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10 February 2012
Justice Department Settles Allegations of Employment Discrimination at the Massachusetts Department of CorrectionRead the Press Release
WASHINGTON – The Department of Justice announced today that it has entered into a settlement that, if approved by the court, will resolve the department’s allegations that the Commonwealth of Massachusetts and the Massachusetts Department of Correction (collectively Massachusetts) violated Title VII of the Civil Rights Act of 1964 by discriminating against female applicants for entry-level correction officer (CO) and correction program officer (CPO) positions at the Massachusetts Department of Correction (MDOC).
Title VII’s prohibitions of discrimination in employment on the basis of race, color, sex, national origin or religion proscribe not only intentional discrimination, but also the use of employment practices (e.g., physical tests) that result in disparate impact. Unless the employer can prove that such practices are job related and consistent with business necessity, employment practices that disproportionately screen out applicants based upon sex do not identify the best qualified candidates and violate the law. The United States’s complaint, filed in the U.S. District Court for the District of Massachusetts in Boston, alleges that Massachusetts’s use of a physical abilities test to pre-screen and select applicants for CO and CPO positions with the MDOC disproportionately excluded female applicants since 2007 and was not job related and consistent with business necessity.
The Justice Department, along with Massachusetts, filed a joint motion today requesting that the court provisionally approve the settlement agreement executed by the parties and schedule an initial fairness hearing regarding the terms of the settlement agreement.
The settlement agreement requires that Massachusetts no longer use the physical abilities test challenged by the United States for pre-screening and selecting CO and CPO positions with the MDOC and requires that Massachusetts develop a new lawful selection procedure that complies with Title VII. The settlement agreement, if approved by the court, also requires that Massachusetts pay $736,000 towards back pay to female CO and CPO applicants who were harmed by the hiring practice challenged by the United States and who are determined to be eligible for relief. Additionally, female CO and CPO applicants determined to be eligible for relief under the settlement agreement may receive a priority offer of hire to a CO and CPO position with the MDOC. All CO and CPO applicants must pass a physical test and other lawful selection procedures to be considered for priority hire relief. Female CO and CPO applicants eligible for priority hire relief and those currently employed with the MDOC who are entitled to delay hire relief are also eligible for retroactive seniority relief.
“The Department of Justice will not tolerate discrimination in employment on the basis of sex, whether that discrimination is intentional or the result of employment practices that have discriminatory impact,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The department commends Massachusetts for working to put in place a new physical test that complies with Title VII and enables Massachusetts to choose qualified applicants for CO and CPO positions, and to provide relief to those female applicants who have been harmed by the prior employment practices challenged by the department.”
More information about Title VII and other federal employment laws is available on the Department of Justice website at www.usdoj.gov/crt/emp/index.html .
Justice Department Requires Mill Divestitures in International Paper’s Acquisition of Temple-InlandRead the Press Release
WASHINGTON — The Department of Justice announced today that it will require International Paper Company and Temple-Inland Inc. to divest three containerboard mills in order to proceed with their $4.3 billion merger. The department said that the merger, as originally proposed, would have substantially lessened competition in the production and sale of containerboard, the type of paper used to make corrugated boxes, in the United States.
The department’s Antitrust Division filed a civil antitrust lawsuit today in U.S. District Court in Washington, D.C., to block the proposed transaction. At the same time, the department filed a proposed settlement that, if approved by the court, will resolve the lawsuit by requiring International Paper and Temple-Inland to divest three containerboard mills to resolve the competitive concerns alleged in the lawsuit.
“Corrugated boxes made from containerboard are used to ship more than 90 percent of all goods nationwide,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “With the mill divestitures, the transaction can proceed and American consumers and businesses across the country can be assured that competition is preserved in this important industry that is vital to the U.S. economy.”
According to the complaint, International Paper and Temple-Inland are, respectively, the largest and third-largest producers of containerboard in North America. The merger, as originally proposed, would have produced a single firm in control of approximately 37 percent of North American containerboard capacity.
The department said that by combining the containerboard capacity of International Paper and Temple-Inland, the proposed merger would significantly expand the volume of containerboard over which International Paper would benefit from a price increase, and likely would have led International Paper to strategically reduce its output of containerboard in order to increase the market price.
The proposed settlement requires the divestiture of Temple-Inland’s containerboard mills in Waverly, Tenn., and Ontario, Calif., and either International Paper’s containerboard mill in Oxnard, Calif., or International Paper’s containerboard mill in Henderson, Ky., but not both of those mills. Collectively, the divestitures account for approximately 950,000 tons of containerboard capacity. The department’s Antitrust Division must approve the purchaser or purchasers of the divested mills.
International Paper is a New York corporation headquartered in Memphis, Tenn. International Paper owns and operates 12 containerboard mills and 133 box plants that convert containerboard into corrugated boxes in the United States. In 2010, International Paper reported revenues of approximately $25.2 billion, with its North American Industrial Packaging Group, which produces containerboard and corrugated products, accounting for $8.4 billion.
Temple-Inland is a Delaware corporation headquartered in Austin, Texas. Temple-Inland owns and operates seven containerboard mills and 53 box plants in the United States. In 2010, Temple-Inland reported revenues of approximately $3.8 billion, with its corrugated-packing business accounting for approximately $3.2 billion.
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 Joshua H. Soven, Chief, Litigation I Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 4100, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the settlement upon a finding that it is in the public interest.
Former IRS Employee from Texas Sentenced to Nearly Nine Years in Prison on Theft of Government Property and Aggravated Identity Theft ConvictionsRead the Press Release
Thomas W. Richardson was sentenced Thursday by U.S. District Judge Jane J. Boyle in Dallas to 105 months in prison and ordered to pay $30,649 in restitution, following his guilty plea in August 2011 to one count of theft of government property and one count of aggravated identity theft, the Justice Department announced today. Judge Boyle ordered that Richardson surrender to the Bureau of Prisons on March 6, 2012. According to an order filed that set conditions for his release, Richardson is a resident of Mansfield, Tex.
In handing down the sentence, Judge Boyle commented that Richardson was a former IRS employee who used his inside knowledge of IRS operations to commit his crime.
According to the factual resume filed in the case, Richardson admitted that within a two-day period, April 15, 2006 to April 17, 2006, he filed or caused to be filed 29 fraudulent 2005 individual income tax returns. Each federal income tax return claimed a refund of between $215,801 and $473,832. Richardson admitted that the refunds claimed by all 29 tax returns totaled $7,922,657.
He further admitted that each tax return was filed claiming the married filing jointly election and listed two taxpayers, husband and wife. In each case, the Social Security number reported on the tax returns was assigned to individuals and in most cases, the names on the tax returns matched the names of the individuals to whom the Social Security numbers were assigned. Richardson admitted that the tax returns were prepared without the authorization of the 58 taxpayers listed on the tax returns. All of the returns directed that the Internal Revenue Service (IRS) pay the money to one of Richardson’s bank accounts. According to the factual resume filed in the case, the IRS paid out seven refunds totaling $1,865,401 between May 12, 2006 and May 19, 2006. All but $30,649 was recouped by the IRS.
The case was investigated by the IRS-Criminal Investigation. Trial Attorneys Robert A. Kemins and Jed Silversmith of the Justice Department’s Tax Division, as well as Assistant U.S. Attorney Joe Revesz, prosecuted the case.
More information about the Tax Division and its enforcement efforts can be found at http://www.justice.gov/tax/
Florida Resident Convicted for Interfering with the IRS and Filing False Tax ReturnsRead the Press Release
Roanne Eye , 57, of Plantation, Fla., was found guilty of tax charges late Thursday after a four-day jury trial, the Justice Department and Internal Revenue Service (IRS) announced. Eye was convicted interference with the administration of Internal Revenue laws and of filing false individual income tax returns.
According to evidence presented at trial, Eye attempted to obstruct and interfere with the administration of the laws and regulations of the IRS by telling her employer not to comply with IRS notices and by submitting IRS forms falsely claiming she was exempt from income tax withholding. Eye failed to file timely income tax returns for tax years 1996 and 1999 -2005, even after she received notices that her taxes were due. In March 2006, Eye filed tax returns for 1996 and 1999 - 2005, all claiming refunds to which she was not entitled. She subsequently filed a fraudulent return for tax year 2006. In total, Eye falsely claimed more than $1 million in fraudulent refunds.
In addition to filing the fraudulent income tax returns, Eye flooded IRS offices throughout the United States and Puerto Rico with frivolous letters challenging the authority of the IRS to collect taxes from her.
Sentencing has been scheduled for April 26, 2012, before U.S. District Judge James I. Cohn. At sentencing, Eye faces a statutory maximum prison sentence of up to three years in prison on the interference charge and up to five years in prison on the false claims charge.
Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida, John A. DiCicco, Principal Deputy Assistant Attorney General for the Justice Department’s Tax Division, and Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), announced the conviction.
Mr. Ferrer commended the investigative efforts of the agents of the IRS for their hard work in this matter. The case is being prosecuted by Assistant U.S. Attorney Jennifer Keene and Matthew Mueller of the Tax Division.
Attorney General Eric Holder Launches Consumer Protection Working Group to Combat Consumer FraudRead the Press Release
The Consumer Protection Working Group, formed under President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF), convened its first meeting in Washington, D.C., today to address consumer fraud, which can financially cripple households and can cause extensive losses to our economy. The newly-created group will work across federal law enforcement and regulatory agencies, and with state and local partners, to strengthen efforts to address consumer-related fraud, including schemes targeting vulnerable populations, such as the unemployed, those in need of payday loans, and those suffering from the burden of high credit card and other debt. The new working group will also focus on scams that exploit prospective students, active-duty military personnel and veterans.
“The schemes we are combating are as diverse as the imaginations of those who perpetrate them, and as sophisticated as modern technology will permit. Thanks in large part to the leadership of the President’s Financial Fraud Enforcement Task Force we are tackling financial fraud, in all its forms, head on,” said Attorney General Eric Holder. “Through the extensive and coordinated partnership we start today, we will strengthen our collective efforts, enhance civil and criminal enforcement of consumer fraud and educate the public in an effort to prevent consumers from being victimized in the first place.”
Attorney General Holder delivered remarks at today’s meeting which was convened by FFETF Executive Director Michael Bresnick along with the working group’s co-chairs: Assistant Attorney General for the Department of Justice’s Civil Division Tony West, Assistant Attorney General for the Department of Justice’s Criminal Division Lanny Breuer, U.S. Attorney for the Central District of California André Birotte and Director of the Bureau of Consumer Protection for the Federal Trade Commission (FTC) David Vladeck. Another co-chair, Director of Enforcement for the Consumer Financial Protection Bureau Kent Markus, was unable to attend the meeting.
“We know all too well how opportunistic fraudsters have adapted their schemes to take advantage of consumers facing financial hardships, using false promises of mortgage modification, debt relief, and job placement, to name a few. Since 2009, the FTC has brought over 90 cases to stop these scams,” said Director of the Bureau of Consumer Protection for the FTC David Vladeck. “This partnership will only serve to enhance our collective efforts to protect consumers.”
The Consumer Protection Working Group will address several areas of concern, including payday lending and other high-pressure telemarketing or Internet scams, business opportunity schemes, for-profit schools that engage in fraud or misrepresentation and fraudulent third party payment processors that facilitate payments on behalf of other fraudsters without the permission of the customer.
At today’s meeting, the Consumer Protection Working Group members set priorities and discussed taking collaborative steps to continue to seek out and prosecute consumer fraud as well as protect consumers from fraud before it happens through outreach and education. The new working group plans to establish a best-practices tool kit, legislative, regulatory and policy initiatives and an information sharing structure.
Other members of the Consumer Protection Working Group include representatives from the Department of Treasury, FBI, Internal Revenue Service-Criminal Investigation, Federal Deposit Insurance Corporation, U.S. Secret Service, Financial Crimes Enforcement Network, Executive Office for U.S. Attorneys, Department of Education’s Office of the Inspector General, U.S. Trustee Program, the National Association of Attorneys General, U.S. Postal Inspection Service, the Office of the Comptroller of the Currency, the Federal Reserve Board and the National Credit Union Administration. The state attorneys general are represented on the working group by Attorney General Lisa Madigan from Illinois, Attorney General Greg Zoeller from Indiana and Attorney General Roy Cooper from North Carolina.
The Consumer Protection Working Group is part of ongoing enforcement efforts by President Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Task force members have charged a record number of mortgage fraud cases in the past two years, trained more than 100,000 professionals responsible for awarding and overseeing Recovery Act funds and held regional summits around the country to discuss strategies, resources and initiatives, as well as to meet with communities most affected by the financial crisis.
Learn more about the Financial Fraud Enforcement Task Force at www.stopfraud.gov .
9 February 2012
Three Northern California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure AuctionsRead the Press Release
Three Northern California real estate investors have agreed to plead guilty today for their roles in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced. To date, as a result of the ongoing investigation, 20 individuals have agreed to plead guilty.
Charges were filed today in U.S. District Court for the Northern District of California in Oakland, Calif., against Barry Heisner of Brentwood, Calif.; Dominic Leung of Alameda, Calif.; and Hilton Wong of San Ramon, Calif.
According to court documents, for various lengths of time between August 2008 and January 2011, Heisner, Leung and Wong conspired with others not to bid against one another at public real estate foreclosure auctions. Instead, the investors designated a winning bidder to obtain selected properties at public real estate foreclosure auctions in Contra Costa County.
“The Antitrust Division will continue to pursue vigorously the perpetrators of these fraudulent schemes. Those who eliminated competition from the marketplace and lined their pockets while preying on the misfortune of others will be held accountable for their actions,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division also will aggressively seek to forfeit the proceeds earned by those who took a leading role in facilitating these conspiracies.”
“The integrity of the real estate market depends on the transparency and fairness of all participants,” said FBI Special Agent in Charge Stephanie Douglas. “When individuals take advantage of the public’s trust to enrich themselves they damage the very foundation of our economy. The FBI is committed to working with our local and federal partners to continue to bring those who engage in anticompetitive activities to justice.”
Heisner, Leung and Wong also were charged with conspiracies to use the mail to carry out a scheme to fraudulently acquire title to selected properties sold at public auctions, to make and receive payoffs, and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions. The private auctions took place at or near the courthouse steps where the public auctions were held. According to court documents, a forfeiture allegation was also included in the charges against Heisner.
The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Contra Costa County public foreclosure auctions at noncompetitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. Each count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the $1 million statutory maximum.
Today’s charges are the latest cases filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda Counties, Calif.
The investigation into fraud and bid rigging at certain real estate foreclosure auctions in Northern California is being conducted by the Antitrust Division’s San Francisco Field Office and the FBI’s San Francisco office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Field Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm or call the FBI tip line at 415-553-7400.
Today’s charges are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.
**The fraud charge(s) referenced in this press release were subsequently dismissed on the government’s motion.**
Justice Department Dismisses Antitrust Lawsuit Against Deutsche Börse and NYSE EuronextRead the Press Release
WASHINGTON – The Department of Justice today announced that it filed a notice with the U.S. District Court for the District of Columbia to dismiss its antitrust lawsuit regarding the potential merger of Deutsche Börse AG and NYSE Euronext. The department said that the lawsuit and proposed settlement are no longer necessary since the parties have formally abandoned their plans to merge.
Background
On Dec. 22, 2011, the department filed an antitrust lawsuit in U.S. District Court for the District of Columbia, alleging that the transaction as originally proposed would have substantially lessened competition for displayed equities trading services, listing services for exchange-traded products, including exchange-traded funds, and real-time proprietary equity data products in the United States. At the same time, the department filed a proposed settlement of the lawsuit that would preserve competition in the United States by requiring Deutsche Börse to direct its subsidiary, International Securities Exchange Holdings Inc., to sell its 31.5 percent stake in Direct Edge Holdings LLC, the fourth largest stock exchange operator in the United States, and agree to other restrictions.
The European Commission recently prohibited the transaction due to the proposed deal’s effect on European consumers. The department’s Antitrust Division and the European Commission communicated extensively throughout the course of their respective investigations, with frequent contact between the leadership and investigative staffs, aided by waivers provided by the merging parties.
Former Owner of Illinois Technology Company Sentenced to Serve 30 Months in Prison for Role in Multi-State Scheme to Defraud Federal E-Rate ProgramRead the Press Release
WASHINGTON — A former owner of two Illinois-based technology companies was sentenced today to serve 30 months in prison for her participation in a conspiracy to defraud the federal E-Rate program, the Department of Justice announced. Gloria Harper was sentenced by U.S. District Court Judge Carl J. Barbier.
Harper was charged in U.S. District Court in New Orleans on Nov. 18, 2010, with conspiring to defraud the E-Rate program by providing bribes and kickbacks to school officials in Arkansas, Florida, Illinois and Louisiana. Harper pleaded guilty on June 2, 2011.
Including today’s sentencing, as a result of the Antitrust Division’s ongoing investigation into fraud and anticompetitive conduct in the E-Rate program, a total of seven companies and 24 individuals have pleaded guilty, been convicted at trial or entered civil settlements. Those companies and individuals have been sentenced to pay criminal fines and restitution totaling more than $40 million. Nineteen individuals, including Harper, have been sentenced to serve prison time. In June 2011, Barrett C. White and Tyrone Pipkin, Harper’s co-conspirators, were each sentenced to serve one year and one day in prison for their roles in the conspiracy.
According to court documents, Harper, former co-owner of Global Networking Technologies and former owner of Computer Training Associates, acting on behalf of these companies as well as on her own behalf, participated in the conspiracy beginning on or about December 2001 through September 2005. Harper conspired to provide bribes and kickbacks to school officials and employees responsible for the procurement of Internet access services at certain schools in Arkansas, Florida, Illinois and Louisiana. The department said that in return, those individuals ceded control of the E-Rate competitive bidding process to Harper and a co-conspirator, ultimately allowing them to ensure E-Rate contracts at these schools were awarded to their companies.
The schools and school districts affected by the conspiracy include: in Arkansas – Gould and Holly Grove public school districts; in Florida – Innovation Child Development Center and Innovation School of Excellence; in Illinois – Antioch Center, Fairfield Center, Ingleside Center, St. Mary’s Center, Waukegan Center, Zion Center and Niles Terrace Center; and in Louisiana – All Saints School, St. Augustine High School, St. David School and St. Monica School.
The E-Rate program was created by Congress in the Telecommunications Act of 1996, and is administered by the Universal Service Administrative Company, under the oversight of the Federal Communications Commission (FCC). The program provides subsidies to economically disadvantaged schools and libraries. Depending on the financial needs of the applicant schools, the program pays 20 to 90 percent of the cost for Internet access and telecommunications services, as well as internal computer and communications networks.
Today’s sentencing resulted from an investigation by the Department of Justice Antitrust Division’s Dallas Field Office, the FBI’s Dallas Field Office and the FCC’s Office of Inspector General, with assistance from the U.S. Attorney’s Office for the Eastern District of Louisiana. Anyone with information concerning violations of the E-Rate program is urged to call the Antitrust Division’s Dallas Field Office at 214-661-8600 or visit www.justice.gov/atr/contact/newcase.htm.
Food Storage and Processing Facility in Washington State Agrees to Resolve Seizure ActionRead the Press Release
The U.S. District Court for the Eastern District of Washington has entered a consent decree against Dominguez Foods of Washington Inc. to resolve a food seizure action alleging violations of the Food, Drug and Cosmetic Act (FDCA), the Justice Department announced today.
During an inspection in August and September 2011, investigators from the Food and Drug Administration (FDA) observed evidence of rodent and insect infestation in a facility in Zillah, Wash., where Dominguez Foods stores and processes foods. At the conclusion of the inspection, FDA investigators issued a detention order covering all food in the facility that was not in hermetically sealed containers. At the request of FDA, the United States sought a warrant of arrest for the detained products, alleging that the food was adulterated under the FDCA due to the conditions in the warehouse documented during FDA’s inspection. The court issued the warrant and, on Sept. 30, 2011, the U.S. Marshals seized various articles of food at the Dominguez facility, including spices, tea, chile pods and dried beans. After negotiations with the government, Dominguez Foods agreed to resolve the matter through a consent decree.
Under the consent decree, Dominguez Foods must certify that it has taken the necessary corrective actions to render its facility fit for the storage and handling of food and must also implement an ongoing sanitation control program. The consent decree also bans the firm from causing the adulteration of food by maintaining them in insanitary conditions.
“Public health and safety demand that food be processed and stored under sanitary conditions,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “The Court’s consent decree requires Dominguez Foods to put in place programs and procedures to ensure that the food handled in its facility is safe.”
The matter was handled by Department of Justice Trial Attorney Shannon Pedersen of the Civil Division’s Consumer Protection Branch and Assistant Chief Counsel Scott Kaplan of the FDA’s Office of the Chief Counsel.
Federal Government and State Attorneys General Reach $25 Billion Agreement with Five Largest Mortgage Servicers to Address Mortgage Loan Servicing and Foreclosure AbusesRead the Press Release
WASHINGTON – U.S. Attorney General Eric Holder, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, Iowa Attorney General Tom Miller and Colorado Attorney General John W. Suthers announced today that the federal government and 49 state attorneys general have reached a landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses. The agreement provides substantial financial relief to homeowners and establishes significant new homeowner protections for the future.
The unprecedented joint agreement is the largest federal-state civil settlement ever obtained and is the result of extensive investigations by federal agencies, including the Department of Justice, HUD and the HUD Office of the Inspector General (HUD-OIG), and state attorneys general and state banking regulators across the country. The joint federal-state group entered into the agreement with the nation’s five largest mortgage servicers: Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC).
“This agreement – the largest joint federal-state settlement ever obtained – is the result of unprecedented coordination among enforcement agencies throughout the government,” said Attorney General Holder. “It holds mortgage servicers accountable for abusive practices and requires them to commit more than $20 billion towards financial relief for consumers. As a result, struggling homeowners throughout the country will benefit from reduced principals and refinancing of their loans. The agreement also requires substantial changes in how servicers do business, which will help to ensure the abuses of the past are not repeated.”
“This historic settlement will provide immediate relief to homeowners – forcing banks to reduce the principal balance on many loans, refinance loans for underwater borrowers, and pay billions of dollars to states and consumers,” said HUD Secretary Donovan. “ Banks must follow the laws. Any bank that hasn’t done so should be held accountable and should take prompt action to correct its mistakes. And it will not end with this settlement. One of the most important ways this settlement helps homeowners is that it forces the banks to clean up their acts and fix the problems uncovered during our investigations. And it does that by committing them to major reforms in how they service mortgage loans. These new customer service standards are in keeping with the Homeowners Bill of Rights recently announced by President Obama – a single, straightforward set of commonsense rules that families can count on.”
“This monitored agreement holds the banks accountable, it provides badly needed relief to homeowners, and it transforms the mortgage servicing industry so now homeowners will be protected and treated fairly,” said Iowa Attorney General Miller.
“This settlement has broad bipartisan support from the states because the attorneys general realize that the partnership with the federal agencies made it possible to achieve favorable terms and conditions that would have been difficult for the states or the federal government to achieve on their own,” said Colorado Attorney General Suthers.
The joint federal-state agreement requires servicers to implement comprehensive new mortgage loan servicing standards and to commit $25 billion to resolve violations of state and federal law. These violations include servicers’ use of “robo-signed” affidavits in foreclosure proceedings; deceptive practices in the offering of loan modifications; failures to offer non-foreclosure alternatives before foreclosing on borrowers with federally insured mortgages; and filing improper documentation in federal bankruptcy court.
Under the terms of the agreement, the servicers are required to collectively dedicate $20 billion toward various forms of financial relief to borrowers. At least $10 billion will go toward reducing the principal on loans for borrowers who, as of the date of the settlement, are either delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth. At least $3 billion will go toward refinancing loans for borrowers who are current on their mortgages but who owe more on their mortgage than their homes are worth. Borrowers who meet basic criteria will be eligible for the refinancing, which will reduce interest rates for borrowers who are currently paying much higher rates or whose adjustable rate mortgages are due to soon rise to much higher rates. Up to $7 billion will go towards other forms of relief, including forbearance of principal for unemployed borrowers, anti-blight programs, short sales and transitional assistance, benefits for service members who are forced to sell their home at a loss as a result of a Permanent Change in Station order, and other programs. Because servicers will receive only partial credit for every dollar spent on some of the required activities, the settlement will provide direct benefits to borrowers in excess of $20 billion.
Mortgage servicers are required to fulfill these obligations within three years. To encourage servicers to provide relief quickly, there are incentives for relief provided within the first 12 months. Servicers must reach 75 percent of their targets within the first two years. Servicers that miss settlement targets and deadlines will be required to pay substantial additional cash amounts.
In addition to the $20 billion in financial relief for borrowers, the agreement requires the servicers to pay $5 billion in cash to the federal and state governments. $1.5 billion of this payment will be used to establish a Borrower Payment Fund to provide cash payments to borrowers whose homes were sold or taken in foreclosure between Jan. 1, 2008 and Dec. 31, 2011, and who meet other criteria. This program is separate from the restitution program currently being administered by federal banking regulators to compensate those who suffered direct financial harm as a result of wrongful servicer conduct. Borrowers will not release any claims in exchange for a payment. The remaining $3.5 billion of the $5 billion payment will go to state and federal governments to be used to repay public funds lost as a result of servicer misconduct and to fund housing counselors, legal aid and other similar public programs determined by the state attorneys general.
The $5 billion includes a $1 billion resolution of a separate investigation into fraudulent and wrongful conduct by Bank of America and various Countrywide entities related to the origination and underwriting of Federal Housing Administration (FHA)-insured mortgage loans, and systematic inflation of appraisal values concerning these loans, from Jan. 1, 2003 through April 30, 2009. Payment of $500 million of this $1 billion will be deferred to partially fund a loan modification program for Countrywide borrowers throughout the nation who are underwater on their mortgages. This investigation was conducted by the U.S. Attorney’s Office for the Eastern District of New York, with the Civil Division’s Commercial Litigation Branch of the Department of Justice, HUD and HUD-OIG. The settlement also resolves an investigation by the Eastern District of New York, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the Federal Housing Finance Agency-Office of the Inspector General (FHFA-OIG) into allegations that Bank of America defrauded the Home Affordable Modification Program.
The joint federal-state agreement requires the mortgage servicers to implement unprecedented changes in how they service mortgage loans, handle foreclosures, and ensure the accuracy of information provided in federal bankruptcy court. The agreement requires new servicing standards which will prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create dozens of new consumer protections. The new standards provide for strict oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court.
The new servicing standards make foreclosure a last resort by requiring servicers to evaluate homeowners for other loss mitigation options first. In addition, banks will be restricted from foreclosing while the homeowner is being considered for a loan modification. The new standards also include procedures and timelines for reviewing loan modification applications and give homeowners the right to appeal denials. Servicers will also be required to create a single point of contact for borrowers seeking information about their loans and maintain adequate staff to handle calls.
The agreement will also provide enhanced protections for service members that go beyond those required by the Servicemembers Civil Relief Act (SCRA). In addition, the four servicers that had not previously resolved certain portions of potential SCRA liability have agreed to conduct a full review, overseen by the Justice Department’s Civil Rights Division, to determine whether any servicemembers were foreclosed on in violation of SCRA since Jan. 1, 2006. The servicers have also agreed to conduct a thorough review, overseen by the Civil Rights Division, to determine whether any servicemember, from Jan. 1, 2008, to the present, was charged interest in excess of 6% on their mortgage, after a valid request to lower the interest rate, in violation of the SCRA. Servicers will be required to make payments to any servicemember who was a victim of a wrongful foreclosure or who was wrongfully charged a higher interest rate. This compensation for servicemembers is in addition to the $25 billion settlement amount.
The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia. Compliance with the agreement will be overseen by an independent monitor, Joseph A. Smith Jr. Smith has served as the North Carolina Commissioner of Banks since 2002. Smith is also the former Chairman of the Conference of State Banks Supervisors (CSBS). The monitor will oversee implementation of the servicing standards required by the agreement; impose penalties of up to $1 million per violation (or up to $5 million for certain repeat violations); and publish regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement.
The agreement resolves certain violations of civil law based on mortgage loan servicing activities. The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by the servicers. The agreement does not prevent the government from punishing wrongful securitization conduct that will be the focus of the new Residential Mortgage-Backed Securities Working Group. The United States also retains its full authority to recover losses and penalties caused to the federal government when a bank failed to satisfy underwriting standards on a government-insured or government-guaranteed loan. The agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits. State attorneys general also preserved, among other things, all claims against the Mortgage Electronic Registration Systems (MERS), and all claims brought by borrowers.
Investigations were conducted by the U.S. Trustee Program of the Department of Justice, HUD-OIG, HUD’s FHA, state attorneys general offices and state banking regulators from throughout the country, the U.S. Attorney’s Office for the Eastern District of New York, the U.S. Attorney’s Office for the District of Colorado, the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Western District of North Carolina, the U.S. Attorney’s Office for the District of South Carolina, the U.S. Attorney’s Office for the Southern District of New York, SIGTARP and FHFA-OIG. The Department of Treasury, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Justice Department’s Civil Rights Division, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Department of Veterans Affairs and the U.S. Department of Agriculture made critical contributions.
For more information about the mortgage servicing settlement, go to www.NationalMortgageSettlement.com. To find your state attorney general’s website, go to www.NAAG.org and click on “The Attorneys General.”
The joint federal-state agreement is part of enforcement efforts by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force, visit: www.stopfraud.gov.
~ ~Department of Justice Reaches Agreement to Compensate Servicemembers for Wrongful ForeclosuresRead the Press Release
The settlement agreement with the nation’s five largest servicers announced today by Attorney General Eric Holder and the Department of Justice’s federal and state partners includes substantial financial compensation to homeowners who are servicemembers and establishes significant new protections for servicemembers in the future. The financial compensation to servicemembers is in addition to the $25 billion settlement.
JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC) have agreed to conduct a full review, overseen by the Department of Justice’s Civil Rights Division, to determine whether any servicemembers were foreclosed on in violation of the Servicemembers Civil Relief Act (SCRA) since Jan.1, 2006. Wells Fargo, Citigroup and Ally will be required to provide any servicemember who was a victim of a wrongful foreclosure a minimum payment of $116,785 plus the servicemember’s lost equity and interest. The servicemember’s payment could be higher as a result of the review conducted by the banking regulators. To ensure consistency with an earlier private settlement, JP Morgan Chase will provide any servicemember who was a victim of a wrongful foreclosure either his or her home free and clear of any debt or the cash equivalent of the full value of the home at the time of sale. In addition, servicemebers will receive compensation for any additional harm suffered. All compensation for servicemembers wrongfully foreclosed on is in addition to the $25 billion settlement amount.
In addition, Citigroup, Wells Fargo and Ally have also agreed to conduct a thorough review, overseen by the Department of Justice’s Civil Rights Division, to determine whether any servicemember, from January 1, 2008 to the present, was charged interest in excess of 6% on his or her mortgage, after a valid request to lower the interest rate, in violation of the SCRA. Servicers will be required to provide any servicemember who was wrongfully charged interest in excess of 6% with a payment equal to a refund, with interest, of any amount charged in excess of 6% plus triple the amount refunded or $500, whichever is larger. This compensation for servicemembers is in addition to the $25 billion settlement amount. JP Morgan Chase had already compensated servicemembers charged interest in excess of 6% on their mortgage through the earlier private settlement.
“The men and women who serve our nation in the armed forces deserve, at the very least, to know that we will protect their rights while they are serving our country,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “We appreciate that Wells Fargo, JP Morgan Chase, Citigroup and Ally agreed, through this settlement, to compensate servicemembers whose rights were violated.”
All four servicers agreed to numerous other measures, including SCRA training for employees and agents and developing SCRA policies and procedures to ensure compliance with the SCRA. The servicers will also repair any negative credit report entries related to the allegedly wrongful foreclosures and will not pursue any remaining amounts owed under the mortgages.
The joint federal-state agreement also includes expanded protections for servicemembers. The SCRA prohibits foreclosures on servicemembers without court orders on mortgages that were originated before military service began. The settlement extends this protection to all servicemembers, regardless of when their mortgage was secured, if they were receiving Hostile Fire/Imminent Danger Pay and were stationed away from their home within nine months of the foreclosure. The agreement requires all five servicers to provide certain servicemembers who are forced to move because of Permanent Change in Station (PCS) orders access loan modifications without going into default or, in the event that they must sell their home at a loss, but are ineligible for funding from the Department of Defense’s Homeowners’ Assistance Program (HAP), with short sale agreements and mandatory deficiency waivers. On the servicemember relief, the Department worked closely with the Delaware Attorney General’s Office, who led the servicemember negotiations on behalf of the state attorneys general.
In May 2011, the Department of Justice reached a more than $20 million settlement with Bank of America for wrongfully foreclosing on servicemembers without court orders. That settlement only resolved allegations related to non-judicial foreclosures. The Department did not release as part of today’s announced settlement any potential claims related to judicial foreclosures or possible 6% violations by Bank of America.
The JP Morgan Chase investigation was handled jointly by the Civil Rights Division and the United States Attorney’s Office in South Carolina.
President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.stopfraud.gov .
Servicemembers and their dependents who believe that their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance office. Please consult the military legal assistance office locator at http://legalassistance.law.af.mil and click on the Legal Services Locator. Additional information about the Justice Department’s enforcement of the SCRA and the other laws protecting servicemembers is available at www.servicemembers.gov.
8 February 2012
Us Court Bars Two in Alabama from Preparing Federal Tax ReturnsRead the Press Release
WASHINGTON – A federal court has permanently barred Paul E. Foster Jr. and Sheree McDade, both of Montgomery, Ala., from preparing federal tax returns for others, the Justice Department announced today. The civil injunction order, to which Foster and McDade agreed without admitting the government’s allegations, was signed by Chief Judge W. Keith Watkins of the U.S. District Court for the Middle District of Alabama.
The government complaint alleged that Foster and McDade, through businesses called Miami Tax, Paul’s Tax Service and Advance Taxes Inc., prepared tax returns for customers that reported phony business expenses for fictitious businesses, inflated earned income and falsely claimed dependents in order to increase refunds based on the earned income tax credit. The complaint also alleged that at least 48 returns that Foster and McDade prepared for the 2008 tax year contained false claims for the first-time homebuyer tax credit. According to the complaint, Foster and McDade’s misconduct has thus far resulted in $1 million of lost tax revenue, plus resources spent by the Internal Revenue Service (IRS) to assess and collect unpaid taxes from the customers.
The court ordered Foster and McDade to send a copy of the injunction order to all customers for whom they prepared a federal tax return for tax years 2006 and later. The court also ordered the pair to provide the government with a list of those customers.
In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of unscrupulous tax-return preparers and tax-fraud promoters. Information about these cases is available on the Justice Department website.
Related Documents:
United States v. Paul E. Foster Jr., et al.
Final Judgment
Complaint for Permanent Injunction and Other Relief
Foster Order
McDade Order
(PDF documents)Portable Document Format (PDF) files may be viewed with a free copy of Adobe Acrobat Reader
Accessibility InformationU.S. and Chinese Defendants Charged with Economic Espionage and Theft of Trade Secrets in Connection with Conspiracy to Sell Trade Secrets to Chinese CompaniesRead the Press Release
SAN FRANCISCO – A federal grand jury in San Francisco has charged five individuals and five companies with economic espionage and theft of trade secrets for their roles in a long-running effort to obtain U.S. trade secrets for the benefit of companies controlled by the government of the People’s Republic of China (PRC), announced U.S. Attorney Melinda Haag; Lisa Monaco, Assistant Attorney General for National Security at the Department of Justice; and Stephanie Douglas, Special Agent in Charge of the FBI San Francisco Division.
According to the superseding indictment, the government of the PRC identified as a priority the development of chloride-route titanium dioxide (TiO2) production capabilities. TiO2 is a commercially valuable white pigment with numerous uses, including coloring paint, plastics and paper. To achieve that goal, companies controlled by the PRC government, specifically the Pangang Group companies named in the superseding indictment, and employees of those companies conspired and attempted to illegally obtain TiO2 technology that had been developed over many years of research and development by E.I. du Pont de Nemours & Company (DuPont).
According to the superseding indictment, the Pangang Group companies were aided in their efforts by individuals in the United States who had obtained TiO2 trade secrets and were willing to sell those secrets for significant sums of money. Defendants Walter Liew, Christina Liew, Robert Maegerle and Tze Chao obtained and possessed TiO2 trade secrets belonging to DuPont. Each of these individuals allegedly sold information containing DuPont TiO2 trade secrets to the Pangang Group companies for the purpose of helping those companies develop large-scale chloride route TiO2 production capability in the PRC, including a planned 100,000 ton TiO2 factory at Chongqing, PRC.
According to the superseding indictment, the Liews, USA Performance Technology Inc. (USAPTI), and one of its predecessor companies, Performance Group, entered into contracts worth in excess of $20 million to convey TiO2 trade secret technology to Pangang Group companies. The Liews allegedly received millions of dollars of proceeds from these contracts. The proceeds were wired through the United States, Singapore and ultimately back into several bank accounts in the PRC in the names of relatives of Christina Liew.
The five individuals charged in the indictment are:
- Walter Lian-Heen Liew, aka “Liu Yuanxuan,” 54, of Orinda, Calif. Mr. Liew is a naturalized U.S. citizen and co-owner of USAPTI. Mr. Liew is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, attempted economic espionage, attempted theft of trade secrets, possession of trade secrets, conveying trade secrets, conspiracy to obstruct justice, witness tampering, conspiracy to tamper with evidence and false statements. Mr. Liew was charged in August 2011 with obstruction of justice and making false statements to the FBI. He was arrested at that time and has been ordered detained pending trial based on a finding by Magistrate Judge Nathanael Cousins that he is a flight risk. Mr. Liew’s next scheduled court appearance is before the Honorable Jeffrey S. White on Feb. 9, 2012, at 2:00 pm.
- Christina Hong Qiao Liew, aka “Qiao Hong,” 49, of Orinda. Mrs. Liew is a naturalized U.S. citizen and co-owner with her husband, Walter Liew, of USAPTI. Mrs. Liew is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, attempted economic espionage, attempted theft of trade secrets, witness tampering, conspiracy to tamper with evidence and false statements. Mrs. Liew also was charged in August 2011 with obstruction of justice and making false statements to the FBI. She was released by the court on conditions that include travel restrictions and electronic monitoring. Mrs. Liew’s next scheduled court appearance is before the Honorable Jeffrey S. White on Feb. 9, 2012, at 2:00 pm.
- Hou Shengdong, 42, a citizen of the PRC. Hou was the vice director of the Chloride Process TiO2 Project Department for the Pangang Group Titanium Industry Company Ltd. According to the superseding indictment, Hou and other Pangang Group employees requested DuPont blueprints as a condition of working on the Pangang Group project. Hou is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets and attempted economic espionage. A warrant has been issued for Hou’s arrest.
- Robert Maegerle, 76, of Harbeson, Del. Maegerle was employed by DuPont as an engineer from 1956 to 1991. According to the superseding indictment, Maegerle had access to DuPont TiO2 trade secrets, including specific information regarding DuPont’s TiO2 facility at Kwan Yin, Taiwan. Maegerle is charged with conspiracy to commit theft of trade secrets, attempted theft of trade secrets, conveying trade secrets and conspiracy to obstruct justice. Maegerle was arrested this morning in Harbeson.
- Tze Chao, 77, of Newark, Del. Chao was employed by DuPont from 1966 to 2002. Chao is charged with conspiracy to commit economic espionage. Chao was served with a summons to appear in court in San Francisco on March 1, 2012, at 9:30 a.m. for arraignment on the superseding indictment.
The superseding indictment also names five companies as defendants:
- Pangang Group Company Ltd. Pangang Group is a state-owned enterprise controlled by the State-Owned Assets Supervision and Administration Commission of the PRC State Council and located in Sichuan Province, PRC.
- Pangang Group Steel Vanadium & Titanium Company Ltd. (PGSVTC). PGSVTC is a subsidiary of the Pangang Group.
- Pangang Group Titanium Industry Company Ltd. Pangang Group Titanium is a subsidiary of PGSVTC and was the entity directly responsible for constructing the 100,000 ton chloride-route TiO2 factory at Chongqing, PRC. Pangang Group Titanium entered into an agreement with USAPTI in 2009 under which USAPTI conveyed DuPont TiO2 technology to Pangang Group Titanium and its employees.
- Pangang Group International Economic & Trading Co. (PIETC). PIETC is a subsidiary of PGSVTC and is responsible for financial matters related to the construction of the Chongqing TiO2 factory. PIETC signed a 2009 agreement with USAPTI under which DuPont technology was transferred.
- USA Performance Technology Inc. (USAPTI). USAPTI is an Oakland, Calif.-based engineering consulting company owned and operated by Walter and Christina Liew. According to the superseding indictment, USAPTI succeeded two other companies owned by the Liews – Performance Group USA and LH Performance – which also were used in the conspiracy to convey DuPont trade secrets to PRC-based companies.
Each of the five corporate defendants named in the superseding indictment are charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets and attempted economic espionage. Summonses were issued to each corporate defendant requiring them to appear in court in San Francisco on March 1, 2012, at 9:30 a.m. for arraignment on the superseding indictment.
DuPont is a company based in Wilmington, Del., that manufactures a wide variety of products, including TiO2. DuPont invented the chloride-route process for manufacturing TiO2 in the late-1940s and since then has invested heavily in research and development to improve that production process. The global titanium dioxide market has been valued at roughly $12 billion, and DuPont has the largest share of that market.
The chloride-route process is more efficient and cleaner than the sulfate-route process prevalent in the PRC. The superseding indictment alleges that the object of the defendants’ conspiracy was to convey DuPont’s secret chloride-route technology to the PRC companies for the purpose of building modern TiO2 production facilities in the PRC without investing in time-consuming and expensive research and development.
DuPont reported information to the FBI that its TiO2 trade secrets had been misappropriated. The FBI opened an investigation in March 2011.
“As today’s case demonstrates, technology developed by U.S. companies is vulnerable to concerted efforts by competitors – both at home and abroad – to steal that technology,” said U.S. Attorney Haag. “Fighting economic espionage and trade secret theft is one of the top priorities of this Office and we will aggressively pursue anyone, anywhere who attempts to steal valuable information from the United States.”
Assistant Attorney General Monaco said, “The theft of America’s trade secrets for the benefit of China and other nations poses a substantial and continuing threat to our economic and national security, and we are committed to holding accountable anyone who robs American businesses of their hard-earned research. I thank the agents and prosecutors who helped bring about this important case.”
FBI Special Agent-in-Charge Stephanie Douglas stated, “The conduct alleged in the superseding indictment reveals a methodical effort by foreign interests to misappropriate valuable U.S. technology by using individuals operating within our borders. The goal of this scheme was to obtain the benefit of research and development investments by U.S. companies, without making the same investment of time and money. This is not only unfair, but it does great damage to the U.S. economy and as a result undercuts on national security. The FBI is committed to rooting out commercial espionage that puts U.S. companies at a disadvantage in the global market.”
The maximum statutory penalty for each of the charges alleged in the superseding indictment is as follows:
- Count One, conspiracy to commit economic espionage: 15 years in prison, $500,000 fine and restitution. The fine for an organizational defendant is not more than the greatest of $10,000,000 or twice the pecuniary gain or loss.
- Count Two, conspiracy to commit theft of trade secrets: 10 years in prison, $250,000 fine or twice the gross gain or loss, and restitution. The fine for an organizational defendant is not more than the greatest of $5,000,000 or twice the pecuniary gain or loss.
- Count Three, attempted economic espionage: 15 years in prison, $500,000 fine and restitution. The fine for an organizational defendant is not more than the greatest of $10,000,000 or twice the pecuniary gain or loss.
- Count Four, attempted economic espionage: 15 years in prison, $500,000 fine and restitution. The fine for an organizational defendant is not more than the greatest of $10,000,000 or twice the pecuniary gain or loss.
- Count Five, attempted theft of trade secrets: 10 years in prison, $250,000 fine or twice the gross gain or loss, and restitution. The fine for an organizational defendant is not more than the greatest of $5,000,000 or twice the pecuniary gain or loss.
- Counts Six and Seven, possession of trade secrets: 10 years in prison, $250,000 fine or twice the gross gain or loss, and restitution. The fine for an organizational defendant is not more than the greatest of $5,000,000 or twice the pecuniary gain or loss.
- Count Eight, conveying trade secrets: 10 years in prison, $250,000 fine or twice the gross gain or loss, and restitution. The fine for an organizational defendant is not more than the greatest of $5,000,000 or twice the pecuniary gain or loss.
- Count Nine, possession of trade secrets: 10 years in prison, $250,000 fine or twice the gross gain or loss, and restitution. The fine for an organizational defendant is not more than the greatest of $5,000,000 or twice the pecuniary gain or loss.
- Count 10, conspiracy to tamper with witnesses and evidence: 20 years in prison, $250,000 fine or twice the gross gain or loss, and restitution.
- Counts 11 and 12, witness tampering: 20 years in prison, $250,000 fine or twice the gross gain or loss, and restitution.
- Count 13, conspiracy to tamper with evidence: 20 years in prison, $250,000 fine or twice the gross gain or loss, and restitution.
- Count 14, false statements in a matter within the jurisdiction of the executive branch: five years in prison, $250,000 fine, and restitution.
The case is being prosecuted by the Special Prosecutions and National Security Unit of the U.S. Attorney’s Office in San Francisco, and the Counterespionage Section of the U.S. Department of Justice. The investigation, which is ongoing, is being conducted by the FBI.
Please note, an indictment contains only allegations and, as in all cases, the defendants must be presumed innocent unless and until proven guilty.
U.S. Court Bars Two in Alabama from Preparing Federal Tax ReturnsRead the Press Release
A federal court has permanently barred Paul E. Foster Jr. and Sheree McDade, both of Montgomery, Ala., from preparing federal tax returns for others, the Justice Department announced today. The civil injunction order, to which Foster and McDade agreed without admitting the government’s allegations, was signed by Chief Judge W. Keith Watkins of the U.S. District Court for the Middle District of Alabama.
The government complaint alleged that Foster and McDade, through businesses called Miami Tax, Paul’s Tax Service and Advance Taxes Inc., prepared tax returns for customers that reported phony business expenses for fictitious businesses, inflated earned income and falsely claimed dependents in order to increase refunds based on the earned income tax credit. The complaint also alleged that at least 48 returns that Foster and McDade prepared for the 2008 tax year contained false claims for the first-time homebuyer tax credit. According to the complaint, Foster and McDade’s misconduct has thus far resulted in $1 million of lost tax revenue, plus resources spent by the Internal Revenue Service (IRS) to assess and collect unpaid taxes from the customers.
The court ordered Foster and McDade to send a copy of the injunction order to all customers for whom they prepared a federal tax return for tax years 2006 and later. The court also ordered the pair to provide the government with a list of those customers.
In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of unscrupulous tax-return preparers and tax-fraud promoters. Information about these cases is available on the Justice Department website .
Justice Department Signs Agreement with the City of Humboldt, Kansas, to Ensure Civic Access for People with DisabilitiesRead the Press Release
WASHINGTON - The Justice Department today announced an agreement with the city of Humboldt, Kan., to improve access to all aspects of civic life for individuals with disabilities. The agreement was reached under Project Civic Access (PCA), the department’s wide-ranging initiative to ensure that cities, towns and counties throughout the country comply with the Americans with Disabilities Act (ADA). The department has now reached 197 agreements under the PCA initiative, improving access to civic life for more than four million individuals with disabilities nationwide. According to census data, the city population is just under 2,000, and just over 21 percent of Humboldt residents have a disability.
“Individuals with disabilities must have the opportunity to participate in civic life in every city, town and county in the country, no matter how large or small, and this agreement represents another positive step forward,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “We applaud Humboldt officials for their commitment to improving access for all residents and visitors with disabilities to the full range of city programs, activities, services and facilities.”
“Kansans with disabilities have much to contribute,” said Barry Grissom, U.S. Attorney for the District of Kansas. “This agreement will help remove the barriers that prevent them from participating fully in community life. I am pleased this matter was resolved without protracted litigation.”
PCA was initiated to ensure that persons with disabilities have an equal opportunity to participate in civic life, a fundamental part of American society. As part of the PCA initiative, Justice Department investigators, attorneys and architects survey state and local government facilities, services and programs in communities across the country to identify the modifications needed for compliance with ADA requirements. The agreements are tailored to address the steps each community must take to improve access.
Under the agreement announced today, Humboldt officials will take several important steps to improve access for individuals with disabilities, such as:
- Making physical modifications to its facilities so that parking, routes into the buildings, entrances, service areas and counters, restrooms, locker rooms and drinking fountains are accessible to persons with disabilities. The agreement specifies which modifications will be made at each facility.
- Surveying other facilities and programs and making modifications wherever necessary to achieve full compliance with ADA requirements.
- Implementing a comprehensive plan to improve the accessibility of the city’s sidewalks, transportation stops and pedestrian crossings by installing accessible curb ramps throughout the city.
- Ensuring that buildings and outdoor facilities that will be built or altered by or on behalf of the city comply with the ADA’s architectural requirements.
- Officially recognizing the Kansas telephone relay service as a key means of communicating with individuals who are deaf, are hard-of-hearing, or have speech impairments and training staff in using the relay service for telephone communications.
- Posting, publishing and distributing a notice to inform members of the public of the provisions of Title II of the ADA and their applicability to the city’s programs, services and activities.
- Ensuring that the city’s official website and other web-based services are accessible to people with disabilities.
- Developing a method for providing information for interested persons with disabilities concerning the existence and location of the city’s accessible services, activities and programs.
- Undertaking the required planning and modifications to ensure equal, integrated access to emergency management for individuals with disabilities, including emergency preparedness, notification, evacuation, sheltering, response, clean up, and recovery .
Today’s agreement was reached under Title II of the ADA, which prohibits discrimination against individuals with disabilities by state and local governments. The department will actively monitor compliance with today’s agreement, which will remain in effect for three years from Feb. 8, 2012, or until the department has confirmed that all required actions have been completed, whichever is later.
People interested in finding out more about the ADA, today’s agreement, the PCA initiative, or the ADA Best Practices Tool Kit for State and Local Governments can access the ADA website at www.ada.gov or call the toll-free ADA Information Line at 800-514-0301 or 800-514-0383 (TTY).
The agreement with the City of Humboldt is available at http://www.ada.gov/humboldt_KS_pca/humboldt_KS_sa.htm.
Florida Resident Sentenced to Year in Prison in Connection with Selling Fraudulent Business Opportunities to ConsumersRead the Press Release
James Cummings, a resident of Boca Raton, Fla., has been sentenced for committing fraud in connection with a coffee machine business opportunity scheme, the Justice Department and U.S. Postal Inspection Service announced today.
The government alleged that the defendant sold a business package that included coffee machines, locations in which to place those machines and on-going support and assistance in the operation of the machines. Cummings sold the business opportunities for a minimum price of approximately $10,000 each.
In pleading guilty, Cummings admitted that, in making sales to consumers, he made a number of false claims about the profits generated by the machines. In addition, he admitted that he led potential buyers to believe that they would recoup their investment in 12 to 18 months. Cummings admitted that he misrepresented to his customers that “locating companies” would find high traffic, high profit locations in which to place the vending machines. In reality, as the government alleged, buyers suffered a total loss on their investments and some buyers did not receive their purchased machines.
Cummings was sentenced by U.S. District Judge William P. Dimitrouleas in Ft. Lauderdale, Fla., to a year and a day in prison and three years supervised release, and ordered to pay over $137,000 in restitution. Cummings had pleaded guilty on Nov. 29, 2011, to conspiracy to commit mail fraud for his participation at three Florida companies: M & D Gourmet Coffee Inc. of Boca Raton, Fla.; Coffee Heaven LLC of Deerfield Beach, Fla.; and Divino Trio Coffee & Vending Company of Ft. Lauderdale. The criminal information charging Cummings alleged that he served as a salesman at these companies from December 2003 to February 2008.
“This defendant took advantage of investors who wanted to make a better living for themselves, causing them to pay thousands of dollars for worthless business opportunities,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “This prosecution and the court’s sentence should send a signal to others that we will pursue those who perpetrate fraud regardless of their position in the scheme.”
Cummings’ co-conspirator, Manuel Rodriguez, the leader of the scheme, was convicted by a jury of one count of conspiracy and seven counts of wire fraud in September 2011. In December 2011, Rodriguez was sentenced to 120 months in federal prison.
“Business opportunity fraud often involves a number of perpetrators – owners, salespeople, locators, references, and others,” said U.S. Postal Inspector in Charge, Henry Gutierrez, based in Miami. “As this case and many others show, the Postal Inspection Service will vigorously pursue anyone who plays a part in bilking consumers of their hard earned money through the U.S. mails.”
Assistant Attorney General West commended the investigative efforts of the U.S. Postal Inspection Service. The case was prosecuted by Matthew Ebert of the Justice Department’s Consumer Protection Branch.
Florida Jury Holds Tax Preparer Liable for $135,000 in Penalties for False Tax ReturnsRead the Press Release
An eight-member jury has unanimously found that a former Jackson Hewitt tax preparer, Frances Carlson of Bradenton, Fla., prepared 27 federal tax returns that she knew would understate her customers’ tax liabilities, the Justice Department announced today. The verdict followed an eight-day trial in Tampa, Fla., before Judge Susan Bucklew of the U.S. District Court for the Middle District of Florida.
The jury answered 36 separate questions in favor of the government in reaching the verdict. As a consequence, based on evidence presented at the trial, Carlson is liable for penalties totaling $135,000, plus interest.
According to evidence presented at the trial, Carlson worked at JH Accounting, a Sarasota, Fla., accounting firm controlled by Daniel Prewett. The evidence showed that Carlson also worked as a tax preparer for a Sarasota franchise of Jackson Hewitt Tax Service Inc. that Prewett controlled. According to trial evidence, Prewett was previously convicted by a federal jury on charges related to cocaine distribution and money laundering and was sentenced to 18 years in prison in 2008.
In 2009, a federal court in Tampa permanently barred Prewett and Carlson from preparing federal tax returns for others.
Further information about the recent enforcement efforts of the Justice Department’s Tax Division against unscrupulous tax-return preparers and tax-fraud promoters is available on the Justice Department’s website .
Judgment in a Civil Case (PDF)
Verdict Form (PDF)
Dava Pharmaceuticals to Pay U.S. $11 Million to Settle False Claims Act AllegationsRead the Press Release
Dava Pharmaceuticals Inc. has agreed to pay the United States $11 million to settle allegations that it violated the False Claims Act by misreporting drug prices in order to reduce its Medicaid Drug Rebate obligations, the Justice Department announced today.
The settlement resolves allegations that between Oct. 1, 2005 and Sept. 30, 2009, Dava and its corporate predecessors knowingly underpaid their rebate obligations under the Medicaid Prescription Drug Rebate Program. Under that program, participating drug companies are required to pay quarterly rebates to state Medicaid programs based, in part, on whether a drug is a “generic” or “branded” product and the difference between what the health care program paid for the drug and prices paid by other purchasers.
The government contends that i n order to reduce its Medicaid rebate obligation, Dava incorrectly treated its version of the drugs cefdinir, clarithromycin and methotrexate as “generic” drugs rather than “branded” products, thereby lowering the overall percentage rebate payable to Medicaid. In addition, the government further alleges Dava reduced its Medicaid rebate obligations by incorrectly calculating average manufacturer prices for its versions of the drugs cefdinir, clarithromycin, methotrexate and rheumatrex. As a result, the government alleges that Dava underpaid drug rebates to the Medicaid program and overcharged certain public health service entities for these products.
“Pharmaceutical companies that participate in Medicaid must accurately report drug prices and pay their fair share of rebates to the federal and statement governments,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “Settlements like this one help maintain important programs on which so many depend for needed health care.”
The federal government’s portion of the settlement is approximately $5.7 million. Dava will also pay over $5 million to the Medicaid participating states and approximately $200,000 to certain public health services entities who paid inflated prices for the drugs at issue.
The settlement resolves a lawsuit filed in federal court in the District of Maryland under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery. As part of today’s resolution, the whistleblower – Jim Conrad – will receive 15 percent of the settlement proceeds.
This resolution is part of the government’s emphasis on combating health care fraud and another success 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 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.
The investigation was handled by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Maryland, the Department of Health and Human Services’ Office of Inspector General and Office of Counsel to the Inspector General, and the National Association of Medicaid Fraud Control Units.Assistant Administrator of Houston Hospital Indicted for Alleged Role in $116 Million Medicare Fraud SchemeRead the Press Release
WASHINGTON – An assistant administrator of a Houston hospital was arrested today on charges related to his alleged participation in a $116 million Medicare fraud scheme involving false claims for mental health treatment, announced the Department of Justice, the FBI and the Department of Health and Human Services (HHS).
An indictment filed in the Southern District of Texas and unsealed today charges Mohammed Khan, 62, of Houston, with one count of conspiracy to commit health care fraud, one count of conspiracy to pay and receive illegal health care kickbacks and five counts of paying or offering to pay health care kickbacks. Khan is expected to make his initial appearance in federal court today in Houston.
“The indictment against Mr. Kahn alleges that he used his position as a hospital assistant administrator to submit millions in false claims to the Medicare program,” said Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division. “According to the charges, he paid kickbacks to patient recruiters, owners of group homes and assisted living facilities, and beneficiaries so that he could fill his hospital with patients for whom he could bill the government for medically unnecessary services or services that were never provided. We will continue aggressively to pursue individuals who attempt to enrich themselves at the expense of the Medicare program.”
“The defendant charged in this indictment is accused of stealing precious Medicare resources by billing for services that were medically unnecessary or never provided," said Special Agent in Charge Stephen L. Morris of the FBI’s Houston Field Office. “Our health care fraud efforts have never been more collaborative and aggressive. We will continue to work with our law enforcement partners to protect patients and fight against health care fraud.”
According to the indictment, Khan, as the assistant administrator of a Houston hospital, allegedly operated a scheme to defraud Medicare beginning in 2008 and continuing until his arrest today. Khan allegedly caused the submission of false and fraudulent claims for partial hospitalization program (PHP) services to Medicare through the hospital. A PHP is a form of intensive outpatient treatment for severe mental illness.
The indictment alleges that Khan paid kickbacks to owners and operators of group care homes and assisted living facilities and to patient recruiters in exchange for delivering ineligible Medicare beneficiaries to the hospital’s PHPs. The indictment alleges that Khan also paid kickbacks to Medicare beneficiaries who attended the hospital’s PHPs. These kickbacks included cigarettes, food and coupons redeemable for items available at the hospital’s “country stores.” Khan and his co-conspirators submitted or caused to be submitted approximately $116 million in claims to Medicare for PHP services purportedly provided by the hospital to the recruited beneficiaries, when in fact, the PHP services were medically unnecessary or never provided.
Today’s charges were announced by Assistant Attorney General Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; Special Agent in Charge Morris of the FBI’s Houston Field Office; Special Agent in Charge Mike Fields of the Dallas Regional Office of HHS’s Office of the Inspector General (HHS-OIG); the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU Special Agent in Charge Lucy R. Cruz of the Internal Revenue Service (IRS) Houston Field Office; Joseph J. Del Favero, Special Agent in Charge of the Chicago Field Office of the Railroad Retirement Board, Office of Inspector General (RRB-OIG); and Scott Rezendes, Special Agent in Charge of Field Operations of the Office of Personnel Management, Office of Inspector General (OPM-OIG).
The case is being prosecuted by Trial Attorney Laura M.K. Cordova, Attorney Allan Medina, Assistant Chief William Pericak and Deputy Chief Sam S. Sheldon of the Criminal Division’s Fraud Section. The case was investigated by the FBI, HHS-OIG, MFCU, IRS, RRB-OIG and OPM-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 Texas.
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 $3.2 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.
7 February 2012
Three Men Sentenced for Attempting to Intimidate African-American Students at a Louisiana Middle SchoolRead the Press Release
WASHINGTON – The Department of Justice announced today that three men were sentenced for a federal hate crime stemming from an incident that took place at Beekman Junior High School in Beekman, Morehouse Parish, La. U.S. Magistrate Judge Karen Hayes sentenced James Lee Wallis Jr. to eight months in prison, Tony L. Johnson to six months in prison and Brian Wallis to five months in prison. All three defendants will also receive one year of supervised release and must attend a cultural diversity and sensitivity program.
On Aug. 12, 2011, defendant Johnson pleaded guilty to intentionally attempting to intimidate and interfere with African-American students who were attending Beekman Junior High School. Brothers Brian Wallis, 21, and James Lee Wallis Jr., 25, pleaded guilty to the same offense on Sept. 2, 2011. During their respective plea hearings, all three defendants admitted that they hung a dead raccoon in a noose from a flagpole located in front of Beekman Junior High School. They each further admitted that they were angered by the school’s new busing policy, which had increased the number of African-American children attending the school, and that they wanted to scare the African-American children into leaving the school.
“Every child, regardless of race, is entitled to an education free from intimidation or discrimination,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “Unfortunately, acts of hate such as this one are all too common in this country in 2012. The Justice Department will continue to enforce our nation’s civil rights laws in order to protect the most vulnerable in our society.”
“There is no place in our schools for this kind of intimidation,” said Stephanie A. Finley, U.S. Attorney for the Western District of Louisiana. “Every child has the right to an education and to feel safe in school. I hope this case sends a message that this type of activity will not be taken lightly.”
This case was investigated by the FBI and prosecuted by Senior Litigation Counsel Mark Blumberg and Trial Attorney Christine M. Siscaretti of the Justice Department’s Civil Rights Division and Assistant U.S. Attorney Mary J. Mudrick for the Western District of Louisiana.
Los Angeles Man Sentenced to 77 Months in Prison for Medicare Fraud Scheme Resulting in More Than $18.9 Million in Fraudulent Claims to MedicareRead the Press Release
WASHINGTON – A Los Angeles-area man was sentenced yesterday to 77 months in prison for organizing and leading a medical clinic fraud scheme that used the stolen identities of physicians to submit more than $18.9 million in fraudulent claims to Medicare, the Department of Justice, the FBI and the Department of Health and Human Services (HHS) announced.
Eduard Aslanyan, 38, of Sherman Oaks, Calif., was sentenced by U.S. District Judge Consuelo B. Marshall in the Central District of California. In addition to his prison term, Aslanyan was sentenced to three years of supervised release and was ordered to pay $10.8 million in restitution.
Aslanyan pleaded guilty in April 2011. He admitted that between March 2007 and September 2008, he established a series of fraudulent medical clinics in and around Los Angeles to defraud Medicare. Carolyn Vasquez, who previously pleaded guilty to conspiring with Aslanyan to defraud Medicare, recruited physicians to serve as the medical directors of Aslanyan’s fraudulent medical clinics. The physicians did not perform services at the clinics and were rarely present at the clinics. Physician assistants were hired by Aslanyan and Vasquez and were complicit in the fraud scheme at the clinics.
According to court documents, Aslanyan hired patient recruiters to find Medicare beneficiaries who were willing to provide the recruiters with their Medicare billing information in exchange for expensive, high-end power wheelchairs and other medical equipment which the patient recruiters told the beneficiaries they could receive for free. Often, the Medicare beneficiaries did not have a legitimate medical need for the power wheelchairs and equipment. The patient recruiters then provided the beneficiaries’ Medicare billing information to Aslanyan or brought the beneficiaries to Aslanyan’s clinics. Aslanyan paid the patient recruiters cash kickbacks in exchange for recruiting the Medicare beneficiaries.
In court documents, Aslanyan admitted that he and Vasquez instructed and paid physician assistants who worked at his clinics to prescribe medically unnecessary power wheelchairs, medical equipment and diagnostic tests for the Medicare beneficiaries. The physician assistants used stolen identities of physicians who did not supervise them or work at the clinics.
According to court documents, Aslanyan profited from the scheme at his fraudulent medical clinics in several ways. Aslanyan admitted that he allowed fraudulent diagnostic testing facilities to use the Medicare billing information he purchased from patient recruiters to submit false claims to Medicare for tests ordered at the clinics. In exchange, the fraudulent diagnostic testing facilities paid Aslanyan cash kickbacks that were disguised as rent payments to Aslanyan.
Aslanyan also profited from the scheme by selling fraudulent prescriptions and documents generated at his clinics to the owners and operators of fraudulent durable medical equipment (DME) supply companies, which used the prescriptions and documents to submit false claims to Medicare. Aslanyan also used the fraudulent prescriptions and documents to submit false claims to Medicare through his own fraudulent DME supply companies, Vila Medical Supply Inc. and Blanc Medical Supplies.
According to court documents, as a result of Aslanyan’s conduct, he and his co-conspirators submitted approximately $18.9 million in fraudulent claims to Medicare.
Currently, Aslanyan is serving a three-year state sentence for assault. On Jan. 9, 2012, Judge Marshall sentenced Vasquez to 60 months in prison for her role in the fraud scheme and ordered her to pay more than $6.2 million in restitution to Medicare. A second co-defendant, David James Garrison, a physician assistant who worked at the fraudulent medical clinics with Vasquez and Aslanyan, is scheduled for trial on Feb. 7, 2012. Defendants are presumed innocent until proven guilty at trial.
The sentence was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney André Birotte Jr. for the Central District of California; Glenn R. Ferry, Special Agent-in-Charge for the Los Angeles Region of the HHS Office of Inspector General (HHS-OIG); Steven Martinez, Assistant Director in Charge of the FBI’s Los Angeles Field Office; and Tony Sidley, Assistant Chief of the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse.
The case is being prosecuted by Trial Attorney Jonathan T. Baum of the Criminal Division’s Fraud Section. Former Special Trial Attorney Joseph Hudzik participated in the prosecution. The case is being investigated by the FBI. The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.
Since their inception in March 2007, strike force operations in nine districts have charged more than 1,160 defendants who collectively have falsely billed the Medicare program for more than $2.9 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 & Enforcement Action Team, go to: www.stopmedicarefraud.gov .
Fourteen Hospitals to Pay U.S. More Than $12 Million to Resolve False Claims Act Allegations Related to KyphoplastyRead the Press Release
Fourteen hospitals located in New York, Mississippi, North Carolina, Washington, Indiana, Missouri and Florida have agreed to pay the United States a total of more than $12 million to settle allegations that the health care facilities submitted false claims to Medicare, the Justice Department announced today.
The settling facilities include the following: Plainview Hospital, Plainview, N.Y. ($2,307,265); North Shore Syosset Hospital, Syosset, N.Y. ($192,735); North Mississippi Medical Center, Tupelo, Miss. ($1,894,683.30); Mission Hospital, Asheville, N.C. ($1.5 million); Wenatchee Valley Medical Center, Wenatchee, Wash. ($1,224,709.96); Community Hospital Anderson, Anderson, Ind. ($500,561.36); St. John’s Mercy Hospital, Creve Coeur, Mo. ($365,000); Gulf Coast Hospital, Fort Myers, Fla. ($173,005.86); Lee Memorial Hospital, Fort Myers, Fla. ($159,571.87); and Cape Coral Hospital, Cape Coral, Fla. ($73,279.47). Four hospitals affiliated with Adventist Health System/Sunbelt Inc. in Florida will pay a total of $3.9 million, and these include Florida Hospital Orlando, Florida Hospital-Oceanside, Florida Hospital Fish Memorial and Florida Hospital Heartland Medical Center.
The settlements resolve allegations that these hospitals overcharged Medicare between 2000 and 2008 when performing kyphoplasty, a minimally-invasive procedure used to treat certain spinal fractures that often are due to osteoporosis. In many cases, the procedure can be performed safely as a less costly outpatient procedure, but the government contends that the hospitals performed the procedure on an inpatient basis in order to increase their Medicare billings.
“Patients want reassurance that their health care provider is making treatment decisions based on the patient’s best interests, not an interest in maximizing profits,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “By recovering taxpayer dollars lost to improper billing, this settlement will help support the vital public health care programs we depend on.”
The Justice Department has now reached settlements with more than 40 hospitals totaling over $39 million to resolve false claims allegations related to kyphoplasty claims submitted to Medicare. These settlements follow the government’s 2008 settlement with Medtronic Spine LLC, corporate successor to Kyphon Inc., which paid $75 million to settle allegations that the company defrauded Medicare by counseling hospital providers to perform kyphoplasty procedures as an inpatient procedure even though the minimally-invasive procedure should have been done in many cases on an outpatient basis.
“These hospitals put profits ahead of sound medical judgment, making decisions based on a desire to maximize Medicare reimbursement rather than on individualized assessments of medical necessity,” said William J. Hochul Jr., U.S. Attorney for the Western District of New York in Buffalo. “The U.S. Attorney’s Office is committed to protecting the Medicare program by ensuring that medicine, and not financial profit, is used to determine the best course of medical care in all cases.”
All of the settling facilities were named as defendants in a qui tam, or whistleblower, lawsuit brought under the False Claims Act, which permits private citizens, known as “relators,” to bring lawsuits on behalf of the United States and receive a portion of the proceeds of any settlement or judgment awarded against a defendant. The lawsuit was filed in 2008 in federal district court in Buffalo, N.Y., by Craig Patrick and Charles Bates. Mr. Patrick is a former reimbursement manager for Kyphon, and Mr. Bates was formerly a regional sales manager for Kyphon in Birmingham, Ala. The relators will receive a total of approximately $2.1 million from the settlements.
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 $6.6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are more than $8.8 billion.
The settlement with these hospitals was the result of a coordinated effort among the U.S. Attorney’s Office for the Western District of New York, the Commercial Litigation Branch of the Justice Department’s Civil Division, and the Department of Health and Human Services’ Office of Inspector General and Office of Counsel to the Inspector General.
Dover Chemical Corporation in Ohio to Pay $1.4 Million for Unauthorized Production of Chemical SubstancesRead the Press Release
WASHINGTON – Dover Chemical Corporation has agreed to pay $1.4 million in civil penalties for the unauthorized manufacture of chemical substances at facilities in Dover, Ohio, and Hammond, Ind., the Department of Justice and the U.S. Environmental Protection Agency (EPA) announced today. The settlement resolves violations of the Toxic Substances Control Act (TSCA) premanufacture notice obligations for Dover Chemical’s production of various chlorinated paraffins. Dover Chemical produces the vast majority of the chlorinated paraffin products sold in the United States.
As part of the settlement, Dover Chemical has ceased manufacturing short-chain chlorinated paraffins, which have persistent, bioaccumulative and toxic (PBT) characteristics. PBTs pose a number of health risks, particularly for children, including genetic impacts, effects on the nervous system and cancer. Dover Chemical will also submit premanufacture notices to EPA for various medium-chain and long-chain chlorinated paraffin products.
“This settlement will require Dover to participate in an EPA review of all types of chlorinated paraffin products sold by the company and bring Dover into compliance with the Toxic Substances Control Act,” said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice. “By halting production of short-chain chlorinated paraffins, this settlement will reduce undue risks to human health and the environment.”
“Assuring the safety of chemicals is one of EPA’s top priorities,” said Cynthia Giles, Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance. “Today’s action reinforces the need for chemical manufacturers to follow the law and protects Americans from chemicals that could be harmful to their health.”
Chlorinated paraffins are a family of chemical substances with different properties depending on their carbon chain lengths and are generally identified as short, medium or long-chain. Chlorinated paraffins are used as a component of lubricants and coolants in metal cutting and metal forming operations, as a secondary plasticizer and flame retardant in plastics, and as an additive in paints. Short-chain chlorinated paraffins, however, have been found to be bioaccumulative in wildlife and humans, persistent and transported globally in the environment, and toxic to aquatic animals at low concentrations. EPA has developed an action plan for these chemicals based on the potential for significant impacts on the environment. The environmental and health concerns relating to medium-chain chlorinated paraffins and long-chain chlorinated paraffins may be similar to those associated with short-chain chlorinated paraffins. Those chemicals may also be persistent and bioaccumulative based on their physical-chemical properties, bioaccumulation modeling, and because they are also found in the environment.
In 1978, EPA compiled the initial TSCA Inventory of chemical substances from industry submissions and those substances were grandfathered onto the TSCA Inventory without additional human health or environmental review. Chemical substances not on the TSCA Inventory constitute “new chemical substances” for which a premanufacture notice (PMN) must be submitted to EPA at least 90 days before a company begins producing the substance. A PMN includes information such as the specific chemical identity, use, anticipated production volume, exposure and release information and existing available test data. EPA identifies risks associated with new chemicals through the PMN process. In the PMN process, EPA can require additional testing or issue orders prohibiting or limiting the production or commercial use of such substances.
The proposed settlement agreement, lodged in the U.S. District Court for the Northern District of Ohio, is subject to a 30-day public comment period and approval by the federal court.
More information on the settlement: www.epa.gov/compliance/resources/cases/civil/tsca/doverchemical.html.
6 February 2012
Ohio Man Pleads Guilty to Providing Support to Somali-based Terrorist GroupRead the Press Release
FOR IMMEDIATE RELEASE
February 6, 2012
MINNEAPOLIS – Earlier today in federal court, a 27-year-old man from Westerville, Ohio, pleaded guilty to conspiring to provide money and personnel to al-Shabaab, a designated foreign terrorist organization based in Somalia. Ahmed Hussein Mahamud, formerly of Eden Prairie, Minnesota, pleaded guilty to one count of conspiracy to provide material support to a foreign terrorist organization. Mahamud, who was indicted on June 7, 2011, entered his plea before
United States District Court Chief Judge Michael J. Davis.
In his plea agreement, Mahamud admitted that from 2008 through February of 2011, he conspired with others to provide money and people to al-Shabaab, a U.S.-designated foreign terrorist organization, in its fight against the Transitional Federal Government of Somalia
(“TFG”) and the Ethiopian military, which supports the TFG. The defendant also admitted that he and his co-conspirators raised money from the Somali-American community in Minnesota under false pretenses to pay for men in Minnesota to travel to Somalia to join al Shabaab.
Specifically, the defendant and his co-conspirators claimed the money raised would be used for a local mosque or to help orphans in Somalia. In fact, the money collected was used to purchase airline tickets and to pay other expenses so men could travel from Minnesota to Somalia to join al-Shabaab.
Further, Mahamud admittedly sent money via wire transfers to a co-conspirator in Somalia, knowing the money would be used to purchase weapons or otherwise support al-Shabaab.
Court documents indicate that since September of 2007, approximately 20 young men have left the Minneapolis area for Somalia, where they have trained with al-Shabaab. The charges against Mahamud stem from an ongoing, three-year investigation into that activity. To date, 18 people have been charged in the District of Minnesota in unsealed indictments or criminal complaints. Eight of those individuals have been arrested in the U.S. or overseas; of these eight, seven have pleaded guilty to related charges. Of the remaining ten defendants, eight are at large and believed to be abroad, while two others are believed to have died in Somalia. The charge levied against Mahamud carries a potential maximum sentence of 15 years in federal prison. A federal judge will determine the actual sentence at a hearing not yet scheduled.
This case was investigated by the FBI’s Minneapolis Joint Terrorism Task Force (“JTTF”), with assistance from the FBI’s JTTF in Columbus, Ohio. It is being prosecuted by Assistant U.S.
Attorneys Charles J. Kovats, Jr. and John Docherty and Trial Attorney William M. Narus of the
Counterterrorism Section of the Justice Department’s National Security Division.Nebraska Man Pleads Guilty for Fraudulently Seeking Corrupt Payments in Return for Promising to Obtain Reduction in Associate’s Prison SentenceRead the Press Release
WASHINGTON – An Omaha, Neb., man pleaded guilty today to committing wire fraud for trying to solicit corrupt payments from an individual in return for a promised reduction in the individual’s ultimate prison sentence, announced Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.
Austin Galvan, 30, was charged in a two-count indictment unsealed on Aug. 29, 2011, with wire fraud and obstruction of justice. According to court documents filed in U.S. District Court for Nebraska, Galvan told an associate, who was facing federal criminal charges in the District of Nebraska, that he had a law enforcement contact in Nebraska who could secure a substantial reduction in his associate’s prison sentence in exchange for corrupt payments. Galvan, in fact, had no such contact.
According to court documents, in subsequent conversations, Galvan urged his associate not to cooperate with federal authorities. Galvan admitted that he assured his associate that his contact was in a position to help secure a reduction in the associate’s prison sentence, contingent upon corrupt payments. Galvan also admitted that he gave his associate what he claimed was official material given to him by his purported law enforcement contact. Specifically, Galvan provided his associate with an audio recording of a court hearing and claimed that his purported law enforcement contact had given it to him. In fact, Galvan had downloaded the recording from the Public Access to Court Electronic Records system, or PACER. Moreover, Galvan had provided his associate with what he claimed to be the business card of a federal judge who would assist in securing the sentence reduction, when in fact the federal judge was not handling the case.
Wire fraud carries a maximum penalty of five years in prison and a $250,000 fine. Sentencing is scheduled for May 11, 2012.
The case is being prosecuted by Trial Attorneys Kevin Driscoll and Barak Cohen of the Criminal Division’s Public Integrity Section. The case is being investigated by the FBI.
Medical Device Company Smith & Nephew Resolves <br /> Foreign Corrupt Practices Act InvestigationRead the Press Release
WASHINGTON – Smith & Nephew Inc. has entered into a deferred prosecution agreement with the Department of Justice to resolve improper payments by the company and certain affiliates in violation of the Foreign Corrupt Practices Act (FCPA), the Department of Justice announced today. The matter is part of an investigation into bribery by medical device companies of physicians employed by government institutions.
Smith & Nephew, a Delaware corporation, is headquartered in Memphis, Tenn., and is a wholly-owned subsidiary of Smith & Nephew plc, an English company traded on the New York Stock Exchange. The company manufactures and sells medical devices worldwide.
Smith & Nephew acknowledged responsibility for the actions of its affiliates, subsidiaries, employees and agents who made various improper payments to publicly-employed health care providers in Greece from 1998 until 2008 to secure lucrative business.
According to the criminal information filed today in U.S. District Court in the District of Columbia in connection with the agreement, Smith & Nephew, through certain executives, employees and affiliates, agreed to sell products at full list price to a Greek distributor based in Athens, and then pay the amount of the distributor discount to an off-shore shell company controlled by the distributor. These off-the-books funds were then used by the distributor to pay cash incentives and other things of value to publicly-employed Greek health care providers to induce the purchase of Smith & Nephew products. In total, from 1998 to 2008, Smith & Nephew, its affiliates and employees authorized the payment of approximately $9.4 million to the distributor’s shell companies, some or all of which was passed on to physicians to corruptly induce them to purchase medical devices manufactured by Smith & Nephew.
The agreement recognizes Smith & Nephew’s cooperation with the department’s investigation, thorough self-investigation of the underlying conduct, and the remedial efforts and compliance improvements undertaken by the company. As part of the agreement, Smith & Nephew will pay a $16.8 million penalty and is required to implement rigorous internal controls, cooperate fully with the department and retain a compliance monitor for 18 months.
In a related matter, Smith & Nephew reached a settlement today with the U.S. Securities and Exchange Commission, under which Smith & Nephew agreed to pay $5.4 million in disgorgement of profits, including pre-judgment interest.
This case is being prosecuted by Trial Attorney Kathleen M Hamann of the Criminal Division’s Fraud Section with assistance from the FBI Washington Field Office’s dedicated FCPA squad.
The Justice Department acknowledges and expresses its appreciation for the assistance provided by the authorities of the 8th Ordinary Interrogation Department of the Athens Court of First Instance and the Athens Economic Crime Squad in Greece, as well as the significant coordination with and assistance by the Securities and Exchange Commission’s Division of Enforcement.
Louisiana Patient Recruiter Pleads Guilty in Health Care Fraud SchemeRead the Press Release
WASHINGTON – A Baton Rouge, La.,-area resident pleaded guilty today for his role in a Medicare fraud scheme involving false claims for unnecessary durable medical equipment (DME), announced the Department of Justice, the FBI, the Department of Health and Human Services (HHS) and the Louisiana State Attorney General’s Office.
Rodney D. Taylor, 45, pleaded guilty before U.S. District Judge James J. Brady of the Middle District of Louisiana to one count of conspiracy to commit health care fraud and one count of conspiracy to defraud the United States and to pay and receive health care kickbacks.
According to court documents, Taylor worked as a recruiter for Healthcare 1 LLC, Medical 1 Patient Services LLC and Lifeline Healthcare Services Inc., Louisiana-based companies that fraudulently billed DME to the Medicare program from 2004 to 2009. He and other recruiters were hired to obtain prescriptions for DME such as leg braces, arm braces, power wheel chairs and wheel chair accessories. Taylor obtained information from Medicare beneficiaries as well as prescriptions for medical equipment from the beneficiaries’ physicians. Taylor then sold these prescriptions so they could be used by Healthcare 1, Medical 1 Patient Services and Lifeline Healthcare Services to submit fraudulent claims to the Medicare program.
The indictment alleges that from 2004 to 2009 Medicare was billed more than $21 million as part of this conspiracy.
Taylor faces a maximum penalty of 10 years in prison on the conspiracy to commit health care fraud count and five years in prison on the conspiracy to defraud the United States count. A sentencing date has not yet been set.
Today’s plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Donald J. Cazayoux Jr. of the Middle District of Louisiana; Mike Fields, Special Agent-in-Charge of the Dallas Region for the HHS Office of the Inspector General (HHS-OIG); David Welker, Special Agent-in-Charge of the FBI’s New Orleans division; and Louisiana State Attorney General James Buddy Caldwell.
The case is being prosecuted by Trial Attorneys David Maria and Abigail Taylor and Assistant Chief William Pericak of the Criminal Division’s Fraud Section. The case was investigated by the FBI, HHS-OIG and the Medicaid Fraud Control Unit of the Louisiana State Attorney General’s Office (MFCU), 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 Middle District of Louisiana.
Since its inception in March 2007, the Medicare Fraud Strike Force operations in nine locations have charged more than 1,160 defendants that collectively have billed the Medicare program for more than $2.9 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov .
Justice Department Files Lawsuit Against Lee County, Florida, for Race and National Origin DiscriminationRead the Press Release
WASHINGTON – The Justice Department announced today the filing of a lawsuit against Lee County, Fla., alleging that the county discriminated against three Hispanic employees on the basis of race and national origin in violation of Title VII of the Civil Rights Act of 1964, as amended. Title VII is a federal statute which prohibits employment discrimination on the basis of gender, race, color, national origin or religion.
The suit, filed in U.S. District Court in Fort Myers, Fla., alleges that Lee County discriminated against tradesworkers Marco Ferreira, Eduardo Rivera and Leonides Sepulveda by subjecting them to racial and ethnic harassment over a period of approximately two years beginning in 2007 and ending in 2009. According to the complaint, these employees were subjected to the discriminatory actions of several of their co-workers who regularly used racial and ethnic slurs, repeatedly mocked Ferreira’s and Rivera’s accents, refused to perform work assigned by Rivera and made false accusations against Ferreira and Rivera to Lee County’s Office of Equal Opportunity in an effort to have the county terminate the two employees.
The United States alleges that despite timely complaints about the harassment by the workers to their supervisors, as well as direct observation of the harassment on several occasions by county supervisory employees, Lee County failed to take any meaningful steps to stop the harassment or discipline the harassers until January 2009, when the harassers were terminated. Through this lawsuit, the United States is seeking declaratory and injunctive relief requiring Lee County to develop and implement policies that would prevent its employees from being subjected to harassment based on race or national origin as well as monetary damages for the victims of the county’s discriminatory actions.
“No one should have to endure harassment because of his or her race or national origin in the workplace,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Civil Rights Division is committed to enforcing this nation’s employment discrimination laws.”
Ferreira, Rivera and Sepulveda initially filed charges of discrimination with the Equal Employment Opportunity Commission (EEOC), which investigated the matter, determined there was reasonable cause to believe discrimination occurred and referred the matter to the Justice Department.The continued enforcement of Title VII has been a priority of the Justice Department’s Civil Rights Division. Additional information about the Civil Rights Division of the Justice Department is available on its website at www.justice.gov/crt/ and www.justice.gov/crt/about/emp/.
Former U.S. Marine Corps Gunnery Sergeant Sentenced to Prison for Role in Scheme to Steal Military Equipment in IraqRead the Press Release
WASHINGTON – A former U.S. Marine Corps (USMC) gunnery sergeant was sentenced today to 18 months in prison for conspiring to steal at least 55 electrical generators from USMC bases in Iraq in 2008, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Bill Nettles for the District of South Carolina.
Eric Scott Hamilton, 40, of Carrollton, Ga., also was sentenced today by U.S. District Judge J. Michelle Childs in Greenville, S.C., to three years of supervised release following his prison term. In addition, Hamilton was ordered to pay $124,944 in restitution to the U.S. Department of Defense. Hamilton pleaded guilty on Aug. 10, 2011, to a criminal information charging him with two counts of conspiracy to steal public property.
According to court documents and information presented at his plea hearing, Hamilton was stationed from May to September 2008 at Camp Fallujah, Iraq, where he was in charge of a military storage yard containing electrical generators and other equipment for use by USMC units in Iraq. Hamilton admitted that while he was stationed at Camp Fallujah, he entered into a scheme with a USMC officer to facilitate the theft of electrical generators from the base by private Iraqi contractors. Hamilton admitted that he identified the generators to be stolen, painted markings on them to designate them for theft by Iraqi contractors, and facilitated access to the storage yard by the contractors’ trucks to load and remove the generators. Hamilton also entered into a separate scheme with a private Iraqi contractor to facilitate that contractor’s theft of electrical generators from the base. Both of these theft schemes continued after the USMC closed Camp Fallujah in approximately October 2008 and relocated personnel there to Camp Ramadi, Iraq. According to court documents, Hamilton was assigned at Camp Ramadi from October to December 2008.
In pleading guilty, Hamilton admitted that he received more than $124,000 in payments from the USMC officer and the Iraqi contractor in return for facilitating the theft of at least 55 generators from Camps Fallujah and Ramadi. Hamilton received the funds through cash payments in Iraq, checks issued to Hamilton’s wife in the United States by the USMC officer’s wife and wire transfer payments to a bank account in the United States. Hamilton sent home approximately $43,000 of the cash he received from the thefts at Camp Fallujah by concealing it among American flags contained in foot lockers that he mailed from Iraq to his wife. The investigation in this case continues.
This case is being prosecuted by Assistant U.S. Attorney William C. Lucius from the U.S. Attorney’s Office for the District of South Carolina and Special Trial Attorney Mark Grider of the Criminal Division’s Fraud Section, on detail from the Special Inspector General for Iraq Reconstruction (SIGIR). The case is being investigated by SIGIR and the Defense Criminal Investigative Service.
Californian Sentenced to Five Years in Prison for Evading More Than $150,000 in TaxesRead the Press Release
William H. Nurick, of Camarillo, Cal., was sentenced to 60 months in prison and ordered to pay $286,443 in restitution by U.S. District Judge Dale S. Fischer in Los Angeles, the Justice Department and Internal Revenue Service (IRS) announced today. On September 14, 2011, Nurick was convicted of evading the payment of more than $150,000 in taxes following a five-day jury trial.
Nurick’s conviction arises from his involvement with the Genesis Fund. According to evidence presented at trial and summarized in the government’s sentencing memorandum, the Genesis Fund was an investment fund that operated from approximately 1994 through 2002. Genesis Fund literature described foreign currency trading as the principal activity of the fund. The evidence at trial proved that Nurick received approximately $1.1 million in distributions from the Genesis Fund between 1995 and 2002. During this time, he used eight different entities to conceal his control over bank accounts, vehicles, and real property.
The evidence at trial further demonstrated that in May 2000, Nurick filed an amended 1995 individual income tax return admitting he owed $106,542 related to his investment in the Genesis Fund. Thereafter, Nurick deliberately and systematically attempted to conceal assets between May 2000 and April 2001 in order to evade payment of the balance owed to the IRS for his 1995 income taxes. Following a notice of balance due from the IRS, Nurick transferred approximately $133,000 from an offshore bank account that he controlled to a witness’s offshore bank account. Nurick also submitted a false “Offer in Compromise” to the IRS, offering to pay less than one tenth of his outstanding debt. Nurick’s Offer in Compromise, signed under penalties of perjury, falsely understated his net worth and income, and failed to indicate a bank account in Costa Rica with a balance in excess of $200,000, which consisted primarily of distributions he had received from the Genesis Fund. Nurick also falsely claimed on this document that he would receive no further distributions from the Genesis Fund, when in fact, he received over $350,000 from it through distributions to multiple entities that he controlled.
Of the nine defendants originally charged in this case, eight defendants pleaded guilty to charges including tax fraud, obstruction of justice, and securities violations. Judge Fischer sentenced many of the defendants to significant prison terms and ordered restitution payments totaling millions of dollars. The last of the eight guilty pleas was entered in court on December 12, 2011, by defendant Marlyn D. Hinders. Hinders was a fugitive until June 2011 when he was deported from Mexico and arrested by the United States Marshal’s Service. After a detention hearing in July 2011, Judge Fischer ordered Hinders held without bond pending trial. Hinders, formerly a resident of Colorado, pleaded guilty to tax fraud and is scheduled to be sentenced on April 2, 2012.
This complex fraud case was investigated by special agents of the IRS - Criminal Investigation in Laguna Niguel and prosecuted by Trial Attorneys Lori A. Hendrickson, Matthew J. Kluge, Ellen M. Quattrucci, and Danny N. Roetzel of the Justice Department’s Tax Division, with the assistance of the United States Attorney’s Office in Los Angeles.
California Seafood Corporation Sentenced to Pay $1 Million for False Labeling of Seafood ProductsRead the Press Release
WASHINGTON – Seafood Solutions Inc., a California corporation, was sentenced in federal court in Los Angeles today to pay $1 million in fines and community service payments for its role in the false labeling of frozen fish fillets. The corporation was fined $700,000 and ordered to make a community service donation of $300,000 to the National Fish and Wildlife Foundation. The money is to be used to fund projects related to methodologies, databases and other research into the identification of marine organisms. In addition, the company was sentenced to three years of probation, was ordered to forfeit all remaining inventory of the falsely labeled fish and to develop and implement a corporate compliance plan.
The sentence stemmed from the conviction of Seafood Solutions on July 25, 2011, on a single count of trafficking in fish knowing that the fish had been transported and sold in violation of the U.S. Lacey Act. Specifically, the fish was Pangasius hypophthalmus, a species in the catfish family that were misleadingly labeled as “Paradise Grouper” and “Falcon Baie Grouper.” Seafood Solutions was one of three defendants named in the same charging document. Co-defendants Chau-Shing (Duke) Lin, and Christopher Ragone also entered guilty pleas on July 25, 2011, according to plea agreements.
Duke Lin, 64, of Rancho Palos Verdes, Calif., pleaded guilty to one count of trafficking in fish when in the exercise of due care he should have known that the fish had been transported and sold in violation of the Lacey Act. Duke Lin also pleaded guilty to one count of misbranding food. Christopher Ragone, 50, of Santa Ana, Calif., pleaded guilty to two counts of misbranding food. The sentencing hearing for the individuals is set for Feb. 13, 2012.
According to the plea agreements, in approximately June 2004, Seafood Solutions began to sell a fish it declared to customs as “ponga.” The fish being imported as ponga was Pangasius hypophthalmus, a species in the catfish family. The fish was then sold under the brand names, and in boxes labeled in part as, “Paradise Grouper” and “Falcon Baie Grouper.”
Between July 2005 and February 2006, a wholesale distributor that had purchased this product returned approximately $411,194 worth of the product labeled as “Paradise Grouper” and “ponga” or “Falcon Baie Grouper” and “ponga” because the wholesale distributor’s customer mistakenly believed that the fish product was grouper. Seafood Solutions agreed to be invoiced for and received the returned product, knowing that it had been inaccurately labeled. Defendants Lin, Ragone and Seafood Solutions knowingly again sold and transported the fish in interstate commerce even after its return from the customer, knowing that it was misleadingly labeled. From February 2006 to April 2006, Defendant Ragone sold approximately $2 million worth of Pangasius fillets knowing that the product bore the “Paradise Grouper” and “ponga” labels and was thus misleadingly labeled.
The case was investigated by the National Oceanic and Atmospheric Administration, Office of Law Enforcement and the Department of Homeland Security, Immigration and Customs Enforcement. The case is being prosecuted by the Environmental Crimes Section of the Department of Justice and the U.S. Attorney’s Office for the Central District of California.
3 February 2012
Louisiana Medical Equipment Company Owner Pleads Guilty in $21 Million Fraud SchemeRead the Press Release
WASHINGTON – An owner of multiple Baton Rouge medical equipment companies pleaded guilty today for her role in a Medicare fraud scheme involving false claims and illegal kickback payments for unnecessary durable medical equipment (DME), announced the Department of Justice, the FBI, the Department of Health and Human Services (HHS) and the Louisiana State Attorney General’s Office.
Chikenna D. Jones, 36, pleaded guilty before U.S. District Judge James J. Brady of the Middle District of Louisiana to one count of conspiracy to commit health care fraud and one count of conspiracy to defraud the United States and to pay and receive health care kickbacks.
According to court documents, Jones owned and operated Healthcare 1 LLC, Medical 1 Patient Services LLC, Lifeline Healthcare Services Inc., and Rose Medical Inc., Louisiana-based companies that fraudulently billed DME to the Medicare program from 2004 to 2009. She and Henry Jones, who was her husband at the time, hired patient recruiters to obtain prescriptions for DME such as leg braces, arm braces, power wheel chairs and wheel chair accessories. Specifically, the patient recruiters obtained information from Medicare beneficiaries and used the information to acquire prescriptions for DME from the beneficiaries’ primary care physicians. Chikenna Jones paid the recruiters illegal kickbacks for the DME prescriptions, which she knew were not medically necessary.
Court documents allege that the companies owned and operated by Chikenna Jones billed Medicare for more than $21 million.
Jones faces a maximum penalty of 10 years in prison on the conspiracy to commit health care fraud count and five years in prison on the conspiracy to defraud the United States count. A sentencing date has not yet been set.
Today’s plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Donald J. Cazayoux Jr. of the Middle District of Louisiana; Mike Fields, Special Agent-in-Charge of Dallas Region for the HHS Office of the Inspector General (HHS-OIG); David Welker, Special Agent-in-Charge of the FBI’s New Orleans division; and Louisiana State Attorney General James Buddy Caldwell.
The case is being prosecuted by Trial Attorneys David Maria and Abigail Taylor and Assistant Chief William Pericak of the Criminal Division’s Fraud Section. The case was investigated by the FBI, HHS-OIG and the Medicaid Fraud Control Unit of the Louisiana State Attorney General’s Office (MFCU), 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 Middle District of Louisiana.
Since its inception in March 2007, the Medicare Fraud Strike Force operations in nine locations have charged more than 1,160 defendants that collectively have billed the Medicare program for more than $2.9 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov .
Justice Department Announces Luke J. McCormack as New Chief Information OfficerRead the Press Release
The Department of Justice today announced that Luke J. McCormack will become its new chief information officer (CIO), arriving in late March. McCormack will provide leadership and oversight of the department’s information technology programs and services in support of the department’s technology-intensive law enforcement mission.
McCormack will replace Vance Hitch who left the department in August 2011. Eric R. Olson, deputy CIO, has served as acting CIO since Hitch’s departure. Olson will continue to serve as deputy CIO.
“Luke has the expertise needed to oversee the Justice Department’s information management and technology programs, and I am pleased to welcome him in this new role,” said Deputy Attorney General James M. Cole. “I’m confident that under his leadership the department will continue to enhance its cybersecurity, enterprise network and law enforcement sharing programs in a cost-effective way – while fulfilling our most critical missions. I would also like to thank Eric Olson, our acting CIO, for his hard work and outstanding dedication to these efforts during this transition.”
The Office of the CIO provides strategic direction, management services, and oversight to cross-component information technology efforts, and provides IT infrastructure services such as telecommunications, desktop and data center services, and IT security.
Prior to joining the department, McCormack was the CIO of the Department of Homeland Security’s (DHS) Immigration and Customs Enforcement (ICE) since July 2005. In that capacity, he was responsible for all aspects of the information technology portfolio, including strategic planning, enterprise architecture and cybersecurity. During his tenure at ICE, he strengthened the agency’s cybersecurity and infrastructure operations and modernized a variety of business systems.
McCormack served as acting director of DHS Customs and Border Protection’s (CBP) infrastructure services division from January 2004 to July 2005. While there, he managed the design, implementation and operation of the customer information technology infrastructure. McCormack has served in other roles in CBP, including director of architecture and engineering, and as director of systems engineering.
He has received numerous awards and honors, including the Secretary of Homeland Security’s silver award–the second highest award at DHS–and a presidential meritorious award for his outstanding efforts in information technology. McCormack received his M.B.A. from the University of Maryland’s Smith School of Business in 2005. A native of Long Island, N.Y., Mr. McCormack has two sons and resides in Virginia.
Hungarian Citizen Sentenced in Maryland to 30 Months in Prison for Hacking into Marriott Computers to Extort Employment from the CompanyRead the Press Release
WASHINGTON – Attila Nemeth, 26, a Hungarian citizen, was sentenced today by U.S. District Judge J. Frederick Motz to 30 months in prison for transmitting a malicious code to Marriott International Corporation computers and threatening to reveal confidential information obtained from the company’s computers if Marriott did not offer him a job.
The prison sentence was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge David Beach of the U.S. Secret Service, Washington Field Office.
Judge Motz also ordered Nemeth to serve three years of supervised release following his prison term. Nemeth pleaded guilty in the District of Maryland on Nov. 23, 2011.
According to court documents, on Nov. 11, 2010, Nemeth emailed Marriott personnel, advising that he had been accessing Marriott’s computers for months and had obtained proprietary information. Nemeth threatened to reveal this information if Marriott did not give him a job maintaining the company’s computers. On Nov. 13, 2010, after receiving no response from Marriott, Nemeth sent another email containing eight attachments, seven of which were confirmed as documents stored on Marriott’s computer system. These documents included financial documentation and other confidential and proprietary information. Nemeth admitted that through an infected email attachment sent to specific Marriott employees, he was able to install malicious software on Marriott’s system that gave him a “backdoor” into the system. Using the “backdoor,” Nemeth was able to access proprietary email and other files belonging to Marriott.
According to the plea agreement, on Nov. 18, 2010, Marriott created the identity of a fictitious Marriott employee for the use by the U.S. Secret Service in an undercover operation to communicate with Nemeth. Nemeth, believing he was communicating with Marriott human resources personnel, continued to call and email the undercover agent, and demanded a job with Marriott in order to prevent the public release of the Marriott documents. Nemeth emailed a copy of his Hungarian passport as identification and offered to travel to the United States.
On Jan. 17, 2011, Nemeth arrived at Washington Dulles Airport for an “employment interview.” A Secret Service agent conducted the interview by assuming the role of the Marriott employee with whom Nemeth believed he had been communicating. During the course of the interview, Nemeth admitted that he accessed Marriott’s computer systems; stole Marriott’s confidential and proprietary information; and initiated the emails to Marriott threatening to publicly release Marriott’s data unless he was given a job on his terms by Marriott. To further prove his identity as the perpetrator, Nemeth demonstrated exactly how he accessed the Marriott network, his continued ability to access the Marriott network, and the location of the stolen Marriott proprietary data on a computer server located in Hungary.
As a result of the compromise of its computer network, Marriott was compelled to engage more than 100 of its employees in a thorough search of its network to determine the scope of the compromise and to identify the data that may have been compromised. The loss to Marriott as a result of the intentional damage caused by Nemeth was approximately $1 million in salaries, consultant expenses and other costs associated with Nemeth’s intrusion.
The case is being investigated by the U.S. Secret Service and prosecuted by Special Assistant U.S. Attorney Anthony V. Teelucksingh assigned from the Computer Crime and Intellectual Property Section of the Justice Department’s Criminal Division. The Criminal Division’s Office of International Affairs provided assistance in this matter.
Former Soldier Pleads Guilty in Texas for Leading Role in Scheme to Illegally Obtain Military Recruiting BonusesRead the Press Release
WASHINGTON – A former soldier pleaded guilty today to conspiracy to obtain a total of at least approximately $240,000 in fraudulent recruiting bonuses from various U.S. military components and their contractor, and to one count of aggravated identity theft for unlawfully using the means of identification of a potential soldier, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.
Former Specialist Xavier Aves, 40, of San Antonio, Texas, was indicted on Sept. 13, 2011, along with former Corporal Christopher Castro, 30, of San Antonio; former Staff Sergeant Grant E. Bibb, 40, of Eagle Pass, Texas; Sergeant First Class Jesus Torres-Alvarez, 31, of El Paso, Texas; Specialist Paul Escobar, 32, of San Antonio; and Specialist Richard Garcia Jr., 28, of San Antonio.
According to court documents filed in U.S. District Court for the Western District of Texas, between approximately 2005 and 2008, the U.S. Army, the U.S. Army Reserves and the National Guard Bureau entered into contracts with Document and Packaging Broker Inc., to administer recruiting programs designed to offer monetary incentives to U.S. soldiers who referred others to join the Army, the Army Reserves and the Army National Guard. In addition, the Army managed its own recruiting programs to offer bonuses to soldiers who referred other individuals to join the Army or the Army Reserves.
Through these recruiting programs, a participating soldier could receive up to $2,000 in bonus payments for every person referred to join the U.S. military. Based on certain milestones achieved by the referred soldier, a participating soldier would receive payments in the form of direct deposits and pre-paid debit card payments.
According to court documents, Aves enlisted in the Army National Guard in approximately January 2004. Aves admitted that, between approximately December 2005 and February 2010, he and certain U.S. soldiers who participated in the recruiting programs agreed to pay active duty and civilian contract military recruiters – including, among other recruiters, Castro and Torres-Alvarez – for the names and Social Security numbers of potential soldiers, many of whom were “walk-ins” or people who had decided to join the U.S. military without any referral.
Aves admitted that he and his co-conspirators used the means of identification for these potential soldiers to claim that they were responsible for referring these potential soldiers, when in fact Aves and his co-conspirators had not referred them.
As a result of these fraudulent representations, Aves and his co-conspirators collected at least approximately $244,000 in fraudulent recruiting bonus payments from the various recruiting programs. Aves personally received at least approximately $69,000 in fraudulent bonuses. Aves admitted that he and other participating soldiers split the payments with the active duty and civilian contract military recruiters who provided them with the information concerning the new recruits.
The charge of conspiracy to commit wire fraud carries a maximum penalty of five years in prison and a maximum fine of $250,000 or twice the pecuniary gain or loss. The charge of aggravated identity theft carries a mandatory sentence of two years in prison, which must be imposed consecutively to any prison term imposed on the conspiracy count, and a maximum fine of $250,000 or twice the pecuniary gain or loss. Sentencing has been scheduled for May 25, 2012, before Chief U.S. District Judge Fred Biery in San Antonio.
The case against Aves arises from an investigation involving allegations that former and current military recruiters and U.S. soldiers in the San Antonio area engaged in a wide-ranging scheme to obtain fraudulent recruiting bonuses. To date, the investigation has led to charges against seven individuals, five of whom have pleaded guilty.
On Jan. 28, 2010, Sergeant Ernest Gonzales, 50, of San Antonio, pleaded guilty to a one-count criminal information charging him with conspiracy to commit wire fraud for his role in the scheme.
On Nov. 3, 2011, Castro pleaded guilty to one count of conspiracy to commit wire fraud for his role in the scheme. On Jan. 26, 2012, Torres-Alvarez pleaded guilty to one count of conspiracy to commit wire fraud. According to court documents, Torres-Alvarez, an active duty recruiter, admitted that he sold the names and Social Security numbers of potential soldiers to Aves and others involved in the scheme. On Jan. 30, 2012, Bibb pleaded guilty to one count of conspiracy to commit wire fraud.
The case against Escobar and Garcia is scheduled for trial on April 23, 2012, in San Antonio. These defendants are presumed innocent until proven guilty in a court of law.
The case is being prosecuted by Trial Attorneys Edward J. Loya Jr. and Brian A. Lichter of the Criminal Division’s Public Integrity Section. The case is being investigated by agents from the San Antonio Fraud Resident Agency of the Major Procurement Fraud Unit, U.S. Army Criminal Investigation Command.
2 February 2012
Utah Man Charged with Tax Fraud and Bank StructuringRead the Press Release
A federal grand jury in Salt Lake City has returned an indictment charging Michael Lavery with one count of presenting a false claim to the United States and one count of structuring a currency transaction to avoid the reporting requirements, the Justice Department and Internal Revenue Service (IRS) announced.
According to the indictment, in February of 2009, Michael Lavery, a resident of Sandy, Utah, filed a joint 2008 income tax return, claiming an income tax refund of over $249,000 that was based on the use of false IRS Forms 1099-OID. The indictment further alleges that Lavery attempted to structure a transaction, by making withdrawals of $10,000 or less from the proceeds of his false income tax return, in order to evade the laws that require financial institutions to report currency transactions that exceed $10,000.
The charges and allegations contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt. If convicted, Lavery faces a maximum prison sentence of 10 years.
The case is being investigated by IRS-Criminal Investigation and is being prosecuted by Trial Attorneys Michael Romano and Stuart Wexler of the Justice Department’s Tax Division.
Swiss Bank Indicted on U.S. Tax ChargesRead the Press Release
Wegelin & Co., a Swiss private bank, was indicted today for conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret accounts and the income these accounts generated from the Internal Revenue Service (IRS), the Justice Department announced today. This is the first time an overseas bank has been charged by the United States for facilitating tax fraud by U.S. taxpayers.
At the same time, the U.S. government seized more than $16 million from Wegelin’s correspondent bank account in the United States, in accordance with a civil forfeiture complaint and seizure warrant. Wegelin is charged in a superseding indictment with Michael Berlinka, Urs Frei and Roger Keller, three client advisers at the bank who were previously charged with the same conspiracy. The case is pending before U.S. District Judge Jed S. Rakoff. The civil forfeiture case has been assigned to U.S. District Judge Laura Taylor Swain.
The following allegations are based on the Superseding Indictment and civil forfeiture Complaint unsealed today in Manhattan federal court:
Wegelin, founded in 1741, is Switzerland’s oldest bank. At all times relevant to the superseding indictment, Wegelin provided private banking, asset management and other services to clients around the world, including U.S. taxpayers living in the Southern District of New York. Wegelin had no branches outside Switzerland, but it directly accessed the U.S. banking system through a correspondent bank account that it held at UBS AG in Stamford, Conn. As of December 2010, Wegelin had approximately $25 billion in assets under management. Berlinka, Frei and Keller began working as client advisers at the Swiss bank in 2008, 2006 and 2007 respectively.
From 2002 through 2011, Wegelin, Berlinka, Frei and Keller conspired with various U.S. taxpayers and others to hide the existence of bank accounts held at Wegelin and the income generated in those secret accounts from the IRS. Among other things, in 2008 and 2009, Wegelin, Berlinka, Frei and Keller opened and serviced dozens of undeclared accounts for U.S. taxpayers in an effort to capture clients lost by UBS in the wake of widespread news reports that the IRS was investigating UBS for helping U.S. taxpayers evade taxes and hide assets in Swiss bank accounts. By mid-2008, UBS had stopped servicing undeclared accounts for U.S. taxpayers.
In the wake of the IRS investigation, members of Wegelin’s senior management affirmatively decided to capture the illegal business that UBS exited. To capitalize on the business opportunity this presented and to increase the assets under management, along with the fees earned from managing those assets, Berlinka, Frei, Keller and others, acting on behalf of Wegelin, told various U.S. taxpayer-clients that their undeclared accounts would not be disclosed to U.S. authorities because the bank had a long tradition of secrecy. They also persuaded U.S. taxpayer-clients to transfer assets from UBS to Wegelin by emphasizing, among other things, that unlike UBS, Wegelin did not have offices outside of Switzerland and was therefore less vulnerable to U.S. law enforcement pressure. Members of the Swiss bank’s senior management approved efforts to capture the clients who were leaving UBS and also participated in some meetings with U.S. taxpayer-clients who were fleeing UBS. In February 2009, UBS entered into a deferred prosecution agreement with the Justice Department on charges of conspiring to defraud the United States by impeding the IRS. As part of the deferred prosecution agreement, UBS paid $780 million in fines, penalties, interest and restitution.
To further the goals of the conspiracy, Wegelin, acting through Berlinka, Frei, Keller and/or others, took steps that included the following:
· Opening and servicing undeclared accounts for U.S. taxpayer-clients in the names of sham corporations and foundations formed under the laws of Liechtenstein, Panama, Hong Kong and other jurisdictions for the purpose of concealing some clients’ identities from the IRS;
· Accepting, as part of Wegelin’s client files, documents that falsely declared that the sham entities were the beneficial owners of certain accounts, when in fact the accounts were owned by U.S. taxpayers;
· Permitting certain U.S. taxpayer-clients to open and maintain undeclared accounts at Wegelin using code names and numbers to minimize references to the actual names of the U.S. taxpayers on Swiss bank documents;
· Ensuring that account statements and other mail for U.S. taxpayer-clients were not mailed to them in the United States;
· Communicating with some U.S. taxpayer-clients using their personal email accounts to reduce the risk of detection by law enforcement; and
· Issuing checks drawn on, and executing wire transfers through, its U.S. correspondent bank account for the benefit of U.S. taxpayers with undeclared accounts at Wegelin and at least two other Swiss banks. In doing so, the bank sometimes separated the transactions into batches of checks or multiple wire transfers in amounts that were less than $10,000 to reduce the risk that the IRS would detect the undeclared accounts.
U.S. taxpayers are required to report the existence of any foreign bank account on their federal income tax returns if it holds more than $10,000 at any time during a given year, as well as any income it earns. By 2010, the collective maximum value of the assets in undeclared accounts beneficially owned by U.S. taxpayer-clients of Wegelin was more than $1.2 billion, with many accounts holding more than $10,000 in any one year.
The civil forfeiture complaint and the related seizure warrant arise out of Wegelin’s use of its correspondent bank account to help U.S. taxpayers with undeclared accounts repatriate money that they had hidden at the Swiss bank. This was often done in a manner designed to evade detection by U.S. authorities. For example, U.S. taxpayers routinely asked Wegelin to issue and send them checks, which were drawn off the bank’s correspondent bank account, that represented funds held in their secret accounts at the bank. Further, Wegelin permitted at least two other Swiss banks to issue checks drawn on its correspondent bank account for the benefit of U.S. taxpayers holding undeclared accounts at these other Swiss banks. The sheer volume of transactions in Wegelin’s correspondent bank account served to conceal the repatriation of money from U.S. taxpayers’ undeclared accounts at Wegelin and the other banks.
“As alleged, Wegelin Bank aided and abetted U.S. taxpayers who were in flagrant violation of the tax code,” said Preet Bharara, U.S. Attorney for the Southern District of New York. “And they were undeterred by the crystal clear warning they got when they learned that UBS was under investigation for the identical practices. Today’s indictment makes clear that we will seek to punish not only those U.S. taxpayers who violate the law in an effort to avoid paying their fair share of taxes, but also the individuals and entities who facilitate their crimes.”
IRS Commissioner Douglas Shulman said, “ Today's indictment is another step in our ongoing effort to pursue hidden offshore assets – no matter where they are located. We are continuing our work to crack down on offshore tax evasion. Through our efforts, we are gaining access to more and more information on institutions and individuals involved in offshore tax evasion, and you can expect us to pursue all avenues to stop this abuse.”
Wegelin is headquartered in St. Gallen, Switzerland, and faces a fine of the greatest of $500,000, or twice the gross gain derived from the offense or twice the gross loss to the victims.
Berlinka, Frei, and Keller, 41, 51 and 47, respectively, reside in Switzerland. They each face a maximum term of five years in prison, a maximum term of three years of supervised release and a fine of the greatest of $250,000, or twice the gross gain derived from the offense or twice the gross loss to the victims.
Wegelin has been summoned to appear before Judge Rakoff on Feb. 10, 2012, at 3 p.m. Berlinka, Frei and Keller have not been arrested.
Mr. Bharara praised the outstanding efforts of IRS-CID in the investigation. He also thanked U.S. Department of Justice's Tax Division for their significant assistance in the investigation.
This criminal case is being handled by the Office’s Complex Frauds Unit and the civil forfeiture proceeding is being handled by the Office’s Asset Forfeiture Unit. Assistant U.S. Attorneys David B. Massey, Daniel W. Levy and Jason H. Cowley are in charge of the prosecution and civil forfeiture proceeding.
The charges and allegations contained in the superseding indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty. The allegations contained in the civil forfeiture complaint and seizure warrant are merely accusations.
Indictment (PDF)
Verified Complaint (PDF)Rehabilitation Agency Owner in Detroit Found Guilty for Role in $2 Million Therapy Fraud SchemeRead the Press Release
WASHINGTON - The owner of a rehabilitation agency in Dearborn, Mich., was convicted today by a federal jury in Detroit for his leading role in a fraudulent Medicare therapy scheme, announced the Department of Justice, FBI and the Department of Health and Human Services (HHS).
Detroit-area resident Tariq Mahmud, 55, was convicted of one count of conspiracy to commit health care fraud and six counts of health care fraud. At sentencing, Mahmud faces a maximum penalty of 10 years in prison on the conspiracy count and each count of health care fraud, as well as a $250,000 fine per count. A sentencing date has not yet been set by the court.
According to evidence presented during the four-day trial, Mahmud was the owner of Comprehensive Rehabilitation Services Inc (CRS), a fraudulent rehabilitation agency located in Dearborn. Between January 2003 and February 2007, CRS purchased pre-packaged, falsified physical and occupational therapy files from more than 30 therapy and rehab companies and used them to fraudulently bill Medicare for more than $2 million.As part of the scheme, Medicare beneficiaries were paid cash kickbacks and given prescription drugs to sign forms and visit sheets that were later falsified to indicate that they received therapy service that they had never received. Physical and occupational therapists created false evaluations, progress notes and discharge papers indicating that the therapy services were given, when in fact they never were. Evidence at trial showed that the therapists never met the beneficiaries and Mahmud never provided or supervised the therapy billed to Medicare.
In addition to submitting more than $2 million in false therapy claims, Mahmud made additional false statements to Medicare regarding services that were never rendered. For instance, when Medicare inquired regarding a beneficiary who complained that he had not received the services for which CRS billed Medicare, Mahmud returned the payment and told Medicare that he consulted with his professional staff and the beneficiary had not been satisfied with services. In fact, CRS had no professional staff; the therapists who signed the beneficiary’s file never rendered any services; and the beneficiary never received services. Evidence at trial established that the beneficiary’s identity was stolen and used by CRS and a fraudulent file-making company to bill Medicare.
Today’s conviction was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Andrew G. Arena of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the HHS Office of Inspector General’s (OIG) Chicago Regional Office.
This case was prosecuted by Assistant Chief Benjamin S. Singer and Trial Attorney Catherine K. Dick of the Criminal Division’s Fraud Section. It was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since their inception in March 2007, the strike force operations in nine districts have charged more than 1,160 individuals who collectively have falsely billed the Medicare program for more than $2.9 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.
Nine Indicted for Conspiring to Distribute, Receive and Possess Child PornographyRead the Press Release
WASHINGTON – Nine men have been indicted in the Western District of Virginia for allegedly conspiring to receive, distribute, possess and access with intent to view child pornography, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Timothy J. Heaphy of the Western District of Virginia and Assistant Director Gordon M. Snow of the FBI’s Cyber Division, announced today.
An indictment returned under seal on Jan. 25, 2012, and unsealed today, charges Jesse Leon Coleman, 47, of Lynchburg, Va.; Thomas Syfor, 71, of Bethlehem, Pa.; Matthew Ackerman, 49, of Bethlehem, Pa.; Peter Franklin Ortiz, 56, of Greenville, S.C.; Manuel Antonio Mares, 56, of Miami; Jeremy Hart Yost, 25, of West Bend, Ore.; Richard Phillip Allen, 65, of Redondo Beach, Calif.; and James Calvin Boyd, 58, of Pell City, Ala., with one count of conspiring to receive, distribute, possess and access with the intent to view child pornography. Coleman is also charged with one count of receiving child pornography and one count of accessing with intent to view child pornography. The ninth defendant, known as “Andy Danilov,” is believed to reside in Russia.
Coleman, Ortiz, Yost and Boyd were arrested yesterday, and Allen self-surrendered to authorities yesterday. Syfor, Ackerman and Mares were arrested at earlier dates.
According to the indictment, beginning in August 2010, Danilov distributed emails to a group of individuals, including the defendants, that allegedly contained links to compressed files and file attachments depicting minors engaged in sexually explicit conduct. Danilov often used the screen name “Cinemaboy” in the emails.
If convicted, each defendant faces a maximum penalty of 20 years in prison, a $250,000 fine and lifetime supervised release on the conspiracy count. In addition, Coleman faces a maximum penalty of 20 years in prison, a $250,000 fine and lifetime supervised release on the receipt count and 10 years in prison, a $250,000 fine and lifetime supervised release on the access count.
The investigation of the case was conducted by the FBI Innocent Images Operations Unit. The case is being prosecuted by Assistant U.S. Attorney Nancy Healey of the Western District of Virginia and Trial Attorney Chantel Febus of the Child Exploitation and Obscenity Section in the Justice Department’s Criminal Division.
An indictment is only a charge and not evidence of guilt. Defendants are innocent until proven guilty beyond a reasonable doubt.
Missouri Woman Pleads Guilty for Role in the Vandalism and Arson of a Mobile HomeRead the Press Release
Teresa Witthar, 43, of Independence, Mo., pleaded guilty today in U.S. District Court in Kansas City to federal hate crime charges in connection with the vandalism and arson of a bi-racial man’s mobile home in 2006.
Witthar was indicted by a federal grand jury in August 2011, on one count of conspiracy, one count of violating the Fair Housing Act, one count of using fire to commit a felony, two counts of obstruction of justice and two counts of making false statements for her role in the vandalism and fire of Nathaniel Reed’s mobile home. Witthar entered a guilty plea to one count of conspiracy, one count of violating the Fair Housing Act and one count of obstruction of justice.
According to the indictment, in the summer of 2006, Witthar, Charles Wilhelm and David Martin conspired to intimidate and scare Nathaniel Reed, a bi-racial man, into moving out of the Highland Manor Mobile Home Park in Independence, Mo., in part because of his race. On or about June 6, 2006, Witthar, along with Wilhelm and Martin, entered Reed’s mobile home, without his permission, and vandalized it by writing at least fifteen racially derogatory slurs on the walls of his trailer. Two days later, Witthar drove Martin and Wilhelm to a neighbourhood behind Reed’s mobile home so that they could set fire to Reed’s trailer without being detected. Witthar waited in her vehicle while they set the fire and then provided them a ride back to the Highland Manor Mobile Home Park.
In the spring of 2011, Witthar unsuccessfully attempted to persuade another individual to testify falsely in front of a grand jury about her role in the vandalism and fire.
“Every American has the right to enjoy their home free from racially-motivated violence, threats and intimidation,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division of the United States Department of Justice. “The Civil Rights Division will aggressively prosecute those who violate this right.”
“When threats and vandalism failed to drive their victim out of the neighborhood, these conspirators escalated their racially-motivated campaign by burning down his home,” said Beth Phillips, U.S. Attorney for the Western District of Missouri. “The Constitution protects each of us from racially-motivated intimidation, and this defendant will be held accountable for violating Mr. Reed’s civil rights.”
“Today’s guilty plea exemplifies the FBI’s continued long term commitment to aggressively pursue justice for those who are victims of racially motivated crimes,” said Brian A. Truchon, Special Agent in Charge of the Kansas City Division of the FBI.
The guilty plea was the result of a cooperative effort between the U.S. Attorney’s Office for the Western District of Missouri, the Civil Rights Division of the Department of Justice, and the Kansas City Division of the FBI. The case is being prosecuted by First Assistant U.S. Attorney David Ketchmark for the Western District of Missouri and Trial Attorney Sheldon L. Beer of the Civil Rights Division’s Criminal Section.
Las Vegas Real Estate Agent and Mortgage Broker Convicted for Their Roles in Mortgage Fraud SchemeRead the Press Release
WASHINGTON – A real estate agent and a mortgage broker, both of Las Vegas, were found guilty today for their participation in a mortgage fraud scheme that netted nearly $2.5 million in fraudulent mortgage loans, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Special Agent in Charge Kevin Favreau of the FBI’s Las Vegas Field Office.
After a seven-day trial, a federal jury in Las Vegas found Jeannie Sutherland and Kelly Nunes guilty of one count of bank fraud and one count of conspiracy to commit wire and bank fraud. Sutherland, 67, and Nunes, 41, were acquitted on a second count of bank fraud. A third individual, Michael Toren, 41, was acquitted on the one charge against him.
According to the evidence at trial and court documents, Sutherland, a real estate agent, and Nunes, a mortgage broker, participated in a scheme to submit fraudulent loan documents to a lender and to artificially inflate the sales price of two Las Vegas homes. The scheme netted nearly $2.5 million in mortgage loans, more than $600,000 of which was diverted by the defendants in the form of kickbacks and commissions. The participants then attempted to cover up their scheme by lying to state regulators and federal investigators.
Sutherland and Nunes face a maximum sentence of 30 years in prison on each count.
Two co-conspirators, John Williams and Carson Winget, previously pleaded guilty for their roles in the fraud scheme and will be sentenced at a later date.
This case was investigated by the FBI. Trial Attorneys Thomas B.W. Hall and Brian R. Young of the Fraud Section in the Justice Department’s Criminal Division prosecuted the case. The U.S. Attorney’s Office for the District of Nevada provided assistance with the prosecution. Former Fraud Section Trial Attorney Joseph Capone also assisted with the investigation.
Today’s guilty pleas are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force, visit www.stopfraud.gov.
Four Individuals and Three Corporations Convicted for Roles in Wire Fraud Conspiracy at New York Presbyterian HospitalRead the Press Release
WASHINGTON — A Manhattan jury today convicted four individuals and three corporations for their participation in an eight-year conspiracy, involving kickbacks in excess of $2 million, to defraud New York Presbyterian Hospital (NYPH), the Department of Justice announced. In addition to today’s convictions, previously 10 individuals and three companies have pleaded guilty to date to charges arising out of this investigation.
After a four week trial, Michael Yaron and two companies owned by him, Cambridge Environmental & Construction Corp., which does business as National Environmental Associates (Cambridge/NEA), an asbestos abatement company, and Oxford Construction & Development Corp., a construction company; Moshe Buchnik, the president of two asbestos abatement companies; Santo Saglimbeni, a former vice president of facilities operations at NYPH; Artech Corporation, a company owned by a relative of Saglimbeni; and Emilio “Tony” Figueroa, a former director of facilities operations at NYPH were each convicted of engaging in a wire fraud conspiracy to defraud NYPH. Additionally, Yaron, Cambridge/NEA, Oxford, Buchnik, Saglimbeni and Artech were also convicted of wire fraud for transferring money electronically from the bank account of one co-conspirator to Artech’s bank account.
“We are very pleased that the jury found these individuals and companies guilty of conspiracy to defraud New York Presbyterian Hospital,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Justice Department’s Antitrust Division. “This verdict sends a clear message that corrupt purchasing officials and the contractors who paid them kickbacks will be held accountable for this type of illegal conduct.”
According to the court document, the scheme to defraud NYPH centered on Saglimbeni, with the assistance of Figueroa, awarding asbestos abatement, air monitoring and general construction contracts to Yaron, Buchnik, Cambridge/NEA and Oxford in return for over $2.3 million in kickbacks paid to Saglimbeni. A portion of those kickbacks were funneled by Yaron to Saglimbeni through Artech, a sham company Saglimbeni created in the name of his mother in order to conceal the kickbacks. Counts three and four of the superseding indictment charging Saglimbeni and Figueroa with mail fraud conspiracy and mail fraud were severed from the matter and will be tried on April 16, 2012, in U.S. District Court in Manhattan.
Sentencing for all defendants is scheduled for June 20, 2012, before Judge George B. Daniels. The wire fraud and wire fraud conspiracy charges each carry a maximum penalty of 20 years in prison for individuals and a $1 million criminal fine for individuals and companies. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
The convictions announced today resulted from a federal antitrust investigation of bid rigging, fraud, bribery and tax-related offenses in the award of construction, maintenance and service contracts to the facilities operations department of NYPH.
The investigation is being conducted by the Antitrust Division’s New York Field Office with the assistance of the FBI and the Internal Revenue Service-Criminal Investigation’s New York Field Office. Anyone with information concerning bid rigging, bribery, tax offenses or fraud at NYPH should contact the Antitrust Division’s New York Field Office at 212-264-9308, visit www.justice.gov/atr/contact/newcase.htm or contact the FBI’s New York Division at 212-384-1000.
Florida Man Indicted for Tax Fraud and Identity TheftRead the Press Release
A federal grand jury in Fort Pierce, Fla., returned an indictment charging Ernst Pierre with filing false federal income tax returns and identity theft, the Justice Department and the Internal Revenue Service (IRS) announced. The indictment was unsealed today following Pierre’s arrest. Pierre is charged with 11 counts of filing a false tax return for clients of his business, one count of filing a false tax return for himself, three counts of wire fraud and three counts of aggravated identity theft.
According to the indictment, from October 2009 through May 2011, Pierre filed false tax returns for clients of Tax Max, a Port St. Lucie, Fla., tax return preparation business he owned and operated. Pierre obtained the names and Social Security numbers of clients for whom he prepared and submitted federal income tax returns and that he then fraudulently used those names and Social Security numbers as “dependents” on client tax returns and on his own tax return. Inclusion of a dependent on a federal income tax return can result in a higher tax refund.
“Identity theft is a serious crime. And, when combined with tax refund schemes, it threatens the financial security of our citizens,” Wifredo Ferrer, U.S. Attorney for the Southern District of Florida. “It is time for tax refund scammers to realize that we will not allow them to steal others’ identities and line their pockets through fraud.”
“The Tax Division is dedicated to protecting the personal identities of U.S. taxpayers and prosecuting criminals who steal those identities to commit federal crimes, including tax refund fraud,” said Principal Deputy Assistant Attorney General John A. DiCicco of the Justice Department’s Tax Division. “We are working closely with the IRS and the United States Attorneys to protect the public from these crimes.”
“The IRS is aggressively pursuing those who steal others’ identities in order to file false returns,” said Steven Miller, IRS Deputy Commissioner for Services and Enforcement. “Our cooperative work with the U.S. Attorney’s Office and the Tax Division will help protect taxpayers in Southern Florida from being victimized by identity theft. The IRS is taking additional steps this tax season to further prevent, detect and resolve identity theft cases as soon as possible.”
An indictment merely alleges that crimes have been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Pierre faces a maximum potential sentence of three years in prison for each of the twelve false tax return counts, up to twenty years in prison for each of the three wire fraud counts, and a mandatory two-year sentence for each aggravated identity theft count. Pierre is also subject to fines and mandatory restitution if convicted.
This case was investigated by special agents from the IRS - Criminal Investigation. Tax Division trial attorneys Justin K. Gelfand and Thomas J. Krepp are prosecuting the case with the assistance of the United States Attorney’s Office in the Southern District of Florida.
Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax.
Danish Man Sentenced to 30 Years in Prison for Producing Child Pornography and Extorting a MinorRead the Press Release
WASHINGTON – A Danish man was sentenced today in the Western District of Missouri to 30 years in prison for producing and transporting child pornography and for extortion against an 11-year-old Missouri girl, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Beth Phillips of the Western District of Missouri announced.
Kai Lundstroem Pedersen, 61, a citizen of Denmark, was sentenced by U.S. District Judge Greg Kays. Pedersen pleaded guilty to the federal indictment on Sept. 6, 2011.
According to court documents, in July 2010, Pedersen engaged in a video web chat from his home in Denmark with an 11-year-old girl in Buchanan County, Mo., identified as Jane Doe #1. Pedersen used a fake Facebook account to pose as a juvenile-aged male. Pedersen admitted that he instructed the girl to engage in sexually explicit conduct that he recorded and saved as a digital video on his computer. This video, as well as screen capture images from the video, were later edited and distributed to others, including family and friends of the victim. Pedersen distributed the images and video over the Internet via file-sharing software.
Pedersen contacted Jane Doe #1 using various aliases through email and chat programs from July to September 2010 in an effort to convince her to engage again in sexually explicit conduct via video web chat. Pedersen threatened to disseminate sexually explicit images of her over the Internet if she did not comply with his demands. For example, on Aug. 15, 2010, Pedersen used nine different aliases on Facebook to contact Jane Doe #1, relaying rape and murder fantasies, asserting that various individuals had watched her video and describing the various sexual acts that these individuals wanted to perform on her.
According to court documents, in August 2010, Pedersen initiated contact with another minor female in rural Missouri, whom he believed to be a close friend of Jane Doe #1. Pedersen contacted this victim, identified as Jane Doe #2, in an effort to exert pressure to have either Jane Doe #1 or Jane Doe #2 perform sexually explicit conduct for him via video web chat.
On Aug. 13, 2010, Jane Doe #1=s mother contacted law enforcement authorities. The mother told an officer that she learned of the contact with Pedersen after receiving Facebook messages that contained nude images of her daughter. A law enforcement officer, posing as a minor victim, communicated online with Pedersen and learned that he was traveling for vacation on Aug. 20, 2010. When Pedersen logged into his Facebook account on Aug. 25, 2010, investigators were able to trace his Internet protocol address to a residence in Stonybrook, N.Y., where he was arrested on Sept. 3, 2010.
This case was prosecuted by Assistant U.S. Attorney Patrick D. Daly of the Western District of Missouri and Trial Attorney Keith Becker of the Child Exploitation and Obscenity Section (CEOS) in the Justice Department’s Criminal Division. It was investigated by the Buchanan County, Mo., Sheriff=s Department; the Western Missouri Cyber Crimes Task Force; the U.S. Immigration and Customs Enforcement (ICE) Office of Homeland Security Investigations (HSI); and CEOS.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys= Offices and the Criminal Division=s 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.
1 February 2012
Principal of Offshore Brokerage Firm and Las Vegas Stock Promoter Convicted in Miami for $7 Million Stock Manipulation ScamRead the Press Release
WASHINGTON – The principal of a Costa Rican brokerage firm and a Las Vegas stock promoter were each convicted yesterday in the Southern District of Florida of all charges for their roles in a stock manipulation scheme that defrauded investors, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Chief Postal Inspector Guy Cottrell of the U.S. Postal Inspection Service (USPIS) and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office.
Jonathan Curshen, 47, the principal of Red Sea Management and Sentry Global Securities, two companies located in San Jose, Costa Rica, that provided offshore accounts and facilitated trading in penny stocks, was found guilty of conspiracy to commit securities fraud, wire fraud and mail fraud; two counts of mail fraud; and conspiracy to commit international money laundering. Nathan Montgomery, 30, a Las Vegas stock promoter, was found guilty of conspiring to commit securities fraud and wire fraud.
The evidence at trial showed that in January and February 2007, Curshen, of Costa Rica and Sarasota, Fla., and Montgomery, of Las Vegas, were involved in a scheme to illegally manipulate the stock price of a company called CO2 Tech (ticker CTTD), which traded on the Pink Sheets, an inter-dealer electronic quotation and trading system.
Evidence at trial showed that Curshen’s and Montgomery’s co-conspirators controlled the outstanding shares of CO2 Tech, which were used in the stock manipulation scheme. Montgomery and his conspirators engaged in coordinated trades in conjunction with the issuance of false and misleading press releases that were designed to artificially inflate the price of CO2 Tech shares to make it appear that it had significant business prospects. According to these press releases, CO2 Tech purported to have a business relationship with Boeing to reduce polluting gases emitted from airplanes, when in fact CO2 Tech never had any business or relationship with Boeing.
According to the evidence at trial, Montgomery and his co-conspirators, Robert Weidenbaum, Timothy Barham Jr., Ryan Reynolds and others fraudulently “pumped” the market price and demand for CO2 Tech stock through these press releases and coordinated trades of shares of CO2 Tech stock in order to create the appearance of legitimate buying interest by legitimate investors. The evidence showed that as Montgomery and his conspirators pumped the price of the stock, Curshen and his conspirators facilitated the “dumping” of shares through the trading desk at Red Sea and Sentry Global Securities by selling the shares at the direction of their conspirators to the general investing public. The evidence showed that these shares, which became virtually worthless, were purchased by unsuspecting investors, including investors in the Southern District of Florida. The evidence showed that Montgomery, Weidenbaum, Reynolds and Barham were paid approximately $1 million in cash by their conspirators to participate in sham stock trades of CO2 Tech. The cash was delivered to Miami via a private jet from an airport outside New York.
The evidence further showed that, from approximately 2003 through 2008, Curshen operated Red Sea as a money laundering hub in Costa Rica that established bank accounts and brokerage accounts in the United States and Canada under false pretenses and through nominee owners. The evidence further showed that Curshen and his co-conspirators laundered the proceeds of the stock fraud from accounts in the United States to an account in Canada, all in an effort to conceal and disguise the nature and source of the proceeds.
At sentencing, Curshen faces a sentence of up to five years in prison on the conspiracy to defraud count, and up to 20 years on each count of mail fraud and money laundering conspiracy. Montgomery faces a sentence of up to five years for the conspiracy to defraud count. The defendants are scheduled to be sentenced by Judge Richard W. Goldberg on May 11, 2012.
Stock promoters Weidenbaum, Barham and Reynolds, who were also charged in this case, previously pleaded guilty to conspiring to commit securities fraud, wire fraud and mail fraud. They also will be sentenced by Judge Goldberg on May 9, 2012. Michael Simon Krome, a securities attorney from New York, who participated in the conspiracy and evaded federal securities registration requirements in order to provide co-conspirators with millions of unregistered and “free trading” shares of CO2 Tech that were used to execute the stock manipulation, also pleaded guilty to conspiring to commit securities fraud, mail fraud and wire fraud.
The case was investigated by the FBI’s Washington Field Office and the USPIS. The case is being prosecuted by Trial Attorneys N. Nathan Dimock and Rina Tucker Harris of the Fraud Section in the Justice Department’s Criminal Division. The U.S. Attorney’s Office for the Southern District of Florida provided significant assistance in this case. The Department of Justice acknowledges the significant assistance of the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) in its investigation. The SEC has a pending parallel civil case. The Criminal Division’s Office of International Affairs and Costa Rican authorities also provided assistance.
This prosecution is part of efforts under way by the Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
Justice Department Settles Americans with Disabilities Act Lawsuit with Michigan’s Henry Ford Health SystemRead the Press Release
WASHINGTON – The Justice Department has reached a settlement with the Henry Ford Health System to ensure effective communication with individuals who are deaf or hard of hearing in the provision of medical services. The agreement, under the Americans with Disabilities Act (ADA), resolves a complaint filed with the Department of Justice that alleged that the Henry Ford Health System failed to provide sign language interpreters to a deaf patient at one of its in-patient psychiatric facilities and to his family members who are also deaf and need interpreters to communicate effectively with health care providers.
The complaint alleged that the health system violated the ADA by failing to provide appropriate auxiliary aids and services, including sign language interpreter services, to a deaf patient and his family at Kingwood Hospital in Ferndale, Mich. Because of the hospital’s failure to provide sign language interpreter services, a deaf individual was denied the benefit of effective communication with hospital staff, the opportunity to effectively participate in medical treatment decisions, and the full benefit of health care services provided by Kingswood Hospital, which is a part of the health system. The Justice Department then conducted a full review of the health system and determined that systems were not adequate to ensure that deaf and hard of hearing patients are provided with auxiliary aids and services to guarantee effective communication throughout their medical treatment.
“The ADA protects the right of individuals who are deaf or hard of hearing to be able to access medical services, and this settlement is the latest example of the Justice Department’s unwavering commitment to enforcing the ADA,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “This settlement also demonstrates Henry Ford Health System’s commitment to provide effective communication to people who are deaf or hard of hearing.”
"This settlement enables the Henry Ford Health System and the federal government to achieve their common goal to ensure that deaf and hard of hearing patients can communicate with their doctors and obtain equal access to medical treatment, especially at critical moments in their care," said Barbara McQuade, U.S. Attorney for the Eastern District of Michigan.
The settlement agreement requires the health system to provide training to hospital staff on the requirements of the ADA; to adopt specific policies and procedures to ensure that auxiliary aids and services are promptly provided to patients or companions who are deaf or hard of hearing; to appoint a corporate ADA administrator and ADA facilitators at each of its hospitals, urgent care facilities, medical clinics, community health centers and affiliated health care facilities to ensure access to appropriate auxiliary aids and services. The settlement agreement also requires the Henry Ford Health System to pay $70,000 to family members who were denied effective communication.
The ADA prohibits discrimination against individuals with disabilities by hospitals. Among other things, the ADA requires doctors, hospitals and other health care providers to provide equal access to patients and companions who are deaf or hard of hearing. When medical services involve important, lengthy or complex oral communications with patients or companions, hospitals are generally required to provide qualified sign language interpreters and other auxiliary aids, free of charge, to individuals who are deaf, hard of hearing or have speech disabilities. The appropriate auxiliary aid to be provided depends on a variety of factors, including the nature, length and importance of the communication; the context of the communication; the communication skills and knowledge of the individual who is deaf or hard of hearing; and the individual’s stated need for a particular type of auxiliary aid.
Those interested in finding out more about this settlement or hospitals’ effective communication obligations under the ADA may call the Justice Department’s toll-free ADA information Line at 800-514-0301 or 800-514-0383 (TDD), or access its ADA website at www.ada.gov . ADA complaints may be filed by email to [email protected] . This investigation was handled jointly by the U.S. Attorney’s Office for the Eastern District of Michigan and the Civil Rights Division of the Department of Justice.
Federal Court Orders Iowa Man and Eight Companies to Pay Employment TaxesRead the Press Release
A federal court has ordered James Watts and eight corporations to begin paying employment taxes to the United States on a timely basis, the Justice Department announced today. According to the government complaint in the case, Watts, of Bettendorf, Iowa, is the president of Watts Trucking Service, Inc., an Iowa corporation, of which the other seven corporations are subsidiaries. The complaint alleges that the companies fail to pay over to the Internal Revenue Service (IRS) all of their employment and unemployment taxes, including the income and social security taxes withheld from their employees’ wages.
Chief Judge James E. Gritzner of the U.S. District Court for the Southern District of Iowa entered the preliminary injunction order, which requires Watts and the companies to comply with federal employment tax filing, deposit, and payment requirements, and to certify to the government that they have done so. The injunction also prohibits the defendants from closing a waste-handling business and reopening it under a new name without the written consent of the government.
According to the complaint, Watts has formed and controlled at least 23 different business entities over the past two decades, most of which have accrued delinquent tax liabilities. The complaint states that the defendant corporations, along with 15 inactive entities, owe the government over $30 million in federal employment and unemployment taxes.The preliminary injunction will remain in effect while the case proceeds to final judgment. Violation of an injunction can result in civil and criminal sanctions, including fines and imprisonment.
In the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions prohibiting a wide variety of improper conduct, including repeated non-payment of employment taxes. Information about these cases is available on the Justice Department website .
First Amended Complaint for Permanent Injunction and for Other Relief (PDF)
Order (PDF)Department of Justice Reaches Settlement with Mercer County School District in West Virginia to Ensure Equal Opportunities for ELL StudentsRead the Press Release
WASHINGTON – The Justice Department reached a settlement agreement yesterday with the Mercer County School District in West Virginia. With the district’s cooperation, the department conducted an extensive examination of the district’s English Language Learner (ELL) program to determine whether the district’s ELL students were receiving adequate services as required by the Equal Educational Opportunities Act of 1974.
The three-year settlement agreement will ensure that this rural district takes appropriate action to serve its small but growing and widely dispersed ELL population. The district has agreed to dedicate funding, resources and time through the end of 2014 toward teacher professional development, ELL-specific materials and translator and interpreter services. The district also has agreed to adopt policies to identify incoming ELL students properly through a home language survey and testing, to identify and serve special education ELLs and to monitor the academic performance of current, former and opt-out ELL students.
“Students who are not proficient in English are entitled to language acquisition services that ensure their equal and meaningful participation in educational programs,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Department of Justice is committed to ensuring that all English Language Learners are provided the services they need to succeed, whether they attend large urban districts or smaller rural districts like the Mercer County School District. We applaud the Mercer County School District’s decision to enter into this important agreement and look forward to continuing to work cooperatively with the district to address the diverse needs of its English Language Learners.”
The enforcement of the Equal Educational Opportunities Act is a top priority of the Justice Department’s Civil Rights Division. Additional information about the Civil Rights Division of the Justice Department is available on its website at www.justice.gov/crt .
31 January 2012
Virginia Contractor Sentenced to Serve 37 Months in Prison for Kickback Scheme and Failure to File Tax ReturnRead the Press Release
WASHINGTON — A Virginia contractor was sentenced today to serve 37 months in prison for participating in a scheme to steer contracts to him for repair, maintenance and renovation work at healthcare and nursing home facilities owned by Medical Facilities of America Inc. (MFA), the Department of Justice announced.
Edward T. Fodrey, a resident of Norfolk, Va., was sentenced in U.S. District Court in Norfolk by Judge Mark S. Davis and was ordered to pay $326,799 in restitution. Fodrey pleaded guilty on April 4, 2011, to one count of conspiracy to commit mail fraud in connection with his participation in a kickback scheme and one count of failing to file a tax return.
According to the charge filed on March 30, 2011, from about May 2006 until at least December 2006, Fodrey conspired with an MFA employee who oversaw the bidding process for repair, maintenance and renovation contracts at MFA facilities in North Carolina and Virginia. The MFA employee steered contracts to Fodrey in return for kickbacks by creating fictitious competitor bids that were higher than the quotes submitted by Fodrey and other co-conspirator venders in order to create the appearance of competition. The MFA employee directed subordinates to solicit quotes only from Fodrey or other conspiring vendors and specified the amount Fodrey should quote to MFA as well as the amount of the kickback on each of the contracts.
Fodrey paid more than $160,000 in kickbacks to the MFA employee and received contracts and subcontracts totaling more than $750,000. The court document states that as a result of the kickback scheme, MFA was deprived of competitive pricing to its financial detriment. Fodrey was also charged with failing to file a tax return for 2006, which is the year in which Fodrey received payment on the MFA contracts.
Fodrey is the first to be sentenced of the four individuals charged to date in connection with the department’s ongoing fraud investigation into the award of repair, maintenance and renovation contracts at facilities owned by MFA. The investigation is being conducted by the Antitrust Division’s Philadelphia Field Office, the U.S. Attorney’s Offices for the Eastern District of Virginia and the Western District of Virginia, the FBI in Roanoke, Va., and the Internal Revenue Service-Criminal Investigation in Roanoke. Anyone with information concerning fraudulent behavior relating to the award of contracts by MFA should contact the Antitrust Division’s Philadelphia Field Office at 215-597-7405 or visit www.justice.gov/atr/contact/newcase.htm.
South San Francisco Food Processing Factory Will Pay Nearly $700,000 in Penalties, Spend $6 Million to Update Refrigeration System SafetyRead the Press Release
WASHINGTON – South San Francisco, Calif., food processor Columbus Manufacturing Inc., a wholly owned subsidiary of Columbus Foods LLC, has agreed to pay a penalty and make significant upgrades to settle Clean Air Act violations, the Department of Justice and the U.S. Environmental Protection Agency (EPA) announced today. The case stems from two releases of anhydrous ammonia that occurred in 2009 at its manufacturing facility located in South San Francisco, Calif.
The releases were the result of Columbus’s failure of its general duty of care to identify hazards and to maintain a safe facility and its failure to comply with regulatory requirements for process safety management under Section 112(r) of the Clean Air Act.
“This settlement appropriately penalizes Columbus for violations of the Clean Air Act that resulted in two illegal releases of poisonous gas that put the community at risk, including one release that caused the hospitalization of people in the affected community,” said Ignacia S. Moreno, Assistant Attorney General of the Environment and Natural Resources Division at the Department of Justice. “Today’s agreement will prevent future violations of the Clean Air Act safety standards by requiring Columbus to upgrade its refrigeration technology and emergency notification system.”
“Columbus is responsible for letting plumes of poisonous gas escape into the open air,” said Jared Blumenfeld, EPA’s Regional Administrator for the Pacific Southwest. “Our goal is to safeguard neighbors and workers by requiring critical improvements to the company’s plant to prevent these industrial accidents from happening again.”
As part of the consent decree announced today, Columbus will pay a penalty of $685,446 and spend approximately $6 million converting its refrigeration system to a safer technology that uses glycol and ammonia. The company will also improve its alarm and ammonia release notification procedures.
The first accidental ammonia release, in February 2009, sent 217 pounds of poisonous gases into the atmosphere. Six months later in August 2009, the plant again released an ammonia cloud, this time approximately 200 pounds of anhydrous ammonia was released into the atmosphere.
The August incident resulted in the evacuation of all facility employees and several neighboring businesses. Nearly 30 people from the downwind Genentech campus sought medical attention and 17 individuals were hospitalized. One person remained hospitalized for four days. In addition, off-ramps from Highway 101 and several local streets were shut down as a result of the release.
EPA took action following the August 2009 incident, ordering Columbus to complete initial upgrades to its ammonia refrigeration system, including the replacement of safety relief valves and components with any signs of corrosion, and the proper labeling of all its piping. In 2011, the company paid $850,000 in fines to San Mateo County as a result of the incident.
Anhydrous ammonia is considered a poisonous gas. Exposure to its vapors can cause temporary blindness and eye damage, and irritation of the skin, mouth, throat, respiratory tract and mucous membranes. Prolonged exposure to anhydrous ammonia vapor at high concentrations can lead to serious lung damage and even death. Anhydrous ammonia is one of the listed extremely hazardous substances to which Section 112(r) of the Clean Air Act applies.
Enforcement of the general duty of care and of the regulatory requirements under Section 112(r)(1) and (7) of the Clean Air Act is critical to ensuring that industry focuses on the safety of the public and the environment.
For more information, including a copy of the consent decree lodged in the U.S. District Court for the Northern District of California, please visit: www.epa.gov/region09/superfund/emerprep.html .