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16 April 2012
Ohio Insurance Salesman Pleads Guilty to Failing to File Income Tax ReturnsRead the Press Release
Thomas Mitchell of Mansfield, Ohio pleaded guilty before United States District Judge George J. Limbert of the Northern District of Ohio to criminal information charging him with willfully failing to file an income tax return with the Internal Revenue Service (IRS), the Justice Department and IRS announced today.
According to the plea agreement and statements made in court, Mitchell, an independent Aflac insurance salesman, failed to file individual income tax returns and pay taxes for the years 1999-2009, despite earning sufficient income during those years. As part of the plea agreement, Mitchell has agreed to pay restitution to the IRS in the amount of $111,639.
Mitchell faces a potential maximum sentence of one year in prison and a fine of up to $100,000. Sentencing is set for July 18, 2012.
This case was investigated by IRS-Criminal Investigation and prosecuted by Trial Attorneys Melissa S. Siskind and Sean R. Delaney of the Tax Division.
Former Partner at Major International Accounting Firm Sentenced to Prison for Tax CrimesRead the Press Release
Stephen A. Favato, a resident of Point Pleasant Beach, N.J., and a former partner in BDO Seidman LLP’s Woodbridge, N.J., office, was sentenced to 18 months in prison for tax crimes, the Justice Department and the Internal Revenue Service (IRS) announced today. In August 2010, a jury sitting in Newark, N.J., found Favato guilty of one count of corruptly endeavoring to obstruct and impede the Internal Revenue laws and one count of aiding and assisting in the preparation and filing of a false income tax return.
During the trial, evidence presented proved that from late 2001 through April 2005, Favato attempted to obstruct the IRS by, among other conduct, advising his client, Daniel Funsch, on how to include false items on the 2002, 2003 and 2004 joint income tax returns for Funsch and his then-wife. Additionally, the evidence proved that Favato knowingly prepared and signed false joint income tax returns for the Funsches for these years, causing over $114,000 of tax loss to the IRS in connection with the Funsches’ filed 2002 return and attempting to cause over $70,000 of tax loss in connection with tax years 2003 and 2004.
The evidence presented at the trial established that Favato advised Funsch to significantly reduce the salary payments that Funsch was receiving from his corporation and to instead have this compensation paid to Funsch’s limited liability company, Great Escape Yachts LLC, in the form of purported lease payments for Funsch’s yacht. However, his corporation had not leased the yacht. This course of action recommended by Favato enabled Funsch to fraudulently deduct his personal yacht expenses as business expenses. In addition, the evidence presented showed that Favato advised Funsch on how to falsely increase his expenses in order to fraudulently eliminate a portion of the gain on three properties that Funsch sold in 2002 and 2004. Finally, the evidence showed that Favato advised Funsch to report inflated charitable contributions on Funsch’s 2003 tax return. The jury acquitted Favato on one count of tax evasion.
The case was investigated by Special Agents of the IRS – Criminal Investigation and prosecuted by Trial Attorneys Patrick J. Murray and Sean Delaney of the Justice Department’s Tax Division.
Additional information about the Tax Division and its enforcement efforts is available at www.usdoj.gov/tax .
13 April 2012
Two Harlan County, Kentucky, Women Plead Guilty to Federal Hate Crime Against Individual Because of Sexual OrientationRead the Press Release
The Justice Department announced today that two Harlan County women admitted they assisted others in kidnapping and assaulting a gay man because of his sexual orientation.
Today, the U.S. District Court in London, Ky., unsealed guilty pleas, previously entered by 19-year-old Mable Ashley Jenkins and 19-year-old Alexis LeeAnn Jenkins. The defendants pleaded guilty to aiding and abetting kidnapping and aiding and abetting the hate crime assault against Kevin Pennington on April 4, 2011.
The women admitted they lured Pennington into a truck with two other defendants, Anthony Ray Jenkins and David Jason Jenkins. The truck was driven to an Eastern Kentucky state park where Pennington was allegedly assaulted by the male defendants.
Both women waived their right to be indicted and pleaded guilty to the charges. Mable Jenkins pleaded guilty Tuesday and Ashley Jenkins pleaded guilty Wednesday of this week. Their plea agreements remain under seal.
The women admitted to violating the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act. The act expanded federal jurisdiction to include certain hate crimes motivated by a victim’s sexual orientation. This case marks the first Federal convictions in the nation for a violation of this provision of the federal hate crime law.
The Shepard-Byrd law criminalizes certain acts of physical violence causing bodily injury motivated by any person’s actual or perceived race, color, national origin, religion, sexual orientation, gender, gender identity or disability.
Alexis and Mable Jenkins will appear for sentencing in August. The kidnapping and hate crime offenses carry maximum penalties of up to life in prison.
The indictments concerning Anthony Jenkins and David Jenkins were returned Wednesday, April 11. Both men pleaded not guilty at their arraignments yesterday and a trial date has been set for June 18. An indictment is only an accusation, and the defendants are presumed to be innocent until proven guilty.
This case was investigated by special agents with the FBI and Kentucky State Police. This case is being prosecuted by Assistant U.S. Attorney Hydee Hawkins in the Eastern District of Kentucky and Trial Attorney Angie Cha with the Civil Rights Division at the Department of Justice.
Justice Department Settles with Air Methods Corporation and Lifemed Alaska Llc to Enforce the Employment Rights to Army National Guard Member in AlaskaRead the Press Release
The Justice Department today announced that it has resolved a lawsuit alleging that Air Methods Corp. and LifeMed Alaska, LLC willfully violated the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) by discriminating against and failing to reemploy Chief Warrant Officer Third Class Jonathon L. Goodwin of Wasilla, Alaska. The suit was filed in federal district court in Alaska.
Under USERRA, an employer is prohibited from discriminating against service members because of their membership in the military, past military service or future service obligations. In addition, and subject to certain limitations, USERRA requires that service members who leave their civilian jobs to serve in the military be reemployed promptly by their civilian employers in the positions they would have held if their employment had not been interrupted by military service or in positions of comparable seniority, pay and status.
Goodwin has been a member of the Army National Guard for 20 years, with honorable service as both a fixed-wing and helicopter pilot. The Justice Department’s complaint alleged that Goodwin was employed by Air Methods as a helicopter pilot when he was called upon for a nine month period of active duty, including a period of deployment to Iraq. According to the complaint, at the end of his deployment, Goodwin sought to be reemployed by Air Methods and assigned to a contract helicopter pilot position with LifeMed Alaska. The complaint alleged that LifeMed refused to accept Goodwin for the contract position due to LifeMed’s bias against recently returned service members as well as an unwillingness to accommodate Goodwin’s possible future military obligations. The complaint also alleged that Air Methods furthered LifeMed’s discriminatory action by refusing to assign Goodwin to the LifeMed contract and, consequently, failed to offer Goodwin proper reemployment.
Under the terms of the settlement agreement, Air Methods will immediately reinstate Mr. Goodwin, will assign him to the first available position on the LifeMed contract at Wolf Lake Base in Alaska, and will pay him an undisclosed sum of money in back pay and other damages.
“Military reservists provide an important and valuable service to our country, often at great personal sacrifice. No service member should be disadvantaged because he or she answered the call of duty,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Justice Department is committed to vigorously enforcing federal laws that protect the employment rights of our service members.”
“Here, in Alaska, we are committed to preserving and protecting the rights of our military and military reserve members. We honor and support their dedication and service to our community and our nation,” said Karen Loeffler, U.S. Attorney for the District of Alaska.
The case stemmed from a referral by the Department of Labor following an investigation by the Department of Labor’s Veterans’ Employment and Training Service and was jointly litigated by the Department of Justice Civil Rights Division and the U.S. Attorney’s Office for the District of Alaska.
Additional information about USERRA can be found on the Justice Department website: www.servicemembers.gov and www.usdoj.gov/crt/emp , as well as on the Labor Department’s website at www.dol.gov/vets/programs/userra/main.htm .
Five Aryan Brotherhood of Texas Gang Members Sentenced in Houston for Violent Crimes in Aid of RacketeeringRead the Press Release
WASHINGTON – Five members of the Aryan Brotherhood of Texas (ABT) have been sentenced to federal prison for their role in an aggravated assault that took place in Tomball, Texas, in September 2008, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas.
U.S. District Court Senior Judge Ewing Werlein Jr. today sentenced Zechariah Aaron Johnston, 31, aka “Oz,” to 84 months in prison; Stephen Kyle Knebel, 33, aka “Lil Evil,” to 24 months in prison; Robert Lynn Sheats, 33, aka “Dirty,” to 36 months in prison; and Johnny Ray Nichols, 35, aka “Nick,” to 18 months in prison. On March 23, 2012, Senior Judge Werlein sentenced Rusty Dwayne Plante, 34, aka “Rusty,” to 36 months in prison.
All five defendants pleaded guilty for their role in the aggravated assault of an ABT prospect member. Johnston, Knebel and Nichols each pleaded guilty to racketeering aggravated assault. Plante and Sheats pleaded guilty to conspiracy to commit racketeering aggravated assault. All five defendants are from the greater Houston area.
According to court documents, the defendants were members of the ABT, a powerful race-based, state-wide organization that operated inside and outside of state and federal prisons throughout the United States. The ABT was established in the early 1980s within the Texas prison system. The gang modeled itself after and adopted many of the precepts and writings of the Aryan Brotherhood, a California-based prison gang that was formed in the California prison system during the 1960s. According to court documents, previously, the ABT was primarily concerned with the protection of white inmates and white supremacy/separatism. Over time, the ABT has expanded its criminal enterprise to include illegal activities for profit.
According to court documents, the ABT enforces its rules and promotes discipline among its members, prospects and associates through murder, attempted murder, conspiracy to murder, assault, robbery and threats against those who violate the rules or pose a threat to the enterprise. Members, and oftentimes associates, are required to follow the orders of higher-ranking members, often referred to as “direct orders.”
According to court documents, Johnston, Knebel, Plante, Nichols and Sheats, along with seven fellow ABT gang members, participated in the beating of an ABT prospect member at the home of another ABT gang leader, Steven Walter Cooke, 48, aka “Stainless,” in Tomball, on Sept. 22, 2008. The ABT prospect, who sustained serious bodily injury, was beaten by ABT gang members because he violated ABT rules of conduct.
Eleven of the 12 co-defendants have pleaded guilty for their roles in the assault. The 12th ABT gang member, David Harlow, 43, aka, “Bam Bam,” was found guilty by Senior Judge Werlein on March 21, 2012, at trial in the Southern District of Texas.
This case is being investigated by a multi-agency task force consisting of the Bureau of Alcohol, Tobacco, Firearms and Explosives; the Drug Enforcement Administration; the FBI; the U.S. Marshals Service; the Texas Ranger Division – Texas Department of Public Safety; the Walker County, Texas, Sheriff’s Office; the Montgomery County, Texas, Sheriff’s Department; the Houston Police Department-Gang Division; the Tomball Police Department; the Texas Department of Criminal Justice – Inspector General; and the Harris County, Texas, Sheriff’s Office.
The case is being prosecuted by David Karpel of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorney Jay Hileman of the Southern District of Texas.
Departments of Justice and Education Reach Agreement with the University of California, San Diego to Resolve Harassment AllegationsRead the Press Release
The Departments of Justice and Education reached a settlement agreement with the University of California, San Diego (UCSD), to resolve an investigation into complaints of racial harassment against African-American students on campus. Titles IV and VI of the Civil Rights Act of 1964 each prohibit harassment based on race.
The complaints alleged multiple incidents of racial harassment on campus, including public displays of nooses and a Ku Klux Klan-style hood, and the hosting of an off-campus party where students were invited to dress as stereotypes of African-Americans. After conducting an extensive investigation into the alleged incidents, and following the receipt of additional complaints of racial discrimination and harassment on campus, the Departments of Justice and Education worked collaboratively with the university to address concerns regarding racial hostility on campus.
UCSD voluntarily entered into a resolution agreement with the departments. Under the terms of the resolution agreement, UCSD will take steps to prevent racial harassment on campus, respond appropriately to harassment that occurs, and eliminate any hostile environment resulting from harassment. The university has agreed to revise its campus policies and procedures related to racial harassment to ensure they are consistent with federal civil rights laws; maintain an Office for the Prevention of Harassment and Discrimination to receive, investigate, and resolve complaints of harassment and discrimination; and provide mandatory trainings for staff and students on the university’s anti-discrimination policies and procedures. The university also voluntarily initiated a number of additional programs to address campus climate issues, and the departments will monitor the implementation of those programs to evaluate their impact on resolving the departments’ concerns.
“Students have a right to seek and obtain an education without facing racial harassment. UCSD, like all colleges and universities, has an obligation to make clear that racial discrimination and harassment on campus will not be tolerated, and this agreement is a significant step in the right direction,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “We commend the university for working with us to address this matter, and we recognize the importance of this agreement in the context of larger efforts by the UC system to create supportive and inclusive learning environments for students. We look forward to working with UCSD as it implements the measures and programs called for in the agreement.”
“We salute UCSD for taking these steps and we hope the entire school community learns from this experience and works together to overcome ignorance and intolerance,” said Russlynn Ali, Assistant Secretary for the Education Department’s Office for Civil Rights. “America is a country that has always celebrated its diversity. Nowhere is that more important than in our classrooms and schools – at every level – from the earliest grades to our colleges and universities. The Department of Education and the Department of Justice will continue to work cooperatively with UCSD to ensure that all students are safe from harassment and discrimination.”
The enforcement of Title IV and Title VI are top priorities of the Justice Department’s Civil Rights Division. Additional information about the Civil Rights Division is available on its website at www.justice.gov/crt . Enforcement of Title VI is also a top priority of Department of Education’s Office for Civil Rights. Additional information about the Office for Civil Rights is available on its website at www2.ed.gov/about/offices/list/ocr/index.html .
Ammed Direct Llc to Pay $18 Million to United States and Tennessee to Resolve False Claims AllegationsRead the Press Release
AmMed Direct LLC has agreed to pay the United States and the state of Tennessee $18 million plus interest to settle allegations that it submitted false claims to Medicare and Tennessee Medicaid (TennCare), the Justice Department announced today. Under the agreement, AmMed will pay $17,560,997 to the United States and $439,003 to Tennessee.
The United States and Tennessee allege that, from September 2008 through January 2010, the Antioch, Tenn.-based company submitted false claims to Medicare and TennCare for diabetes testing supplies, vacuum erection devices and heating pads. The United States and Tennessee asserted that AmMed widely advertised free cookbooks in order to induce Medicare beneficiaries to contact AmMed or its hired telemarketing firm. Once AmMed confirmed that a beneficiary was covered by Medicare, AmMed representatives improperly attempted to sell the beneficiary supplies that would be paid for by Medicare. Medicare rules prohibit medical businesses from making unsolicited telephone contact with beneficiaries to sell them their products, unless specific exceptions apply.
The United States and Tennessee further alleged that, as a result of AmMed’s improper marketing, many Medicare beneficiaries who called AmMed to receive the advertised free cookbooks returned their diabetic supplies to AmMed. AmMed, however, failed to timely refund the money to Medicare or TennCare. Rather, AmMed allowed the unpaid refunds to accrue from September 2006 until January 2010. Prior to learning of the United States’ and Tennessee’s investigation, AmMed disclosed to the Medicare Administrative Contractors its failure to refund monies for returned supplies and began paying the refunds to Medicare and TennCare.
“Government health care programs have in place important rules that prohibit suppliers from improperly contacting beneficiaries regarding their products,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division. “The Department of Justice is committed to ensuring that companies that bill government health care programs abide by those rules.”
“Enforcement of the False Claims Act remains a top priority of this office,” said Jerry E. Martin, U.S. Attorney for the Middle District of Tennessee. “All Medicare providers must comply with Medicare rules for reimbursement. The U.S. Attorney’s Office for the Middle District of Tennessee will continue to devote the resources necessary to vigorously protect taxpayers’ interests and aggressively pursue fraud and abuse.”
“We are grateful for the hard work and cooperation of our state and federal agencies in this case,” said Tennessee Attorney General Bob Cooper. “Working to stop healthcare fraud is a major priority for all of us because ultimately everyone pays for this kind of theft.”
The allegations arose from a lawsuit brought under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private citizens with knowledge of false claims against the government to bring an action on behalf of the United States and to share in any recovery. The qui tam action was filed in 2009 in federal district court in Nashville, Tenn., by former AmMed Direct employee Bryan McNeese. The relator will receive approximately $2.88 million as his share of the settlement proceeds.
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 more than $6.7 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 $9 billion.
The case was investigated by the Department of Health and Human Services- Office of Inspector General (HHS-OIG), the U.S. Attorney’s Office for the Middle District of Tennessee and the Tennessee Attorney General’s Office. The Justice Department’s Civil Division monitored the investigation.
The claims settled by today’s agreement are allegations only; there has been no determination of liability.
12 April 2012
Two Harlan County, Kentucky, Men Indicted for Federal Hate Crime Against Individual Because of Sexual OrientationRead the Press Release
WASHINGTON – Two Harlan County, Ky., men were indicted today for their roles in kidnapping and assaulting a gay man because of his sexual orientation, the Justice Department announced today.
A federal grand jury in London, Ky., returned a three-count indictment charging David Jason Jenkins, 37, and Anthony Ray Jenkins, 20, for kidnapping and assaulting Kevin Pennington, and for conspiring with each other and with other unnamed individuals to commit the kidnapping. The indictment charges the men with committing a hate crime in violation of the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act, which expanded federal jurisdiction to include certain assaults motivated by someone’s sexual orientation. This case marks the first federal hate crime charging a violation of the sexual orientation provision of the statute.
The indictment alleges that on April 4, 2011, the two defendants kidnapped and assaulted Kevin Pennington because of Pennington’s sexual orientation. According to the indictment, the defendants enlisted two women to trick Pennington into getting into a truck with the defendants, so that the defendants could drive Pennington to a state park and assault him. According to the indictment, the defendants then drove Pennington a secluded area of the Kingdom Come State Park in Kentucky and assaulted him.
If convicted, the defendants face a maximum penalty of up to life in prison for each charge.
The Shepard-Byrd law, enacted in 2009, criminalizes acts of physical violence causing bodily injury motivated by any person’s actual or perceived race, color, national origin, religion, sexual orientation, gender, gender identity or disability.
This case is being prosecuted by Assistant U.S. Attorney Hydee Hawkins with the U.S. Attorney Office for the Eastern District of Kentucky and Trial Attorney Angie Cha with the Civil Rights Division.
An indictment is only an accusation, and the defendants are presumed to be innocent until proven guilty.
Three Tennessee Men Sentenced for Launching Mortar-Style Fireworks at African-AmericansRead the Press Release
Colton L. Partin, 22, of Apison, Tenn., Kyle C. Montgomery, 23, and James Smiley, 27, both of Chattanooga, Tenn., were sentenced today by Chief U.S. District Court Judge Curtis L. Collier. Smiley and Montgomery were sentenced to 12 months in prison and three years of supervised release for conspiring to intimidate African-Americans in the free exercise and enjoyment of housing rights secured to them by the laws of the United States. Partin was sentenced to 18 months probation, including six months home confinement. All three men will also serve 300 hours of community service. The men pleaded guilty on Jan. 6, 2012.
In the early morning hours of July 9, 2011, at least four African-American residents of East Lake Courts Public Housing Authority in Chattanooga were on the porch of one of the units. As they conversed, defendants Smiley, Partin and Montgomery drove by several times yelling racial slurs and launched mortar-type fireworks, from a cylinder, directly toward these individuals. The individuals on the porch avoided the explosions, one of which was captured on video by the Chattanooga Housing Authority. Another explosion shattered a window pane in an apartment of an African-American resident of the East Lake Courts. This individual was asleep inside with her infant child and her boyfriend's adolescent siblings.
Based on a 911 call, the Chattanooga Police Department swiftly apprehended and arrested Smiley, Partin and Montgomery. Fireworks, like the ones fired at the individuals on the porch, were photographed and observed in the bed of the truck. Smiley, Partin and Montgomery admitted their involvement to the officers. They further admitted that the explosives were fired toward the individuals in order to intimidate them because they were African-American.
“Today’s sentence sends the clear message that every person in our country has the right to live peacefully in their communities free from hate-fueled acts of violence,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The department is committed to vigorously enforcing our nation’s civil rights laws.”
“This is an example to others that the exhibition of actions based upon racial or any other kind of prejudice will result in federal convictions and confinement, said Bill Killian, U.S. Attorney for the Eastern District of Tennessee. Acts of violence based upon prejudice, regardless of the nature of the prejudice, will be actively prosecuted.”
This case was investigated by the FBI and Chattanooga Police and is being prosecuted by Assistant U.S. Attorney Chris Poole of the U.S. Attorney’s Office for the Eastern District of Tennessee and Trial Attorney Myesha Braden of the Civil Rights Division.
Pennsylvania Man Arrested for Tax EvasionRead the Press Release
Stephen Thomas of York, Pa., was arrested on charges of attempted tax evasion, the Justice Department and Internal Revenue Service (IRS) announced today. On April 4, 2012, a federal grand jury in the District of Columbia returned an indictment charging Thomas with three counts of attempted evasion of his personal income taxes. The indictment was unsealed following Thomas’s arrest.
According to the indictment, in 2004, in the District of Columbia, Thomas formed multiple entities whose names contained the acronym ECG, which stood for ESOP Capital Group. ECG purported to provide financial, business and other management services to companies that were interested in creating ESOPs, which are employee stock ownership plans. In or about 2005 and 2006, Thomas, through ECG, contracted to provide such services to two companies in Maine.
The indictment further alleges that, despite earning income, Thomas did not file his 2005 through 2007 individual income tax returns. In addition, he allegedly evaded assessment of his individual income tax liabilities for those years by diverting cash from the two companies he contracted with in Maine, using nominee bank accounts, titling assets in his spouse’s name and withdrawing substantial amounts of cash.
If convicted, the defendant faces a potential maximum sentence of five years in prison and a maximum fine of $250,000 on each count.
This case was investigated by IRS-Criminal Investigation and is being prosecuted by Trial Attorneys Jessica Moran and Jeffrey Bender of the Justice Department’s Tax Division.
Five Indicted in Alabama for Conspiracy to Obtain Tax Refunds Using Stolen IdentitiesRead the Press Release
A federal grand jury in the Middle District of Alabama returned a 37-count indictment against Mary Bennett, Milton Bennett, Narendrakumar Patel, Corinthian Bennett and Eugenia Burks for their roles in an identity theft and tax fraud scheme, the Justice Department, the U.S. Secret Service and the Internal Revenue Service (IRS) announced today. All five are charged with conspiring to commit mail fraud and wire fraud. The indictment also charges various defendants with mail fraud, wire fraud, aggravated identity theft, theft of government funds and forgery of state securities. The indictment was returned on Feb. 15, 2012, and unsealed today following the arrests of the defendants.
According to the indictment, the defendants conspired to fraudulently obtain both federal income tax refunds as well as state income tax refunds from several different states by using stolen identities to file false tax returns. Allegedly, fraudulently obtained refund checks were mailed to various addresses used by the conspiracy, while other refunds were obtained through direct deposits into numerous bank accounts controlled by the conspirators. Some of the checks obtained by the scheme allegedly were cashed by Patel, who shared in the proceeds.
An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, all the defendants face a maximum potential sentence of 20 years in prison for the conspiracy charge. There is also a statutory maximum of 20 years in prison for each wire fraud and mail fraud count, 10 years in prison for each theft of government funds and forgery of state securities count, and a mandatory 2-year sentence for the aggravated identity theft counts. All the defendants are also subject to fines and mandatory restitution if convicted.
The case was investigated by Special Agents of the Secret Service and IRS - Criminal Investigation. Trial Attorney Jason H. Poole of the Justice Department’s Tax Division and Assistant U.S. Attorney Andrew O. Schiff are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax.
D.C. Federal Court Acts to Halt Alleged “Sham Cemetery” Tax SchemeRead the Press Release
A federal court has permanently barred Michael Strauss from promoting tax shelters, the Justice Department announced today. The government complaint in the case alleged that Strauss, of Herndon, Va., his son Patrick Strauss, of Washington D.C., and Joseph Barreiro of Poughkeepsie, N.Y., promoted and sold several fraudulent tax schemes, including sham cemetery investments. The men allegedly promoted the cemetery schemes to customers located in Northern Virginia, Maryland and Washington, D.C., using shell companies that they controlled.
Judge Robert L. Wilkins of the U.S. District Court for the District of Columbia signed the civil injunction order, to which Michael Strauss agreed without admitting the government’s allegations. The order permanently bars Strauss from promoting the cemetery schemes identified in the complaint or any other tax shelter, from marketing business or tax services that facilitate noncompliance with federal tax laws, and from engaging in any fraudulent conduct subject to penalty under the tax laws. The same court previously entered injunction orders against Barreiro and Patrick Strauss, to which they consented without admitting the allegations against them.
The defendants allegedly falsely told their customers that they had purchased “licenses” worth tens of millions of dollars that purportedly gave the shell companies the right to future profits from performing funeral services at two purported cemeteries located in Virginia and New York. According to the complaint, the men also falsely claimed that those companies could deduct a portion of the licenses’ supposed value and then pass on millions of dollars in tax losses to the customers. The government contends that there were no arm’s-length purchases of licenses and that the license values were fabricated to generate fake tax benefits. The defendants also allegedly used fictitious promissory notes to siphon off, for their personal benefit, millions of dollars that they told their customers were being “invested.”
In the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions to stop the promotion of abusive or fraudulent tax schemes and the preparation of fraudulent tax returns. Information about these cases is available on the Justice Department website.
Related Documents:
United States v. Michael A. Strauss, et al.
Order of Permanent Injunction Against Michael A. Strauss (PDF)
Order of Permanent Injunction Against Patrick Strauss (PDF)
Order of Permanent Injunction Against Joseph C. Barreiro (PDF)
11 April 2012
North Hollywood, Calif., Man Sentenced in Los Angeles to 20 Years in Prison for Participating in International Child Pornography RingRead the Press Release
WASHINGTON - A North Hollywood man was sentenced today in Los Angeles to 20 years in prison and lifetime supervised release for his participation in an international child pornography ring, 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 and Assistant Director in Charge Steve Martinez of the FBI's Los Angeles Field Office.
Harout Hagop Sarafian was sentenced by U.S. District Judge Virginia A. Phillips. Sarafian, 27, pleaded guilty in September 2011 to one count of conspiracy to advertise child pornography. On April 2, 2012, co-defendant David Michael Fagerness, 45, of Alpharetta, Ga., was sentenced by Judge Phillips to 15 years in prison and lifetime supervised release for one count of conspiracy to transport child pornography.
Today’s sentence is the result of an international investigation into the “Lost Boy” online bulletin board. The Lost Boy bulletin board, according to court documents and proceedings, was dedicated to men who have a sexual interest in young boys and was established to provide a forum to trade child pornography.
Federal authorities, working in conjunction with a coalition of international law enforcement agencies, shut down the Lost Boy bulletin board approximately three years ago. As a result of the investigation, 16 named defendants, including Sarafian and Fagerness, were charged in the United States and arrested for their roles in the bulletin board. To date, 15 defendants have pleaded guilty or have been convicted at trial and one defendant died in custody. Approximately six more men have been charged with child molestation as a result of the investigation. The investigation also led to the identification of 27 domestic victims of child abuse, some of whom were portrayed in images posted to the Lost Boy bulletin board.
According to court documents and proceedings, law enforcement authorities discovered the Lost Boy bulletin board after receiving information from Eurojust, the judicial cooperation arm of the European Union. Eurojust provided U.S. law enforcement with leads obtained from Norwegian and Italian authorities indicating that a North Hollywood man was communicating with an Italian national about child pornography and how to engage in child sex tourism in Romania. Acting on the information from Europe, the FBI executed search warrants that led to the discovery of the Lost Boy network. Further investigation revealed that Lost Boy had 35 members, 16 of whom were U.S. nationals. Other members of the network were located in countries around the world, including Belgium, Brazil, Canada, France, Germany, New Zealand and the United Kingdom.
According to court documents, Lost Boy had a thorough vetting process for new members, who were required to post child pornography to join the organization. Once accepted, members were required to continue posting child pornography to remain in good standing and to avoid removal from the board. According to court documents, Lost Boy members advised each other on techniques to evade detection by law enforcement, which included using screen names to mask identities and encrypting computer data.
International law enforcement efforts involving European law enforcement, the Brazilian Federal Police and other agencies have identified child molestation suspects in South America, Europe and New Zealand. Three suspects in Romania, one in France and another in Brazil have been charged, and offenders have been convicted in Norway and the United Kingdom. Law enforcement efforts have also identified dozens of child victims located in Norway, Romania, Brazil and other nations.
The investigation into the Lost Boy bulletin board was led by the FBI and the U.S. Postal Inspection Service, in conjunction with the Los Angeles-based Sexual Assault Felony Enforcement (SAFE) Team. The High Technology Investigative Unit of the Child Exploitation and Obscenity Section (CEOS) in the Justice Department's Criminal Division, along with Eurojust, has provided invaluable assistance during the investigation.
The case is being prosecuted by Assistant U.S. Attorneys Joey L. Blanch and Yvonne Garcia of the Central District of California and CEOS Trial Attorney Andrew McCormack.
New Orleans Police Officer Sentenced for Perjury and Obstruction of JusticeRead the Press Release
A former New Orleans Police Department officer Ronald Mitchell was sentenced today to 20 months in prison followed by three years of supervised release by U.S. District Judge Sarah Vance for lying under oath and obstructing justice.
On Dec. 9, 2011, a federal jury found Mitchell guilty of committing perjury and obstructing justice for providing false and misleading information during a civil deposition in connection to a lawsuit filed by the family of Danny Brumfield. According to the evidence presented at trial, Mitchell, while seated in the passenger’s seat of a patrol car, shot and killed Danny Brumfield on Convention Center Boulevard in New Orleans a few days after Hurricane Katrina. In 2007, Mitchell gave sworn deposition testimony stating that his partner stopped the patrol car after Mitchell shot Brumfield. Mitchell’s deposition also stated that after he shot Brumfield, Mitchell exited the patrol car and checked Brumfield’s vital signs. The evidence presented at trial showed that Mitchell never exited the patrol car after he shot Brumfield and did not check his vital signs.
“Today’s sentence brings closure to an incident that occurred during a time when the people of New Orleans needed to rely on their officers,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The department will continue to work with the city on ways to create sustainable reforms within the New Orleans Police Department.”
This case was investigated by the New Orleans Division of the FBI and was prosecuted by former Assistant U.S. Attorney Michael Magner, and Civil Rights Division Trial Attorney Christopher Lomax.
Justice Department Settles Lawsuit Against City of New Berlin, Wisconsin, for Blocking Affordable HousingRead the Press Release
The Department of Justice announced today that it has settled its lawsuit against the city of New Berlin, Wis., for race discrimination in violation of the Fair Housing Act.
Filed in June 2011, the lawsuit alleged that the city of New Berlin blocked a 180-unit affordable housing project that a developer, MSP Real Estate Inc., had proposed for the city center area of New Berlin. The city’s planning commission initially approved the project, but reversed course and denied it weeks later, after hundreds of residents objected to it. The suit alleged that opposition was based partly on racial stereotypes and fear that the project’s tenants would be African-American. The lawsuit also charged that the city, in response to public opposition, changed its zoning and land use requirements to bar affordable housing in the city center in the future.
Shortly after the United States filed a motion for preliminary injunction requesting that the court order the city to allow MSP’s affordable housing project , the city agreed to issue the necessary permits to allow MSP’s affordable housing development to be built. The settlement, filed today as a proposed consent decree in the U.S. District Court for the Eastern District of Wisconsin, requires that the city not take any further action to obstruct or delay the affordable housing project. It also requires that the city take affirmative steps to provide for future affordable housing, communicate its commitment to fair housing and establish a mechanism to ensure open and fair housing in New Berlin.
As part of the settlement, the city agreed to modify changes it made to its zoning and land use requirements following public opposition to allow for future additional affordable housing in the city center. The settlement requires the city to provide a minimum of $75,000 to establish a Housing Trust Fund, which will finance projects that promote affordable housing, residential integration and equal housing opportunity. In addition, city officials must develop a Fair Housing Outreach Plan to encourage tenants and developers of affordable housing to come to New Berlin, appoint a fair housing compliance officer, and undergo fair housing training. It also provides for a $5,000 civil penalty to be paid to the United States.
“It is important that people have a choice about where they live and are not excluded from communities because of their race. This settlement makes clear that we will take action against municipalities that violate the law by blocking affordable housing developments not for legitimate reasons but to exclude people based on race,” said Thomas E. Perez, Assistant Attorney General for Civil Rights Division. “Through this innovative settlement, the city of New Berlin will create greater housing opportunities for the people in the Milwaukee area.”
“The lodging today of the proposed consent decree is tremendously important not only for all of the residents of the Greater Milwaukee Area, including those in the City of New Berlin, but also represents the department’s commitment to ensure that the fair housing laws of our nation are enforced fairly and observed uniformly,” James L. Santelle, U.S. Attorney for the Eastern District of Wisconsin. “All Americans benefit from the many positive consequences of providing affordable housing in our communities, including diversity within our populations and enrichment of the lives and livelihoods of our citizens.”
The federal Fair Housing Act prohibits discrimination in housing based on race, color, religion, national origin, sex, disability and familial status. Fair housing enforcement is a priority of the Civil Rights Division. More information about the Civil Rights Division and the laws it enforces is available at www.justice.gov/crt . Individuals who believe that they may have been victims of housing discrimination can call the Housing Discrimination Tip Line at 1-800-896-7743, email the Justice Department at [email protected] , or contact the U.S. Department of Housing and Urban Development at 1-800-669-9777.
Justice Department Reaches Settlement with Three of the Largest Book Publishers and Continues to Litigate Against <br /> Apple Inc. and Two Other Publishers to Restore Price <br /> Competition and Reduce E-book PricesRead the Press Release
The Department of Justice announced today that it has reached a settlement with three of the largest book publishers in the United States– Hachette Book Group (USA), HarperCollins Publishers L.L.C. and Simon & Schuster Inc.–and will continue to litigate against Apple Inc. and two other publishers–Holtzbrinck Publishers LLC, which does business as Macmillan, and Penguin Group (USA)–for conspiring to end e-book retailers’ freedom to compete on price, take control of pricing from e-book retailers and substantially increase the prices that consumers pay for e-books. The department said that the publishers prevented retail price competition resulting in consumers paying millions of dollars more for their e-books.
The civil antitrust lawsuit was filed in U.S. District Court for the Southern District of New York against Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the department’s antitrust concerns with Hachette, HarperCollins and Simon & Schuster, and would require the companies to grant retailers–such as Amazon and Barnes & Noble–the freedom to reduce the prices of their e-book titles.
“As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles,” said Attorney General Eric Holder. “We allege that executives at the highest levels of these companies–concerned that e-book sellers had reduced prices–worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers.”
“With today’s lawsuit, we are sending a clear message that competitors, even in rapidly evolving technology industries, cannot conspire to raise prices,” said Acting Assistant Attorney General Sharis A. Pozen in charge of the Department of Justice’s Antitrust Division. “We want to undo the harm caused by the companies’ anticompetitive conduct and restore retail price competition so that consumers can pay lower prices for their e-books.”
The department’s Antitrust Division and the European Commission cooperated closely with each other throughout the course of their respective investigations, with frequent contact between the investigative staffs and the senior officials of the two agencies. The department also worked closely with the states of Connecticut and Texas to uncover the publishers’ illegal conspiracy.
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, they 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 are now typically forced to pay $12.99, $14.99, or more for the most sought-after e-books, the department said.
The department alleges the conspiracy began in the summer of 2009. CEOs from the publishing companies met privately as a group about once per quarter. The meetings took place in private dining rooms of upscale Manhattan restaurants and were used to discuss confidential business and competitive matters, including Amazon’s e-book’s retailing practices.
The complaint states that the companies accomplished their conspiracy by agreeing to stop the longstanding practice of selling e-books, as they long sold print books, on wholesale to bookstores, and leaving it to the bookstores to set the price at which they would sell the e-books to consumers. Through their conspiracy, the companies imposed a new model under which the publishers seized e-book pricing authority from all of their retail bookstores and raised prices for e-books.
As stated in the department’s complaint, one publisher’s CEO said, “Our goal is to force Amazon to return to acceptable sales prices through the establishment of agency contracts in the USA. . . . To succeed our colleagues must know that we entered the fray and follow us.”
The publishers also agreed with Apple to pay Apple a 30 percent commission for each e-book purchased through Apple’s iBookstore and promised, through a retail price-matching most favored nation (MFN) provision, that no other e-book retailer would sell an e-book title at a lower price than Apple.
As stated in the department’s complaint, Apple’s then-CEO Steve Jobs said, “the customer pays a little more, but that’s what you [publishers] want anyway.” Based on the commitments to Apple, the publishers imposed agency terms, over some objections, on all other e-book retailers. As a result, no e-book retailer is able to compete by using its commission to discount or reduce the price that the publishers set for their e-book titles or offer any special sales promotions to encourage consumers to purchase those e-books. The department said that the intent and effect of the publishers’ contracts with Apple was to raise the prices that consumers nationwide pay for e-books.
Under the proposed settlement agreement with Hachette, HarperCollins and Simon & Schuster, they will terminate their 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 publishers’ e-books. The settlement does not prohibit Hachette, HarperCollins and Simon & Schuster from entering new agency agreements with e-book retailers, but those agreements cannot prohibit the retailer from reducing the price set by the publishers.
The proposed settlement agreement also will prohibit Hachette, HarperCollins and Simon & Schuster for five years from again conspiring with or sharing competitively sensitive information with their competitors. It will impose a strong antitrust compliance program on the three companies, which will include a requirement that each provide advance notification to the department of any e-book ventures they plan to undertake jointly with other publishers and that each regularly report to the department on any communications they have with other publishers. Also for five years, Hachette, HarperCollins and Simon & Schuster will be forbidden from agreeing to any kind of MFN that could undermine the effectiveness of the settlement agreement.
The ongoing litigation against Apple, Macmillan and Penguin seeks to restore price competition among e-book retailers in the sale of the litigating publishers’ e-books. Under the existing agency agreements, Macmillan and Penguin prohibit e-book retailers from exercising any pricing discretion on their titles, and Apple is freed from any price competition with other retailers in selling those e-books.
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.
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.
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, as required by the Antitrust Procedures and Penalties Act. Any person may submit written comments concerning the proposed settlement within 60-days of its publication to John R. Read, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, NW, 4th Floor, Washington, DC 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.
The court will determine a pretrial schedule for the case against Apple, Macmillan and Penguin once the companies file their responses to the government’s lawsuit.
U.S. v. Apple and Hachette, et al.
Former Employee of Government Contractor Sentenced<br /> in Oklahoma for Child Pornography OffenseRead the Press Release
WASHINGTON – A former employee of a government contractor was sentenced today to 27 months in prison followed by seven years of supervised release on a child exploitation charge brought under the Military Extraterritorial Jurisdiction Act (MEJA), announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney for the Northern District of Oklahoma Thomas Scott Woodward.
Keith Strimple, 58, of Tulsa, Okla., pleaded guilty in January 2012 before Chief U.S. District Judge Gregory Frizzell in the Northern District of Oklahoma to one count of attempted possession of a visual depiction of a minor engaging in sexually explicit conduct.According to court documents and proceedings, Strimple worked as an employee of a government contractor between April and September 2007 at a U.S. military facility at Camp Fallujah, Iraq. During that time period, Strimple admitted that he searched for and downloaded videos of minors that he believed to be as young as 12 years old engaging in sexually explicit conduct and downloaded such images using the contractor’s computer system.
MEJA gives U.S. courts jurisdiction to prosecute crimes committed outside the United States by, among others, employees of a government contractor whose work supports a military mission.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and the Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.
The case was investigated by the Naval Criminal Investigative Service and CEOS’ High Tech Investigations Unit, with assistance from the FBI in Tulsa.
The case was prosecuted by CEOS Trial Attorney Keith Becker and Assistant U.S. Attorney Matthew Cyran of the Northern District of Oklahoma.
Attorney General Holder and Secretary Salazar Announce $1 Billion Settlement of Tribal Trust Accounting and Management Lawsuits Filed by More Than 40 TribesRead the Press Release
WASHINGTON – Attorney General Eric Holder and Secretary of the Interior Ken Salazar today announced the settlement of lawsuits filed by 41 federally-recognized tribes against the United States, in which the tribes alleged that the Department of the Interior and the Department of the Treasury had mismanaged monetary assets and natural resources held in trust by the United States for the benefit of the tribes. The announcement followed a 22-month-long negotiation between the tribes and the United States that has culminated in settlements between the government and tribes totaling more than $1 billion.
These settlements resolve claims dating back more than 100 years and will bring to an end protracted litigation that has burdened both the plaintiffs and the United States. Ending these long-running disputes about the United States’ management of trust funds and non-monetary trust resources will allow the United States and the tribes to move beyond the distrust exacerbated by years of litigation. These settlement agreements represent a significant milestone in the improvement of the United States’ relationship with Indian tribes.
“These settlements fairly and honorably resolve historical grievances over the accounting and management of tribal trust funds, trust lands and other non-monetary trust resources that, for far too long, have been a source of conflict between Indian tribes and the United States,” said Attorney General Holder. “Our commitment to tribes is the cornerstone of the Department of Justice’s policies and initiatives in Indian Country, and these settlements will enable the tribal community to pursue the goals and objectives they deem to be appropriate while marking another step in our shared future built upon mutual respect and strong bonds of trust between tribal governments and the United States.”
“These important settlements reflect President Obama’s continuing commitment to ensuring empowerment and reconciliation for American Indians,” said Secretary Salazar. “It strengthens the government-to-government relationship with Tribal nations, helps restore a positive working relationship with Indian Country leaders and empowers American Indian communities. I want to commend Attorney General Holder, our Interior Solicitor Hilary Tompkins and other key officials who were involved in the long negotiations leading to these historic agreements. I look forward to working with Tribal leaders to further strengthen our government-to-government relationship based on mutual respect and a shared concern for the proper management of tribal trust assets and funds.”
The Department of the Interior manages almost 56 million acres of trust lands for federally-recognized tribes and more than 100,000 leases on those lands for various uses, including housing, timber harvesting, farming, grazing, oil and gas extraction, business leasing, rights-of-way and easements. Interior also manages about 2,500 tribal trust accounts for more than 250 tribes.
Starting in the fall of 2009, lawyers for many of the tribes with litigation pending against the United States wrote to President Obama and asked the administration to engage in expedited settlement discussions with their clients. In April 2010, Associate Attorney General Tom Perrelli, Assistant Attorney General of the Environment and Natural Resources Division Ignacia Moreno, Interior Department Solicitor Hilary Tompkins and Treasury Department General Counsel George Madison met with attorneys for the tribes, and the parties embarked on a settlement process that the tribes termed the “Settlement Proposal to Obama Administration,” or “SPOA,” which led in part to today’s announcement.
In addition to the SPOA process, the Departments of Justice, Interior and Treasury have been engaging in other settlement processes involving other litigating tribes. Those processes have been both positive and productive, resulting in the past settlement of other tribal trust accounting and management cases and the processes will continue for other ongoing cases. The United States is committed to resolving the trust accounting and trust management claims of the tribes in a manner that is fair, honorable and reasonable to the tribes and the United States.
Under the negotiated settlement agreements, litigation will end regarding the Department of the Interior’s accounting and management of the tribes’ trust accounts, trust lands and other natural resources. With monies from the congressionally-appropriated Judgment Fund, which is used to pay settlements or final judgments against the government, the United States will compensate the tribes for their breach of trust claims, and the tribes will waive, release and dismiss their claims with prejudice. The parties have agreed to information sharing procedures that will strengthen the management of trust assets and improve communications between tribes and the Department of the Interior. The settlement agreements also include dispute resolution provisions to reduce the likelihood of future litigation.
The sum total of the settlements with the 41 tribes is approximately $1.023 billion.
The 41 tribes are:
1. Assiniboine and Sioux Tribes of the Fort Peck Reservation
2. Bad River Band of Lake Superior Chippewa Indians
3. Blackfeet Tribe
4. Bois Forte Band of Chippewa Indians
5. Cachil Dehe Band of Wintun Indians of Colusa Rancheria
6. Coeur d'Alene Tribe
7. Chippewa Cree Tribe of the Rocky Boy's Reservation
8. Confederated Tribes of the Colville Reservation
9. Confederated Salish and Kootenai Tribes
10. Confederated Tribes of the Siletz Reservation
11. Hualapai Tribe
12. Kaibab Band of Paiute Indians of Arizona
13. Kickapoo Tribe of Kansas
14. Lac du Flambeau Band of Lake Superior Chippewa Indians
15. Leech Lake Band of Ojibwe Indians
16. Makah Tribe of the Makah Reservation
17. Mescalero Apache Nation
18. Minnesota Chippewa Tribe
19. Nez Perce Tribe
20. Nooksack Tribe
21. Northern Cheyenne Tribe
22. Passamaquoddy Tribe of Maine
23. Pawnee Nation
24. Pueblo of Zia
25. Quechan Indian Tribe of the Fort Yuma Reservation
26. Rincon Luiseño Band of Indians
27. Round Valley Tribes
28. Salt River Pima-Maricopa Indian Community
29. Santee Sioux Tribe
30. Shoshone-Bannock Tribes of the Fort Hall Reservation
31. Soboba Band of Luiseño Indians
32. Spirit Lake Dakotah Nation
33. Spokane Tribe
34. Standing Rock Sioux Tribe of the Fort Yates Reservation
35. Swinomish Indian Tribal Community
36. Te-Moak Tribe of Western Shoshone Indians
37. Tohono O'odham Nation
38. Tulalip Tribe
39. Tule River Tribe
40. Ute Mountain Ute Tribe
41. Ute Tribe of the Uintah and Ouray ReservationAlabama Tax Preparation Business Owner and Five Preparers Indicted for Tax Fraud SchemeRead the Press Release
Bruce King, the owner of a Montgomery, Ala., tax preparation business, and five tax preparers from Montgomery have been charged with conspiring to defraud the United States and aiding in the filing of false tax returns, the Justice Department and the Internal Revenue Service (IRS) announced today. A federal grand jury in Montgomery returned an indictment on March 28, 2012, charging Bruce King, Jenika Williams, Antoinette Djonret, Nakesha Donaldson, Angela Smith and Vonecia Orum with participating in a scheme to file false tax returns. Williams, Djonret, Donaldson and Smith have also been charged with wire fraud and aggravated identity theft. The indictment was unsealed yesterday.
According to the indictment, from July 2007 to October 2010, King owned and operated Premier Tax, a tax preparation business in Montgomery along with four other locations in Alabama and Georgia. King allegedly instructed his employees how to falsify federal income tax returns for the purpose of inflating claimed tax refunds. Williams, Djonret, Donaldson, Smith and Orum then allegedly prepared false returns by reporting figures that they knew were not correct.
The indictment also alleges that Williams, Djonret, Donaldson and Smith used the names and Social Security numbers of individuals without their knowledge or consent. Williams, Djonret, Donaldson and Smith allegedly used these names and Social Security numbers to report the individuals as dependents on a customer’s tax return when, in fact, the individuals were not the legitimate dependents of the customer.
An indictment merely alleges that crimes have been committed, and each defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, King, Williams, Djonret, Donaldson, Smith and Orum face a potential maximum of five years in federal prison for conspiring to defraud the United States and a potential maximum of three years for each count of aiding in the preparation of false tax returns. Williams, Djonret, Donaldson and Smith also face a potential maximum of 20 years for each wire fraud count and a mandatory two-year sentence for the aggravated identity theft counts. They all are also subject to fines and mandatory restitution if convicted.
This case was investigated by IRS - Criminal Investigation. Trial Attorneys Justin Gelfand, Jason Poole and Chad Spraker of the Justice Department’s Tax Division, and Assistant U.S. Attorney Jared Morris are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax.
10 April 2012
Statement of the Department of Justice’s Antitrust Division on Its Decision to Close Its Investigation of Highmark’s Affiliation Agreement with West Penn Allegheny Health SystemRead the Press Release
WASHINGTON – The Department of Justice’s Antitrust Division issued the following statement today after announcing the closing of its investigation into Highmark’s affiliation agreement with West Penn Allegheny Health System (WPAHS). Highmark is the Blue Cross and Blue Shield licensee in western Pennsylvania and WPAHS is the second-largest hospital network in the Pittsburgh region:
“After a thorough review of the affiliation agreement and other evidence collected by the Antitrust Division in its investigation, the division has determined that the affiliation agreement likely will not reduce competition in the markets for hospital, physician or health insurance services.
“The proposed affiliation holds the promise of bringing increased competition to western Pennsylvania’s health care markets by providing WPAHS with a significant infusion of capital and increases the incentives of market participants to compete vigorously.
“The affiliation agreement is a vertical combination of Highmark, the region’s dominant health insurance company, and WPAHS. Highmark does not own any hospital assets and owns only a small number of physician groups, and WPAHS does not compete in the health insurance markets. The affiliation agreement between Highmark and WPAHS will not eliminate any material horizontal competition between the parties.
“Vertical agreements, such as the affiliation agreement, can reduce competition by limiting entry or expansion by third parties. Such effects are unlikely here for several reasons. The hospital market in the Pittsburgh region is highly concentrated. Other than WPAHS, the only other significant hospital network is the University of Pittsburgh Medical Center (UPMC), the region’s dominant hospital network. In the absence of the affiliation agreement, Highmark would likely not sponsor expansion by a hospital network other than WPAHS because there is no other significant network with which Highmark could partner.
“WPAHS on its own likely would not have promoted entry or expansion by other health insurers. WPAHS has previously tried to sponsor entry by national insurers and largely failed. The affiliation agreement is not likely to reduce WPAHS’s incentive to offer competitive rates to insurers other than Highmark because WPAHS has strong incentives to increase its patient volume.
“Finally, the affiliation agreement likely will not facilitate horizontal collusion by health plans because new entrant national insurers are for the first time in many years aggressively attempting to reduce Highmark’s dominant market share.
“The division remains mindful that vertical acquisitions and affiliations between health insurers and hospitals with market power can potentially reduce competition. The division will continue to monitor developments in the Pittsburgh health care market as part of our broader commitment to vigilantly enforce the antitrust laws and thereby protect competition in our nation’s health care markets.”
Background
In November 2011, Highmark and WPAHS formalized an affiliation agreement under which a new nonprofit parent company will hold all the corporate membership rights in both Highmark and WPAHS. Highmark has agreed to make a financial commitment of up to $475 million to WPAHS.
Market OverviewHigh concentration levels have long marked the hospital, physician and health insurance markets in western Pennsylvania. On the insurance side, Highmark maintains shares exceeding 60 percent. On the hospital side, and among certain physician specialties, the UPMC wields a similar degree of market power. These high shares have been stable for many years and have not been upset by either new entry or expansion of smaller market participants.
Recently, there have been developments which could increase competition in both the health insurance and hospital markets. For instance, national insurers recently obtained contracts from UPMC that are significantly more competitive than their prior arrangements, improving their prospects of bringing increased competition to the area’s health insurance markets. And the capital that Highmark will contribute to West Penn under the affiliation agreement will likely make West Penn a stronger competitor to UPMC.
The signs of increased competition are appearing just as an existing long-term contract between Highmark and UPMC comes up for renewal. Long-term contracts between dominant hospitals and insurers can dull their incentives to compete, leading to higher prices and fewer services. If a dominant hospital is guaranteed a predictable revenue stream for many years from a dominant insurer, then the hospital may be less likely to promote the growth of new insurers by offering them competitive rates. Similarly, if a dominant health insurer is guaranteed rates from a dominant hospital for an extended period, then the insurer may be less likely to promote competition in the hospital market by investing in more affordable hospitals.
Not all contracts between dominant hospitals and insurers are anticompetitive. Contracts with shorter terms can provide significant benefits to consumers by providing consumers with more options, while at the same time encouraging dominant hospitals to promote competition among health insurers, and encouraging dominant health insurers to promote competition among hospitals. The foreseeable expiration of the contracts increases the need for both the dominant hospital and the insurer to have alternatives to their dominant counterparts. In the circumstances here, it appears that the long-term contract between Highmark and UPMC did diminish the incentives of each to compete and expand competition in these highly concentrated health insurance and hospital markets.
This affiliation agreement between WPAHS and Highmark, along with recent market entry, may help to bolster incentives to expand competition. Increased competition in the insurance and hospital markets can increase consumers’ access to affordable healthcare services by lowering health plan and hospital prices and improving transparency, which enables consumers to make more informed choices. In addition, we recognize that other considerations, including access to unique healthcare facilities, may require other policy and enforcement measures outside the purview of antitrust analysis.
The Antitrust Division’s Closing Statement Policy
The division provides this statement under its policy of issuing statements concerning the closing of investigations in appropriate cases. This statement is limited by the division’s obligation to protect the confidentiality of certain information obtained in its investigations. As in most of its investigations, the division’s evaluation has been highly fact-specific, and many of the relevant underlying facts are not public. Consequently, readers should not draw overly broad conclusions regarding how the division is likely in the future to analyze other collaborations or activities, or transactions involving particular firms. Enforcement decisions are made on a case-by-case basis, and the analysis and conclusions discussed in this statement do not bind the division in any future enforcement actions. Guidance on the division’s policy regarding closing statements is available at www.justice.gov/atr/public/closing/index.html.
Pennsylvania Tax Defier Sentenced to More Than Six Years in PrisonRead the Press Release
Troy A. Beam of Shippensburg, Pa., was sentenced today to 74 months in prison by U.S. District Judge Christopher C. Conner, the Justice Department and the Internal Revenue Service (IRS) announced. On May 4, 2011, a federal jury in the Middle District of Pennsylvania convicted Beam of tax evasion, obstructing and impeding the due administration of the Internal Revenue laws, and willful failure to file federal income tax returns.
According to evidence introduced at trial, Beam, a former certified public accountant and state auditor in the Pennsylvania Auditor General’s Office, earned substantial sums of income from 1992 to the date of the indictment while operating a home construction business known as “Sunbeam Builders,” as well as owning and operating two real estate businesses known as “Latrobe Leasing” and “Goldstar Property Management” that purchased, rented and sold real estate. Despite earning substantial income from these businesses, as well as other activities, Beam failed to file any federal income tax returns since April 1996, when he filed his 1995 tax return reporting a loss. In April 1996, Beam also filed false amended federal income tax returns for 1992, 1993 and 1994, seeking tax refunds for taxes he previously had paid for those years.
The evidence at trial proved that from 1999 to 2007, Beam earned more than $10.3 million in gross income from his various home construction and rental property businesses. Beam obstructed the IRS in its attempt to calculate and collect his taxes by using numerous sham trusts and other entities, including North Star Investment Holdings Ltd. to hide his income and assets. He used North Star to set up a bank account in the Cayman Islands into which he deposited nearly $3 million of income derived from his construction business.
“Convictions such as this send a loud and clear message that those who defy our nation's tax laws will be investigated and prosecuted to the fullest extent of the law,” said Kathryn M. Keneally, Assistant Attorney General of the Justice Department's Tax Division.
“The evidence showed beyond a reasonable doubt that Troy Beam is a consummate fraud and hypocrite who evaded his responsibilities as a citizen while participating in a charade to deceive the government, other citizens and himself for his own selfish ends,” said Peter J. Smith, U.S. Attorney for the Middle District of Pennsylvania.
“The use of abusive trust schemes and sham entities intended to conceal income from the IRS isn't tax planning; it’s criminal activity,” said Rick A. Raven, Acting Chief, IRS Criminal Investigation. “As the tax filing season comes to a close, it’s more important than ever that the American people feel confident that everyone is paying the taxes they owe.”
This case was investigated by IRS-Criminal Investigation and was prosecuted by Assistant U.S.s Attorney Bruce Brandler and Trial Attorneys Jorge Almonte and Mark McDonald of the Tax Division.
Pennsylvania Man Indicted for Cross BurningRead the Press Release
Ryan M. Held, aka Ryan M. Foley, 20, of Philipsburg, Penn., was indicted on March 27, 2012, by a federal grand jury on charges stemming from a cross burning he committed in August 2010. The indictment was unsealed today.
According to the indictment, on or about Aug. 20, 2010, Held burned the cross because a woman was associating with an African-American male within the residence. The two-count indictment charges Held with violating the housing rights of the two victims by burning the cross for the purpose of threatening and intimidating the victims in order to interfere with their rights to occupy a dwelling free from racial discrimination.
If convicted, Held faces a maximum punishment of 10 years in prison and a fine up to $250,000 on each count.
This case was investigated by the FBI and the Pennsylvania State Police and is being prosecuted by the U.S. Attorney's Office for the Western District of Pennsylvania and the Criminal Section of the Civil Rights Division of the Department of Justice.
Pakistani Citizen Sentenced to 31 Months in Prison for Human Smuggling Conspiracy ChargeRead the Press Release
WASHINGTON – A Pakistani citizen was sentenced yesterday in the District of Columbia to 31 months in prison on a human smuggling charge announced Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Ronald C. Machen Jr. for the District of Columbia; John Morton, Director of U.S. Immigration and Customs Enforcement (ICE); and John V. Gillies, Special Agent in Charge of the FBI Miami Division.
Muhammad Abid Hussain, 27, was sentenced by U.S. District Judge John D. Bates. On Jan. 31, 2012, a federal jury in Washington, D.C., found Hussain guilty of conspiring to encourage and induce an individual to come to the United States unlawfully.
According to the evidence presented at trial, in February and March 2011, Hussain and a co-conspirator conducted a human smuggling operation in Quito, Ecuador, that attempted to smuggle an individual from Pakistan to the United States. No individuals or material were actually smuggled from Pakistan as part of the operation. Hussain was arrested in Miami on March 13, 2011.
Hussain was acquitted of a second charge of conspiring to provide material support to a foreign terrorist organization relating to the same conduct.
The investigation was conducted by the ICE Homeland Security Investigations (HSI) attaché office in Quito, Ecuador, with the HSI office in Atlanta, the Miami Division of the FBI and the Ecuadorian National Police.
The investigation was conducted under the Extraterritorial Criminal Travel Strike Force (ECT) program, a joint partnership between the Justice Department’s Criminal Division and HSI. The ECT program focuses on human smuggling networks that may present particular national security or public safety risks, or present grave humanitarian concerns. ECT has dedicated investigative, intelligence and prosecutorial resources. ECT coordinates and receives assistance from other U.S. government agencies and foreign law enforcement authorities.
The Criminal Division’s Office of International Affairs, the U.S. National Central Bureau of INTERPOL, the U.S. Customs and Border Protection, the U.S. Embassy in Quito and the government of Ecuador provided invaluable support.
The case was prosecuted jointly by prosecutors from the Human Rights and Special Prosecutions Section of the Criminal Division, the Counterterrorism Section of the National Security Division and the U.S. Attorney’s Office for the District of Columbia.
Las Vegas Real Estate Agent Sentenced to 18 Months in Prison for Tax and Bankruptcy FraudRead the Press Release
German A. Posada was sentenced to 18 months in prison following a guilty plea to charges of filing a false 2004 individual income tax return and making a false statement in a bankruptcy proceeding, the Justice Department and the Internal Revenue Service (IRS) announced today.
According to court documents and statements made in court, Posada admitted to filing a false individual income tax return for 2004 that under-reported the income from his business as a real estate agent in the Las Vegas area. Between 2003 and 2005, Posada earned commission income from International Realty and another realtor. He asked that International Realty issue some of his commission checks in the name of his then-girlfriend, and deposited those checks into a bank account in her name. Posada also admitted under-reporting his business income on his 2003 Form 1040 and failing to file a timely 2005 Form 1040, despite knowing of his legal duty to report the approximately $557,212 in income that he received in 2005.
Court records establish that, in 2005, Posada filed for bankruptcy in the U.S. Bankruptcy Court for the District of Nevada. In his May 13, 2005, bankruptcy petition, and again in his Aug. 2, 2005, amended petition, he made false statements, including that he had no current income, he had received no income during the two years immediately preceding 2005, and 17 creditors held unsecured non-priority claims totaling $466,885 against him. Then, on Sept. 2, 2005, at a meeting of creditors, Posada falsely testified under oath before the bankruptcy trustee that he had received “one or two” and “probably two” commissions since May 13, 2005, when in fact he knew that he had received at least 19 commission checks totaling $130,575 during that time period.
Posada was also ordered to pay $212,016 in restitution to the IRS, and to pay $ $24,628 in restitution to victims of the bankruptcy fraud.
Special agents from IRS - Criminal Investigation investigated the case and Trial Attorneys John P. Scully and Thomas W. Flynn of the Justice Department’s Tax Division prosecuted the case.
More information about the Tax Division and its enforcement efforts can be found at www.justice.gov/tax .
Former Detention Officer and Inmate Sentenced in North Carolina for Assault on Another InmateRead the Press Release
The Justice Department announced today that Senior U.S. District Judge Malcolm J. Howard sentenced former Sergeant Danny Ray Duncan, of the Columbus County Detention Center in Whiteville, N.C., and inmate Terry McMillian on charges relating to the assault of another inmate. Duncan, 63, received 20 months in prison followed by two years supervised release. McMillian, 26, received 46 months in prison followed by three years supervised release.
“These defendants were brought to justice for abusing their power and violating the rights of an inmate,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The department will continue to prosecute defendants that violate our nation’s civil rights laws.”
U.S. Attorney for the Eastern District of North Carolina Thomas G. Walker stated, “No one is above the law. Those responsible for the beating of this inmate must face consequences for their criminal conduct.”
During plea proceedings on Oct. 6, 2011, Duncan, while working on the night shift as a sergeant with the Columbus County Detention Center admitted that on Aug. 2, 2010, he placed a pretrial detainee into a cell knowing there was a substantial risk that the inmates in the cell would assault the detainee. Duncan further admitted that he acted with deliberate indifference to the risk of assault, and that the detainee suffered bodily injury as a result of the assault.
McMillian pleaded guilty on Dec. 5, 2011, for conspiring to commit an offense against the United States. McMillan with another inmate brutally beat the detainee.
This case was investigated by the FBI and the North Carolina State Bureau of Investigation. Assistant U.S. Attorney Toby Lathan from the U.S. Attorney’s Office of the Eastern District of North Carolina and Trial Attorney Ryan R. McKinstry from the Civil Rights Division of the U.S. Department of Justice prosecuted the case.
Former Antitrust Division Assistant Attorney General James F. Rill Receives the Justice Department’s 2012 John Sherman AwardRead the Press Release
Attorney General Eric Holder presented the 2012 John Sherman Award to James F. Rill for his lifetime contributions to the development and enforcement of antitrust law and the advancement of antitrust policy internationally. Rill served as an Assistant Attorney General for the department’s Antitrust Division from 1989 to 1992 and is currently a partner at Baker Botts LLP in Washington, D.C.
On April 10, 2012, Attorney General Holder honored Rill with the department’s highest antitrust award in the Great Hall of the Robert F. Kennedy Department of Justice building. Officials of several federal agencies and members of the antitrust bar attended the award ceremony.
“Jim was a visionary on many antitrust fronts. From issuing the first joint Department of Justice and Federal Trade Commission Horizontal Merger Guidelines in 1992, to negotiating the historic U.S.-European Union Antitrust Cooperation Agreement in 1991, his leadership and antitrust expertise is beyond compare,” said Acting Assistant Attorney General Sharis A. Pozen in charge of the Department of Justice’s Antitrust Division. “He is truly deserving of this award for his outstanding efforts on behalf of American consumers.”
During his tenure as Assistant Attorney General, Rill oversaw matters in a number of important industries, including airlines and banking.
In 1997, Rill was appointed by then-Attorney General Janet Reno and then-Assistant Attorney General Joel Klein to serve as Co-Chair of the department’s International Competition Policy Advisory Committee (ICPAC). The proposal to create a global competition forum that allows government competition authorities throughout the world to meet and discuss antitrust issues served as the stimulus for what has become the International Competition Network (ICN). The ICN was established in 2001, and has more than 100 member nations.
Rill was chairman of the Competition Committee of the Business and Industry Advisory Committee to the Organisation for Economic Co-operation and Development from 2005 to 2007, and vice chairman from 1993 to 2005. He serves on the American Bar Association’s (ABA) Section of Antitrust Law International Task Force and is vice-chairman of the Competition Committee of the U.S. Council for International Business.
Created in 1994, the John Sherman Award is presented by the Department of Justice’s Antitrust Division to a person or persons for outstanding and substantial contributions to the field of antitrust law, the protection of American consumers and the preservation of economic liberty.
The award is named for the author of the Sherman Act of 1890, the nation’s first and foremost antitrust law. John Sherman, a former congressman and senator, also served as Secretary of the Treasury from 1877 to 1881 and as Secretary of State from 1897 to 1898.
Previous recipients include Robert Pitofsky (2010), Herbert Hovenkamp (2008), Robert H. Bork (2005), Richard A. Posner (2003), Milton Handler (1998), Thomas E. Kauper and William F. Baxter (1996), Phillip E. Areeda (1995) and Howard Metzenbaum (1994).
Department of Justice Seizes More Than $896,000 in Proceeds from the Online Sale of Counterfeit Sports ApparelRead the Press Release
WASHINGTON – The Department of Justice has seized more than $896,000 in proceeds from the distribution of counterfeit sports apparel and jerseys as the result of an investigation into the sale of counterfeit goods on commercial websites, announced 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; and John Morton, Director of the Department of Homeland Security’s Immigration and Customs Enforcement (ICE).
The investigation also resulted in the seizure of seven domain names engaged in the sale of counterfeit goods. The funds were seized from interbank accounts and three PayPal accounts. The seizure warrants were unsealed in U.S. District Court in the District of Columbia on April 5, 2012.
The investigation is a product of Operation In Our Sites, a law enforcement initiative targeting online commercial intellectual property crime announced by ICE’s Office of Homeland Security Investigations (HSI) in June 2010. Operation In Our Sites targeted online retailers of a diverse array of counterfeit goods, including sports equipment, shoes, handbags, athletic apparel, sunglasses and DVD boxed sets. To date, 758 domain names of websites engaged in the sale and distribution of counterfeit goods and illegal copyrighted works have been seized as a result of Operation In Our Sites.
According to court documents, investigation by federal law enforcement agents revealed that several subjects whose domain names had been seized in a November 2010 In Our Sites operation continued to sell counterfeit goods using new domain names. In particular, the individuals, based in China, sold counterfeit professional and collegiate sports apparel, primarily counterfeit sports jerseys. Law enforcement agents made numerous undercover purchases from the websites associated with the new domain names. After the goods were confirmed to be counterfeit or infringing, seizure warrants for seven domain names used to sell the infringing goods were obtained from a U.S. Magistrate Judge in U.S. District Court for the District of Columbia.
According to court documents, the individuals conducted sales and processed payments for the counterfeit goods using PayPal Private Ltd. accounts and then wired their proceeds to bank accounts held at Chinese banks. Under warrants issued by a U.S. District Judge, law enforcement agents seized $826,883 in proceeds that had been transferred from PayPal accounts to various bank accounts in China. The funds were seized from correspondent, or interbank, accounts held by the Chinese banks in the United States. Under additional seizure warrants issued by a U.S. Magistrate Judge, law enforcement agents also seized $69,504 in funds remaining in three PayPal accounts used by the subjects.
“We are working hard to protect American businesses and consumers from the damaging effects of intellectual property crime,” said Assistant Attorney General Breuer. “This investigation disrupted an online counterfeit goods operation and also struck at the heart of the criminal enterprise by seizing hundreds of thousands of dollars in illegal profits. The Justice Department, together with our partners at ICE, will continue to do all that we can to punish and deter the sale and distribution of counterfeit goods.”
“Those who traffic in counterfeit goods harm the American economy as well as the consumers who purchase the substandard merchandise,” said U.S. Attorney Machen. “Seizing the domain names of these unscrupulous operators was one big step, and seizing their ill-gotten proceeds should send them another message that these counterfeit sales will not be tolerated.”
“Counterfeiting and intellectual property theft are seriously undermining U.S. business and innovation,” said ICE Director Morton. “Consumers are at risk, American industry is harmed and U.S. jobs are lost. As a country, we can ill afford the toll that intellectual property theft exacts on our economy and industries. Operation In Our Sites and the related efforts of the National Intellectual Property Rights Coordination Center are critical to combating intellectual property crime and consumer fraud over the Internet.”
The investigation was conducted by the National Intellectual Property Rights Center and ICE-HSI. The case is being prosecuted by Assistant U.S. Attorneys Jonathan Hooks and Diane Lucas and Special Assistant U.S. Attorney Katharine Wagner of the District of Columbia, Senior Trial Attorney Pamela Hicks of the Asset Forfeiture and Money Laundering Section in the Justice Department’s Criminal Division and Trial Attorney Thomas Dougherty of the Computer Crime and Intellectual Property Section in the Justice Department’s Criminal Division.
This enforcement action is one of many efforts being undertaken by the Department of Justice Task Force on Intellectual Property (IP Task Force). Attorney General Eric Holder created the IP Task Force to combat the growing number of domestic and international intellectual property crimes, protect the health and safety of American consumers, and safeguard the nation’s economic security against those who seek to profit illegally from American creativity, innovation and hard work. The IP Task Force seeks to strengthen intellectual property rights protection through heightened criminal and civil enforcement, greater coordination among federal, state and local law enforcement partners and increased focus on international enforcement efforts, including reinforcing relationships with key foreign partners and U.S. industry leaders. To learn more about the IP Task Force, go to www.justice.gov/dag/iptaskforce/.
Dallas-based Tenet Healthcare Pays More Than $42 Million to Settle Allegations of Improperly Billing MedicareRead the Press Release
Tenet Healthcare Corporation has agreed to pay the United States $42.75 million to settle allegations that it violated the False Claims Act by overbilling the federal Medicare program, the Justice Department announced today.
The settlement resolves allegations pertaining to the various inpatient rehabilitation facilities (IRFs) that Dallas-based Tenet has owned and operated throughout the country. IRFs are designed for patients who need an intense rehabilitation program that requires a multidisciplinary, coordinated team approach to improve their ability to function. Because the patients treated at these facilities require more intensive rehabilitation therapy and closer medical supervision than is provided in other settings, such as acute care hospitals or skilled nursing facilities, Medicare generally pays IRFs at a higher rate for rehabilitation care than it pays for such care in other settings.
The Justice Department alleged that, between May 15, 2005, and Dec. 31, 2007, Tenet improperly billed Medicare for the treatment of patients at its IRFs when, in fact, these patient stays did not meet the standards to qualify for an IRF admission. Today’s settlement is the United States’ single largest recovery pertaining to inappropriate admissions to IRFs.
“The Department of Justice is committed to protecting the Medicare program against all types of overcharging by health care providers,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department's Civil Division. “As today's settlement demonstrates, inpatient rehabilitation facilities will not be permitted to bill Medicare for patients who were not qualified for admission.”
“This settlement demonstrates our office’s continued commitment to protect crucial Medicare dollars from fraud and abuse. Inpatient rehabilitation facilities are expensive, and Medicare dollars should be reserved for patients who need the services–not for hospitals seeking to make money through improper billing,” said Sally Quillian Yates, U.S. Attorney for the Northern District of Georgia.
“Tenet disclosed this matter to my office as required under its corporate integrity agreement (CIA),” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services. “Our CIA reporting provisions have resulted in recovery of millions of taxpayer dollars back into the Medicare program.”
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 th e two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $6.6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $8.8 billion.
Acting Assistant Attorney General Delery and U.S. Attorney Yates expressed appreciation to the Department of Justice’s Civil Division, the U.S. Attorney’s Office for the Northern District of Georgia, the FBI and the Department of Health and Human Services’ Office of Inspector General and Centers for Medicare and Medicaid Services for their collaboration in investigating this matter.
9 April 2012
New Mexico Man Sentenced to Life in Prison for Kidnapping That Resulted in the Death of 16-Year-Old VictimRead the Press Release
WASHINGTON – Larry Lujan, 33, was sentenced today to life in prison for a kidnapping that resulted in the death of a 16-year-old, announced U.S. Attorney Kenneth J. Gonzales for the District of New Mexico and Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.
Lujan, originally from Chamberino, N.M., was found guilty on Aug. 9, 2011, of kidnapping and fatally stabbing Dana Joseph “Joe” Grauke Jr. The jury was unable to reach a unanimous verdict on whether Lujan should be sentenced to death, and thus he was sentenced to life in prison by U.S. District Judge Robert C. Brack.According to the evidence and testimony presented at trial, Lujan targeted 16-year-old Grauke for attack because he failed to pay a $600 “tax” to Lujan for selling marijuana in a neighborhood in San Antonio that Lujan considered his “turf.” The evidence established that on March 7, 2005, Lujan led a group of teenagers in breaking into Grauke’s home in San Antonio, where they ransacked the residence; beat and tortured Grauke for several hours; and then transported Grauke, who was bound, gagged and blindfolded, in the luggage compartment of a sport utility vehicle to Anthony, N.M. Approximately 36 hours after kidnapping Grauke, Lujan stabbed the teenager nine times in the back and cut his throat so deeply that his head was almost severed from his body. Grauke’s body was found on March 20, 2005, in an irrigation ditch.
During the penalty phase of the trial, the jury heard testimony about Lujan’s role in the stabbing deaths of a Chamberino couple in 1998. The double homicides also were related to a drug dealing dispute. Lujan pleaded “no contest” in December 2011 to first degree murder charges for that double homicide in a separate state case and was sentenced to two consecutive life prison terms.
The case was investigated by the FBI; the Dona Ana County, N.M., Sheriff’s Office; and the San Antonio Police Department. It was prosecuted by Assistant U.S. Attorneys Maria Y. Armijo and Mark A. Saltman for the District of New Mexico and Trial Attorney Michael S. Warbel of the Criminal Division’s Capital Case Unit.
6 April 2012
Memphis Man Found Guilty of Child Sex Trafficking <br /> and Firearms OffensesRead the Press Release
WASHINGTON- A federal jury in Memphis, Tenn., has convicted Maurice Mabon of child sex trafficking and a firearms offense, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Edward L. Stanton III for the Western District of Tennessee and Special Agent in Charge Aaron T. Ford of the FBI’s Memphis Field Office.
Mabon, 23, of Memphis, was found guilty yesterday of child sex trafficking, attempted child sex trafficking and conspiracy to commit child sex trafficking for his role in advertising a 15-year-old girl for prostitution on the website backpage.com on April 16, 2011. He also was found guilty of being a felon in possession of ammunition.
The evidence at trial showed, among other things, that Mabon posted the advertisement to backpage.com after taking numerous photographs of the 15-year-old victim in lingerie. Mabon and his co-defendants then drove the 15-year-old to an address provided by an individual responding to the advertisement. A suspicious neighbor contacted the Shelby County, Tenn., Sheriff’s Department and deputies intervened.
A later search of Mabon’s home led to the discovery of 12 live rounds of 9 mm Luger ammunition, 17 live rounds of 7.65 ammunition, 25 live rounds of .380 ammunition, 20 live rounds of .45 auto ammunition and eight spent rounds of 7.62 ammunition. As a previously-convicted felon, Mabon was prohibited from possessing any ammunition by federal law.
“Mr. Mabon used the Internet to facilitate sex trafficking of a minor,” said Assistant Attorney General Breuer. “The jury’s guilty verdict ensures that he will now be imprisoned for his crimes. We will continue to prioritize the fight against predators who exploit children for profit or any other reason.”
“Child sex traffickers like Maurice Mabon prey upon young victims because they are vulnerable and often defenseless,” said U.S. Attorney Stanton. “The jury’s guilty verdict underscores this office’s relentless commitment to working with our law enforcement partners to prosecute and bring to justice those who exploit children for profit.”
“The cruel exploitation of children will not be tolerated, and the FBI, along with our law enforcement partners, is committed to targeting those who prey on innocent juveniles,” said FBI Special Agent in Charge Ford. “This conviction is a message to those who would seek to take part in human trafficking or commercial sex trafficking, that you will be investigated brought to justice and held accountable.
Mabon faces a mandatory minimum sentence of 10 years in prison and faces a maximum penalty of life in prison. He will be sentenced on July 13, 2012, by Chief U.S. District Judge Jon Phipps McCalla. Mabon’s co-defendants, Arieke Lester and Chauntta Lewis, pleaded guilty to related charges last week. Lester will be sentenced on Aug. 10, 2012, and faces up to life in prison. Lewis will be sentenced on June 6, 2012, and faces up to 20 years in prison.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend, and prosecute individuals who exploit children, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.
The case was investigated by the FBI, working with the Shelby County Sheriff’s Department and the Bureau of Alcohol, Tobacco, Firearms and Explosives. The case was prosecuted by Assistant U.S. Attorney Jonathan Skrmetti of the Western District of Tennessee and CEOS Trial Attorney Keith Becker.
District of Columbia Return Preparer Indicted for Preparing False Tax ReturnsRead the Press Release
A federal grand jury in the District of Columbia returned an indictment charging Enyinnaya Udo with 25 counts of aiding and assisting in the preparation of false income tax returns, the Justice Department and Internal Revenue Service (IRS) announced today.
According to the indictment, the defendant operated a tax preparation business called Anic and Associates, located in Washington, D.C. The defendant allegedly aided, advised and prepared false individual income tax returns for the tax years 2005 through 2008 for at least seven taxpayers. These individual income tax returns allegedly claimed fraudulent filing statuses and false deductions.
If convicted, the defendant faces a potential maximum sentence of three years in prison and a maximum fine of $250,000 on each count.
This case was investigated by the IRS-Criminal Investigation and is being prosecuted by Tax Division Trial Attorneys Jessica Moran and Erin Pulice.
Arkansas Man Sentenced for His Role in Firebombing Residence of Interracial CoupleRead the Press Release
The Department of Justice announced today that Gary Dodson, 33, of Waldron, Ark., was sentenced in Little Rock for his involvement in firebombing the residence of an interracial couple. On Dec. 7, 2011, Dodson pleaded guilty to conspiring to violate the civil rights, criminal interference with housing rights due to race and possession of an unregistered firearm/destructive device. District Judge Billy Roy Wilson sentenced Dodson to 15 years in prison and 3 years of supervised release for the three counts of conviction.
During his plea, Dodson admitted that on the night of Jan. 14, 2011, he attended a party where he and three other men, Jake Murphy, Dustin Hammond and Jason Barnwell, devised a plan to firebomb the victims’ house. Dodson then drove the other men to purchase gas for the firebomb and then Dodson drove everyone to the victims’ house in Hardy, Ark. When they arrived, Barnwell, Murphy and Hammond constructed three Molotov cocktails and threw them at the house. They damaged the victims’ house; however, no one was injured.
Murphy and Hammond previously pleaded guilty to conspiring to and violating the civil rights of the victim. Both received sentences of 54 months incarceration and three years of supervised release. In June 2011, Wendy Treybig, who co-hosted the party on Jan. 14, 2011, with Barnwell, pleaded guilty to obstructing justice. She was sentenced on Dec. 13, 2011, to 21 months incarceration and three years of supervised release. Jason Barnwell pleaded guilty on Aug. 26, 2011, and was sentenced on Jan. 27, 2012 to 20 years incarceration.
“With today’s sentencing, we can finally close the book on this terrible incident of racial hatred,” stated Assistant Attorney General for the Civil Rights Division Thomas E. Perez. “The sentence reflects the gravity of these kinds of crimes. The Civil Rights Division will continue to pursue justice in hate crimes such as these, where victims are targeted because of the color of their skin.”
U.S. Attorney for the Eastern District of Arkansas Christopher R. Thyer said, “The very strength we have in our communities is a result of the diversity of its people. Those who perpetrate crimes against others solely because of racial differences will find, as these four defendants have, that there is a price to pay. The laws that protect our communities leave no tolerance for hate crimes.”
This case was investigated by the Little Rock Office of the FBI and the Little Rock Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives, with assistance from the Arkansas State Police, the Hardy and Waldron Police Departments, and the Scott and Sharp County Sheriff’s Offices. It was prosecuted by Assistant U.S. Attorney John Ray White of the Eastern District of Arkansas, and Trial Attorneys Cindy Chung and Henry Leventis of the U.S. Department of Jus tice Civil Rights Division.
5 April 2012
U.S. Announces Innovative Clean Air Agreement for Industrial Flares with Marathon Petroleum CompanyRead the Press Release
WASHINGTON – The Department of Justice and the U.S. Environmental Protection Agency (EPA) today announced an innovative environmental agreement with Ohio-based Marathon Petroleum Company that already has significantly reduced air pollution from all six of the company’s petroleum refineries. In a first for the refining industry, Marathon has agreed to state of the art controls on combustion devices known as flares and to a cap on the volume of waste gas it will send to its flares. When fully implemented, the agreement is expected to reduce harmful air pollution by approximately 5,400 tons per year and result in future cost savings for the company.
“This agreement is a great victory for the environment and will result in cleaner and healthier air for the benefit of communities across the country in Illinois, Kentucky, Louisiana, Michigan, Ohio and Texas,” said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice. “By spurring corporate ingenuity, this settlement will dramatically reduce emissions from all 22 flares at Marathon’s six refineries.”
“Today’s agreement will result in cleaner air for communities across the South and Midwest,” said Cynthia Giles, Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance. “By working with EPA, Marathon helped advance new approaches that reduce air pollution and improve efficiency at its refineries and provide the U.S. with new knowledge to bring similar improvements in air quality to other communities across the nation.”
“We commend Marathon for taking this action, which will reduce pollution in the areas around its refineries, including one in Detroit,” said Barbara McQuade, U.S. Attorney for the Eastern District of Michigan. “While this agreement helps protect clean air for future generations, it also protects the public health right now for the people living near the refineries.”
The settlement is part of the EPA’s national effort to reduce air pollution from refinery, petrochemical and chemical flares. A flare is a mechanical device, ordinarily elevated high off the ground, used to combust waste gases. The more waste gas a company sends to a flare, the more pollution occurs. The less efficient a flare is in burning waste gas, the more pollution occurs. EPA wants companies to flare less, and when they do flare, to fully combust the harmful chemicals found in the waste gas.
A consent decree filed today in the U.S. District Court in Detroit resolves Marathon’s alleged violations of the Clean Air Act. As part of the effort to reach this agreement, Marathon, under the direction and oversight of EPA, spent more than $2.4 million to develop and conduct pioneering combustion efficiency testing of flares and to advance the understanding of the relationship between flare operating parameters and flare combustion efficiency.
In addition, beginning in 2009, Marathon installed equipment, such as flow monitors and gas chromatographs, to improve the combustion efficiency of its flares. To date, Marathon has spent approximately $45 million on this equipment and projects that it will spend an additional $6.5 million for this equipment. Marathon also will spend an as yet undetermined sum to comply with the flaring caps required in the consent decree.
At the same time, Marathon indicates that the equipment it already has installed is saving it approximately $5 million per year through reduced steam usage and product recovery. Marathon also projects additional savings through the operation of the equipment to be installed in the future.
From 2008 to the end of 2011, the controls Marathon installed eliminated approximately 4720 tons per year of volatile organic compounds (VOCs) and 110 tons per year of hazardous air pollutants (HAPs) from the air. An additional 530 tons per year of VOCs and 30 tons per year of HAPs are projected to be eliminated in the future.
Under the agreement, Marathon will also implement a project at its Detroit refinery to remove another 15 tons per year of VOCs and another one ton per year of benzene from the air. At an estimated cost of $2.2 million, Marathon will install controls on numerous sludge handling tanks and equipment.
Marathon’s six refineries are located in: Robinson, Ill.; Catlettsburg, Ky.; Garyville, La.; Detroit; Canton, Ohio; and Texas City, Texas. Together, the refineries have a capacity of more than 1.15 million barrels per day.
Marathon, headquartered in Findlay, Ohio, will pay a civil penalty of $460,000 to the United States.
The consent decree – subject to a 30-day public comment period and final court approval – is available at: www.justice.gov/enrd/.
To learn more about the settlement, visit: www.epa.gov/compliance/resources/cases/civil/caa/marathonrefining.html.To learn more about EPA’s civil enforcement of the Clean Air Act, visit: www.epa.gov/compliance/civil/caa/index.html.
To learn more about EPA’s refinery initiative, visit: www.epa.gov/compliance/resources/cases/civil/caa/oil/.
Montgomery, Alabama, Woman Indicted for Using Stolen Identities and Debit Cards to Obtain Tax RefundsRead the Press Release
A federal grand jury in Montgomery returned an indictment on March 28, 2012, charging Antoinette Djonret for using stolen identities to file false tax returns, the Justice Department, U.S. Attorney George L. Beck Jr. and the Internal Revenue Service (IRS) announced today. The 19-count indictment, which was unsealed today following her arrest, charges Djonret with filing false claims, theft of government funds, access device fraud, aggravated identity theft and possession of unauthorized access devices.
Djonret had earlier been charged with making false claims in a criminal complaint that was filed on February 22, 2012. According to the indictment and other court documents, Djonret used stolen identities to file false tax returns which fraudulently claimed refunds. Djonret had some of the refunds deposited onto a prepaid debit card in her name. Court documents state that nearly 650 tax returns were electronically filed from an IP address assigned to her residence. According to the criminal complaint, on May 22, 2010, Djonret was arrested during a traffic stop and police officers seized from her car several prepaid debit cards in the names of other individuals. The cards were linked to bank accounts that had received federal income tax refunds.
If convicted, she faces a maximum potential sentence of five years in prison for each false claims count and each theft of government funds count, 15 years in prison for the access device fraud count, 10 years in prison for the possession of unauthorized access devices count, and a mandatory two-year sentence for the aggravated identity theft counts. She is also subject to fines and mandatory restitution if convicted.
An indictment merely alleges that crimes have been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt.
The case was investigated by Special Agents of the IRS - Criminal Investigation. Trial attorneys Jason H. Poole and Michael Boteler of the Justice Department’s Tax Division and Assistant U.S. Attorney Jared Morris are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax .
Justice Department Files Complaint Against Home Depot for Violating the Employment Rights of a California Army National Guard SoldierRead the Press Release
WASHINGTON – The Justice Department announced today the filing of a complaint in U.S. District Court in Arizona against Home Depot U.S.A. Inc. for violating the employment rights of California Army National Guard soldier Brian Bailey under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA).
The department’s complaint alleges that Home Depot willfully violated USERRA by terminating Bailey’s employment because of his military service obligations. Bailey, an Iraq War veteran, worked at a Home Depot store in Flagstaff, Ariz., as a department supervisor while at the same time serving in the California Army National Guard. Throughout his employment with Home Depot, Bailey took periodic leave from work to fulfill his military obligations with the National Guard. According to the Justice Department’s complaint, Bailey was removed from his position as a department supervisor after Home Depot management officials at the Flagstaff store openly expressed their displeasure with his periodic absences from work due to his military obligations and further indicated their desire to remove him from his position because of those absences.
Bailey initially filed a complaint with the Labor Department’s Veterans’ Employment and Training Service, which investigated the matter, determined that the complaint had merit and referred the matter to the Justice Department. The Justice Department’s Civil Rights Division subsequently decided to represent Bailey in this matter and filed this lawsuit on his behalf.
USERRA prohibits employers from discriminating against National Guard soldiers, such as Bailey, with respect to employment opportunities based on their past, current or future uniformed service obligations. Under USERRA, it is unlawful for an employer to terminate an employee because he has to miss work due to military obligations.
Among other things, the suit seeks compensation for Bailey’s lost wages and benefits, liquidated damages and reinstatement of Bailey’s employment with Home Depot.
“The men and women who wear our nation’s uniform need to know that they do not have to sacrifice their job at home in order to serve our country,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Civil Rights Division is committed to aggressive enforcement of USERRA to protect the rights of those who, through their bravery and sacrifice, secure the rights of all Americans.”
“The National Guard is composed primarily of civilian men and women who serve their country, state and community on a part-time basis,” said Acting U.S. Attorney Ann Birmingham Scheel. “National Guard members, and their employers, should know that we will employ all of USERRA’s tools to protect the employment rights of those in uniform while they sacrifice time away from their families and jobs for training and active duty.”
This case is being handled by the Employment Litigation Section of the Justice Department’s Civil Rights Division and the U.S. Attorney’s Office for the District of Arizona.
Additional information about USERRA can be found on the Justice Department websites www.usdoj.gov/crt/emp and www.servicemembers.gov, as well as the Labor Department website www.dol.gov/vets/programs/userra/main.htm.
Juarez Drug Cartel Leader Pleads Guilty to Charges Related to U.S. Consulate Murders and Is Sentenced to Life in PrisonRead the Press Release
WASHINGTON – The Juarez Drug Cartel’s leader in Juarez and Chihuahua, Mexico, pleaded guilty today in El Paso, Texas, and was sentenced to life in prison for his participation in drug-trafficking and numerous acts of violence in connection with the Barrio Azteca gang, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Robert Pitman for the Western District of Texas, FBI Special Agent in Charge Mark Morgan of the FBI’s El Paso Office and Administrator Michele M. Leonhart of the U.S. Drug Enforcement Administration (DEA).
Jose Antonio Acosta-Hernandez, 34, aka “Diego,” “Dienton,” “Diez” and “Bablazo,” of Chihuahua, was extradited to the United States from Mexico on March 16, 2012. Today, he pleaded guilty to four counts of racketeering, narcotics trafficking and money laundering. Acosta-Hernandez also pleaded guilty to seven counts of murder and weapons charges, which specifically related to the March 13, 2010, triple homicide in Juarez of U.S. Consulate employee Leslie Enriquez, her husband Arthur Redelfs and Jorge Salcido Ceniceros, the husband of another U.S. Consulate employee. Immediately after the guilty plea hearing, Acosta-Hernandez was sentenced to seven concurrent life terms, three additional consecutive life terms and 20 years in federal prison by U.S. District Judge Kathleen Cardone of the Western District of Texas, El Paso Division.
Today’s action is the result of close coordination between U.S. law enforcement and the government of Mexico in the investigation and prosecution of this case. The cooperation and assistance of the government of Mexico was essential to achieving the successful extradition, plea and sentencing of Acosta-Hernandez.
“As the leader of La Linea’s enforcement wing, Mr. Acosta-Hernandez directed a reign of terror,” said Assistant Attorney General Breuer. “Today’s guilty plea and sentence are a significant step in our effort to bring to justice those responsible for the consulate murders, and it would not have been possible without the extraordinary assistance of our law enforcement partners in Mexico, including Attorney General Marisela Morales Ibáñez. We are determined to hold accountable those individuals who committed the consulate murders, and to dismantle the dangerous criminal enterprise that fueled these and many other tragic and senseless acts of violence. Gangs and other criminal organizations that threaten public safety on both sides of the border are on notice that we are working more closely than ever with our Mexican counterparts to shut them down.”
“This plea represents the culmination of a virtual textbook example of cooperation among law enforcement agencies, both in the United States and in Mexico, to hold accountable those at the highest level of the drug trafficking trade,” said U.S. Attorney Pitman. “We will continue to work together with our counterparts in Mexico to target those responsible for the heinous crimes associated with cartel activity.”
“This investigation exemplifies the FBI’s commitment and that of our federal, state, local and international partners to investigate and prosecute individuals and organized criminal organizations who commit violent acts and other crimes impacting the U.S. and our border area with the Republic of Mexico,” said Special Agent in Charge Morgan. “The joint effort included the participation of USM Service, CBP, DEA, HSI, DOS, Texas DPS, El Paso Police, El Paso County Sheriff’s office and our Mexican partners.”
“Acosta-Hernandez is a cold blooded murderer with no respect for human life or the rule of law,” said DEA Administrator Leonhart. “His violent and deadly actions were put to a stop due to the combined efforts of U.S. law enforcement, and the will of the Mexican government. Together, we will relentlessly continue our pressure on the Mexican cartels and gangs that carry out violence on both sides of the border.”
The third superseding indictment, returned on March 2, 2011, alleged that Acosta-Hernandez was an associate of the Barrio Azteca (BA), a violent street and prison gang that began in the late 1980s and expanded into a transnational criminal organization. According to information presented in court, the BA formed an alliance with “La Linea,” which is part of the Juarez Drug Cartel and is also known as the Vincente Carrillo Fuentes Drug Cartel or “VCF.” The purpose of the BA-La Linea alliance was to battle the Chapo Guzman Cartel and its allies for control of the drug trafficking routes through Juarez and Chihuahua. The drug routes through Juarez, known as the Juarez Plaza, are important to drug trafficking organizations because they are a principal illicit drug trafficking conduit into the United States.
Acosta-Hernandez admitted that in approximately 2008, he became the leader of La Linea’s armed enforcement wing and acted as the VCF’s plaza boss in Chihuahua and Juarez. In this role, Acosta-Hernandez, in coordination with the BA, led violent attacks against their common enemies. Acosta-Hernandez admitted that he directed or participated in more than 1,500 murders since 2008.
For example, Acosta-Hernandez admitted that on Jan. 30, 2010, he ordered hit-men in his organization to kill members of the opposition that were sighted at a daytime birthday party at a home in Juarez. As part of this incident, 16 individuals were killed and 10 individuals were wounded at three different residences in Juarez. On July 15, 2010, Acosta-Hernandez directed a car bombing in Juarez that ultimately killed four people.
Acosta-Hernandez admitted that his purpose for engaging in these violent attacks was, in part, to protect and enhance the La Linea-BA alliance’s importation of heroin, cocaine and marijuana into the Western District of Texas and elsewhere, and ultimately to make possible the distribution of those drugs in the United States. Acosta-Hernandez admitted that he knew that the La Linea-BA alliance earned millions of dollars in drug trafficking profits each year. He also knew that these profits were reinvested into the organization to purchase additional drugs to import into the United States and/or to purchase weapons, ammunition or supplies to continue fighting enemies of La Linea and the BA.During the guilty plea hearing, Acosta-Hernandez also pleaded guilty to charges relating to the triple homicide of Enriquez, Redelfs and Salcido, based on his leadership position within La Linea and association with the BA. According to information presented in court, on March 13, 2010, Enriquez, her husband Redelfs, and Salcido, the Mexican national husband of a second U.S. Consulate employee, were shot and killed by other BA members in Juarez in separate but related incidents. According to information presented in court, on March 13, employees of the U.S. Consulate hosted a child’s birthday party in Juarez. Salcido was shot and killed in his vehicle as he left the party. His three children also were in the car and sustained minor injuries. His wife, a Mexican national employee at the U.S. Consulate, was following Salcido in a separate vehicle and was unharmed in the attack.
At approximately the same time, U.S. citizens Enriquez and Redelfs left the same party and were shot and killed in their vehicle. Enriquez was four months pregnant at the time of the shooting. Enriquez’s and Redelfs’ nine-month-old daughter also was in the vehicle but was unharmed.
During the hearing, Acosta-Hernandez acknowledged that Salcido, Enriquez and Redelfs were murdered by members and associates of the BA to further the gang’s racketeering activities. Acosta-Hernandez admitted that at the time, under his leadership as VCF’s plaza boss and coordinator of enforcement actions with the BA in Juarez, La Linea and the BA had agreed to unite and commit murders to further their criminal enterprise.A total of 35 defendants were charged in the third superseding indictment and are alleged to have committed various criminal acts, including racketeering, narcotics distribution and importation, retaliation against persons providing information to U.S. law enforcement, extortion, money laundering, obstruction of justice and murder, including the 2010 Juarez consulate murders. Of the 35 defendants charged, 32 have been apprehended; 23 of those defendants have pleaded guilty, while seven others are pending extradition from Mexico. U.S. and Mexican law enforcement are actively seeking to apprehend the three remaining fugitives in this case, including Eduardo Ravelo, an FBI Top Ten Most Wanted Fugitive. Trial against Ramon Renteria, aka “Spooky,” is scheduled to begin in El Paso on May 18, 2012.
The case is being prosecuted by Trial Attorney Joseph A. Cooley of the Criminal Division’s Organized Crime and Gang Section, Trial Attorney Brian Skaret of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorney George Leal of the Western District of Texas - El Paso Division. The U.S. Attorney’s Office for the District of New Mexico provided significant assistance in this case, including by Assistant U.S. Attorney Sarah Davenport. Valuable assistance was provided by the Criminal Division’s Offices of International Affairs and Enforcement Operations.
The case was investigated by the FBI’s El Paso Field Office, Albuquerque Field Office (Las Cruces Resident Agency), DEA Juarez and DEA El Paso. Special assistance was provided by the Bureau of Alcohol, Tobacco, Firearms and Explosives; Immigration and Customs Enforcement; the U.S. Marshals Service; U.S. Customs and Border Protection; Federal Bureau of Prisons; U.S. Diplomatic Security Service; the Texas Department of Public Safety; the Texas Department of Criminal Justice; El Paso Police Department; El Paso County Sheriff’s Office; El Paso Independent School District Police Department; Texas Alcohol and Beverage Commission; New Mexico State Police; Dona Ana County, N.M., Sheriff’s Office; Las Cruces, N.M., Police Department; Southern New Mexico Correctional Facility; and Otero County Prison Facility New Mexico.
Former Wilcox County, Georgia, Jail Trustee Pleads Guilty to Assaulting InmateRead the Press Release
WASHINGTON – The Justice Department announced today that former jail trustee Willie James Caruthers pleaded guilty yesterday to acting with several others, including law enforcement officials, to assault an inmate inside of the Wilcox County, Ga., Jail on July 23, 2009. Caruthers also pleaded guilty to conspiring to tamper with a witness in connection with the assault.
During his plea hearing and in the factual basis he signed, Caruthers admitted that he, along with several other individuals, including former Wilcox County Sheriff Stacy Bloodsworth, assaulted Wilcox County inmate K.H., causing K.H. to suffer a broken jaw. Caruthers further admitted that he was present when several individuals, including then-Sheriff Bloodsworth, assaulted inmates K.F. and T.O., causing both of them to sustain bruises, scratches and pain. During the plea hearing, Caruthers further admitted that he conspired with several other people, including Stacy Bloodsworth, to cover up the fact that law enforcement officials and others had used excessive force against inmates K.H., K.F. and T.O. Caruthers acknowledged that the plan of the conspiracy was for the co-conspirators to prepare false reports and submit them to Wilcox County Sheriff’s Office officials and to make statements consistent with those false reports to anyone inquiring about the excessive use of force incident.
“The Department of Justice is committed to promoting confidence in our criminal justice system and will vigorously prosecute anyone who acts with law enforcement officials to violate the civil rights of another person,” said Assistant Attorney General for the Civil Rights Division Thomas E. Perez.
U.S. Attorney for the Middle District of Georgia Michael J. Moore said, “Today’s guilty plea is another example of the zero tolerance the Department of Justice has for those defendants who violate the civil rights of another citizen.”
When Caruthers is sentenced, he faces a maximum penalty of up to 10 years on the civil rights violation and a maximum penalty of up to five years on the conspiracy charge.
On Feb. 17, 2012, the Justice Department unsealed a 14-count indictment against Stacy Bloodsworth; his son, Austin Bloodsworth; former Wilcox County Jailer Casey Owens; and Caruthers. The indictment charges the four defendants with civil rights violations in connection with the July 23, 2009, assault of the three inmates and with conspiring to cover up the assaults. In addition, the indictment charges Stacy Bloodsworth, Austin Bloodsworth and Caruthers with lying to the FBI, and it charges Caruthers and Owens with writing false reports. Stacy Bloodsworth was also charged with tampering with one of the victims, as well as with tampering with two witnesses.
On March 5, 2012, former South Central Georgia Drug Task Force Agent Timothy King Jr., 31, pleaded guilty to a bill of information charging him with conspiring to tamper with a witness in connection with the July 23, 2009, assaults of inmates K.H., K.F. and T.O. During his plea hearing, King admitted that he conspired with several other people, including a law enforcement official, to cover up the fact that law enforcement officials and others had used excessive force against the three inmates. When King is sentenced, he faces a maximum penalty of up to five years.
This case was investigated by the FBI and is being prosecuted by Trial Attorney Christine M. Siscaretti and Special Litigation Counsel Gerard V. Hogan of the Justice Department’s Civil Rights Division and Assistant U.S. Attorney Paul C. McCommon III of the U.S. Attorney’s Office for the Middle District of Georgia.
Former CIA Officer John Kiriakou Indicted for Allegedly Disclosing Classified Information, Including Covert Officer’s Identity, to Journalists and Lying to CIA’s Publications BoardRead the Press Release
ALEXANDRIA, Va. – Former CIA officer John Kiriakou was indicted today for allegedly repeatedly disclosing classified information to journalists, including the name of a covert CIA officer and information revealing the role of another CIA employee in classified activities, Justice Department officials announced. Kiriakou was charged in a five-count indictment returned by a federal grand jury in the Eastern District of Virginia, after he was initially charged in a criminal complaint and arrested in January 2012.
The indictment charges Kiriakou with one count of violating the Intelligence Identities Protection Act for allegedly illegally disclosing the identity of a covert officer and with three counts of violating the Espionage Act for allegedly illegally disclosing national defense information to individuals not authorized to receive it. The indictment also charges him with one count of making false statements for allegedly lying to the Publications Review Board of the CIA in an unsuccessful attempt to trick the CIA into allowing him to include classified information in a book he was seeking to publish.
Kiriakou, 47, of Arlington, Va., was a CIA intelligence officer between 1990 and 2004, serving at headquarters and in various classified overseas assignments. He remains free on bond and is expected to be arraigned on April 13, 2012, in U.S. District Court in Alexandria, Va.
The charges result from an investigation that was triggered by a classified defense filing in January 2009, which contained classified information the defense had not been given through official government channels, and, in part, by the discovery in the spring of 2009 of photographs of certain government employees and contractors in the materials of high-value detainees at Guantanamo Bay, Cuba. The investigation revealed that, on multiple occasions, one of the journalists to whom Kiriakou is alleged to have illegally disclosed classified information, in turn, disclosed that information to a defense team investigator, and that this information was reflected in the classified defense filing and enabled the defense team to take or obtain surveillance photographs of government personnel. There are no allegations of criminal activity by any members of the defense team for the Guantanamo Bay detainees.
The indictment alleges that Kiriakou made illegal disclosures about two CIA employees and their involvement in classified operations to two journalists on multiple occasions between 2007 and 2009. In one case, by revealing an employee’s name as a CIA officer, Kiriakou allegedly disclosed classified information – as the employee was and remains covert (identified in the indictment as “Covert Officer A”). In the second case, Kiriakou allegedly disclosed the name and contact information of another CIA employee, identified in the indictment as “Officer B,” whose participation in an operation to capture terrorism subject Abu Zubaydah in 2002 was then classified. Kiriakou’s alleged disclosures occurred prior to a June 2008 front-page story in The New York Times disclosing Officer B’s alleged role in the Abu Zubaydah operation.
The indictment was announced by Patrick J. Fitzgerald, U.S. Attorney for the Northern District of Illinois, who was appointed Special Attorney in 2010 to supervise the investigation. He announced the charges with James W. McJunkin, Assistant Director in Charge of the Washington Field Office of the FBI. Together, they thanked the CIA for its very substantial assistance in the investigation, as well as the Air Force Office of Special Investigations for its significant assistance.
The Justice Department’s National Security Division, working with the FBI, began the investigation. To avoid the risk of encountering a conflict of interest because of the pending prosecutions of some of the high-value detainees, Mr. Fitzgerald was assigned to supervise the investigation conducted by a team of attorneys from the Southern District of New York, the Northern District of Illinois and the Counterespionage Section of the National Security Division who were not involved in pending prosecutions of the detainees.
The count charging violation of the Intelligence Identities Protection Act, as well as each count of violating the Espionage Act, carries a maximum penalty of 10 years in prison, and making false statements carries a maximum prison term of five years. Each count carries a maximum fine of $250,000. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory U.S. Sentencing Guidelines.
An indictment contains only allegations and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is being represented in court by Assistant U.S. Attorneys Iris Lan (Southern District of New York) and Mark E. Schneider (Northern District of Illinois), and Trial Attorney Ryan Fayhee, of the Counterespionage Section of the Justice Department’s National Security Division. Assistant U.S. Attorney Lisa Owings (Eastern District of Virginia) will assist in the matter under local court rules.
Alabama Woman Indicted for Tax Fraud Using Stolen IdentitiesRead the Press Release
A federal grand jury in Montgomery, Ala., returned an indictment charging Jacqueline Slaton for using stolen identities to file false tax returns, the Justice Department, U.S. Attorney George L. Beck Jr. and the Internal Revenue Service (IRS) announced today. The 12-count indictment, which was unsealed following her arrest, charges Slaton with filing false claims, wire fraud, and aggravated identity theft.
According to the indictment, Slaton used stolen identities to file false tax returns which fraudulently claimed refunds. Slaton directed a portion of the proceeds to be deposited onto prepaid debit cards.
An indictment merely alleges that crimes have been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, she faces a potential maximum of five years in prison for each false claims count, 20 years in prison for each wire fraud count, and a mandatory two-year sentence for the aggravated identity theft counts. She is also subject to fines and mandatory restitution if convicted.
The case was investigated by Special Agents of the IRS - Criminal Investigation. Trial Attorneys Jason H. Poole and Michael Boteler of the Justice Department’s Tax Division and Assistant U.S. Attorney Jared Morris are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax .
4 April 2012
Former Executive of Miami-Based Ocean Bank Sentenced to Serve 37 Months in Prison for Participating in Bribery Scheme and Filing False Tax ReturnsRead the Press Release
WASHINGTON – A former executive of Ocean Bank, a financial institution headquartered in Miami, was sentenced today for participating in a scheme to accept bribes and for failing to report income on federal income tax returns, the Department of Justice announced.
Danilo P. Perez, a former vice president of Ocean Bank, was sentenced today in the U.S. District Court in Miami by District Judge Donald L. Graham to serve 37 months in prison followed by one year of supervised release.
On Jan. 25, 2012, Perez pleaded guilty to one count of conspiracy to solicit or demand money and other things of value to influence an employee of a financial institution and three counts of tax offenses. The charges against Perez stemmed from his accepting nearly $500,000 in cash and other items from co-conspirators in connection with his supervision of certain customer business with the bank. As vice president, Perez generally oversaw Ocean Bank’s lending relationships with corporate customers of the bank.
Perez admitted to accepting bribes, including payments for expensive watches, Super Bowl tickets and other items for his personal use, as well as substantial amounts of cash. Perez accepted the payments intending to be rewarded and influenced in connection with his role in approving Ocean Bank’s issuance of letters of credit, loans and overdraft privileges to his co-conspirators. Perez also admitted that he failed to report income from those bribes for tax years 2005, 2006 and 2007, resulting in lost tax revenue of approximately $91,000 to the federal government.
The investigation was conducted by the Antitrust Division’s Atlanta Field Office and Internal Revenue Service-Criminal Investigation in Atlanta and Miami, with assistance from the U.S. Attorney’s Office for the Southern District of Florida. Anyone with information concerning anticompetitive conduct in the banking industry is urged to call the Antitrust Division’s Atlanta Field Office at 404-331-7100 or visit www.justice.gov/atr/contact/newcase.htm.
Five New Orleans Police Officers Sentenced on Civil Rights and Obstruction of Justice Violations in the Danziger Bridge Shooting CaseRead the Press Release
WASHINGTON – The Justice Department announced today that five officers from the New Orleans Police Department (NOPD) were sentenced in connection with the federal civil rights prosecution of a police-involved shooting that occurred on the Danziger Bridge in the days after Hurricane Katrina, leaving two innocent civilians dead and four others seriously wounded. The defendants were also sentenced for their roles in an extensive cover-up of the shooting
U.S. District Court Judge Kurt Englehardt imposed long prison sentences on the four officers who were involved in the shooting on the bridge. He sentenced those four officers as follows:- Sergeant Kenneth Bowen was sentenced to 40 years in prison;
- Sergeant Robert Gisevius was sentenced to 40 years in prison;
- Officer Robert Faulcon was sentenced to 65 years in prison; and
- Officer Anthony Villavaso was sentenced to 38 years in prison.
The fifth officer, Sergeant Arthur “Archie” Kaufman, was a supervisor who was not involved in the shooting, but who helped the other officers cover up what they had done. Kaufman was sentenced to six years in prison.
“We hope that today’s sentences give a measure of peace and closure to the victims of this terrible shooting, who have suffered unspeakable pain and who have waited so patiently for justice to be done. The officers who shot innocent people on the bridge and then went to great lengths to cover up their own crimes have finally been held accountable for their actions,” said Assistant Attorney General for the Civil Rights Division Thomas E. Perez. “As a result of today’s sentencing, the city of New Orleans can take another step forward.”
“Our undying gratitude goes to our partners in the Civil Rights Division and FBI who, together with the tremendous professionals in the United States Attorney=s Office, made today=s closure – and justice – possible,” said U.S. Attorney for the Eastern District of Louisiana Jim Letten. “I am equally grateful to the courageous families of James Brissette and Ronald Madison who gave their lives on the bridge, as well as to those who suffered abuse needlessly at the hands of a few corrupt police officers. We will never relent, back down or give up our fight to ensure that our citizens – especially those most vulnerable among us – never have to fear those who are sworn to protect them.”
“Today’s sentencings send a strong message that no one is above the law and the civil rights of all of our citizens are paramount in a free society,” said Special Agent in Charge of the FBI’s New Orleans Division David Welker. “My hope as we move forward is that the men and women of NOPD and all law enforcement will conduct themselves always in a manner that will withstand the scrutiny of the bright light of justice.”
Bowen, Gisevius, Faulcon and Villavaso were convicted in connection with the shootings of multiple victims, including 17-year-old James Brissette and 40-year-old Ronald Madison, who died on the bridge. Those four officers and a supervisor, Kaufman, also were convicted of obstructing justice during the subsequent investigations.
Five other officers pleaded guilty before trial and cooperated with the federal investigation. Those officers testified at trial about the unjustified shooting on the bridge and about a massive police cover-up that followed.
The evidence at trial established that a group of police officers – including Sergeant Bowen, Sergeant Gisevius, Officer Faulcon and Officer Villavaso – opened fire with assault rifles and a shotgun, shooting at an unarmed family walking on the east side of the bridge. Police gunfire struck the victims multiple times, wounding a New Orleans couple, their daughter, and their nephew, and killing family-friend James Brissette. Susan Bartholomew, 38, suffered serious injuries, including the loss of her right arm, which was shot off by a high-powered assault rifle; Leonard Bartholomew III, 44, was shot in the leg and the back of the head, but survived his wounds; Lesha Bartholomew, 17, was shot in both legs and in the stomach; and the Bartholomew’s nephew, Jose Holmes, 19, was shot in the face, the neck, both arms, the hand and the stomach. James Brissette, who was shot in the back, the leg, both arms and the back of the head, died on the bridge. The Bartholomew’s 14-year-old son ran away from the shooting and was fired at, but was not injured.
According to the evidence presented at trial, a second shooting occurred several minutes later, on the west side of the Danziger Bridge. After shooting at the Bartholomew Family and James Brissette, officers traveled to the other side of the bridge to chase two men – brothers Lance and Ronald Madison – who had run away when the shooting started. Officers caught up to the Madisons on the west side of the bridge, where Officer Faulcon used a shotgun to shoot Ronald Madison in the back as Madison was running away. Ronald, a 40-year-old man with severe mental and physical disabilities, died near the base of the bridge.When the shooting was over, according to witnesses at trial, the officers at the scene immediately started a cover-up. Lance Madison was arrested and falsely charged with eight counts of attempting to kill police officers. Officers collected no guns or shell casings on the day of the shooting, and 30 casings they collected more than a month later were fired by officers rather than civilians. Three weeks after the shooting, Kaufman testified at a court appearance for Madison, claiming falsely that Madison had had a gun on the bridge and had shot at police. Madison was held in jail for three weeks, but was eventually released without being formally charged.
The evidence at trial also established that all five defendants conspired with each other, and with the officers who pleaded guilty, to cover-up what had happened on the bridge and to make the shootings appear justified. As part of the conspiracy, Kaufman obtained a gun from his home and claimed to have found the gun at the bridge on the day after the shooting. According to testimony, Kaufman also made up the existence of two phony eyewitnesses and fabricated alleged statements that he claimed to have taken from these witnesses and that he claimed helped justify the shootings. There was also testimony that Kaufman and the other members of the conspiracy held a meeting in an abandoned and gutted out NOPD building, where the officers practiced getting their stories straight before they gave formal audiotaped statements about the shooting.
Kaufman, who wrote a formal report about the incident, in which he concluded that the shooting was justified and that Lance Madison and Jose Holmes should be arrested, was also found guilty of conspiring with other officers to have Madison and Holmes prosecuted on the basis of false evidence.The five former NOPD officers who pleaded guilty before trial, admitting that they had participated in a conspiracy to obstruct justice and cover-up what happened on Sept. 4, 2005, were all sentenced previously. Former Officer Mike Hunter was sentenced to serve eight years in prison; former officer Ignatius Hills was sentenced to serve six-and-a-half years; former officer Robert Barrios was sentenced to serve five years; former lieutenant Michael Lohman was sentenced to serve four years; and former detective Jeffrey Lehrmann was sentenced to serve three years.
This case was investigated by the FBI’s New Orleans Field Office, and was prosecuted by Deputy Chief Bobbi Bernstein and Trial Attorney Cindy Chung of the Justice Department’s Civil Rights Division, along with Assistant U.S. Attorney Theodore Carter of the Eastern District of Louisiana.Departments of Justice and Health and Human Services Highlight Obama Administration Efforts, Health Reform Tools to Combat Medicare FraudRead the Press Release
WASHINGTON – At a Chicago summit highlighting a new high-tech war against health care fraud, Health and Human Services (HHS) Secretary Kathleen Sebelius and Attorney General Eric Holder today discussed how the Affordable Care Act and the Obama Administration’s Health Care Fraud Prevention and Enforcement Action Team (HEAT) are helping fight Medicare fraud. The Chicago summit is the seventh regional health care fraud prevention summit hosted by the Department of Justice and HHS.
The regional summits bring together a wide array of public and private partners, and are part of the HEAT partnership between HHS and the Department of Justice to prevent and combat health care fraud. The Obama Administration’s HEAT efforts have resulted in record-breaking health care fraud recoveries. In fiscal year 2011, for the second year in a row, the departments’ anti-fraud activities resulted in more than $4 billion in recoveries, an all-time high.
“This Administration continues to move aggressively in protecting patients and consumers and bringing health care fraud criminals to justice,” said Attorney General Holder. “Through HEAT, we have achieved unprecedented, record-breaking successes in combating health care fraud and as a result of the Affordable Care Act, we have additional critical resources, tools and authorities to continue this great success.”
“We have a simple message to criminals thinking about committing Medicare fraud: don’t even try,” said Secretary Sebelius. “Thanks to health reform and our Administration’s work, we have new tools and resources to catch criminals and stop Medicare fraud before it happens.”
New tools provided by the Affordable Care Act are strengthening the Obama Administration’s efforts to fight health care fraud. As a result of Affordable Care Act provisions:
- Criminals face tougher sentences for health care fraud, 20-50 percent longer for crimes that involve more than $1 million in losses;
- Contractors that police the Medicare program for waste, fraud and abuse will expand their work to Medicaid, Medicare Advantage and Medicare Part D programs;
- Government entities, including states, the Centers for Medicare and Medicaid Services (CMS) and law enforcement partners at the Office of the Inspector General (OIG) and the Justice Department, have greater abilities to work together and share information so that CMS can prevent money from going to bad actors by using its authority to suspend providers and suppliers engaged in suspected fraudulent activity.
A fact sheet with additional details about the Obama Administration’s efforts to combat health care fraud can be found at www.healthcare.gov/news/factsheets/2012/02/medicare-fraud02142012a.html.
Increased collaboration has yielded significant results through the HEAT partnership. Since the creation of HEAT in 2009, the Medicare Fraud Strike Force operations have expanded from two to nine locations throughout the United States, including Chicago. Strike force operations expanded to Chicago in February 2011 and since that time, charges have been filed against more than 35 defendants in the Northern District of Illinois for offenses related to health care fraud. Overall, in fiscal year 2011, strike force operations in nine locations charged a total of more than 320 defendants for allegedly billing more than $1 billion in false claims.
In February 2012, as a result of HEAT and strike force actions, a Dallas-area physician and the office manager of his medical practice, along with five owners of home health agencies, were arrested on charges related to their alleged participation in a nearly $375 million health care scheme involving fraudulent claims for home health services. In conjunction with this action, CMS imposed payment suspensions against 78 home health agencies in the Dallas area.
Today, the Obama Administration also announced more progress from its anti-fraud efforts, beyond the nearly $4.1 billion recovered last year:
- In the early phase of revalidating the enrollment of providers in Medicare, 234 providers were removed from the program because they were deceased, debarred or excluded by other federal agencies, or were found to be in false storefronts or otherwise invalid business locations;
- In 2011, HHS revoked 4,850 Medicaid providers and suppliers and deactivated 56,733 Medicare providers and suppliers as HHS took steps to close vulnerabilities in the Medicare program;
- In 2011, HHS saved $208 million through pre-payment edits that stop implausible claims before they’re paid;
- Prosecutions are up: the number of individuals charged with fraud increased from 797 in fiscal year 2008 to 1,430 in fiscal year 2011 – nearly a 75 percent increase;
- In the first few weeks of enhanced site visits required under the ACA screening requirements, HHS found 15 providers and suppliers whose business locations were non-operational and terminated their billing privileges;
- Through outreach and engagement efforts more than 49,000 complaints of fraud from seniors and people with disabilities reported to 1-800-MEDICARE were referred for further evaluation;
- A recent re-design of the quarterly Medicare Summary Notices received by Medicare beneficiaries makes it easier to spot and report fraud.
3 April 2012
Three Men Convicted in Puerto Rico for Roles in Providing Armed Security for Drug TransactionsRead the Press Release
WASHINGTON – Three men, including a former officer with the Puerto Rico Department of Corrections, were convicted by a federal jury in San Juan, Puerto Rico, yesterday for their roles in providing security for drug transactions, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Rosa E. Rodriguez-Velez of the District of Puerto Rico and Special Agent in Charge Joseph S. Campbell of the FBI’s San Juan Field Office.
Wendell Rivera Ruperto, 37, was convicted of five counts of conspiracy to possess with intent to distribute more than five kilograms of cocaine, five counts of attempting to possess with the intent to distribute more than five kilograms of cocaine and five counts of possession of a firearm in furtherance of a drug transaction.
Bernis Gonzalez Miranda, 27, a former Puerto Rico Department of Corrections officer, was convicted of three counts of conspiracy to possess with intent to distribute more than five kilograms of cocaine, three counts of attempting to possess with the intent to distribute more than five kilograms of cocaine and three counts of possession of a firearm in furtherance of a drug transaction.
Jose M. Nieves-Velez, 39, was convicted of one count each of conspiracy to possess with intent to distribute more than five kilograms of cocaine, attempting to possess with the intent to distribute more than five kilograms of cocaine and possession of a firearm in furtherance of a drug transaction.
Rivera Ruperto, Gonzalez Miranda and Nieves-Velez were charged in a superseding indictment returned on Oct. 28, 2010, along with 88 law enforcement officers in Puerto Rico and 42 other individuals, as part of the FBI undercover operation known as Guard Shack.
According to the evidence presented in court, Rivera Ruperto provided security for what he believed were illegal cocaine deals on five separate occasions (April 14, April 27, June 9, June 25, and Sept. 16, 2010); Gonzalez Miranda on three separate occasions (June 15, July 2, and July 7, 2010); and Nieves-Velez on one occasion (July 7, 2010). In fact, the purported drug transactions were part of the undercover FBI operation. According to information presented at trial, the three men acted as security guards for what they believed were multi-kilogram cocaine deals by frisking the buyer, providing armed protection for the deal and escorting the buyer in and out of the transaction. Information presented at trial also showed that Rivera Ruperto and Gonzalez Miranda recruited other individuals, including law enforcement officers, to participate in the transactions.
One of those officers, Jose Bermudez Quinones, a Puerto Rico Department of Corrections officer recruited by Gonzalez Miranda, pleaded guilty on Feb. 2, 2012, to attempting to possess with intent to distribute cocaine, and possessing a firearm in furtherance of a drug trafficking crime. He is scheduled to be sentenced on June 15, 2012.
In return for the security they provided, Rivera Ruperto, Gonzalez Miranda and Nieves-Velez received cash payments of $2,000 for each transaction, and in one instance, Rivera Ruperto received $3,000.
U.S. District Judge Juan Pérez-Giménez scheduled sentencing for Aug. 10, 2012. At sentencing, Rivera Ruperto faces a mandatory minimum sentence of 115 years in prison and a maximum penalty of life in prison; Gonzalez Miranda faces a mandatory minimum of 65 years and a maximum penalty of life in prison; and Nieves-Velez faces a mandatory minimum of 15 years and a maximum penalty of life in prison.
The case was prosecuted by Trial Attorneys Kevin Driscoll and Monique Abrishami of the Criminal Division’s Public Integrity Section. The case was investigated by the FBI. The Bureau of Alcohol, Tobacco, Firearms and Explosives also provided assistance in this case. The U.S. Attorney’s Office for the District of Puerto Rico also participated in the investigation and prosecution of this case.
Miami-Area Assisted Living Facility Owner Pleads Guilty to Fraud and Kickback SchemeRead the Press Release
WASHINGTON – The owner of a Miami-area assisted living facility pleaded guilty yesterday for her role in a kickback scheme that funneled patients to a fraudulent mental health provider, American Therapeutic Corporation (ATC), announced the Department of Justice, FBI and Department of Health and Human Services (HHS).
Billy Denica, 50, pleaded guilty before U.S. District Judge Joan A. Lenard in Miami to one count of conspiracy to commit health care fraud. Denica was the owner of an assisted living facility called Robyll Care Assisted Living Facility.
According to court documents, Denica agreed to send Medicare beneficiaries who resided at Robyll to ATC for mental health treatment called partial hospitalization program (PHP) services in exchange for illegal health care kickbacks. ATC purported to operate PHPs in seven different locations throughout south Florida and Orlando. According to court documents, Denica admitted that she knew ATC fraudulently billed Medicare for the PHP treatment that her referrals purportedly received at ATC. Denica was aware that some of the Robyll residents would be offered gifts such as money, cigarettes and candy, so that they would agree to be admitted to a hospital for purposes of later attending ATC. She also admitted that she referred her residents to ATC simply because they had Medicare, because she would receive a cash kickback and because they were willing to go.
According to the plea agreement, Denica’s participation in the fraud resulted in more than $1.1 million in fraudulent billing to the Medicare program. At sentencing, scheduled for June 11, 2012, Denica faces a maximum of 10 years in prison and a $250,000 fine.
ATC, its management company Medlink Professional Management Group Inc., a related company called American Sleep Institute (ASI), and various owners, managers, doctors, therapists, patient brokers and marketers of ATC and Medlink and ASI, were charged with various health care fraud, kickback, money laundering and other offenses in two indictments unsealed on Feb. 15, 2011. ATC, Medlink and 14 of the individual defendants have pleaded guilty or have been convicted at trial. Seven other defendants are scheduled for trial April 9, 2012, before U.S. District Judge Patricia A. Seitz, and one defendant’s trial has been deferred until after June 2012. A defendant is presumed innocent unless proven guilty beyond a reasonable doubt in a court of law.
The guilty plea was announced today by 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; John V. Gillies, Special Agent-in-Charge of the FBI’s Miami Field Office; and Special Agent-in-Charge Christopher B. Dennis of the HHS Office of Inspector General (HHS-OIG), Office of Investigations Miami Office.
The case is being prosecuted by Trial Attorneys Steven Kim and Jennifer L. Saulino 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 Southern District of Florida.
Since its inception in March 2007, the Medicare Fraud Strike Force operations in nine locations have charged more than 1,190 defendants that collectively have billed the Medicare program for more than $3.6 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.
Georgia-Based Radiation Oncology Practice to Pay $3.8 Million to Settle False Claims Act CaseRead the Press Release
WASHINGTON – Radiotherapy Clinics of Georgia LLC, a radiation oncology practice, and its affiliates RCOG Cancer Centers LLC, Physician Oncology Services Management Company LLC, Frank A. Critz, M.D. and Physician Oncology Services L.P. (collectively, RCOG) agreed to pay $3.8 million to settle claims that they violated the False Claims Act, the Justice Department announced today. RCOG, which is located in Decatur, Ga., allegedly billed Medicare for medical treatment that they provided to prostate cancer patients in excess of those permitted by Medicare rules and for services that were not medically necessary.
The civil settlement resolves complaints filed by two whistleblowers, called relators, under the qui tam, or whistleblower, provisions of the False Claims Act by a former employee and a former doctor who both worked for RCOG. The government alleged that RCOG overbilled Medicare for port films (X-ray images of the treatment area) and for simulations (the process by which radiation treatment fields are defined, filmed and marked on the skin in preparation for personalized radiation therapy). Additionally, it was alleged that the practice overbilled Medicare for physics consults (production of complete special consultative reports for an individual patient) and for pre-plans ordered by Dr. Critz that were not medically necessary and/or never reviewed by the doctor.“Protecting the integrity of the Medicare program, which over 47 million individuals rely on for their medical care, is one of the department’s highest priorities. Health care providers are put on notice that they must bill only for medically appropriate care” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.
The complaints, which were filed separately by the two relators, were consolidated into the case captioned United States ex rel. R. Jeffrey Wertz and Rebecca S. Tarlton v. Radiotherapy Clinics of Georgia, LLC, et al., Civil Action No. 1:08-CV-2244, pending in the U.S. District Court for the Northern District of Georgia. The relators, R. Jeffrey Wertz and Rebecca S. Tarlton, M.D., will receive $646,000 as their share of the proceeds.
Sally Quillian Yates, U.S. Attorney for the Northern District of Georgia, said, “This settlement demonstrates our office's continued commitment to stop Medicare fraud. Unfortunately, otherwise legitimate businesses continue to take advantage of federal healthcare programs for their private profit. We will not ignore these violations.”
“The OIG would like to remind providers that if they know a claim to be false, it is their responsibility to bill the claim properly,” said Derrick L. Jackson, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG) for the Atlanta region. “The OIG will continue to hold companies like RCOG responsible for improper claims.”
Brian D. Lamkin, Special Agent in Charge, FBI Atlanta Field Office, stated: “The FBI continues to dedicate many investigative resources to the protection of the federally funded Medicare program from individuals who would attempt to divert these much needed funds through fraud. The public is reminded that anyone with information regarding healthcare fraud, to include Medicare fraud, related activity should contact their nearest FBI field office.”
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 more than $6.7 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 $9 billion.
This case was investigated jointly by the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Northern District of Georgia, the FBI and HHS-OIG.The claims settled by today’s agreement are allegations only; there has been no determination of liability.
G.S. Electech Agrees to Plead Guilty to Price Fixing on Auto Parts Installed in U.S. CarsRead the Press Release
WASHINGTON – Toyota City, Japan-based G.S. Electech Inc. has agreed to plead guilty and to pay a $2.75 million criminal fine for its role in a conspiracy to fix the prices of auto parts used on antilock brake systems installed in U.S. cars, the Department of Justice announced today.
According to a one-count felony charge filed today in the U.S. District Court for the Eastern District of Michigan, in Detroit, G.S. Electech engaged in a conspiracy to rig bids and to fix the prices of speed sensor wire assemblies, which are installed on automobiles with an antilock brake system (ABS) and were sold to an automaker in the United States and elsewhere. According to the charge, G.S. Electech’s involvement in the conspiracy lasted from at least as early as January 2003 until at least February 2010. According to the plea agreement, which is subject to court approval, G.S. Electech has agreed to pay a criminal fine and to cooperate with the department’s ongoing investigation.
"The Antitrust Division continues to uncover and prosecute illegal conduct in its ongoing and active investigation into price fixing and bid rigging in the auto parts industry,” said Acting Assistant Attorney General Sharis A. Pozen in charge of the Department of Justice’s Antitrust Division. “Today’s announcement demonstrates that the Antitrust Division, working with its law enforcement partners, will continue to pursue those who engage in anticompetitive behavior that harms American businesses and consumers.
Including G.S. Electech, eight executives and four companies have been charged and have agreed to plead guilty in the investigation thus far. Three of the companies have pleaded guilty and have been sentenced to pay criminal fines totaling more than $748 million. Seven of the executives have pleaded guilty and have been sentenced to serve a total of more than 122 months in jail.
G.S. Electech manufactures, assembles and sells a variety of automotive electrical parts, including speed sensor wire assemblies. The speed sensor wire assemblies connect a sensor on each tire to the ABS and carry electrical signals from the sensors to the ABS to instruct it when to engage.
According to the charge, G.S. Electech and its co-conspirators carried out the conspiracy by, among other things, agreeing during meetings and discussions in Japan to coordinate bids submitted to, and price adjustments requested by, an automobile manufacturer. In court documents, G.S. Electech and its co-conspirators employed measures to keep their conduct secret, including using code names and instructing participants to destroy evidence of collusion.
G.S. Electech is charged with price fixing in violation of the Sherman Act, which carries a maximum fine of $100 million for corporations. The maximum fine for the company may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
Today’s charge is the result of an investigation being conducted by the Antitrust Division’s National Criminal Enforcement Section and the FBI’s Detroit Field Office with the assistance of the FBI headquarters’ International Corruption Unit. Anyone with information concerning the focus of this investigation is urged to call the Antitrust Division’s National Criminal Enforcement Section at 202-307-6694, visit www.justice.gov/atr/contact/newcase.htm or call the FBI’s Detroit Field Office at 313-965-2323.
Florida-Based Wellcare Health Plans Agrees to Pay $137.5 Million to Resolve False Claims Act AllegationsRead the Press Release
WASHINGTON – WellCare Health Plans Inc. will pay $137.5 million to the federal government and nine states to resolve four lawsuits alleging violations of the False Claims Act, the Justice Department announced today. WellCare, based in Tampa, Fla., provides managed health care services for approximately 2.6 million Medicare and Medicaid beneficiaries nationwide.
The lawsuits alleged a number of schemes to submit false claims to Medicare and various Medicaid programs, including allegations that WellCare falsely inflated the amount it claimed to be spending on medical care in order to avoid returning money to Medicaid and other programs in various states, including the Florida Medicaid and Florida Healthy Kids programs; knowingly retained overpayments it had received from Florida Medicaid for infant care; and falsified data that misrepresented the medical conditions of patients and the treatments they received.
Additionally, it was alleged that WellCare engaged in certain marketing abuses, including the “cherrypicking” of healthy patients in order to avoid future costs; manipulated “grades of service” or other performance metrics regarding its call center; and operated a sham special investigations unit.
The settlement requires that Wellcare pay the United States and nine states – Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Missouri, New York and Ohio – a total of $137.5 million. WellCare may also be required to pay an additional $35 million in the event that the company is sold or experiences a change in control within three years of this agreement.
“Government health plans increasingly rely on managed care organizations to provide patient care. This case illustrates our commitment to ensure that government funds are in fact used to render care and not to line the pockets of those more concerned with the bottom line,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.
This is the second monetary settlement reached with WellCare since the government initiated a criminal and civil investigation of WellCare in 2006. On May 5, 2009, in order to resolve potential criminal charges related to losses by the Florida Medicaid and Healthy Kids programs, WellCare entered a Deferred Prosecution Agreement (DPA) with the U.S. Attorney in the Middle District of Florida, under which WellCare paid $40 million in restitution and forfeited an additional $40 million. The U.S. Attorney’s office also has pursued criminal charges against several former Wellcare employees. One former WellCare analyst, Gregory West, entered into a plea agreement and pleaded guilty to a conspiracy charge shortly after execution of a search warrant on WellCare’s corporate headquarters in Tampa; he is currently awaiting sentencing. Five former executives – including former CEO Todd Farha, former CFO Paul Behrens and former general counsel Thaddeus Bereday – were indicted in March 2011 and are currently awaiting trial, which is presently scheduled for January 2013. Additionally, Wellcare previously executed a Corporate Integrity Agreement (CIA) with the Office of Inspector General of the U.S. Department of Health and Human Services (HHS-OIG) that imposes compliance obligations on the company for a period of five years.
The resolution of the civil suits announced today brings the total recoveries from WellCare to $217.5 million, a number that will rise to over a quarter billion ($252.5 million) if the contingency payment provision is triggered.
“The monies recovered in restitution and from this settlement agreement will go to the federal and state programs which suffered these losses, while the forfeited funds will go to law enforcement to help fund future investigations,” said Robert E. O’Neill, U.S. Attorney for the Middle District of Florida. O’Neill continued, “In an era of decreasing federal and state budgets, and increasing healthcare costs, we must pursue all available civil remedies to recover losses suffered by government healthcare programs. This settlement should serve as notice to those defrauding state and federal healthcare programs that, in addition to appropriate criminal prosecutions, we will utilize civil suits to root out their conduct and recover their ill-gotten gains.”
“Fraud committed by managed care companies harms the integrity of the Medicare and Medicaid programs and increases the healthcare burden for all of us,” said David B. Fein, U.S. Attorney for the District of Connecticut. “The government is committed to preventing fraud in federal and state health care programs, and managed care companies that are dishonest will be held accountable.”
“Ensuring the integrity of the Medicaid and Medicare managed care programs is one of our highest priorities ” said Daniel R. Levinson, Inspector General of the U.S. Department of Health & Human Services. “OIG will work vigilantly with law enforcement partners at all levels of government to safeguard this vital program.”
The four lawsuits were filed by whistleblowers, known as relators, under the qui tam provisions of the False Claims Act, which allows private parties to file suit on behalf of the United States and share in any recovery. Sean Hellein, a financial analyst formerly employed by WellCare whose qui tam complaint initiated the government’s investigation, will receive approximately $20.75 million. The other three relators – Clark Bolton, SF United Partners Inc. and Eugene Gonzalez – will split about $4.66 million and will be entitled to receive an additional share of any contingency payment.
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 more than $6.7 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 $9 billion.
This case was investigated jointly by the Commercial Litigation Branch of the Justice Department’s Civil Division, the United States Attorney’s Office for the Middle District of Florida and the District of Connecticut, the National Association of Medicaid Fraud Control Units, the FBI, and the HHS-OIG.
The claims settled by today’s agreement are allegations only; there has been no determination of liability except as noted in the referenced criminal proceeding.
2 April 2012
Two Owners and Two Employees of Miami Home Health Company Plead Guilty in $20 Million Health Care Fraud SchemeRead the Press Release
WASHINGTON – Two owners and two employees of a Miami home health care agency pleaded guilty for their participation in a $20 million Medicare fraud scheme involving false billings for home health care services, announced the Department of Justice, the FBI and the Department of Health and Human Services (HHS).
Ariel Rodriguez, 41, Reynaldo Navarro, 37, and Ysel Salado, 26, each pleaded guilty today before U.S. District Judge Marcia G. Cooke to one count of conspiracy to commit health care fraud, and Melissa Rodriguez, 24, pleaded guilty on March 28, 2012, before Judge Cooke to the same charge.
According to court documents, Ariel Rodriguez and Reynaldo Navarro were the owners of Serendipity Home Health Inc., a Florida home health agency that purported to provide home health care and physical therapy services to eligible Medicare beneficiaries. Melissa Rodriguez and Ysel Salado were employees at Serendipity Home Health.According to plea documents, Ariel Rodriguez, Navarro and their co-conspirators paid kickbacks and bribes to patient recruiters. In return, the recruiters provided patients to Serendipity, as well as prescriptions, plans of care (POCs) and certifications for medically unnecessary therapy and home health services. Ariel Rodriguez and Navarro used the prescriptions, POCs and medical certifications to fraudulently bill the Medicare program, which Ariel Rodriguez and Navarro knew was in violation of federal criminal laws.
Melissa Rodriguez and Salado admitted that they cashed checks from Serendipity and provided the cash to Ariel Rodriguez and Navarro to use for the kickback payments.
According to plea documents, Serendipity nurses and office staff falsified patient files for Medicare beneficiaries to make it appear that the beneficiaries qualified for home health care and therapy services. In fact, the beneficiaries did not actually qualify for and did not receive such services. Ariel Rodriguez and Navarro admitted that they knew files were falsified so that Medicare could be billed for medically unnecessary services.
From approximately April 2007 through March 2009, Ariel Rodriguez, Navarro and their co-conspirators submitted approximately $20 million in false and fraudulent claims to Medicare. Medicare paid approximately $14 million on those claims.
The pleas were announced today by 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; John V. Gillies, Special Agent-in-Charge of the FBI’s Miami Field Office; and Special Agent-in-Charge Christopher Dennis of the HHS Office of Inspector General (HHS-OIG), Office of Investigations Miami Office.
This case is being prosecuted by Trial Attorney Joseph S. Beemsterboer 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 Southern District of Florida.
Since their inception in March 2007, Medicare Fraud Strike Force operations in nine locations have charged more than 1,190 defendants who collectively have falsely billed the Medicare program for more than $3.6 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.
New Hampshire and Massachusetts Residents Convicted for Promoting and Using Tax Defier SchemesRead the Press Release
A federal jury in Worcester, Mass., convicted William Scott Dion and Catherine Floyd, both of Sanbornville, N.H., and Charles Adams of Norwood, Mass., for conspiracies to defraud the United States through the promotion and use of multiple tax fraud schemes, the Justice Department and the Internal Revenue Service (IRS) announced today.
Dion and Floyd were released on electronic monitoring bracelets pending sentencing and Adams was released on call in/voice recognition pending sentencing. Dion’s sentencing is scheduled for June 21, 2012, Floyd’s sentencing is scheduled for June 26, 2012 and Adams’s sentencing is scheduled on June 27, 2012, all before U.S. District Judge F. Dennis Saylor.
Dion, Floyd and Adams were convicted of conspiracy to defraud the IRS by promoting an “under the table” payroll scheme. Dion and Floyd were also convicted for conspiracy to defraud the IRS through the use of an “underground warehouse banking” scheme designed to conceal customer income and assets from the IRS. Floyd and Dion were also convicted separately for corruptly endeavoring to obstruct the IRS’s ability to determine their own income. Adams was separately convicted of tax evasion.
According to the evidence presented at trial, Dion, Floyd and Adams ran a payroll tax scheme in order to pay employees “under the table” without properly accounting for, withholding and paying over to the IRS the payroll taxes required by law. The three promoted the payroll scheme to employers and individuals who wanted to avoid payment of employer payroll taxes and individual payroll taxes. The three ran the payroll scheme under three different names: Contract America, Talent Management and New Way Enterprises. Approximately 150 individuals subscribed to the payroll scheme and in excess of $2.5 million in unreported wages and compensation were paid through the system.
The evidence at trial also proved that Dion and Floyd conspired to defraud the United States by promoting and operating an “underground warehouse banking” scheme which helped subscribers conceal income and assets from the IRS. According to the evidence, the warehouse scheme operated under three different names: Your Virtual Office, Office Services and Calico Management. As part of the warehouse banking scheme, the defendants maintained accounts at several banks and used the accounts to deposit and commingle business receipts and other funds received from subscribers in order to mask the true ownership of the funds. According to evidence presented at trial, more than $28 million in deposits were made into the various bank accounts used in the scheme.
In August 2009, the three defendants were indicted with four other individuals relating to the promotion and use of these schemes. On Dec. 9, 2011, prior to trial, Gail and Myron Thorick of West Warwick, R.I., pleaded guilty to conspiring to defraud the United States by helping operate the “warehouse banking” scheme and for filing false tax returns. On that same date, Gary Alcock pleaded guilty to conspiracy by using the payroll scheme, as well as to tax evasion and willful failure to file tax returns. OnJan. 24, 2012, Kenneth Scott Alcock pleaded guilty to conspiracy relating to the payroll scheme and to multiple counts of tax evasion. All four defendants are awaiting sentencing.
The defendants face up to five years in prison on each count of conspiracy to defraud the United States and tax evasion, together with fines of up to $250,000 or twice the financial gain to the defendant or loss to the IRS, to be followed by three years of supervised release. The charges for obstructing the IRS carry maximum penalties of three years in prison, fines of $250,000 and one year of supervised release.
The U.S. Attorney and the Principal Deputy Assistant Attorney General of the Tax Division jointly announced the verdict.
The case was investigated by Special Agents of the IRS-Criminal Investigation. It is being prosecuted jointly by the U.S. Attorney’s Office in Boston, and the Tax Division of the U.S. Department of Justice in Washington DC. Assistant U.S. Attorney Victor A. Wild, and Assistant Chief John N. Kane and Trial Attorney Jeffrey L. Shih of the Justice Department’s Tax Division prosecuted the case.
More information about the Tax Division and its enforcement efforts can be found at www.justice.gov/tax .
Michigan Man Arrested on Tax ChargesRead the Press Release
Steven Kern of Marine City, Mich., was arrested today following his indictment on March 27, 2012, on eight counts of failing to file his individual tax returns and eight counts of filing false corporate tax returns, the Justice Department and Internal Revenue Service (IRS) announced today.
The indictment alleges that Kern failed to file individual tax returns for tax years 2003 to 2010, despite earning more $1.2 million in gross income during that time period. The indictment further alleges that Kern filed false corporate tax returns on the behalf of Kern Chiropractic Center, failing to report cash and check payments diverted from the center by Kern from 2003 to 2010.
According to the indictment, Kern has not submitted a tax return to the IRS since tax year 2002. The indictment alleges that Kern used funds diverted from the Kern Chiropractic Center to pay for his own personal expense.
An indictment is merely a formal charge by the grand jury. Kern is presumed innocent unless and until proven guilty in U.S. District Court. If convicted of all charges, Kern faces a maximum potential sentence of 32 years in prison and maximum fines of up to $2.8 million.
The case was investigated by the IRS Criminal Investigation Division and is being prosecuted by Trial Attorneys Mark McDonald and Jeff Bender of the Justice Department’s Tax Division.