of an independent monitor with expertise in the areas covered by this agreement. In addition to monitoring of agreement implementation, the independent monitor will periodically inspect the facility for compliance and provide technical assistance to OPP staff regarding how to achieve compliance.
With today’s signing of the parties’ proposed consent decree, Sheriff Gusman is committing to implement vast improvements in safety, security, medical and mental health care, sanitation and LEP services at OPP through improved policies and procedures, training, accountability measures and independent monitoring.
The court will determine if the proposed consent decree is fair, adequate, reasonable and necessary, it will then decide the appropriate level and allocation of responsibility for jail funding under the consent judgment as between the sheriff and city of New Orleans, who are both defendants in Jones.
“The Justice Department is eager to move forward with proactive solutions to the inhumane conditions that have plagued the Orleans Parish Prison,” said Roy L. Austin, Jr. Deputy Assistant Attorney General for the Civil Rights Division. “Our execution of this agreement today is another step in our ongoing efforts in the City of New Orleans to promote public safety through a contemporary criminal justice system that meets constitutional standards. We look forward to working with all the necessary parties to see to it that this goal is achieved.”
This investigation was led by the Special Litigation Section of the Civil Rights Division. For more information on the Justice Department’s Civil Rights Division, please visit www.justice.gov/crt .
Justice Department Announces Availability of Funding to Federally-Recognized Tribes and Tribal ConsortiaRead the Press Release
WASHINGTON – The Department of Justice today announced the opening of their comprehensive grant solicitation period for funding to support public safety, victim services and crime prevention improvements for American Indian and Alaska Native tribal governments. The department’s Fiscal Year (FY) 2013 Coordinated Tribal Assistance Solicitation (CTAS) will be posted at 9:00 p.m. EST today at www.justice.gov/tribal/open-sol.html.
“Through the Coordinated Tribal Assistance Solicitation we have made it easier for tribes to tap much-needed federal funding for critical needs, such as violence against women,” said Acting Associate Attorney General Tony West. “We have made excellent progress in restoring a healthy government-to-government relationship with tribal nations, but we are far from finished with our work.”
CTAS is administered by the Justice Department’s Office of Justice Programs (OJP), the Office of Community Oriented Policing Services (COPS) and the Office on Violence Against Women (OVW). The funding can be used to enhance law enforcement; bolster adult and juvenile justice systems; prevent and control juvenile delinquency; serve sexual assault, domestic violence and elder victims; and support other efforts to combat crime. To view the fact sheet on the FY 2013 CTAS, visit www.justice.gov/tribal/ctas2013/ctas-factsheet.pdf.
Applications for CTAS are submitted through the Justice Department’s Grants Management System (GMS) which enables grantees to register and apply for CTAS online. Applicants should register early, but no later than Tuesday, March 5, 2013, in order to resolve difficulties in advance of the application deadline.
The FY 2013 CTAS reflects improvements and refinements from earlier versions. Feedback was provided to the department during tribal consultations and listening sessions, from a specially developed assessment tool about the application experience and from written comments from applicants and grantees.
For the FY2013 CTAS, a tribe or tribal consortium will submit a single application and select from nine competitive grant programs referred to as purpose areas. This approach allows the department’s grant-making components to consider the totality of a Tribal nation’s overall public safety needs. The deadline for submitting applications in response to this grant announcement is 9:00 p.m. EST on Tuesday, March 19, 2013.The nine purpose areas are:
• Public Safety and Community Policing (COPS)
• Comprehensive Tribal Justice Systems Strategic Planning (BJA)
• Justice Systems and Alcohol and Substance Abuse (BJA)
• Corrections and Correctional Alternatives (BJA)
• Violence Against Women Tribal Governments Program (OVW)
• Children’s Justice Act Partnerships for Indian Communities (OVC)
• Comprehensive Tribal Victim Assistance Program (OVC)
• Juvenile Justice (OJJDP)
• Tribal Youth Program (OJJDP)
Tribes or tribal consortia may also be eligible for non-tribal government-specific federal grant programs and are encouraged to explore other funding opportunities for which they may be eligible. Additional funding information may be found at www.grants.gov or the websites of individual agencies.
Today’s announcement is part of the Justice Department’s ongoing initiative to increase engagement, coordination and action on public safety in tribal communities.
Husband and Wife Sentenced in Virginia<br /> for Investment Fraud SchemeRead the Press Release
WASHINGTON – Former FBI agent John Robert “Bob” Graves and his wife Sara Turberville Graves were sentenced today in federal court to serve 135 months in prison and 36 months in prison, respectively, for their participation in an investment fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Virginia Neil H. MacBride; Jeffrey C. Mazanec, Special Agent in Charge of the FBI’s Richmond Field Office; and Keith A. Fixel, Inspector in Charge of the Charlotte Division of the U.S. Postal Inspection Service (USPIS).
John Graves, 53, and Sara Graves, 45, both of Fredericksburg, Va., were sentenced by U.S. District Judge James R. Spencer in the Eastern District of Virginia. In addition to their prison sentences, John and Sara Graves were both sentenced to serve three years of supervised release and were also ordered to pay $1,235,773 in restitution to the victims of their fraud.
On April 27, 2012, John and Sara Graves were both convicted of one count of conspiracy to commit mail and wire fraud, one count of mail fraud and four counts of wire fraud. John Graves was also convicted of three counts of Investment Advisers Act fraud and one count of making false statements to the FBI. The defendants were previously ordered to forfeit over $1.3 million, including the contents of several bank and brokerage accounts.
John and Sara Graves were indicted on Oct. 4, 2011. According to the evidence presented at trial, John Graves, who is a former Special Agent with the FBI, founded and served as president of Brooke Point Management (BPM), a corporation through which he sold insurance, performed estate and tax planning services and recruited and advised investment clients. He was also a registered investment advisory representative with, and CEO of, Compass Financial Advisers, an Indiana-based registered investment advisory firm. Sara Graves served as secretary of BPM and managing member of Dupont Auburn Real Estate, an Indiana real estate investment company. Between approximately June 2008 and July 2011, John and Sara Graves devised and executed a scheme to defraud approximately 11 investors located in central Virginia of approximately $1.3 million.
According to the evidence presented at trial, John and Sara Graves raised investor funds by selling investments in BPM and Dupont Auburn Real Estate through misrepresentations about the safety and security of the investments, as well as misrepresentations and omissions regarding their intended use of investor money. According to evidence presented at trial, John and Sara Graves used investor funds to, among other things, pay back previous investors who requested access to their money, purchase real estate, pay personal expenses, including credit card bills and time share dues, and to pay for John Graves’ personal acquisition of Compass Financial Advisers. As alleged at trial, John Graves continued to make misrepresentations even after the scheme was uncovered, through false and misleading filings in U.S. Bankruptcy Court and false and misleading statements to investors and to investigators from the U.S. Securities and Exchange Commission (SEC), FBI and USPIS.
The case is being prosecuted by Trial Attorney Kevin B. Muhlendorf of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Jamie L. Mickelson and Michael R. Gill of the Eastern District of Virginia. This case was investigated by the FBI and USPIS. The department acknowledges the significant assistance provided by the SEC, which referred the case for criminal prosecution.
This 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. 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 (FFETF) in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
HSBC Holdings Plc. and HSBC Bank USA N.A. Admit to Anti-Money Laundering and Sanctions Violations, Forfeit $1.256 Billion in Deferred Prosecution AgreementRead the Press Release
WASHINGTON – HSBC Holdings plc (HSBC Group) – a United Kingdom corporation headquartered in London – and HSBC Bank USA N.A. (HSBC Bank USA) (together, HSBC) – a federally chartered banking corporation headquartered in McLean, Va. – have agreed to forfeit $1.256 billion and enter into a deferred prosecution agreement with the Justice Department for HSBC’s violations of the Bank Secrecy Act (BSA), the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA). According to court documents, HSBC Bank USA violated the BSA by failing to maintain an effective anti-money laundering program and to conduct appropriate due diligence on its foreign correspondent account holders. The HSBC Group violated IEEPA and TWEA by illegally conducting transactions on behalf of customers in Cuba, Iran, Libya, Sudan and Burma – all countries that were subject to sanctions enforced by the Office of Foreign Assets Control (OFAC) at the time of the transactions.
The announcement was made by Lanny A. Breuer, Assistant Attorney General of the Justice Department’s Criminal Division; Loretta Lynch, U.S. Attorney for the Eastern District of New York; and John Morton, Director of U.S. Immigration and Customs Enforcement (ICE); along with numerous law enforcement and regulatory partners. The New York County District Attorney’s Office worked with the Justice Department on the sanctions portion of the investigation. Treasury Under Secretary David S. Cohen and Comptroller of the Currency Thomas J. Curry also joined in today’s announcement.
A four-count felony criminal information was filed today in federal court in the Eastern District of New York charging HSBC with willfully failing to maintain an effective anti-money laundering (AML) program, willfully failing to conduct due diligence on its foreign correspondent affiliates, violating IEEPA and violating TWEA. HSBC has waived federal indictment, agreed to the filing of the information, and has accepted responsibility for its criminal conduct and that of its employees.
“HSBC is being held accountable for stunning failures of oversight – and worse – that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries, and to facilitate hundreds of millions more in transactions with sanctioned countries,” said Assistant Attorney General Breuer. “The record of dysfunction that prevailed at HSBC for many years was astonishing. Today, HSBC is paying a heavy price for its conduct, and, under the terms of today’s agreement, if the bank fails to comply with the agreement in any way, we reserve the right to fully prosecute it.”“Today we announce the filing of criminal charges against HSBC, one of the largest financial institutions in the world,” said U.S. Attorney Lynch. “HSBC’s blatant failure to implement proper anti-money laundering controls facilitated the laundering of at least $881 million in drug proceeds through the U.S. financial system. HSBC’s willful flouting of U.S. sanctions laws and regulations resulted in the processing of hundreds of millions of dollars in OFAC-prohibited transactions. Today’s historic agreement, which imposes the largest penalty in any BSA prosecution to date, makes it clear that all corporate citizens, no matter how large, must be held accountable for their actions.”
“Cartels and criminal organization are fueled by money and profits,” said ICE Director Morton. “Without their illicit proceeds used to fund criminal activities, the lifeblood of their operations is disrupted. Thanks to the work of Homeland Security Investigations and our El Dorado Task Force, this financial institution is being held accountable for turning a blind eye to money laundering that was occurring right before their very eyes. HSI will continue to aggressively target financial institutions whose inactions are contributing in no small way to the devastation wrought by the international drug trade. There will be also a high price to pay for enabling dangerous criminal enterprises.”
In addition to forfeiting $1.256 billion as part of its deferred prosecution agreement (DPA) with the Department of Justice, HSBC has also agreed to pay $665 million in civil penalties – $500 million to the Office of the Comptroller of the Currency (OCC) and $165 million to the Federal Reserve – for its AML program violations. The OCC penalty also satisfies a $500 million civil penalty of the Financial Crimes Enforcement Network (FinCEN). The bank’s $375 million settlement agreement with OFAC is satisfied by the forfeiture to the Department of Justice. The United Kingdom’s Financial Services Authority (FSA) is pursuing a separate action.
As required by the DPA, HSBC also has committed to undertake enhanced AML and other compliance obligations and structural changes within its entire global operations to prevent a repeat of the conduct that led to this prosecution. HSBC has replaced almost all of its senior management, “clawed back” deferred compensation bonuses given to its most senior AML and compliance officers, and has agreed to partially defer bonus compensation for its most senior executives – its group general managers and group managing directors – during the period of the five-year DPA. In addition to these measures, HSBC has made significant changes in its management structure and AML compliance functions that increase the accountability of its most senior executives for AML compliance failures.
The AML Investigation
According to court documents, from 2006 to 2010, HSBC Bank USA severely understaffed its AML compliance function and failed to implement an anti-money laundering program capable of adequately monitoring suspicious transactions and activities from HSBC Group Affilliates, particularly HSBC Mexico, one of HSBC Bank USA’s largest Mexican customers. This included a failure to monitor billions of dollars in purchases of physical U.S. dollars, or “banknotes,” from these affiliates. Despite evidence of serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as “standard” risk, its lowest AML risk category. As a result, HSBC Bank USA failed to monitor over $670 billion in wire transfers and over $9.4 billion in purchases of physical U.S. dollars from HSBC Mexico during this period, when HSBC Mexico’s own lax AML controls caused it to be the preferred financial institution for drug cartels and money launderers.
A significant portion of the laundered drug trafficking proceeds were involved in the Black Market Peso Exchange (BMPE), a complex money laundering system that is designed to move the proceeds from the sale of illegal drugs in the United States to drug cartels outside of the United States, often in Colombia. According to court documents, beginning in 2008, an investigation conducted by ICE Homeland Security Investigation’s (HSI’s) El Dorado Task Force, in conjunction with the U.S. Attorney’s Office for the Eastern District of New York, identified multiple HSBC Mexico accounts associated with BMPE activity and revealed that drug traffickers were depositing hundreds of thousands of dollars in bulk U.S. currency each day into HSBC Mexico accounts. Since 2009, the investigation has resulted in the arrest, extradition, and conviction of numerous individuals illegally using HSBC Mexico accounts in furtherance of BMPE activity.
As a result of HSBC Bank USA’s AML failures, at least $881 million in drug trafficking proceeds – including proceeds of drug trafficking by the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia – were laundered through HSBC Bank USA. HSBC Group admitted it did not inform HSBC Bank USA of significant AML deficiencies at HSBC Mexico, despite knowing of these problems and their effect on the potential flow of illicit funds through HSBC Bank USA.The Sanctions Investigation
According to court documents, from the mid-1990s through September 2006, HSBC Group allowed approximately $660 million in OFAC-prohibited transactions to be processed through U.S. financial institutions, including HSBC Bank USA. HSBC Group followed instructions from sanctioned entities such as Iran, Cuba, Sudan, Libya and Burma, to omit their names from U.S. dollar payment messages sent to HSBC Bank USA and other financial institutions located in the United States. The bank also removed information identifying the countries from U.S. dollar payment messages; deliberately used less-transparent payment messages, known as cover payments; and worked with at least one sanctioned entity to format payment messages, which prevented the bank’s filters from blocking prohibited payments.
Specifically, beginning in the 1990s, HSBC Group affiliates worked with sanctioned entities to insert cautionary notes in payment messages including “care sanctioned country,” “do not mention our name in NY,” or “do not mention Iran.” HSBC Group became aware of this improper practice in 2000. In 2003, HSBC Group’s head of compliance acknowledged that amending payment messages “could provide the basis for an action against [HSBC] Group for breach of sanctions.” Notwithstanding instructions from HSBC Group Compliance to terminate this practice, HSBC Group affiliates were permitted to engage in the practice for an additional three years through the granting of dispensations to HSBC Group policy.
Court documents show that as early as July 2001, HSBC Bank USA’s chief compliance officer confronted HSBC Group’s Head of Compliance on the issue of amending payments and was assured that “Group Compliance would not support blatant attempts to avoid sanctions, or actions which would place [HSBC Bank USA] in a potentially compromising position.” As early as July 2001, HSBC Bank USA told HSBC Group’s head of compliance that it was concerned that the use of cover payments prevented HSBC Bank USA from confirming whether the underlying transactions met OFAC requirements. From 2001 through 2006, HSBC Bank USA repeatedly told senior compliance officers at HSBC Group that it would not be able to properly screen sanctioned entity payments if payments were being sent using the cover method. These protests were ignored.
“Today HSBC is being held accountable for illegal transactions made through the U.S. financial system on behalf of entities subject to U.S. economic sanctions,” said Debra Smith, Acting Assistant Director in Charge of the FBI’s Washington Field Office. “The FBI works closely with partner law enforcement agencies and federal regulators to ensure compliance with federal banking laws to promote integrity across financial institutions worldwide.”
“Banks are the first layer of defense against money launderers and other criminal enterprises who choose to utilize our nation’s financial institutions to further their criminal activity,” said Richard Weber, Chief, Internal Revenue Service-Criminal Investigation (IRS-CI). “When a bank disregards the Bank Secrecy Act’s reporting requirements, it compromises that layer of defense, making it more difficult to identify, detect and deter criminal activity. In this case, HSBC became a conduit to money laundering. The IRS is proud to partner with the other law enforcement agencies and share its world-renowned financial investigative expertise in this and other complex financial investigations.”
Manhattan District Attorney Cyrus R. Vance Jr., said, “New York is a center of international finance, and those who use our banks as a vehicle for international crime will not be tolerated. My office has entered into Deferred Prosecution Agreements with two different banks in just the past two days, and with six banks over the past four years. Sanctions enforcement is of vital importance to our national security and the integrity of our financial system. The fight against money laundering and terror financing requires global cooperation, and our joint investigations in this and other related cases highlight the importance of coordination in the enforcement of U.S. sanctions. I thank our federal counterparts for their ongoing partnership.”
Queens County District Attorney Richard A. Brown said, “No corporate entity should ever think itself too large to escape the consequences of assisting international drug cartels. In particular, banks have a special responsibility to use appropriate due diligence in monitoring the cash transactions flowing through their financial system and identifying the sources of that money in order not to assist in criminal activity. By allowing such illicit transactions to occur, HSBC failed in its global responsibility to us all. Hopefully, as a result of this historical settlement, we have gained the attention of not only HSBC but that of every other major financial institution so that they cannot turn a blind eye to the crime of money laundering.”
* * *
This case was prosecuted by Money Laundering and Bank Integrity Unit Trial Attorneys Joseph Markel and Craig Timm of the Criminal Division’s Asset Forfeiture and Money Laundering Section, and Assistant U.S. Attorneys Alex Solomon and Daniel Silver of the U.S. Attorney’s Office for the Eastern District of New York.The AML investigation was conducted by HSI’s El Dorado Task Force, a joint task force composed of members from more than 55 law enforcement agencies in New York and New Jersey, including special agents and investigators from IRS-CI and the Queens County District Attorney’s Office, other federal agents, state and local police investigators and intelligence analysts, with the assistance of DEA’s New York Division. The sanctions investigation was conducted by the FBI’s Washington Field Office.
The Money Laundering and Bank Integrity Unit is a corps of prosecutors with a boutique practice aimed at hardening the financial system against criminal money laundering vulnerabilities by investigating and prosecuting financial institutions and professional money launderers for violations of the anti-money laundering statutes, the Bank Secrecy Act and other related statutes.
The Department of Justice expressed gratitude to William Ihlenfeld II, U.S. Attorney for the Northern District of West Virginia; Assistant District Attorney Garrett Lynch of the New York County District Attorney’s Office, Major Economic Crimes Bureau; the Treasury Department’s Office of Foreign Assets Control; the Board of Governors of the Federal Reserve System; and the Office of the Comptroller of the Currency for their significant and valuable assistance.
Federal Court Permanently Bars Baton Rouge Tax Service from Preparing Tax ReturnsRead the Press Release
A federal court has permanently barred Larry Carnell Dixon Sr., a Louisiana tax return preparer, and his business, Dixon’s Tax Service, LLC from preparing federal tax returns for others, the Justice Department announced today. The civil injunction order, to which Dixon and Dixon’s Tax Service LLC, consented without admitting the allegations against them, was signed by Judge James Brady of the U.S. District Court for the Middle District of Louisiana.
The government amended complaint alleged that Dixon and the preparers at Dixon’s Tax Service, which has offices in Baton Rouge and Gonzales, La., prepared returns for customers that reported false deductions which generated higher refunds and/or the Earned Income Tax Credit (EITC), a refundable credit that can generate a refund exceeding the amount of income tax paid by an individual taxpayer.
The amended complaint alleged that Dixon and the preparers at Dixon’s Tax Service fabricated and inflated business expense deductions reported on many of their taxpayers’ Schedule Cs (Forms 1040) for existing and fictional businesses. By allegedly fabricating and inflating these deductions, Dixon and Dixon’s Tax Service reduced a client’s taxable income, which resulted in a reduced tax liability and possibly a higher refund. In addition, Dixon and his preparers have allegedly repeatedly prepared returns that claim the EITC for customers who did not qualify for it. The complaint alleges that Dixon’s alleged misconduct may have cost the United States as much as $39 million.
The IRS lists tax-preparer fraud as one of the “Dirty Dozen” tax scams. The Justice Department has obtained injunctions against hundreds of tax-return preparers and tax-fraud promoters in the past decade. Information about these cases is available on the Justice Department website.
Related Documents: United States v. Larry Carnell Dixon Sr., et al.
Amended Complaint for Permanent Injunction (PDF)
Order Entering Permanent Injunction (PDF)
Detroit-Area Physical Therapy Assistant Sentenced to 30 Months in Prison for Role in $13.8 Million Home Health Care Fraud SchemeRead the Press Release
WASHINGTON—A Detroit-area registered physical therapy assistant was sentenced today to serve 30 months in prison for her role in a nearly $13.8 million Medicare fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Robert D. Foley III of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Chicago Regional Office.
Hetal Barot, 30, of Westland, Mich., was sentenced by U.S. District Judge Gerald E. Rosen in the Eastern District of Michigan. In addition to her prison term, Barot was sentenced to serve two years of supervised release and ordered to pay $1,336,739 in restitution, jointly and severally with her co-defendants.
Barot pleaded guilty on June 26, 2012, to one count of conspiracy to commit health care fraud.
According to Barot’s plea agreement, beginning in approximately May 2009, Barot, a physical therapy assistant, was paid to falsify medical documentation for Physicians Choice Home Health Care LLC, a home health agency owned by her co-conspirators. Barot created evaluations, therapy revisit notes and other medical documentation memorializing purported physical therapy for patients she did not see or treat. According to court documents, she was instructed on how to falsify the medical documentation by a co-conspirator.
Barot also pleaded guilty to signing therapy revisit notes as a physical therapy assistant for patients she did not see or treat, knowing that the documents she falsified and the documents that she signed would be used to support false claims to Medicare for home health services.
Barot was subsequently paid to sign falsified medical documentation and files for First Care Home Health Care LLC, Quantum Home Care Inc. and Moonlite Home Care Inc., which were Detroit-area home health care companies also owned by Barot’s co-conspirators that billed Medicare.
From approximately May 2009 through September 2011, Medicare paid approximately $1,336,739 to the four home health care companies for fraudulent physical therapy claims based on falsified files and notes signed by Barot. The four home health companies for which Barot worked were paid in total approximately $13.8 million by Medicare.
Nine of Barot’s co-defendants have pleaded guilty, and one has been sentenced. Three co-defendants are fugitives, and six co-defendants await trial.
This case is being prosecuted by Trial Attorney Catherine K. Dick of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is 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.
Department of Justice Forfeits More Than $11 Million in Fraud Proceeds Located in Southern Florida on Behalf of an Australian Criminal ProsecutionRead the Press Release
WASHINGTON – The Department of Justice has forfeited cash and properties worth more than $11 million related to fraud proceeds located in the United States in connection with the conviction by Australian prosecutors of Rachel Cowen, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division announced today.
Cowen was convicted in Melbourne, Australia, for fraudulently acquiring and liquidating securities held by Computershare Limited, an Australian investment broker. This enforcement of the Australian forfeiture judgment marks the first time that the Department of Justice has sought and obtained a forfeiture judgment in a U.S. court under Section 2467 of Title 28 of the U.S. Code, which was amended in December 2010. This provision permits the enforcement of foreign restraining orders and forfeiture judgments against criminal proceeds by U.S. courts.
In granting the department’s request to enforce the Australian forfeiture judgment, the U.S. District Court for the District of Columbia authorized the forfeiture to the United States of a residence located in Miami-Dade County, Fla., appraised at $715,000, more than $4.9 million held in various bank accounts, precious metals accounts valued at approximately $5.5 million and two vehicles. U.S. Chief District Judge Lamberth granted the application and issued a final order enforcing the Australian judgment on Nov. 27, 2012. The U.S. Marshals executed the judgment against the bank and precious metals accounts today.
“This case demonstrates the Justice Department's resolve to prevent the United States from becoming a haven for criminal proceeds,” said Assistant Attorney General Breuer. “The department is committed to partnering with foreign law enforcement authorities to return the proceeds of crime to their rightful owners.”
According to court documents, in June 2008, Cowen defrauded a client of Computershare of more than 15 million Australian dollars by presenting false documents and fraudulently representing to Computershare that she had authority to obtain and liquidate securities. Accounts held by U.S. resident Raul Mari in Florida received wire transfers totaling 10.5 million Australian dollars from Australian accounts holding the fraud proceeds. Cowen was convicted in Australia of obtaining property by deception and sentenced to four years in prison, with three years suspended. The Supreme Court of Victoria at Melbourne subsequently issued a judgment forfeiting 15 assets controlled by Mari and located in the United States in connection with Cowen’s conviction.
The case was prosecuted by Deputy Chief Linda Samuel, Assistant Deputy Chief Jack de Kluiver and Trial Attorney Katharine Wagner of the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS). Valuable assistance was provided by the Criminal Division’s Office of International Affairs. The FBI and U.S. Marshals Service worked closely with AFMLS in this action. The United States worked with the Victoria Police and the Office of Public Prosecutions for the State of Victoria to execute the Australian forfeiture judgment.
10 December 2012
Standard Chartered Bank Agrees to Forfeit $227 Million for Illegal Transactions with Iran, Sudan, Libya, and BurmaRead the Press Release
WASHINGTON – Standard Chartered Bank, a financial institution headquartered in London, has agreed to forfeit $227 million to the Justice Department for conspiring to violate the International Emergency Economic Powers Act (IEEPA). The bank has agreed to the forfeiture as part of a deferred prosecution agreement with the Justice Department and a deferred prosecution agreement with the New York County District Attorney’s Office for violating New York state laws by illegally moving millions of dollars through the U.S. financial system on behalf of sanctioned Iranian, Sudanese, Libyan and Burmese entities. The bank has also entered into settlement agreements with the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Board of Governors of the Federal Reserve System.
The announcement was made by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; Ronald C. Machen Jr., U.S. Attorney for the District of Columbia; New York County District Attorney Cyrus R. Vance Jr.; George Venizelos, Assistant Director in Charge of the FBI New York Field Office; and IRS Criminal Investigation (IRS-CI) Chief Richard Weber.
A criminal information was filed today in federal court in the District of Columbia charging Standard Chartered Bank with one count of knowingly and willfully conspiring to violate IEEPA. Standard Chartered Bank has waived the federal indictment, agreed to the filing of the information and has accepted responsibility for its criminal conduct and that of its employees.
“For years, Standard Chartered Bank deliberately violated U.S. laws governing transactions involving Sudan, Iran, and other countries subject to U.S. sanctions,” said Assistant Attorney General Breuer. “The United States expects a minimum standard of behavior from all financial institutions that enjoy the benefits of the U.S. financial system. Standard Chartered’s conduct was flagrant and unacceptable. Together with the Treasury Department and our state and local partners, we will continue our unrelenting efforts to hold accountable financial institutions that intentionally mislead regulators to do business with sanctioned countries.”
“When banks dodge U.S. sanctions laws, they imperil our financial system and our national security,” said U.S. Attorney Machen. “Today’s agreement holds Standard Chartered Bank accountable for intentionally manipulating transactions to remove references to Iran, Sudan, and other sanctioned entities, and then further concealing these transactions through misrepresentations to U.S. regulators. This $227 million forfeiture should make clear that trying to skirt U.S. sanctions is bad for business.”
“Investigations of financial institutions, businesses, and individuals who violate U.S. sanctions by misusing banks in New York are vitally important to national security and the integrity of our banking system. Banks occupy positions of trust. It is a bedrock principle that they must deal honestly with their regulators. I will accept nothing less; too much is at stake for the people of New York and this country,” said District Attorney Vance. “These cases give teeth to sanctions enforcement, send a strong message about the need for transparency in international banking, and ultimately contribute to the fight against money laundering and terror financing. I thank our federal partners for their cooperation and assistance in pursuing this investigation.”
“Standard Chartered Bank regularly engaged in prohibited banking practices, took steps to conceal the illegal conduct, and misled regulators about the pattern of illegality,” said Assistant Director in Charge Venizelos. “New York is a world financial capital and an international banking hub, and you have to play by the rules to conduct business here.”
“To protect and uphold the integrity of the American financial system, it is essential that we ensure global banking institutions obey U.S. laws, including sanctions against other countries,” said IRS-CI Chief Weber. “Criminal Investigation, the world’s preeminent financial investigative agency, was proud to be part of this law enforcement team working collaboratively with our federal and local partners to hold Standard Chartered Bank accountable for their criminal actions. When we work together, it’s a force multiplier and it is government working smart. It’s what taxpayers expect of us.”
Standard Chartered Bank (SCB) operates a branch in New York (“SCB New York”) that provides wholesale banking services, primarily U.S.-dollar clearing for international wire payments. SCB New York also provides U.S.-dollar correspondent banking services for SCB’s branches in London and Dubai. According to court documents, from 2001 through 2007, SCB violated U.S. and New York state laws by moving millions of dollars illegally through the U.S. financial system on behalf of Iranian, Sudanese, Libyan and Burmese entities subject to U.S. economic sanctions. SCB knowingly and willfully engaged in this criminal conduct, which caused SCB’s branch in New York and unaffiliated U.S. financial institutions to process over $200 million in transactions that otherwise should have been rejected, blocked or stopped for investigation under Office of Foreign Assets Control regulations relating to transactions involving sanctioned countries and parties.
According to court documents, SCB engaged in this criminal conduct by, among other things, instructing a customer in a sanctioned country to represent itself using SCB London’s unique banking code in payment messages, replacing references to sanctioned entities in payment messages with special characters and deleting payment data that would have revealed the involvement of sanctioned entities and countries using wire payment methods that masked their involvement. This conduct occurred in various business units within SCB in locations around the world, primarily SCB London and SCB Dubai, with the knowledge and approval of senior corporate managers and the legal and compliance departments of SCB.
In addition to evading U.S. economic sanctions, SCB made misleading statements to regulators to further conceal its business with sanctioned countries. In August 2003, SCB wrote in a letter to OFAC that the use of cover payments for transactions related to sanctioned countries was contrary to SCB’s global instructions. In fact, SCB used the cover payment method to effect billions of dollars in payments, lawful and unlawful, through SCB New York originating from or for the benefit of customers in Iran, Libya, Burma and Sudan – all U.S. sanctioned countries – and continued to do so after the letter was sent.
During an extensive examination of all transactions at, by, or through SCB New York to detect suspicious activity, SCB failed to disclose to the Federal Reserve Bank of New York and New York Department of Financial Services that it was processing billions of dollars of non-transparent payments for customers in sanctioned countries. As a result of SCB’s failure to disclose these transactions, the regulators were misled about the nature and extent of SCB’s business with sanctioned countries.
SCB’s agreement to forfeit $227 million will settle forfeiture claims by the Department of Justice and New York State. In light of the bank’s remedial actions to date and its willingness to acknowledge responsibility for its actions, the Justice Department will recommend the dismissal of the information in 24 months, provided the bank fully cooperates with, and abides by, the terms of the deferred prosecution agreement.
Under the terms of its settlement agreement with SCB, OFAC’s penalty of $132 million will be satisfied by $227 million forfeited in connection with the bank’s resolution with the Justice Department. OFAC’s settlement agreement further requires the bank to conduct a review of its policies and procedures and their implementation, taking a risk-based sampling of U.S. dollar payments to ensure that its OFAC compliance program is functioning effectively to detect, correct and report apparent sanctions violations to OFAC.
The case was prosecuted by Money Laundering and Bank Integrity Unit Trial Attorney Clay Porter of the Criminal Division’s Asset Forfeiture and Money Laundering Section, and Assistant U.S. Attorney George P. Varghese of the National Security Section of the U.S. Attorney’s Office for the District of Columbia. The case was investigated by the FBI’s New York Field Office and IRS-Criminal Investigation’s Washington Field Division, with assistance from OFAC.
The Money Laundering and Bank Integrity Unit is a corps of prosecutors with a boutique practice aimed at hardening the financial system against criminal money laundering vulnerabilities by investigating and prosecuting financial institutions and professional money launderers for violations of the money laundering statutes, the Bank Secrecy Act and other related statutes.The Department of Justice expressed its gratitude to OFAC, under the leadership of Director Adam J. Szubin, and the Federal Reserve Bank of New York.
Former Dallas Securities Broker Pleads Guilty in Oklahoma for Role in Stock Manipulation SchemeRead the Press Release
WASHINGTON – A former securities broker pleaded guilty today for his role in a scheme to defraud thousands of investors through the manipulation of publicly traded stocks, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Danny C. Williams Sr. of the Northern District of Oklahoma.
Joshua Wayne Lankford, 39, of Dallas, pleaded guilty before U.S. Magistrate Judge Paul Cleary in the Northern District of Oklahoma to one count of money laundering.
“Joshua Wayne Lankford fled the country in an attempt to escape punishment for his role in a pump and dump investment scheme that allowed him to cash in at the expense of innocent investors,” said Assistant Attorney General Breuer. “We tracked him down, and today he stands as a convicted felon. We have no tolerance for individuals who take advantage of investors, and we will continue to devote significant resources to prosecuting those who threaten the integrity of our markets.”
“Mr. Lankford used his position as a stockbroker and owner of a brokerage to exploit unsuspecting investors of millions of dollars,” said U.S. Attorney Williams. “The investing public must depend upon the integrity of the financial markets. Those who commit such blatant stock fraud will be brought to justice.”
Lankford was originally charged along with four other defendants in a 24-count indictment unsealed on Feb. 10, 2009. Prior to trial, Lankford fled to Costa Rica, where he remained until he was extradited to the United States in May 2012. Two defendants, George David Gordon and Richard Clark, were convicted by a federal jury in May 2010 for their roles in the scheme. James Reskin pleaded guilty on March 26, 2010, to one count of conspiracy to commit securities fraud, wire fraud and money laundering and to one count of obstruction of a proceeding before the Internal Revenue Service (IRS) for his role in the scheme. Dean Sheptycki remains a fugitive.
According to court documents and evidence presented at the 2010 trial, the defendants manipulated the stocks of three companies: Deep Rock Oil & Gas Inc. and Global Beverage Solutions Inc., formerly known as Pacific Peak Investments, both of Tulsa, Okla., and National Storm Management Group Inc. of Glen Ellyn, Ill. According to court documents and evidence presented at the 2010 trial, the defendants devised and engaged in a scheme to defraud investors known as a “pump and dump,” in which they manipulated publicly traded penny stocks. A penny stock is a common stock that trades for less than $5 per share in the over the counter market, rather than on national exchanges. The defendants executed the scheme by obtaining a majority of the free-trading shares of stock of the company they intended to manipulate, using fraudulent and deceptive means to acquire the stock and/or remove the trading restrictions on the shares they obtained.
According to court documents and evidence presented at the 2010 trial, the defendants hid and “parked” their shares with various nominees, such as friends, relatives or other entities that they owned and controlled. Subsequently, they engaged in coordinated trading in order to create the appearance of an emerging market for these stocks, after which they conducted massive promotional campaigns in which unsolicited fax and email “blasts” were sent to millions of recipients. According to evidence presented at the 2010 trial, these blasts touted the respective stocks without accurately disclosing who was paying for the promotions, omitted that the defendants intended to sell their shares, and induced unsuspecting legitimate investors to purchase stock in the companies. The defendants and their nominees obtained significant profits by selling large amounts of shares after they had artificially inflated the stock price. For each of the three manipulated stocks, the co-conspirators’ sell-off caused declines of the stock price and left legitimate investors holding stock of significantly reduced value.
Evidence presented in the 2010 trial showed that the overall scheme resulted in illegal proceeds of more than $44 million.
According to Lankford’s guilty plea, he laundered $250,000 in proceeds derived from the stock manipulation scheme.
At sentencing, which is scheduled for March 26, 2013, Lankford faces a maximum sentence of 10 years in prison and a $250,000 fine.
The case is being prosecuted by Trial Attorneys Kevin Muhlendorf and Andrew Warren of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Catherine Depew for the Northern District of Oklahoma. The case is being investigated by IRS-Criminal Investigation and the FBI. The department wishes to thank the Securities and Exchange Commission for its assistance with the investigation. The department also wishes to thank the Criminal Division’s Office of International Affairs, the U.S. Department of State and the U.S. Marshals Service for their work in securing Lankford’s extradition.
This case is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.Former California Police Officer <br /> <br /> Indicted and Arrested on Civil Rights Charges for<br /> <br /> Sexually Assaulting Woman While Transporting Her to JailRead the Press Release
Bryan Benson, a former Anderson, Calif., police officer, was arrested today on charges of deprivation of civil rights for sexually assaulting a woman while transporting her to jail and of trying to conceal his criminal conduct, announced the Justice Department.
Benson, 28, was charged in a three-count indictment returned by a federal grand jury in the Eastern District of California and unsealed today. He is charged with one count of deprivation of rights under color of law, one count of obstruction of justice and one count of causing a false entry to be made in a document or record with the intent to impede investigation into his conduct.
The indictment alleges that on May 29, 2010, Benson sexually assaulted the arrested woman, resulting in bodily injury and involving aggravated sexual assault and kidnapping. The indictment further alleges that Benson obstructed justice by warning the woman not to report the crime, and that he caused a police dispatcher to falsely record his location in the dispatch logs in an effort to conceal his offense.
If convicted, Benson could face a maximum sentence of life in prison and a fine of $250,000 on the deprivation of civil rights charge, and 20 years in prison and a fine of $250,000 on both the obstruction and false-entry charges.
This case is being investigated by the FBI. The case is being prosecuted by Assistant U.S. Attorneys R. Steven Lapham and Michelle Prince for the Eastern District of California and Trial Attorney Chiraag Bains from the Justice Department’s Civil Rights Division.
An indictment is merely an accusation and the defendant is presumed innocent unless proven guilty.
Brooklyn, N.Y., Physician and Clinic President<br /> Pleads Guilty to Medicare Fraud SchemeRead the Press Release
WASHINGTON – A medical doctor and the president of two Brooklyn, N.Y., medical clinics pleaded guilty today for his role in a scheme resulting in more than $11.7 million in fraudulent Medicare claims, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.According to court documents, Ho Yon Kim, 86, of Flushing, N.Y., was the president of URI Medical Service PC and Sarang Medical PC, both doing business in Flushing, and purportedly providing physical therapy and electric stimulation treatment. He was also a rendering physician at both clinics. Kim pleaded guilty in Brooklyn federal court before U.S. Magistrate Judge Marilyn D. Go to a superseding information charging him with conspiracy to commit health care fraud.
During today’s plea hearing, Kim admitted that, from approximately March 2007 to October 2011, he conspired with others to induce Medicare beneficiaries to allow their Medicare numbers to be billed for medical services that were never provided or were not medically necessary. In exchange, the conspirators provided the beneficiaries with a variety of spa services such as massages, facials, lunches and dancing classes.
At sentencing, Kim faces a maximum penalty of 10 years in prison. A sentencing date has not yet been set.
Also charged by indictment in the scheme were medical doctors Hoi Yat Kam and Peter Lu, who await trial. The charges and allegations against them are merely accusations and they are considered innocent unless and until proven guilty.
The case is being prosecuted by Trial Attorneys Nicholas S. Acker and Bryan D. Fields of the Criminal Division’s Fraud section. The case was investigated by the FBI and the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), and brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
Brooklyn, N.Y., Doctor Sentenced to 30 Months in Prison for Role in Medicare and Private Insurance Fraud SchemeRead the Press Release
WASHINGTON – A Brooklyn, N.Y., board-certified colorectal surgeon, who owned and operated a New York medical clinic, was sentenced today to serve 30 months in prison for his role in a fraud scheme that billed Medicare and more than 10 private insurance companies for surgeries and other complex medical procedures that were never performed, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, Acting Assistant Director in Charge George Venizelos of the FBI’s New York Field Office and Special Agent in Charge Thomas O’Donnell of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) New York Regional Office.
Dr. Boris Sachakov, 43, of Brooklyn, was sentenced by U.S. District Judge Jack Weinstein in the Eastern District of New York. In addition to his prison term, Sachakov was sentenced to serve three years of supervised release, pay forfeiture of $1,103,069 and pay restitution of $1,103,069 to the victims of his crimes, Medicare and numerous private insurance plans.
Sachakov was found guilty by a jury on June 13, 2012, after a two-week trial in federal court in Brooklyn. Sachakov was found guilty of one count of health care fraud and five counts of health care false statements. The trial evidence showed that from January 2008 to January 2010, Sachakov, who owned and operated a clinic called Colon and Rectal Care of New York P.C., defrauded Medicare and private insurance companies by billing for surgeries and medical services that he never provided. According to trial testimony, several private insurance companies began investigating Sachakov after receiving complaints from patients that Sachakov had submitted claims for surgeries, including hemorrhoidectomies, that he never performed.
At trial, 11 of Sachakov’s patients testified that they had not received the surgeries and other medical services for which Sachakov had billed their insurance companies. The evidence presented at trial showed that the medical records Sachakov created and maintained on these patients, including letters to the patient’s referring doctors, did not support the extensive billings he submitted. After Sachakov was confronted by two insurance companies about complaints of billings for surgeries that did not happen, the evidence at trial showed that Sachakov sent letters to his patients, asking them to falsely certify in writing that they had received the phony surgeries. The indictment alleged that Sachakov submitted and caused the submission of more than $22.6 million in false and fraudulent claims to Medicare and private insurance companies, and received more than $9 million on those claims.
The case was prosecuted by Trial Attorney Sarah M. Hall and Assistant Chief William Pericak of the Criminal Division’s Fraud Section, with assistance from Fraud Section Trial Attorneys Arun Bhoumik and Bryan Fields. The case was investigated by the FBI, HHS-OIG, the New York State Office of Medicaid Inspector General and the New York State Department of Financial Services, Criminal Investigative Division.
The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is 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.
British Contractor Agrees to Plead Guilty to Wire Fraud Conspiracy Related to Iraq Reconstruction EffortsRead the Press Release
WASHINGTON – British contractor APTx Vehicle Systems Limited agreed today to plead guilty to conspiracy to defraud the United States, the Coalition Provisional Authority that governed Iraq from April 2003 to June 2004, the government of Iraq and JP Morgan Chase Bank. A civil settlement agreement resolving a related action filed under the False Claims Act was also announced today.
APTx was charged with one count of wire fraud conspiracy in a criminal information filed today in U.S. District Court in Massachusetts. As part of the plea agreement filed with the information, APTx agreed to pay a criminal fine of $1 million.
The charges and resolutions were announced today by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, Principal Deputy Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division and U.S. Attorney for the District of Massachusetts Carmen M. Ortiz.
According to the criminal information, APTx engaged in a fraudulent scheme involving an August 2004 contract valued at over $8.4 million for the procurement of 51 vehicles for the Iraqi Police Authority. The contract was initially awarded to a different, “prime” contractor, which in turn subcontracted the procurement to APTx for over $5.7 million. Payment under the contract was by letters of credit issued by JP Morgan Bank.
The criminal information further charges that in May and June 2005, APTx submitted shipping documents to JP Morgan to draw down on the letters of credit, which falsely and fraudulently asserted that all 51 vehicles were produced and ready to ship to Iraq. In fact, as APTx knew, none of the vehicles had been built, none of the vehicles were legally owned or held by APTx and none of the vehicles were in the process of transport to Iraq. The fraudulent shipping documents also listed a company as the freight carrier that APTx knew was not a shipping company and named a fictitious company as the freight forwarder.
In a related civil settlement agreement, APTx, along with Alchemie Grp Ltd., a United Kingdom corporation, and Haslen Back, the director and shareholder of Alchemie, agreed to pay $2 million to the United States to resolve claims originated by Ian Rycroft, an individual retained by the prime contractor to oversee transportation of the vehicles, under the qui tam, or whistleblower, provisions of the False Claims Act in the District of Massachusetts. The False Claims Act authorizes private whistleblowers to bring suit for false claims submitted to the United States and to share in any recovery. Rycroft’s estate will receive $540,000 as its share of the settlement amount.Benjamin Kafka, a representative for APTx in the United States, was charged on April 13, 2009, with one count of misprision of a felony in connection with his role in the wire fraud conspiracy. According to court documents, Kafka allegedly allowed APTx to use his corporate name and identity as the freight carrier and freight forwarder on the fraudulent shipping documents presented to JP Morgan.
The criminal case is being prosecuted by Director of Procurement Fraud Catherine Votaw and Trial Attorney William H. Bowne III of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorneys Eugenia M. Carris and Jeffrey Cohen of the District of Massachusetts. The civil case is being handled by Trial Attorney Diana Younts of the Civil Division, and by Assistant U.S. Attorney Christine Wichers of the District of Massachusetts. The investigation was conducted by the Special Inspector General for Iraq Reconstruction, the Defense Criminal Investigative Service Boston Resident Agency and U.S. Immigration and Customs Enforcement Homeland Security Investigations in Washington, D.C.
7 December 2012
Las Vegas Playboy Bloods Member Pleads Guilty to Racketeering ChargesRead the Press Release
WASHINGTON – A Las Vegas man pleaded guilty today in federal court to conspiring to conduct a racketeering enterprise as a member of the Playboy Bloods criminal street gang, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Daniel G. Bogden of the District of Nevada.
Reginald Dunlap, 30, aka “Bowlie,” pleaded guilty today before U.S. District Judge Phillip Pro in the District of Nevada to one count of conspiracy to engage in a racketeering enterprise.
According to court documents, the Bloods is a criminal street organization whose members engage in drug trafficking and acts of violence. The Playboy Bloods is a local affiliate of the Bloods, with control and operation within the Las Vegas metropolitan area. A subset of the Playboy Bloods is Full Throttle Clique, a group made up of Playboy Bloods members who engage in acts of violence, including murder.
According to court documents, Dunlap is a member of the Playboy Bloods and the Full Throttle Clique. Dunlap pleaded guilty to conspiring to conduct and participate in the conduct of the affairs of the Playboy Bloods through a pattern of racketeering activity.
Dunlap pleaded guilty today to aiding and abetting the murder of Billy Thomas. On Oct. 31, 2004, Playboy Bloods and Full Throttle member Quazi Burns was murdered, and Playboy Bloods members believed that a rival Crips gang member was responsible for the crime. That night, according to court documents, several Playboy Bloods members, including the defendant, met at the Jets housing complex located in Playboy Blood controlled territory, and discussed retaliating against the Crips. Dunlap and the other Playboy Bloods members got into two cars and spotted Billy Ray Thomas, who was working on his car, at Pecos Terrace Apartments in Las Vegas. According to court documents, several Playboy Bloods’ members got out of the cars carrying firearms, approached Thomas and shot and killed him, believing that he was a Crips gang member.
As part of his guilty plea, Dunlap also admitted to being in possession of 34 grams of crack cocaine and over $2,000 in cash on June 25, 2008, during a traffic stop by the North Las Vegas Police Department.
At sentencing, scheduled for April 5, 2013, Dunlap faces a maximum penalty of 20 years in prison.
Dunlap is one of 10 defendants charged in October 2008 with conducting racketeering activity through the Playboy Bloods criminal enterprise. To date, eight defendants have pleaded guilty to this indictment and six have been sentenced.
This case is being prosecuted by Assistant U.S. Attorneys Nicholas D. Dickinson and Phillip N. Smith Jr. of the District of Nevada an
Trial Attorney Kevin L. Rosenberg of the Criminal Division’s Organized Crime and Gang Section. The case was investigated by the FBI and the Las Vegas Metropolitan Police Department.