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21 June 2011
Pittsburgh Crips Gang Member Pleads Guilty to Racketeering ChargesRead the Press Release
WASHINGTON – A Pittsburgh man has pleaded guilty in federal court to charges of conspiring to conduct a racketeering enterprise related to his membership in a Pittsburgh Crips gang, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney David J. Hickton of the Western District of Pennsylvania.
Terrance Clark, 22, aka “Doo Wop,” pleaded guilty yesterday before Senior U.S. District Judge Gustave Diamond to one count of conspiracy to engage in a racketeering enterprise.
According to the guilty plea, Clark and others participated in a pattern of racketeering activity that included multiple acts involving robberies at gun point; attempted murders; distribution of controlled substances, including cocaine, heroin and crack cocaine; and obstruction of justice and witness intimidation.
According to court documents, Clark was a member of the Northview Heights/ Fineview Crips, a criminal street gang operating out of the Northview Heights public housing facility in the Northside neighborhood, and in the nearby Fineview neighborhood of Pittsburgh. The gang had been operating in the Northside since 2002; in 2003, it formed an alliance with the Brighton Place Crips to expand the gang’s drug trafficking territory and increase the gang’s capability for violence.
The Brighton Place/Northview Heights Crips gang maintains exclusive control over drug trafficking in these neighborhoods through continuous violence and intimidation of rivals and witnesses. Members of the gang support each other through payment of attorneys’ fees and bonds, as well as payments to jail commissary accounts and support payments to incarcerated members’ families.
In addition, the Brighton Place/Northview Heights Crips gang maintains an ongoing feud with the Manchester Original Gangsters, a criminal street gang located in the Manchester area of the Northside Section of Pittsburgh. Brighton Place/Northview Heights Crips gang members identify themselves by wearing blue, using Crips gang hand signals, and using phrases such as “Cuz,” “C-Safe,” “Loc” and “G.K.” According to court documents, members and associates of the gang gain greater authority and prestige within the gang based upon their reputation for violence and their ability to obtain and sell a steady supply of illegal drugs.
According to court documents, Clark acted as a “hustler” or distributor of controlled substances, including heroin, cocaine and crack cocaine, for the gang. He also acted as a “soldier/ gorilla” or enforcer for the gang, providing protection for the enterprise through the commission of violent crimes. According to information presented in court, Clark and a co-conspirator were responsible for at least two armed robberies, one of which involved a carjacking. Clark was also involved in at least two instances relating to the obstruction of criminal investigations, including a homicide prosecution. In addition, in December 2007, Clark pointed a firearm at several Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) agents and task force officers as they drove an unmarked car through the Brighton Place neighborhood seeking to serve a subpoena on a government witness. Subsequent recorded telephone conversations from jail between Clark and his co-conspirators showed that Clark initially believed the occupants of the vehicle were members of a rival gang attempting to shoot at him and his fellow Crips members.
Clark is one of 26 defendants charged in February 2010 with being members of, and conducting racketeering activity through, the Brighton Place/Northview Heights Crips gang. This prosecution resulted from a Project Safe Neighborhoods Task Force investigation that began in 2005. To date, 16 members of the Brighton Place/ Northview Heights Crips who were charged in this indictment have pleaded guilty to racketeering charges.
Clark faces a maximum sentence of life in prison and a fine of $250,000. He is scheduled to be sentenced on Oct. 20, 2011.
This case is being prosecuted by Assistant U.S. Attorneys Charles A. Eberle and Troy Rivetti of the Western District of Pennsylvania and Trial Attorney Kevin Rosenberg of the Criminal Division’s Organized Crime and Gang Section. The case was investigated by the ATF; the City of Pittsburgh Bureau of Police; the Allegheny County, Penn., Police Department; and the Allegheny County Sheriff’s Office.
Owner of Detroit-Area Medical Clinic Sentenced to Prison for Role in $1.12 Million Diagnostic Testing Fraud SchemeRead the Press Release
WASHINGTON – An owner of a Detroit-area medical clinic was sentenced today to 15 months in prison for her role in a $1.12 million Medicare fraud scheme, the Departments of Justice and Health and Human Services (HHS) announced.
Maria Haber, 46, an owner of CompleteHealth LLC, also was sentenced by U.S. District Judge Patrick J. Duggan in the Eastern District of Michigan to three years of supervised release following her prison term and was ordered to pay $ 1,004,343 in restitution, jointly and severally with other defendants in the case.
Haber pleaded guilty on Oct. 27, 2010, to one count of conspiracy to commit health care fraud. She was one of 10 individuals charged in connection with a fraudulent diagnostic testing scheme operating at CompleteHealth and Ritecare LLC, another related clinic. Co-defendants Emilio Haber, Genna Yates, Alejandro Haber, Grant Johnson, Darrell Nichols, Elizabeth Egan, Hans Lobato, Emma King and Melvin Young previously pleaded guilty to health care fraud conspiracy for their roles in the scheme.
According to court documents, Haber incorporated a limited liability company called CompleteHealth on Sept. 20, 2007, which purported to provide primary care services at a facility in Livonia, Mich. Haber signed the provider application submitted by CompleteHealth to enroll in the Medicare program and admitted that she helped operate the clinic.
Haber admitted that she and her co-conspirators, including her then-husband Emilio Haber, billed Medicare for medically unnecessary tests and services. Haber admitted in court documents that she obtained patients for CompleteHealth by paying kickbacks to driver recruiters and directly to Medicare beneficiaries. Haber and her co-conspirators typically paid patient recruiters $100-$150 per patient, with $50-$75 going to the patient in exchange for visiting CompleteHealth and subjecting themselves to medically unnecessary tests.
According to court documents, Haber’s co-conspirators instructed the patient recruiters to have the patients feign certain symptoms to justify the medically unnecessary tests. The kickbacks paid to the recruiters and the patients were contingent upon the Medicare beneficiaries identifying the symptoms necessary to justify the medically unnecessary tests reflected in the patients’ medical records. The fraudulent conduct continued at Ritecare after CompleteHealth merged with it in June 2008.
Today’s sentence 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 (HHS-OIG) Chicago Regional Office.
The case was prosecuted by Trial Attorney Gejaa T. Gobena of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since its inception in March 2007, Medicare Fraud Strike Force operations in nine districts have obtained indictments of 1,000 defendants that collectively have billed the Medicare program for more than $2.3 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 .
Massachusetts Man Sentenced to 96 Months in Prison on Child Pornography ChargesRead the Press Release
WASHINGTON – George H. Lunt, 27, of Plymouth, Mass., was sentenced today to 96 months in prison, to be followed by five years of supervised release for his transportation and possession of child pornography, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney Carmen M. Ortiz for the District of Massachusetts and Richard DesLauriers, Special Agent in Charge of the FBI Boston Field Office.
Lunt was sentenced by U.S. District Judge George A. O’Toole Jr. in Boston. On March 15, 2011, Lunt pleaded guilty to two counts of transportation of child pornography and one count of possession of child pornography. In pleading guilty, Lunt admitted to possessing thousands of images and videos of child sexual abuse, including depictions of prepubescent children and toddlers and sadistic conduct. Lunt admitted to distributing graphic depictions of child sexual abuse through online peer-to-peer file-sharing software. This case arose from an FBI investigation of individuals sharing and trading child pornography over the Internet.
This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by U.S. Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.
The case against Lunt was prosecuted by Assistant U.S. Attorney Michael I. Yoon of the District of Massachusetts and CEOS Trial Attorney Bonnie L. Kane of the Criminal Division. The case was investigated by the FBI.
Former TBW CEO Sentenced to 40 Months in Prison for Fraud SchemeRead the Press Release
WASHINGTON – The former chief executive officer (CEO) of Taylor, Bean & Whitaker (TBW) was sentenced today to 40 months in prison for his role in a more than $2.9 billion fraud scheme that contributed to the failure of TBW. At one time, TBW was one of the largest privately held mortgage lending companies in the United States.
Paul Allen was sentenced today by U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. The sentence was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Acting Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Deputy Inspector General of the Department of Housing and Urban Development (HUD-OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA-OIG); and Victor S. O. Song, Chief of the Internal Revenue Service-Criminal Investigation (IRS-CI).
Allen, 55, of Oakton, Va., pleaded guilty in April 2011 to one count of making false statements and one count of conspiring to commit bank and wire fraud. Co-conspirator Sean Ragland, a former senior financial analyst at TBW who reported to Allen, was also sentenced today by Judge Brinkema to three months in prison. Ragland, 37, of San Antonio, pleaded guilty in March 2011 to one count of conspiracy to commit bank and wire fraud. Allen and Ragland both admitted to conspiring with Lee Bentley Farkas, the former chairman of TBW, and others, to defraud financial institutions that had invested in Ocala Funding LLC, a facility wholly-owned by TBW.
Farkas was convicted on April 19, 2011, on 14 counts of fraud for his role in masterminding the scheme, which was one of the largest bank frauds in the country. Farkas is scheduled to be sentenced on June 27, 2011. The Securities and Exchange Commission (SEC) has a civil action pending against Farkas in the Eastern District of Virginia.
Co-conspirators Catherine Kissick, a former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division (MWLD); Teresa Kelly, a former operations supervisor in Colonial Bank’s MWLD; Raymond Bowman, the former president of TBW; and Desiree Brown, the former treasurer of TBW, have also pleaded guilty for their participation in the scheme. Earlier this month, Kissick was sentenced to eight years in prison, Brown was sentenced to six years in prison, Bowman was sentenced 30 months in prison and Kelly was sentenced to 3 months in prison.
“As TBW’s chief executive officer, Mr. Allen served as an accomplice to Lee Farkas and his massive fraud scheme,” said Assistant Attorney General Breuer. “He concealed TBW’s staggering deficits through false financial reports, which ultimately caused investors to lose more than $1.5 billion. Today’s sentence sends a strong message that corporate fraud by senior executives will not be tolerated. At the same time, it demonstrates that substantial assistance in the government’s investigation and prosecution of corporate fraud will be taken into account at sentencing.”
“Paul Allen was a well-respected mortgage executive hired by Lee Farkas to be TBW’s chief executive officer. Working from Oakton, Va., Mr. Allen led Ocala Funding, a TBW multi-billion dollar lending facility that was used to defraud investors of more than $1 billion,” said U.S. Attorney MacBride. “Mr. Allen’s sentence reflects his ultimate cooperation with this investigation, but also sends the message that unless executives expose and stop fraud when they first learn of it, they will be punished.”
According to court documents and information presented at trial, Allen and Ragland participated in the scheme from early 2005 through August 2009 by distributing materially false documents to investors in Ocala Funding that misrepresented the financial condition of the facility. The fraud scheme ultimately caused investors in Ocala Funding to lose more than $1.5 billion and Colonial Bank to lose $900 million.
According to court documents and information presented at trial, TBW began running overdrafts in its master bank account at Colonial Bank because of TBW’s inability to meet its operating expenses, which included payroll, servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities and other obligations. In or about 2002, Farkas and other co-conspirators engaged in a series of fraudulent actions to cover up the overdrafts, first by sweeping overnight money from one TBW account with excess funds into another, and later through the fictitious “sales” of mortgage loans to Colonial Bank, a fraud scheme the conspirators dubbed “Plan B.” The conspirators accomplished Plan B by selling Colonial Bank mortgage loans that did not exist or that TBW had already committed or sold to other third-party investors. As Plan B evolved, co-conspirators at TBW also caused TBW to engage in sham sales of groups of mortgage loans, known as “pools,” that other entities already owned to Colonial Bank. As a result, false information was entered on Colonial Bank’s books and records, giving the appearance that the bank owned interests in legitimate pools of mortgage loans, when in fact the pools had no value and could not be securitized or sold. Neither Allen nor Ragland participated in the effort to cover up TBW’s overdrafts or Plan B.
Additionally, the co-conspirators at TBW caused TBW to misappropriate more than $1.5 billion in collateral from Ocala Funding. According to court documents, both Allen and Ragland played significant roles in the Ocala Funding misappropriation. The misappropriation caused Colonial Bank and the Federal Home Loan Mortgage Corporation (Freddie Mac) to falsely believe that they each had an undivided ownership interest in thousands of the same loans worth hundreds of millions of dollars.
According to court documents, the fraud scheme also included an effort by certain conspirators in the fall of 2008 to obtain $570 million in taxpayer funding through the Capital Purchase Program, a sub-program of the U.S. Treasury Department’s TARP. In connection with the application, Colonial BancGroup submitted financial data and filings that included materially false information related to mortgage loan and securities assets held by Colonial Bank as a result of the fraudulent activity at TBW. Colonial BancGroup never received the TARP funding. According to court documents, Allen played a key role in causing materially false information to be submitted to and received by the government in connection with Colonial Bank’s TARP application. Ragland was not aware of this aspect of the fraud scheme.
In August 2009, the Alabama State Banking Department, Colonial Bank’s regulator, seized the bank and appointed the FDIC as receiver. Colonial BancGroup also filed for bankruptcy in August 2009.
“Instead of upholding his position of power and trust as CEO of TBW, Paul Allen chose the path of fraud and deception in helping facilitate the long-running fraud carried out by TBW and Colonial Bank. Fortunately, the scheme came to a halt when an attempt was made to steal more than a half billion dollars from the TARP,” said Acting Special Inspector General for the TARP Romero. “Today’s sentence appropriately recognizes the severity of Allen’s participation in the fraud along with his cooperation in the Government’s investigation.”
“As a result of this complex fraud scheme, these defendants cost investors and our financial markets billions of dollars,” said Assistant Director in Charge McJunkin. “Today’s sentence shows that those who take advantage of investors and our banking and mortgage systems will be held accountable. The FBI will continue to work with our law enforcement partners and remain vigilant in investigating these illegal transactions.”
“Today’s sentencing marks the culmination of a large effort on the part of this agency and of the law enforcement and regulatory community,” said Deputy Inspector General Stephens of HUD-OIG. “More importantly, however, it shows our nation that is slowly recovering from a damaged housing market that we are committed to bringing to justice those whose pernicious behavior contributed to this condition.”
“ The Federal Deposit Insurance Corporation (FDIC) Office of Inspector General is pleased to join our law enforcement colleagues in announcing this sentencing,” said Inspector General Rymer of FDIC. “We are particularly concerned in cases like this one where fraudulent activities involving employees of Colonial Bank in association with officials of Taylor, Bean and Whitaker contributed to the failure of Colonial Bank, resulting in a $3.8 billion loss to the Deposit Insurance Fund. We are committed to continuing our investigations of such criminal misconduct to help ensure the integrity of the financial services industry and maintain the safety and soundness of the nation’s financial institutions and the viability of the fund.”
“Paul Allen used his extensive experience gained from employment with the government sponsored enterprises (GSEs) to assist Lee Farkas in his massive fraud scheme,” said Inspector General Linick of FHFA-OIG. “This sentence sends a strong message to individuals who would try to defraud Freddie Mac and American taxpayers, who have invested over $163 billion in the GSEs to date.”
The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. This case was investigated by SIGTARP, FBI’s Washington Field Office, FDIC-OIG, HUD-OIG, FHFA-OIG and the IRS-CI. The department recognizes the substantial assistance of the SEC. The department also recognizes the assistance of the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury.
This prosecution was brought in coordination with 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.
Former Hickman County, Tennessee Deputy Sheriff Pleads Guilty to Civil Rights ChargesRead the Press Release
WASHINGTON - The Justice Department announced that former Hickman County Deputy Sheriff Kenneth H. Smith, 43, pleaded guilty today to violating the rights of two women by photographing parts of their unclothed bodies under the false pretense that those photographs were necessary for an official investigation. Smith also pleaded guilty to making material false statements to federal investigators. Sentencing is scheduled for Oct. 7, 2011, before Chief U.S. District Judge Todd J. Campbell.
“Our law enforcement officers are tasked with protecting and serving our communities, and those who use their power to take advantage of vulnerable individuals will be prosecuted to the fullest extent of the law,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.
While working as a deputy sheriff, Smith was assigned to investigate two domestic violence complaints. During his investigatory interviews, Smith told the victims that he needed to take photographs of their exposed bodies to document injuries, including intimate areas of their bodies where no injury had occurred. Smith, abusing his power and position, lied to the victims and claimed these photographs were necessary for the police investigation and prosecution, when in fact the photos were not for legitimate law enforcement purposes, but for himself . The victims, trusting a law enforcement officer to protect them, acquiesced to Smith’s authority.
Smith also lied to FBI agents about sending text messages to a former female inmate in which he requested the former inmate send him nude pictures of herself, in return for Smith’s help in dismissing or reducing the outstanding criminal charges against her. When Smith was confronted with photographs of the explicit text messages coming from his personal cell phone number, Smith continued to lie to FBI agents that he had not sent them.
The case has been investigated by investigators with the FBI and the Tennessee Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney Hal McDonough and Civil Rights Division Trial Attorney Saeed Mody.
Former Co-Owner of Illinois Technology Company Sentenced to Serve One Year and a Day in Prison for Role in Conspiracy to Defraud the Federal E-Rate ProgramRead the Press Release
WASHINGTON — A former co-owner of an Illinois-based technology company, Global Networking Technologies Inc. (GNT), was sentenced today to serve one year and a day in prison for his participation in a conspiracy to defraud the federal E-Rate program, the Department of Justice announced.
Tyrone Pipkin was also sentenced by U.S. District Court Judge Jay C. Zainey to pay a $6,000 criminal fine for conspiring to defraud the E-Rate program by providing bribes and kickbacks to school officials in multiple states. Pipkin was charged with the conspiracy in U.S. District Court in New Orleans on Nov. 18, 2010, and pleaded guilty on March 28, 2011.
As a result of the Antitrust Division’s 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. Seventeen individuals, including Pipkin, have been sentenced to serve prison time. On June 9, 2011, Barrett C. White, Pipkin’s co-conspirator, was sentenced to one year and one day in prison for his role in the conspiracy. On June 2, 2011, Gloria F. Harper, a second conspirator, pleaded guilty to the conspiracy in a separate charge and awaits sentencing set for Sept. 8, 2011
According to court documents, Pipkin, who acted on his own behalf and on behalf of Computer Training Associates and GNT, participated in the conspiracy beginning on or about December 2001 through September 2005. The department said that Pipkin participated in the conspiracy 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. In return, those individuals ceded control of the E-Rate competitive bidding process to Pipkin and his co-conspirators, ultimately allowing them to ensure E-Rate contracts at these schools were awarded to their companies.
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.
Bloods Gang Member in Nashville Pleads Guilty to <br /> Federal Racketeering ChargesRead the Press Release
WASHINGTON – A Nashville, Tenn., man pleaded guilty today to conspiring to participate in racketeering activity related to his membership in the Bloods criminal enterprise , announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney for the Middle District of Tennessee Jerry E. Martin.
Antonio Washington, 22, aka “T.O.,” pleaded guilty in Nashville before U.S. District Judge Aleta Trauger to one count of conspiracy to participate in racketeering activity.
According to court documents, Washington and other Bloods gang members and associates agreed to commit multiple acts of robbery, narcotics trafficking and bribery on behalf of the Bloods gang. Washington and numerous Bloods gang members met on a regular basis at various locations throughout the Middle District of Tennessee, including Shelby Park, Cedar Hill Park and the Galaxy Star Drug Awareness and Gang Prevention Center to report on gang-related business, collect dues, commit disciplinary actions against fellow gang members, discuss acts of violence against rival gang members, and initiate or “jump in” new members by beating them for a period of time, among other things.
Washington admitted that o n March 28, 2010, during a joint Bloods gang meeting at Galaxy Star Drug Awareness and Gang Prevention Center, he and numerous other Bloods gang members voted to punish Bloods member Joedon Bradley. Following the vote, the Bloods gang members exited the building and formed a large circle in the backyard behind a wooden fence, where several groups of Bloods gang members violently assaulted Bradley. According to court documents, Bradley collapsed after being punched and kicked numerous times on his face and body.
Also according to court documents, o n April 14, 2010, Washington and other known Bloods gang members and associates agreed to rob an individual of approximately 30 pounds of marijuana near Bud’s Hardware Store in Nashville. Washington admitted that, armed with a pistol, he rode in a vehicle with several known Bloods gang members to commit the robbery. However, when Washington and the other Bloods gang members arrived at the location, they were unable to commit the robbery because of the presence of law enforcement in the area.
At sentencing, scheduled for Sept. 26, 2011, Washington faces a maximum penalty of life in prison and a $250,000 fine.
The case was investigated by the ATF; the Metropolitan Nashville Police Department; the Gallatin, Tenn., Police Department; and assisted by the U.S. Marshals Service and the Davidson County, Tenn., District Attorney’s Office.
The case is being prosecuted by Assistant U.S. Attorney Scarlett Singleton and Trial Attorney Cody L. Skipper of the Criminal Division’s Organized Crime and Gang Section.
20 June 2011
Owner of Houston Health Care Company Pleads Guilty to Defrauding MedicareRead the Press Release
WASHINGTON – An owner of a Houston health care company pleaded guilty today in connection with a $654,227 Medicare fraud scheme, announced the Departments of Justice and Health and Human Services (HHS).
Simone Ball, 24, pleaded guilty before U.S. District Judge Lee Rosenthal in Houston to one count of conspiracy to commit health care fraud. In her plea, Ball admitted that she defrauded Medicare of $654,227
According to court documents, Ball was an owner and operator of Preferred Plus Medical Supply. Preferred Plus maintained a valid Medicare provider number in order to submit Medicare claims for the costs of durable medical equipment (DME) and purported to provide orthotics and other DME to Medicare beneficiaries. According to court documents, Preferred Plus submitted claims to Medicare for DME, including orthotic devices, which were medically unnecessary and/or not provided. Many of the orthotic devices were components of “arthritis kits,” and purported to be for the treatment of arthritis-related conditions, although they were neither medically necessary nor appropriate for such conditions. The arthritis kit generally contained a number of orthotic devices including braces for both sides of the body and related accessories such as heat pads. In total, from August through December 2008, Preferred Plus submitted approximately $654,227 in fraudulent claims to Medicare.
At sentencing, scheduled for Oct. 12, 2011, Ball faces a maximum sentence of 10 years in prison.
Today’s guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney José Angel Moreno of the Southern District of Texas; the Texas Attorney General Greg Abbott; Acting Special Agent-in-Charge Russell D. Robinson of the FBI’s Houston Field Office; and Special Agent-in-Charge Mike Fields of the Dallas Regional Office of HHS Office of Inspector General (HHS-OIG), Office of Investigations.
This case is being prosecuted by Trial Attorneys Laura M.K. Cordova and Benjamin O’Neil, and Deputy Chief Charles La Bella of the Criminal Division’s Fraud Section. The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section.
Since their inception in March 2007, Medicare Fraud Strike Force operations in nine districts have obtained indictments of more than 1,000 individuals who collectively have falsely billed the Medicare program for more than $2.3 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 Reaches Agreement with City of Manassas Park, Virginia, on Bailout from the Voting Rights ActRead the Press Release
WASHINGTON – The Justice Department announced that it has reached an agreement with the city of Manassas Park, Va., that, if approved by the court, will allow for the city to bail out from its status as a “covered jurisdiction” under the special provisions of the Voting Rights Act, and thereby exempt the city from the preclearance requirements of Section 5 of the Voting Rights Act. The agreement is in the form of a consent decree filed today in the U.S. District Court for the District of Columbia.
Under Section 5 of the Voting Rights Act, certain covered jurisdictions, determined according to Section 4 of the act, are required to seek preclearance for any changes in voting qualifications, standards, practices or procedures from the U.S. District Court for the District of Columbia or from the U.S. Attorney General, prior to their implementation. Section 4 of the act provides that a covered jurisdiction may seek to “bail out,” or remove itself from such coverage, and therefore be exempted from the preclearance requirements, by seeking a declaratory judgment before a three-judge panel in U.S. District Court for the District of Columbia. A bailout judgment can be issued only if the court determines that the jurisdiction meets certain eligibility requirements for bailout contained in the statute, including a 10-year record of nondiscrimination in voting-related actions. The act also provides that the attorney general can consent to entry of a judgment of bailout only if, based upon investigation, the attorney general is satisfied that the jurisdiction meets the eligibility requirements.
Manassas Park filed its bailout action in the U.S. District Court for the District of Columbia on April 19, 2011. City officials had contacted the attorney general prior to filing the action, indicating that the city was interested in seeking a bailout. The city provided the Justice Department with substantial information, and the department conducted an investigation to determine the city’s eligibility. Based on that investigation, the department is satisfied that the city meets the Voting Rights Act’s requirements for bailout.
“In this case, the department carefully evaluated the information provided by the city and conducted its own investigation, which has satisfied us that the city is eligible for a bailout,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “I appreciate the cooperation of city officials in providing the department with the information requested, and in moving toward a resolution of this matter in the way envisioned by the Voting Rights Act.”
The consent decree details the legal and factual basis for a bailout determination and, if approved, will grant the city’s request. The court will retain jurisdiction of the action for 10 years and can reopen the action upon the motion of the attorney general or any aggrieved person alleging conduct by the city that would have originally precluded the city from bailing out if it had occurred during the 10-year period preceding entry of the consent decree.
Information about bailout, the Voting Rights Act, and other federal voting laws is available on the Department of Justice website at www.justice.gov/crt/voting/ . Complaints may be reported to the Voting Section of the Justice Department’s Civil Rights Division at 1-800-253-3931.
Justice Department Files Gender Discrimination Lawsuit Against Waupaca County, WisconsinRead the Press Release
WASHINGTON — The Justice Department today announced it has filed a lawsuit alleging that Waupaca County, Wis., discriminated against Waupaca County Sheriff’s Department patrol officer Julie Ann Thobaben because of her gender when it failed to promote her. The suit was filed in federal district court in Wisconsin.
Title VII prohibits employers from discriminating against individuals based on their race, color, gender, national origin or religion when making employment-related decisions, including decisions about whether to promote, hire or fire someone.
Thobaben is a well-regarded, 16-year veteran of the Waupaca County Sheriff’s Department. The Justice Department’s complaint alleges that in March 2006, Waupaca County unlawfully discriminated against Thobaben when it failed to promote her from patrol officer to detective sergeant because she is a woman. According to the complaint, Waupaca County managers conceded that Thobaben was the most qualified candidate for the promotion. Despite her superior qualifications, the county claimed it could not promote Thobaben because Thobaben’s husband works as a patrol officer at the sheriff’s department, and promoting Thobaben would violate the county’s nepotism policy. Although the policy prohibits employees from supervising their relatives, the complaint alleges that the county has ignored this policy on at least 10 other occasions when it permitted males to supervise their family members. Also, months after denying Thobaben the promotion, Waupaca County took the position, in a labor dispute, that detective sergeants do not supervise patrol officers.
“Gender discrimination in employment will not be tolerated,” said Thomas Perez, Assistant Attorney General for the Civil Rights Division. “This lawsuit should send a clear message that the department will take necessary action to eliminate and remedy the effects of gender discrimination in our public sector workplaces.”
The case stems from a referral by the Equal Employment Opportunity Commission following that agency’s investigation. The case will be handled by the Civil Rights Division in cooperation with the U.S. Attorney’s Office in the Eastern District of Wisconsin.
Additional information about Title VII can be found on the Justice Department website, www.justice.gov/crt/emp , as well as on the Equal Employment Opportunity Commission’s website at www.eeoc.gov.
Iowa Ready-Mix Concrete Company Pleads Guilty to Participating in Price-Fixing ConspiracyRead the Press Release
WASHINGTON - An Iowa ready-mix concrete company pleaded guilty to participating in a price-fixing conspiracy for the sales of ready-mix concrete, the Department of Justice announced today.
According to a one-count felony charge filed on June 10, 2011, in U.S. District Court in Sioux City, Iowa, Tri-State Ready Mix Inc., a producer of ready-mix concrete headquartered in Rock Valley, Iowa, participated in a conspiracy with GCC Alliance Concrete Inc. and its predecessor entity to fix prices for ready-mix concrete sold in the northern district of Iowa. The department said that the conspiracy took place beginning at least as early as January 2006 and continuing until as late as August 2009.
Ready-mix concrete is a product comprised of cement, aggregate (sand and gravel), water and other additives. The concrete generally is produced in a concrete plant and is transported by concrete-mixer trucks to work sites, where it is used in various types of construction projects, including buildings and roads.
According to court documents, Tri-State Ready Mix participated in the conspiracy through its president, Chad Van Zee, who engaged in discussions and reached agreements with Steven VandeBrake of GCC Alliance Concrete and its predecessor entity regarding the conspirators’ prices for ready-mix concrete sold in Iowa. Tri-State Ready Mix then accepted payment for those sales at collusive and noncompetitive prices, the department said.
Tri-State Ready Mix is charged with violating the Sherman Act, which carries a maximum fine of $100 million for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
Today’s plea arose from an ongoing federal antitrust investigation of the ready-mix concrete industry in Iowa and surrounding states. As a result of the investigation, on May 20, 2011, GCC Alliance Concrete Inc., another ready-mix concrete producer, pleaded guilty to participating in three separate conspiracies to fix prices and/or rig bids for the sales of ready-mix concrete. On May 26, 2010, VandeBrake, former sales manager of GCC Alliance Concrete, pleaded guilty to participating in the conspiracies and, on Feb. 8, 2011, was sentenced to serve 48 months in prison and to pay a criminal fine of $829,715. On the same day, Kent Robert Stewart, the president of another Iowa ready-mix concrete company, was sentenced to serve a year and a day in prison and to pay a $83,427 criminal fine for conspiring with VandeBrake to fix prices and rig bids. Stewart pleaded guilty on May 24, 2010. Van Zee pleaded guilty to conspiring with VandeBrake to fix prices of ready-mix concrete on Dec. 6, 2010, and is scheduled to be sentenced tomorrow.
The investigation is being conducted by the Antitrust Division’s Chicago Field Office, the FBI’s Sioux City Resident Agency and the Department of Transportation’s Office of Inspector General, with the assistance of the U.S. Attorney’s Office in Sioux City. Anyone with information concerning bid rigging, price fixing or territorial allocation related to the ready-mix concrete industry in Iowa and its surrounding states should contact the Antitrust Division’s Chicago Field Office at 312-353-7530 or visit www.justice.gov/atr/contact/newcase.htm.
California UBS Clients Plead Guilty to Hiding Assets in Secret Swiss Bank AccountRead the Press Release
WASHINGTON – Sean Roberts and Nadia Roberts of Tehachapi, Calif., pleaded guilty before U.S. District Judge Anthony W. Ishii of the Eastern District of California to a criminal information charging them with filing a false tax return related to an undisclosed Swiss bank account that they maintained at UBS, as well as other offshore bank accounts, the Justice Department and the Internal Revenue Service (IRS) announced today.
According to court documents and statements made in court, the Robertses pleaded guilty to filing a false 2008 individual U.S. income tax return in which they failed to report that they had an interest in or a signature authority over a secret Swiss financial account at UBS, as well as several other foreign accounts, failed to report income earned on the foreign accounts, and falsely deducted transfers from their domestic business to the foreign accounts on their corporate tax returns. The false deductions allowed the Robertses to under-report their income on their individual income tax returns. The Robertses own and operate the National Test Pilot School and Flight Research Incorporated in Mojave, Calif. National Test Pilot School is a non-profit educational institute that trains test pilots from domestic and foreign aerospace industries and governments. Flight Research Inc. owns and maintains most of the aircraft used by the school.
In or about 1991, the Robertses opened a bank account at an Isle of Man branch of a United Kingdom bank, in the name of nominee entity Interline Trade Associates Limited. From at least 2002 through 2004, the Robertses transferred funds from their company, Flight Research Incorporated of Mississippi (FRI Mississippi), to the Interline account, and caused the transfers to be falsely deducted as interest payments on corporate income tax returns as a sham aircraft loan.
In or about 1995, the Robertses, with the assistance of a UBS banker, established an account in their own names at UBS in Switzerland. In 2004, the Robertses, with the assistance of an account manager at a Zurich-based financial services company, acquired a nominee Hong Kong entity called Excalibur Investments Limited and opened a new UBS account in Excalibur’s name. In July 2004, the Robertses closed the UBS account in their own names and transferred the assets to the nominee Excalibur UBS account. In February 2005, the Robertses also closed their Interline account and, with the assistance of the Zurich account manager, transferred the assets to the Excalibur UBS account. From 2004 through 2008, the Robertses transferred more than $1.2 million from FRI Mississippi to the Excalibur UBS account, and caused the transfers to be falsely deducted as interest payments on corporate income tax returns as a sham aircraft loan.
In or about May 2008, the Robertses closed their Excalibur UBS account and, with the assistance of the Zurich account manager, transferred more than $4.8 million to an account in Excalibur’s name at a Swiss branch of a Liechtenstein bank. This was done after the account manager informed the Robertses that UBS was under investigation by U.S. authorities and that they should leave UBS to ensure the continued secrecy of their account. In 2008, the Robertses transferred more than $1.4 million from FRI Mississippi to the Excalibur account at the Liechtenstein bank, and again caused the transfers to be falsely deducted on a corporate income tax return. Also in May 2008, the Robertses, again with the assistance of the Zurich account manager, opened a bank account in the name of Modest Winner, a nominee Hong Kong entity, at the Liechtenstein bank. In 2008 and 2009, the Robertses transferred funds from another of their entities, Tisours LLC, to the Modest Winner account. In 2009, with the assistance of the Zurich account manager, the Robertses transferred that account to a bank in Hong Kong. The Robertses also maintained numerous undeclared foreign bank accounts in New Zealand and South Africa held in their own names.
The Robertses admitted to filing false tax returns for tax years 2004 through 2008 that concealed their interest in these various offshore accounts, failing to report income earned from these accounts, and falsely deducting transfers from their business to these accounts. The Robertses also admitted that they never filed reports of Foreign Bank and Financial Accounts (FBARs) disclosing their interest in any offshore financial accounts. As part of their plea agreements, the Robertses agreed to pay restitution to the IRS in the amount of $709,675, and to pay a 50 percent penalty for the one year with the highest balance in their offshore accounts in order to resolve their civil liability for failing to file FBARs, Forms TD F 90-22.1.
In February 2009, UBS entered into a deferred prosecution agreement under which the bank admitted to helping U.S. taxpayers hide accounts from the IRS. As part of their agreement, UBS provided the United States government with the identities of, and account information for, certain U.S. customers of UBS's cross-border business, including the Robertses.
Sentencing has been set for Sept. 6, 2011, and the Robertses remain free on bail pending sentencing, where each faces a maximum sentence of three years in prison.
U.S. Attorney for the Eastern District of California Benjamin B. Wagner and Principal Deputy Assistant Attorney General John A. DiCicco of the Justice Department’s Tax Division commended the efforts of the IRS-Criminal Investigation agents who investigated the case and Tax Division Trial Attorneys Timothy J. Stockwell and John P. Scully, as well as Assistant U.S. Attorney Mark E. Cullers, who are prosecuting the case.
More information about the Tax Division and its enforcement efforts is available at www.justice.gov/tax .
Associate Attorney General Tom Perrelli and Interior Secretary Ken Salazar Applaud Final Approval of Cobell SettlementRead the Press Release
WASHINGTON – Today, the Departments of Justice and Interior applauded the final approval by U.S. Senior District Judge Thomas F. Hogan of Cobell v. Salazar, a long-running and contentious individual American Indian trust class-action lawsuit. Unless the decision is appealed, the court’s approval of the $3.4 billion settlement paves the way for payments to be made to as many as a half-million individual American Indians who had Individual Indian Money accounts or an interest in trust or restricted land managed by the Department of the Interior. The suit has been pending for 15 years.
Reaching a final settlement of Cobell has been a priority of the Obama administration.
“The judge’s finding that the settlement is fair and reasonable is a major milestone in the Administration’s effort to reach a resolution of litigation that has cast a cloud over the government’s relationship with American Indians,” said Associate Attorney General Tom Perrelli, who has twice testified before Congress on the settlement.
“Judge Hogan’s decision is another milestone in empowerment and reconciliation for the American Indians,” Interior Secretary Ken Salazar said, noting in particular the contributions of Deputy Secretary David J. Hayes and Interior’s Solicitor Hilary Tompkins in reaching the settlement. “The Cobell settlement not only resolves the contentious 15-year litigation, but also honorably and responsibly turns the page on an unfortunate chapter in the Department’s history, demonstrating President Obama's commitment to reconciliation and empowerment for American Indian nations.”
“The Cobell settlement is the beginning of true trust reform,” said Interior Deputy Secretary Hayes, noting that Interior is establishing a Secretarial Commission on Indian Trust Administration and Reform in consultation with tribes. This commission will undertake a forward-looking, comprehensive evaluation of how the Interior Department manages and administers its trust responsibilities. “Interior needs to be more transparent and customer-friendly,” said Deputy Secretary Hayes. "The status quo is not acceptable.”
Following an earlier ruling by Judge Hogan, Interior Deputy Secretary Hayes began scheduling consultation meetings with tribal leaders to begin discussions on the land consolidation component of the settlement. Deputy Secretary Hayes and other Department officialswill hold six regional government-to-government tribal consultations which will provide valuable input in developing an implementation strategy that will benefit tribal communities and help free up trust lands. The consultation process is fundamental to respecting the government-to-government relationship with the tribes.
Additional information is available at www.cobellsettlement.com and the Office of Special Trustee website at www.doi.gov/ost . More information on the Cobell settlement, including resources for Indian Trust Beneficiaries, is available at www.doi.gov/ost/cobell/index.html or www.indiantrust.com/index .
Anadarko and Kerr-Mcgee to Pay More Than $17 Million to Resolve Allegations of Royalty Underpayments from Federal and Indian LandsRead the Press Release
WASHINGTON – Anadarko Petroleum Corporation, Kerr-McGee Corporation and their affiliates have agreed to pay the United States more than $17 million to resolve claims that the companies violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and Indian leases, and numerous additional administrative claims,
the Justice Department announced today. Anadarko is among the largest independent oil and natural gas exploration and production companies in the world. Anadarko and Kerr-McGee were independent companies and were separately sued when this case was originally filed in 1996. In June of 2006, Kerr-McGee Corporation became a wholly-owned Anadarko subsidiary.
Congress has authorized federal and Indian lands to be leased for the production of natural gas in exchange for the payment of royalties on the value of the gas that is produced. Each month companies are required to report to the U.S. Department of the Interior the amount of royalty that is due. This settlement resolves claims by the United States under the False Claims Act that the Anadarko and Kerr-McGee defendants improperly deducted from royalty values the cost of boosting gas up to pipeline pressures and improperly reported processed gas as unprocessed gas to reduce royalty payments, as well as a series of outstanding administrative claims.
“This case is one in a series of significant oil and gas settlements that demonstrate our commitment to ensuring that companies pay all of the royalties they owe,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “When companies pay natural gas royalties for the privilege to extract non-renewable resources from public lands, that income supports vital federal programs from which we all benefit.”
“We remain committed to ensuring that energy companies accurately report production and report and pay all of the required royalties, with no exceptions,” said Rhea Suh, Assistant Secretary for the Department of the Interior's Office of Policy, Management and Budget. “We will continue to pursue every dollar due to taxpayers and the federal government from extracting these precious natural resources from federal and American Indian lands.”
Today’s settlement arises from a lawsuit filed by Harrold Wright under the False Claims Act. Under the qui tam, or whistleblower, provisions of the act, private citizens may file actions on behalf of the United States and share in any recovery. Because Mr. Wright is deceased, his heirs will receive $1.95 million plus interest as their share of the settlement. The United States will intervene against the Anadarko and Kerr-McGee defendants for the purpose of completing this settlement. The Justice Department previously intervened against several other defendants in the Wright lawsuit. Total settlements in the case to date exceed $249 million.
The investigation and settlement of this matter was jointly handled by the Justice Department’s Civil Division and the U.S. Attorney for the Eastern District of Texas, with assistance from the Department of the Interior’s Office of Natural Resource Revenue, Office of the Solicitor and Office of the Inspector General.
The case is U.S. ex rel. Wright v. Chevron USA, Inc. et al., 5:03-CV-264 (E.D. Tex.) .
17 June 2011
United States and Two California State Agencies File Civil Lawsuit Against Greka Oil & Gas Inc. for Oil Spills in Santa Barbara CountyRead the Press Release
WASHINGTON – The United States, the California Department of Fish and Game and the California Regional Water Quality Control Board, Central Coast Region, filed a civil complaint today in federal court against Greka Oil & Gas Inc. (now known as HVI Cat Canyon Inc.) alleging that the company violated federal and state water laws.
According to the complaint, announced today by the Department of Justice, the U.S. Environmental Protection Agency (EPA), the California Regional Water Quality Control Board, Central Coast Region and the California Department of Fish and Game, Greka illegally discharged crude oil and produced water from its oil and gas production facilities in Santa Barbara County during 21 spills between June 2005 and December 2010. The spills resulted from ruptured storage tanks, corroded pipelines and overflowing injection ponds. Oil from each of the spills flowed into nearby waterways.
The complaint, filed in U.S. District Court for the Central District of California, also alleges that at 12 facilities, Greka failed to prepare plans and implement measures required by the Clean Water Act to prevent, contain, and respond to spills.
The lawsuit asks the court to order Greka to take all appropriate action to prevent future spills, and to fully implement the oil pollution prevention requirements of the Clean Water Act. The United States and the two California state agencies also seek civil penalties up to the maximum amount authorized by law.
In addition, the United States seeks the recovery of $2.4 million in costs incurred responding to and directing the cleanup of Greka’s spills. The California Department of Fish and Game also seeks the recovery of its unpaid response costs and damages for harm caused to natural resources by the spills.
In May 2011, Greka changed its name to HVI Cat Canyon Inc. The company is a privately held Colorado corporation and a wholly-owned subsidiary of Greka Integrated Inc.
Texas-Based Fluor Corporation to Pay U.S. $4 Million to Resolve False Claims Act and Anti-Kickback Act LiabilityRead the Press Release
WASHINGTON - Fluor Hanford Inc., a wholly-owned subsidiary of Fluor Federal Services Inc. and Fluor Corporation, has agreed to pay the United States $4 million to resolve allegations that it knowingly submitted false claims and paid and received kickbacks relating to a contract to operate and manage mixed radioactive waste at the Department of Energy’s (DOE) Hanford Nuclear Site in Hanford, Wash. Fluor Corporation is headquartered in Irving, Texas, near Dallas.
Between 2003 and 2008, Fluor employed individuals known as material coordinators, whose job responsibilities included purchasing supplies for use by Fluor on its DOE contract. Between 2003 and 2008, three such material coordinators, Susanna Zuniga, Gregory Detloff and Paul Kempf, made hundreds of fraudulent purchases using government purchase cards, using their positions and exploiting weaknesses in Fluor’s internal control system to funnel DOE funds to themselves.
“Vigorously prosecuting financial fraud is one of the Justice Department’s top priorities,” said Assistant Attorney General Tony West. “Government contractors who line their bank accounts with kickbacks or money from fraudulent claims undermine the public's trust and will continue to attract our enforcement attention.”
As early as 2001 and repeatedly between 2001 and 2008, internal audits conducted by Fluor alerted it to weaknesses in its purchase card controls, weaknesses exploited by the three material coordinators. Nonetheless, Fluor failed to address these weaknesses, allowing these schemes to go undetected for years.
“The cleanup of the Hanford Nuclear Facility is a high priority for this region; Government contractor fraud undermines these efforts and at Hanford simply will not be tolerated,” said Michael C. Ormsby, U.S. Attorney for the Eastern District of Washington. “This resolution demonstrates that corporations will be held accountable when they turn a blind eye to fraud and self-dealing.”
Additionally, between 2005 and 2008, at least 14 Fluor material coordinators solicited, received and accepted kickbacks from a Hanford-area vendor known as Fast Pipe and Supply Company and its owner, Shane Fast. These kickbacks, which took the form of cash, tickets to sporting events, gift cards and other things of value, were intended to influence the material coordinators to purchase from Fast rather than competing vendors. In return for these kickbacks, the 14 Fluor material coordinators did more than $3.5 million in business with Fast.
“The $4 million settlement announced today and the successful outcome of this case reflect our commitment to aggressively pursuing those who defraud the Department of Energy and to protect the interests of U.S. taxpayers,” said Gregory H. Friedman, Department of Energy Inspector General. “I commend the hard work of the DOJ Attorneys and IG Special Agents. Strong working relationships like this are vital to the successful resolution of major fraud cases."
Five former Fluor employees have been indicted for their participation in the fraudulent schemes. Four of the individuals have pleaded guilty, with the fifth awaiting trial.
The government’s investigation was conducted by the Civil Division of the U.S. Department of Justice, the U.S. Attorney’s Office for the Eastern District of Washington and the Department of Energy Office of Inspector General.
Since January 2009, the Department of Justice’s total False Claims Act recoveries have exceeded $7.3 billion.
Justice Department Reaches Settlement with Nixon State Bank to Resolve Allegations of Lending DiscriminationRead the Press Release
WASHINGTON – The Justice Department announced today that Nixon State Bank of Nixon, Texas, will establish uniform pricing policies, conduct employee training, and pay nearly $100,000 as part of a settlement to resolve allegations that it engaged in a pattern or practice of discrimination on the basis of national origin.
The settlement, which is subject to court approval, was filed in conjunction with the Justice Department’s complaint in the U.S. District Court for the Western District of Texas. The complaint alleges that Nixon charged higher prices on unsecured consumer loans made to His panic borrowers through the bank’s branch offices in violation of the Equal Credit Opportunity Act (ECOA).
“Fair and equal access to credit is critical and lenders have a responsibility to have protocols in place that ensure all of their lending programs comply with the law and don’t discriminate,” said Thomas E. Perez, Assistant Attorney General in charge of the Justice Department’s Civil Rights Division. “The Civil Rights Division is committed to fair lending enforcement that stops abuses across the entire spectrum of credit markets. We are pleased that this settlement will compensate the victims of this discriminatory conduct and we commend Nixon for working cooperatively with the Justice Department in reaching an appropriate resolution of this case.”
“Any form of discrimination is intolerable, including in the lending of money,” stated U.S. Attorney John E. Murphy. “The rates consumers pay for credit should be based solely upon factors directly related to their creditworthiness without any reference to their race or ethnicity.”
“The FDIC is committed to ensuring its supervised banks comply with fair lending laws, including the Equal Credit Opportunity Act,” said Mark Pearce, Director of the Federal Deposit Insurance Corporation’s (FDIC) Division of Depositor and Consumer Protection. “This particular matter highlights the dangers of discretionary pricing in loan products. We appreciate the collaboration with the Department of Justice to address this matter.”
Prior to mid-2009, Nixon did not have a written loan pricing guideline for its unsecured consumer loans. Instead, the bank’s loan officers were granted broad discretion in handling all aspects of the unsecured consumer loan transaction. The Justice Department’s complaint alleges that this policy had a disparate impact on Hispanic borrowers.
Nixon began to develop uniform pricing policies in late 2009, which included implementation of a uniform rate matrix to price unsecured consumer loans. As part of the settlement, Nixon will further revise these and other pricing policies to ensure that the price charged for its loans is set in a non-discriminatory manner consistent with the requirements of ECOA. The settlement also requires the bank to pay nearly $100,000 to Hispanic victims of discrimination, monitor its loans for potential disparities based on national origin, and provide equal credit opportunity training to its employees. The agreement also prohibits the bank from discriminating on the basis of national origin in any aspect of a credit transaction.
The lawsuit originated from a 2010 referral by the FDIC to the Justice Department’s Civil Rights Division. Nixon is a member of the FDIC.
The Civil Rights Division, the U.S. Attorney’s Office for the Western District of Texas, and the FDIC are members of the Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov .
A copy of the complaint, as well as additional information about fair lending enforcement by the Justice Department, can be obtained from the Justice Department’s website at www.justice.gov/fairhousing .
Former Colonial Bank Senior Vice President Sentenced to 8 Years in Prison for Fraud SchemeRead the Press Release
WASHINGTON – A former senior vice president and head of Colonial Bank’s Mortgage Warehouse Lending Division was sentenced today to eight years in prison for her role in a more than $2.9 billion fraud scheme that contributed to the failures of Colonial Bank and Taylor, Bean & Whitaker (TBW). Colonial Bank was one of the 25 largest banks in the United States and TBW was one of the largest privately-held mortgage lending companies in the United States in 2009.
Catherine Kissick was sentenced today by U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. The sentence was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Acting Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Deputy Inspector General of the Department of Housing and Urban Development (HUD-OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA-OIG); and Victor S. O. Song, Chief of the Internal Revenue Service-Criminal Investigation (IRS-CI).
Kissick, 50, of Orlando, Fla., pleaded guilty in March 2011 to one count of conspiracy to commit bank, wire and securities fraud. Co-conspirator Teresa Kelly, a former operations supervisor at Colonial Bank who reported to Kissick, was also sentenced today by Judge Brinkema to three months in prison. Kelly, 35, of Ocoee, Fla., pleaded guilty in March 2011 to one count of conspiracy to commit bank, wire and securities fraud. Kissick and Kelly both admitted to conspiring with Lee Bentley Farkas, the former chairman of TBW, and others, to fraudulently obtain funding for TBW to cover expenses related to operations and servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities.
Farkas was convicted on April 19, 2011, on 14 counts of fraud for his role in masterminding the scheme, which was one of the largest bank frauds in the country. Farkas is scheduled to be sentenced on June 27, 2011. The Securities and Exchange Commission (SEC) has civil actions pending against Farkas and Kissick in the Eastern District of Virginia.
Co-conspirators Paul Allen, the former chief executive officer of TBW; Raymond Bowman, the former President of TBW; Desiree Brown, the former Treasurer of TBW; and Sean Ragland, a former senior financial analyst at TBW, have also pleaded guilty for their participation in the scheme. Earlier this month, Brown and Bowman were sentenced to six years in prison and 30 months in prison, respectively.
“As a senior executive at Colonial Bank, Catherine Kissick helped execute one of the largest bank frauds in history,” said Assistant Attorney General Breuer. “For years, she used her position within the bank to buy hundreds of millions of dollars in worthless assets from TBW, deceiving shareholders, investors and regulators. If she had refused to participate in the fraud, Lee Farkas’ scheme could have been stopped dead in its tracks. Ms. Kissick ultimately cooperated with the government, and that assistance is reflected in today’s sentence. But she, like her co-conspirators, will pay for her crimes with substantial time in prison.”
“Lee Farkas pulled off one of history’s largest bank frauds because he had people inside Colonial Bank with the power to do it and hide it,” said U.S. Attorney MacBride. “Without help from Catherine Kissick – a high-level executive at one of the nation’s top regional banks – the fraud scheme might have been discovered in its infancy. Her conviction and sentence should be a cautionary tale to other financial executives who may be tempted to bend the rules for favored clients.”
According to court documents and information presented at trial, Kissick and Kelly participated in the scheme from 2002 through August 2009. The fraud scheme caused Colonial Bank and Colonial BancGroup to purchase tens of millions of dollars of worthless assets, caused Colonial BancGroup to report false information in its financial statements, and artificially inflated the value of TBW’s mortgage servicing rights.
According to court documents and information presented at trial, TBW began running overdrafts in its master bank account at Colonial Bank because of TBW’s inability to meet its operating expenses, which included payroll, servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities and other obligations. In or about 2002, Farkas, Kissick, Kelly and other co-conspirators engaged in a series of fraudulent actions to cover up the overdrafts, first by sweeping overnight money from one TBW account with excess funds into another, and later through the fictitious “sales” of mortgage loans to Colonial Bank, a fraud scheme the conspirators dubbed “Plan B.” The conspirators accomplished Plan B by selling Colonial Bank mortgage loans that did not exist or that TBW had already committed or sold to other third-party investors.
As Plan B evolved, co-conspirators at TBW also caused TBW to engage in sham sales of groups of mortgage loans, known as “pools,” to Colonial Bank that other entities already owned. As a result, false information was entered on Colonial Bank’s books and records, giving the appearance that the bank owned interests in legitimate pools of mortgage loans, when in fact the pools had no value and could not be securitized or sold. According to court documents, Kissick played a leadership role in the sweeping and Plan B portions of the fraud scheme and directed Kelly’s activities in the scheme.
Additionally, the co-conspirators at TBW caused TBW to misappropriate more than $1.5 billion in collateral from Ocala Funding LLC, a mortgage lending facility owned by TBW. The misappropriation caused Colonial Bank and the Federal Home Loan Mortgage Corporation (Freddie Mac) to falsely believe that they each had an undivided ownership interest in thousands of the same loans worth hundreds of millions of dollars. Kissick and Kelly did not participate in the Ocala Funding misappropriations.
According to court documents, the fraud scheme also included an effort by certain conspirators in the fall of 2008 to obtain $570 million in taxpayer funding through the Capital Purchase Program (CPP), a sub-program of the U.S. Treasury Department’s TARP. In connection with the application, Colonial BancGroup submitted financial data and filings that included materially false information related to mortgage loan and securities assets held by Colonial Bank as a result of the fraudulent activity at TBW. Colonial BancGroup never received the TARP funding. According to court documents, Kissick knew that Colonial BancGroup’s TARP application relied upon false bank financial data; however, Kelly was not aware of this aspect of the fraud scheme.
In August 2009, the Alabama State Banking Department, Colonial Bank’s regulator, seized the bank and appointed the FDIC as receiver. Colonial BancGroup also filed for bankruptcy in August 2009.
“As a senior bank official of Colonial Bank, Catherine Kissick had a fiduciary duty to speak up and report fraud but instead played an active role in perpetrating and concealing this large-scale fraud, including attempting to deceive the federal government and steal over $550 million from TARP,” said Acting Special Inspector General for the TARP Romero. “SIGTARP and its partners in the Financial Fraud Enforcement Task Force skillfully discovered the fraud and prevented the loss of significant taxpayer funds. SIGTARP will continue to vigorously investigate and prosecute persons who commit fraud or attempt to do so in connection with any program implemented under TARP, regardless of whether such person receives TARP funds.”
“This was a complex investigation that required careful efforts of investigators, forensic accountants and analysts poring through thousands of pages of complicated mortgage and lending documents,” said Assistant Director in Charge McJunkin. “Today’s result is a testament to the hard work and close cooperation of our law enforcement partners. Together we are committed to ensuring the integrity of our banking and mortgage systems.”
“We will continue to work side-by-side with our partners to protect the American dream and the American taxpayers and ensure that criminals who try to enrich themselves through fraud schemes are brought to justice,” said Deputy Inspector General Stephens of HUD.
“ The FDIC Office of Inspector General is pleased to join our law enforcement colleagues in defending the integrity of the financial services industry,” said FDIC Inspector General Rymer. “We are particularly concerned in cases like this one where fraudulent activities involving employees of Colonial Bank and officials of Taylor Bean and Whitaker contributed to the failure of Colonial Bank, resulting in a $3.8 billion loss to the Deposit Insurance Fund. We are committed to continuing our investigations of such criminal misconduct to help maintain the safety and soundness of the nation’s financial institutions and the viability of the fund.”
“This sentence sends a strong message to individuals who would try to defraud Freddie Mac and American taxpayers, who have invested $64.2 billion in Freddie Mac to date,” said Inspector General Linick of the FHFA-OIG. “FHFA-OIG looks forward to future cooperative efforts with law enforcement partners to combat fraud against FHFA, Freddie Mac, Fannie Mae, and the Federal Home Loan Banks.”
The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. This case was investigated by SIGTARP, FBI’s Washington Field Office, FDIC-OIG, HUD-OIG, FHFA-OIG and the IRS-CI. The department recognizes the substantial assistance of the SEC. The department also recognizes the assistance of the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury.
This prosecution was brought in coordination with 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 .
Fifth Member of CD and DVD Counterfeiting Ring in Atlanta Sentenced to 38 Months in PrisonRead the Press Release
WASHINGTON – Ibrahim Diallo, 27, of Atlanta, was sentenced to 38 months in prison today by U.S. District Judge William S. Duffey Jr., in Atlanta for his involvement in a counterfeit DVD and CD ring, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Sally Quillian Yates for the Northern District of Georgia. Diallo was also sentenced to three years of supervised release and ordered to pay $3,867 in restitution, jointly and severally with his co-defendants.
“Mr. Diallo and his co-conspirators trafficked in counterfeit CDs and DVDs that would have been worth millions of dollars on the open market, to the detriment of artists, retailers, producers and others,” said Assistant Attorney General Breuer. “The Justice Department has never been more committed than it is today to investigating and prosecuting these crimes, and this case exemplifies our determination to make sure that counterfeiters and other intellectual property criminals are appropriately punished.”
“The victims in this case are the thousands of Americans who earn their livelihoods from the legitimate creation and performance of popular music and movies,” said U.S. Attorney Quillian Yates. “This group of defendants stole from them by mass-producing counterfeit music CDs and DVD movies in a pirating operation that may have been the largest of its kind in the Southeastern United States.”
Diallo pleaded guilty on Sept. 1, 2009, to one count of conspiracy to commit criminal copyright infringement, to traffic in counterfeit goods and to traffic in counterfeit labels. At the plea hearing, Diallo admitted that he sold pirated CDs and DVDs along with counterfeit labels and packaging. Diallo admitted to selling, and conspiring to sell, thousands of pirated CDs and DVDs per week.
Diallo was one of 13 individuals charged in a May 19, 2009, indictment alleging various copyright, trademark and counterfeit goods offenses. In February 2011, four of Diallo’s co-conspirators were sentenced for their involvement in the piracy ring. Mamadou Sadio Barry, 40, was sentenced to 60 months in prison; Moussa Baradji, 29, was sentenced to 50 months in prison; Sedikey Sankano, 42, was sentenced to 24 months in prison; and Won Ahn, 69, was placed on probation for one year. Barry, Baradji and Sankano also were ordered to serve three years of supervised release following their prison terms. Barry and Baradji were ordered to pay $70,894 in restitution and Sankano was ordered to pay $3,867 in restitution. The court found that these defendants were responsible for distributing illegal copies of products that, if legitimate, would have been valued at more than $2 million.
The case was prosecuted by Assistant U.S. Attorney Brian Pearce in the Northern District of Georgia and Senior Counsel John H. Zacharia of the Criminal Division’s Computer Crime and Intellectual Property Section. The case was investigated by special agents of the FBI and the Department of Homeland Security, Immigration and Customs Enforcement, together with officers of the Atlanta Police Department Organized Crime Unit; the College Park, Ga., Police Department; and the East Point, Ga ., Police Department. Assistance was provided by the Recording Industry Association of America and the Motion Picture Association of America.
The sentence announced today is an example of efforts being undertaken by the Department of Justice Task Force on Intellectual Property (IP Task Force). Attorney General Eric Holder created the IP Task Force to combat the growing number of domestic and international intellectual property crimes, protect the health and safety of American consumers, and safeguard the nation’s economic security against those who seek to profit illegally from American creativity, innovation and hard work. The IP Task Force seeks to strengthen intellectual property rights protection through heightened criminal and civil enforcement, greater coordination among federal, state and local law enforcement partners, and increased focus on international enforcement efforts, including reinforcing relationships with key foreign partners and U.S. industry leaders. To learn more about the IP Task Force, go to www.justice.gov/dag/iptaskforce .
El Departamento de Justicia Llega a un Acuerdo Conciliatorio con Nixon State Bank para Resolver Alegatos de Discriminación en PréstamosRead the Press Release
WASHINGTON – El Departamento de Justicia anunció hoy que Nixon State Bank de Nixon, Texas, establecerá políticas de precios uniformes, llevará a cabo capacitación de empleados y pagará casi 100,000 dólares como parte de un acuerdo conciliatorio para resolver alegatos de que adoptó un patrón o práctica de discriminación en base al origen nacional.
El acuerdo conciliatorio, que está sujeto a aprobación del tribunal, fue presentado junto con la demanda del Departamento de Justicia en el Tribunal Federal de Distrito del Distrito Oeste de Texas. La demanda alega que Nixon cobraba mayores precios en préstamos sin garantía para consumidores realizados a prestatarios hispanos en las sucursales de Nixon, lo que viola la Ley de Igualdad de Oportunidades de Crédito [Equal Credit Opportunity Act (ECOA)].
“Un acceso justo e igualitario al crédito es crucial y las entidades crediticias tienen la responsabilidad de implementar protocolos para garantizar que todos sus programas de préstamos cumplan con la ley y no discriminen”, dijo Thomas E. Perez, Asistente Fiscal General de Justicia de la División de Derechos Civiles. “La División de Derechos Civiles está comprometida a hacer valer los préstamos justos para detener los abusos en todo el espectro de mercados crediticios. Nos complace saber que este acuerdo conciliatorio compensará a las víctimas de esta conducta discriminatoria y felicitamos a Nixon por trabajar en cooperación con el Departamento de Justicia para llegar a una resolución correcta de este caso”.
“Toda forma de discriminación es intolerable, lo que incluye el préstamo de dinero”, declaró el Fiscal Federal John E. Murphy. “Las tasas que los clientes pagan por los créditos deben basarse únicamente en factores directamente relacionados con su capacidad crediticia, sin importar su raza u origen nacional”.
“La Corporación Federal de Seguros de Depósitos Bancarios [Federal Deposit Insurance Corporation (FDIC)] está comprometida a garantizar que los bancos que supervisa cumplan con leyes de préstamos justos, entre ellas la Ley de Igualdad de Oportunidades de Crédito”, dijo Mark Pearce, Director de la División de Protección de Inversionistas y Consumidores. “Este caso específico subraya los peligros de establecer precios discrecionales en productos de préstamo. Agradecemos la colaboración del Departamento de Justicia para tratar este asunto”.
Antes de mediados de 2009, Nixon no tenía una directriz escrita para precios en los préstamos en el caso de sus préstamos sin garantía para consumidores, sino que los agentes de préstamos del banco podían manejar todos los aspectos de la transacción del préstamo sin garantía para consumidores con amplia discreción. La demanda del Departamento de Justicia alega que esta política tenía un impacto dispar en los prestatarios hispanos.
Nixon comenzó a desarrollar políticas de precios uniformes a fines de 2009, que incluían la implementación de una matriz de tasas uniformes para los préstamos sin garantías para consumidores. Como parte del acuerdo conciliatorio, Nixon revisará estas y otras políticas de precios para garantizar que el precio cobrado por sus préstamos esté fijado de manera no discriminatoria de acuerdo con los requisitos de la ECOA. El acuerdo conciliatorio también le exige a Nixon que pague casi 100,000 dólares a las víctimas hispanas de la discriminación, controle sus préstamos en busca de disparidades basadas en el origen nacional y les brinde capacitación sobre igualdad de oportunidades crediticias a sus empleados. El acuerdo también le prohíbe al banco discriminar en base al origen nacional en cualquier aspecto de una transacción de crédito.
La demanda se originó en una remisión de 2010 a la División de Derechos Civiles del Departamento de Justicia por parte de la FDIC. Nixon es un miembro de la FDIC.
La División de Derechos Civiles, la Fiscalía Federal del Distrito Oeste de Texas y la FDIC son miembros de la Fuerza de Tarea de Coacción contra el Fraude Financiero. El Presidente Obama estableció la Fuerza de Tarea Interagencia de Coacción contra el Fraude Financiero para llevar a cabo una iniciativa enérgica, coordinada y proactiva para investigar y enjuiciar los delitos financieros. La fuerza de tarea incluye a representantes de una amplia gama de dependencias federales, autoridades regulatorias, inspectores generales y miembros de las fuerzas del orden público estatales y locales, quienes, trabajando juntos, aprovechan un poderoso espectro de recursos de coacción penal y civil. La fuerza de tarea está trabajando para mejorar la labor en todo el poder ejecutivo federal, y con asociados estatales y locales, para investigar y enjuiciar los delitos financieros importantes, asegurar un castigo justo y eficaz para quienes cometan delitos financieros, combatir la discriminación en los mercados de préstamos y financieros y recuperar fondos para las víctimas de delitos financieros. Para obtener más información sobre la fuerza de tarea, visite www.StopFraud.gov.
Para obtener una copia de la demanda, así como también información adicional sobre la labor del Departamento de Justicia para hacer valer las leyes de otorgamiento justo de préstamos, visite el portal del Departamento de Justicia en www.justice.gov/fairhousing.
Departments of Justice, Health and Human Services Highlight Joint Efforts to Combat Health Care Fraud in PhiladelphiaRead the Press Release
WASHINGTON – U.S. Attorney General Eric Holder and the Department of Health and Human Services (HHS) Secretary Kathleen Sebelius visited Philadelphia today where they participated in the sixth regional health care fraud prevention summit. The summits bring together a wide array of federal, state and local partners, beneficiaries, providers and other interested parties to discuss innovative ways to eliminate fraud within the U.S. health care system.
The summits are part of a larger effort on behalf of the Obama Administration to root-out waste, fraud and abuse within the U.S. health care system.
“In communities across the country, and particularly here in Philadelphia, health care fraud schemes are being aggressively and permanently shut down. That’s, in large part, because of the great work being led by Health Care Fraud Prevention and Enforcement Action Team,” said Attorney General Eric Holder. “Not only have we secured record recoveries totaling billions of dollars, we have raised awareness about these crimes and improved the ability of consumers and victims to report suspected fraud schemes. Through this initiative, we have forged partnerships necessary to ensure the strength and integrity of our most essential health care programs.”
“Today, we continue to work with patients to protect their information, with providers to strengthen screening standards, and with private insurers to share strategies about how to prevent fraud,” said HHS Secretary Kathleen Sebelius. “The Affordable Care Act gives us new resources to eliminate waste and kick criminals out of the health care system. As long as we continue to aggressively put these tools to work preventing and prosecuting fraud, we can continue to protect and strengthen Medicare’s future.”
Joining Attorney General Holder and Secretary Sebelius at the University of the Sciences in Philadelphia were Assistant Attorney General Tony West of the Civil Division and U.S. Attorney Zane D. Memeger for the Eastern District of Pennsylvania. The summit featured educational panels aimed at identifying best practices for providers, law enforcement, and beneficiaries in preventing health care fraud. The summit also showcased the success of public-private partnerships in curbing fraudulent schemes.
The U.S. Attorney’s Office for the Eastern District of Pennsylvania continues to show its strength as one of the leading offices in the nation for health care fraud recoveries, bringing in a record $2.7 billion for the Department of Justice in the past two calendar years. The office set a new record in 2009 when it announced the $1.415 billion joint civil and criminal resolution with pharmaceutical manufacturer Eli Lilly over the company’s off-label marketing of the drug Zyprexa. At the time, it was the largest monetary settlement against a single company.
Investments in fraud detection and enforcement have been shown to pay for themselves many times over, and the Administration’s tough stance against fraud is already yielding results. In FY 2010, more than $4 billion was returned to the Medicare Health Insurance Trust Fund, the U.S. Department of the Treasury and others as a result of enforcement activities targeting false claims and fraud perpetrated against government health care programs. This was an increase of $1.4 billion, or 56 percent, over FY 2009. The $4 billion recovered in FY 2010 includes recoveries from the $2.5 billion in settlements and judgments obtained in FY 2010 by the Department of Justice in False Claims Act matters alleging health care fraud. This is an unprecedented level of funds obtained in a single year and represents a 53 percent increase over FY 2009, in which $1.63 billion was obtained.
The summits are part of the overall joint health care fraud fighting effort undertaken jointly by the Departments of Justice and Health and Human Services through the Health Care Fraud Prevention and Enforcement Action Team (HEAT). As one part of HEAT’s efforts, Medicare Fraud Strike Force operations have expanded from South Florida and Los Angeles to a total of nine health care fraud hot spots including Houston; Detroit; Brooklyn, N.Y.; Baton Rouge, La.; Tampa, Fla.; Chicago; and Dallas. The Strike Force is a partnership between the Criminal Division’s Fraud Section, U.S. Attorneys’ Offices, HHS’ Office of Inspector General, FBI, and other federal, state and local law enforcement partners.
On June 8, 2010, President Obama announced this nationwide series of regional fraud prevention summits as part of a multi-faceted effort to crack down on health care fraud. The Philadelphia summit was the sixth in a series. Previous summits were held in Miami (July 16, 2010), Los Angeles (Aug. 26, 2010), New York (Nov. 5, 2010), Boston (Dec. 16, 2010) and Detroit (March 15, 2011).
The recently enacted Affordable Care Act provides additional tools and resources to fight fraud in the health care system by providing an additional $350 million over the next ten years through the Health Care Fraud and Abuse Control Account. The Act toughens sentencing for criminal activity, enhances screenings and enrollment requirements, encourages increased sharing of data across government, expands overpayment recovery efforts, and provides greater oversight of private insurance abuses. For information on the 2009 Health Care Fraud and Abuse Control Program Report, please visit: www.justice.gov/dag/pubdoc/hcfacreport2009.pdf.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov .
Antitrust Division Issues Updated Merger Remedies GuideRead the Press Release
WASHINGTON – The Department of Justice today released an updated version of the Antitrust Division’s Policy Guide to Merger Remedies. The policy guide is a tool for Antitrust Division staff to use in analyzing proposed remedies in its merger matters. It also provides transparency into the division’s approach to merger remedies for the business community, the antitrust bar and the broader public.
Although the updated policy guide reflects changes in the merger landscape, the goal of the Antitrust Division remains the same – to provide an effective remedy to eliminate the anticompetitive effects of a proposed transaction, the department said.
“In every case, the Antitrust Division focuses on the specific facts of the proposed transaction. We are prepared to clear a merger, block a merger or accept a remedy that maintains efficiencies as long as the result eliminates any competitive harm,” said Assistant Attorney General Christine Varney of the Department of Justice’s Antitrust Division. “In the current environment of increasing transnational mergers and complex vertical transactions, the Antitrust Division must be ever nimble in its efforts to ensure that any remedies effectively preserve competition, promote innovation and protect consumers. The updated policy guide takes into account these changes.”
The updated policy guide highlights the role of the Antitrust Division’s recently created Office of the General Counsel, which will be principally responsible for enforcing division consent decrees. The updated policy guide also reflects the changes in the merger landscape and the lessons the division has learned from the remedies it has entered into since the issuance of the original guide in 2004, ensuring that it accurately details the division’s merger remedy practices.
The policy guide states that effective merger remedies typically include structural or conduct provisions, or a combination. In horizontal merger matters, the division continues to rely predominantly on structural remedies, sometimes in combination with conduct remedies. However, the division has found that in many vertical transactions tailored conduct relief can prevent competitive harm while allowing the merger’s efficiencies to be realized.
The key principles the Antitrust Division applies in analyzing merger remedies remain the same:
- Effectively preserving competition is the key to an appropriate merger remedy;
- Remedies should focus on preserving competition, not protecting individual competitors; and
- A remedy must be based on careful application of legal and economic principles to the particular facts of a specific case.
A copy of the Policy Guide is available on the Department of Justice’s website: www.justice.gov/atr/public/guidelines/272350.pdf
16 June 2011
Swift Beef Company to Pay $1.3 Million Penalty for Clean Water Act and State Law Violations at Its Grand Island, Nebraska Beef Processing PlantRead the Press Release
WASHINGTON – Swift Beef Company, a subsidiary of JBS S.A, the world’s largest beef producer, has agreed to pay $1.3 million to the United States and state of Nebraska to settle alleged violations of the federal Clean Water Act and Nebraska state law at its Grand Island, Neb., beef processing plant, the U.S. Department of Justice and the U.S. Environmental Protection Agency (EPA) announced today.
Swift has already spent over $1 million at its Grand Island plant in implementing measures to reduce pollutants in its wastewater as required by its discharge permits issued by the state of Nebraska under the Clean Water Act.
“Swift will pay a significant penalty for its illegal discharges of wastewater that caused interference with the local water treatment system and damage to the aquatic ecosystem of the Wood and Platte rivers,” said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice. “The same industry that puts food on American dinner tables must also comply with the Clean Water Act that keeps our country’s waterways healthy, safe and clean.”
“Protection of our waterways is one of our highest priorities,” said Deborah R. Gilg, U.S. Attorney for the District of Nebraska. “Fouling our Nebraska water demands a harsh penalty to deter others from doing so. We appreciate the collaboration among federal and state agencies that accomplished this.”
The Nebraska Department of Environmental Quality issued Swift a permit under the Clean Water Act that allowed Swift to discharge wastewater containing limited amounts of pollutants directly to the Wood River and to the city of Grand Island’s publicly owned treatment works (POTW). The permit prohibited Swift from discharging pollutants that would interfere with the POTW’s treatment process and also required Swift to monitor and report its discharges. According to the complaint, in which Nebraska joined as a co-plaintiff, Swift violated its permit on numerous occasions between 2006 and 2011 by discharging pollutants in excess of the permitted limits and that caused interference with the Grand Island’s POTW’s treatment process. Some of these violations resulted in a 2008 fish kill in a 16 mile stretch of the Wood River and a 7.5 mile length of the Platte River. An estimated 10,000 fish were killed. The complaint alleges that Swift also violated its permits’ reporting requirements as well as effluent limitations in an emergency order issued by the state of Nebraska in April 2008.
Swift is headquartered in Greeley, Colo. Swift’s Grand Island beef processing plant slaughters, fabricates and packages approximately 5,800 head of beef per day. The plant also conducts blood drying, rendering and hide pickling. The Grand Island plant has approximately 2,700 employees.
After the fish kill in 2008, Swift undertook voluntary improvements to its treatment system to prevent future upsets at Grand Island’s POTW and to protect aquatic life and beneficial uses, such as fishing, swimming and boating in the Wood and Platte rivers. The expansion of Swift’s anaerobic treatment system and installation of centrifuges will result in annual pollutant reductions of 1,281,150 pounds of carbonaceous biological oxygen demand (CBOD), 579,438 pounds of total suspended solids (TSS) and 340,195 pounds of oil and grease.
“EPA Region 7 worked effectively with Nebraska's Department of Environmental Quality to investigate and remedy this unacceptable pollution of the state's premier river,” said EPA Region 7 Administrator Karl Brooks. “This kind of teamwork typifies EPA's commitment to partnership with states and illustrates this region's dedication to clean water and public health.”
The consent decree requires Swift to pay more than $1.3 million in civil penalties and damages to natural resources, including a $1.2 million civil penalty for its Clean Water Act violations that will be split evenly between the U.S. and Nebraska. In addition, Swift will pay Nebraska $100,000 for violations of a state 2008 administrative order and will pay the Nebraska Game and Parks Commission $4,705 for resource damages to restock waters with fish and clams.
This case was brought as part of the National Pretreatment Program, which is a cooperative effort of federal, state and local regulatory environmental agencies established to protect water quality. The program seeks to protect POTWs from the introduction of pollutants that may interfere with plant operation or that may pass through untreated. By reducing the level of pollutants discharged by industry into municipal sewage systems, the pretreatment program protects America's multi-billion-dollar public investment in treatment infrastructure. Eighty-five categories of industrial users are subject to numerous self-implementing regulations.
Learn more about EPA’s civil enforcement of the Clean Water Act: http://www.epa.gov/compliance/civil/cwa/cwaenfprog.html
The consent decree is subject to a 30-day public comment period and approval by the federal court. A copy of the consent decree is available on the Justice Department Web site at www.justice.gov/enrd/Consent_Decrees.html
Justice Department Reaches Settlement with Midwest BankCentre Regarding Alleged Lending Discrimination in St. LouisRead the Press Release
WASHINGTON –Midwest BankCentre will open a full-service branch in an African-American neighborhood and invest approximately $1.45 million in majority African-American areas of the St. Louis metropolitan area as part of a settlement to resolve allegations that they engaged in a pattern or practice of discrimination on the basis of race and color, the Justice Department announced today.
The settlement, which remains subject to court approval, was filed in conjunction with the department’s complaint in the U.S. District Court for the Eastern District of Missouri. The complaint alleges that Midwest BankCentre violated the Fair Housing Act and the Equal Credit Opportunity Act, which prohibit financial institutions from discriminating on the basis of race and color in their mortgage lending practices. The lawsuit alleges that Midwest BankCentre has served the credit needs of the residents of predominantly white neighborhoods in the Missouri portion of the St. Louis metropolitan area to a significantly greater extent than they have served the credit needs of majority African-American neighborhoods. Those neighborhoods are in and to the north and west of the city of St. Louis. They are easily recognized because t he Missouri portion of the St. Louis metropolitan area has long had highly-segregated residential housing patterns, especially for African-Americans.
“Lending discrimination deprives communities of access to credit and leaves the residents of minority neighborhoods vulnerable to predatory lenders. This type of discrimination is part of the web of intolerable practices that stripped vast amounts of wealth from communities of color in the last decade,” said Thomas E. Perez, Assistant Attorney General for the Justice Department’s Civil Rights Division. “We are pleased that Midwest BankCentre has begun working with community groups and agreed to invest and take creative steps to build credit in an area that has been long been neglected by the banking community.”
“Racial or other illegal discrimination has no place in our credit markets,” said Federal Reserve Board Governor Elizabeth A. Duke. “We are pleased that this settlement is designed to expand fair access to credit.”
Under the settlement, Midwest BankCentre will invest $900,000 in a special financing program to increase the amount of credit the bank extends to majority African-American areas in the Missouri portion of the St. Louis metropolitan area, spend $300,000 for consumer education and credit repair programs, and spend $250,000 for outreach to potential customers and promotion of their products and services. Midwest BankCentre will also open a full-service branch in a majority African-American area within the Missouri portion of the St. Louis metropolitan area and conduct fair lending training for its employees. The agreement also prohibits Midwest BankCentre from discriminating on the basis of race or color in any aspect of a residential real estate-related or credit transaction.
The lawsuit originated from information gathered by the Metropolitan St. Louis Equal Housing Opportunities Council and provided to the Department of Justice in 2009, as well as a 2010 referral by the Board of Governors of the Federal Reserve System to the Justice Department’s Civil Rights Division. As part of the settlement, Midwest will pay $25,000 to compensate the Metropolitan St. Louis Equal Housing Opportunity Council for the resources that it diverted to this matter. Midwest BankCenter is a member of the Federal Reserve System.
The Civil Rights Division and the Board of Governors of the Federal Reserve System are members of the Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov .
A copy of the complaint, as well as additional information about fair lending enforcement by the Justice Department, can be obtained from the Justice Department’s website at www.justice.gov/fairhousing .
Five Alabama Tax Return Preparers Charged with Tax FraudRead the Press Release
WASHINGTON – A group of five tax return preparers were indicted in the Middle District of Alabama on tax fraud charges, the Justice Department and Internal Revenue Service (IRS) announced today. James E. Moss, who owned and operated “Flash Tax,” was charged with four of his employees by a grand jury sitting in Montgomery, Ala. Moss along with Lutoyua N. Thompson, Chiquita Q. Broadnax, Avada L. Jenkins and Melinda M. Lambert were each charged with one count of conspiracy to defraud the United States and 27 counts of assisting in the preparation of false tax returns.
According to the indictment, the group conspired to knowingly place false information on taxpayers’ returns in order to obtain higher tax refunds from the IRS. The indictment further alleges that the group sought at least $129,266 in fraudulent tax refunds from the IRS.
An indictment merely alleges that a crime has been committed, and a defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, each defendant faces a maximum of 86 years in prison.
The case is being investigated by IRS-Criminal Investigation and is being prosecuted by Assistant U.S. Attorney Todd Brown and by Tax Division Trial Attorneys Charles M. Edgar, Jr. and Michael Boteler.
More information about the Justice Department's Tax Division and its enforcement efforts is available at www.justice.gov/tax/ .
Federal Court Bars Firm with Offices in Pennsylvania and Virginia from Promoting Stock-Loan Tax SchemeRead the Press Release
WASHINGTON – A federal court has permanently barred HedgeLender LLC from promoting a stock-loan tax scheme, the Justice Department announced today. According to court findings, HedgeLender, which maintained offices in Philadelphia and Reston, Va., promoted a scheme purportedly allowing owners of appreciated stock to obtain cash through purported loans without reporting or paying tax on capital gains.
In entering a permanent injunction order against the firm, Judge T.S. Ellis III of the U.S. District Court for the Eastern District of Virginia found that HedgeLender knowingly made false statements when it told potential customers that these “HedgeLoan” transactions were true loans secured by the customers’ stock. In reality, the court found, the stock was sold immediately, and the funds provided to the customers were sales proceeds, not loan proceeds, and therefore subject to federal income tax on capital gains at the time of receipt. According to the court, HedgeLender caused the sale of more than $268 million in securities through the HedgeLoan scheme, and it promoted the program even after the U.S. Securities and Exchange Commission sued two of its owners, who agreed to stop promoting a similar stock-loan product.
The order announced today is the latest in a series of federal court decisions finding that purported stock-loan transactions like the HedgeLoan scheme are actually sales and not loans. In November 2009, a California federal court enjoined the developer of a similar scheme, the Derivium 90 percent loan program. The government complaint against HedgeLender also named two alleged owners of HedgeLender, Daniel Stafford and Fred R. Wahler, Jr., as well as William Chapman and two companies he allegedly owned, Alexander Capital Markets LLC and Alexander Financial LLC. All five of those defendants previously agreed to permanent injunctions without admitting the allegations in the complaint.
In the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions against tax return preparers and tax fraud promoters. Information about these cases is available on the Justice Department website .
Department of Justice on Behalf of Partner Agencies Releases Solicitation to Build Capacity in Distressed NeighborhoodsRead the Press Release
WASHINGTON – The Department of Justice’s Bureau of Justice Assistance (BJA) today announced the Building Neighborhood Capacity Program (BNCP) Training and Technical Assistance (TTA) Coordinator Solicitation, part of an innovative approach to build capacity in distressed neighborhoods. The BNCP, a core component of the Administration’s Neighborhood Revitalization Initiative (NRI), seeks an experienced TTA coordinator to help an initial group of five neighborhoods build capacity for revitalization and resiliency to prevent and fight crime.
Led by the White House Domestic Policy Council, the NRI brings together the Departments of Housing and Urban Development (HUD), Education, Justice, Health and Human Services and Treasury to align federal programs supporting neighborhood revitalization and to implement interagency pilot programs, such as BNCP. This solicitation is announced on behalf of the NRI and funded through the Departments of Justice, HUD and Education.
“While there are different streams of federal aid available to neighborhoods in need, some communities lack the capacity to qualify for and use this assistance,” said U.S. Attorney General Eric H. Holder, Jr. “This program will build capacity in those neighborhoods, so residents, businesses and leaders are better able to collectively solve problems, identify, access and leverage existing resources, and put improvements in place. Given fiscal realities, this is a significant step towards ensuring that all Americans have access to safe, healthy neighborhoods with affordable housing, good jobs, quality schools and essential services.”
BNCP complements traditional, program-based public and private investment, especially federally-funded programs. An interagency federal team led by the NRI will provide guidance and manage BNCP activities. BJA will oversee the coordinator in consultation with the NRI team.
“This partnership will help build the capacity of community-based organizations to ensure that there is a great school at the center of every neighborhood,” said U.S. Secretary of Education Arne Duncan. “Education is everyone's responsibility, and all of us in the federal government and the local level have to work together to build strong schools and communities.”
“Through the work of this federal partnership, local communities will be better equipped to bring affordable housing, jobs and education to neighborhoods that were once plagued with high poverty, blight and distress,” said Shaun Donovan, U.S. Secretary of Housing and Urban Development. “Problems in housing, school quality and public safety are inextricably connected in neighborhoods -- and working across silos at the federal level is crucial to achieving any success.”
“The NRI recognizes that interconnected problems require interconnected solutions,” said Laurie O. Robinson, Assistant Attorney General for the Office of Justice Programs. “By breaking down the silos that often exist in federal assistance, this initiative empowers communities to more easily and fully leverage available, existing resources and effect lasting, meaningful change in distressed neighborhoods.”
More information about the Neighborhood Revitalization Initiative is available at www.whitehouse.gov/sites/default/files/nri_description.pdf. The BNCP TTA Coordinator solicitation can be found at www.ojp.usdoj.gov/BJA/grant/11BNCTTAsol.pdf.
The Office of Justice Programs (OJP), headed by Assistant Attorney General Laurie O. Robinson, provides federal leadership in developing the nation’s capacity to prevent and control crime, administer justice, and assist victims. OJP has six bureaus and offices: the Bureau of Justice Assistance; the Bureau of Justice Statistics; the National Institute of Justice; the Office of Juvenile Justice and Delinquency Prevention; the Office for Victims of Crime; and the Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking (SMART). More information about OJP and its components can be found at www.ojp.gov.
Chief Engineer Sentenced in Maryland for Obstructing Investigation into the Illegal Overboard Discharge of Oily WasteRead the Press Release
WASHINGTON – Dimitrios Grifakis, 57, of Kallithea, Greece, was sentenced today by U.S. District Judge Marvin J. Garbis to six months in prison, followed by two years of supervised release, for obstructing a Coast Guard inspection that took place in May 2010 aboard a Liberian-operated cargo ship M/V Capitola at the Port of Baltimore. Grifakis was then the Chief Engineer of the Capitola.
In a related case, Cardiff Marine Inc., the Liberian-registered shipping company and operator of the Capitola previously pleaded guilty to obstructing a Coast Guard examination and violating the Act to Prevent Pollution from Ships. The company was sentenced in February 2011 to pay a $2.4 million fine, and to serve three years probation, subject to an environmental compliance plan that includes audits by an independent third party auditor.
The sentence was announced by U.S. Attorney for the District of Maryland Rod J. Rosenstein; Ignacia S. Moreno, Assistant Attorney General, Environment & Natural Resources Division, U.S. Department of Justice; Rear Adm. Dean Lee, Commander of the U.S. Coast Guard's 5th District; Special Agent in Charge Otis E. Harris, Jr. of the Coast Guard Investigative Service-Chesapeake Region; and Acting Special Agent in Charge Christian Spangenberg of Environmental Protection Agency’s (EPA) Criminal Investigation Division.
According to Grifakis’ guilty plea and other court documents, the investigation into the M/V Capitola was launched on May 3, 2010, at the Port of Baltimore, after a crew member informed a clergy member, who was on board the Capitola on a pastoral visit, that there had been “monkey business in the engine room,” which involved a “magic pipe.” The “magic pipe” proved to be a bypass hose that allowed the dumping of waste oil overboard, circumventing pollution prevention equipment required by law. The crew member asked the minister to alert the Coast Guard which triggered an inspection of the Capitola.
At his plea hearing, Grifakis admitted that from about March 2009 through May 3, 2010, he repeatedly ordered his subordinates to illegally pump oil-contaminated waste directly into the ocean, most commonly through the “magic pipe.” However, during the investigation, Grifakis falsely denied having ordered anyone to pump oily waste overboard and falsified documents to hide these discharges from inspectors in ports visited by the Capitola.
Every ship that enters the U.S. is required to have an accurate oil record book that records the ship’s operation related to oil, including the handling and disposal of oil contaminated waste. Grifakis presented an oil record book to the U.S. Coast Guard that was intentionally falsified to conceal the illegal overboard discharges of oil contaminated waste. An oil record book is required under U.S. law and the International Convention for the Prevention of Marine Pollution from Ships, also known as the MARPOL Protocol, which regulates the discharge of pollutants from vessels at sea. The objective of MARPOL is to preserve the marine environment through the complete elimination of intentional pollution by oil and other harmful substances and the minimization of accidental discharge of such substances. The United States is one of the one hundred and sixty-nine nations that are parties to MARPOL.
Grifakis also obstructed the investigation by concealing certain ship’s records and then denying that such records existed. Specifically, he concealed the Capitola’s daily sounding record, which is a daily measurement of the contents of the ship’s waste tanks. This record would have been useful during the Coast Guard’s inspection of the Capitola in that it could have shown when the levels of the waste tanks changed, which could be compared to entries in the oil record book. Sudden, unexplained drops in the measurements could have indicated specific dates when wastes were discharged overboard. The daily sounding record was not produced to the Coast Guard. Grifakis also directed other members of the engine room crew to lie to investigators and claim that the Capitola did not have a daily record of soundings.
This prosecution was made possible through the combined efforts of the U.S. Coast Guard Sector-Baltimore, the Coast Guard Investigative Service-Baltimore, Coast Guard Fifth District Legal Office, Coast Guard Office of Maritime and International Law, Coast Guard Office of Investigations and Analysis, and EPA Criminal Investigation Division with assistance from U.S. Customs and Border Protection. The cases were prosecuted by Justin S. Herring, Assistant U.S. Attorney in Maryland and Thomas T. Ballantine, Environmental Crimes Section of the Environment and Natural Resources Division of the U.S. Department of Justice.
Alabama Women Sentenced for Roles in Tax Fraud ConspiracyRead the Press Release
WASHINGTON – Betty Washington, a resident of Montgomery County, Ala., was sentenced today to 21 months in prison and ordered to pay restitution in the amount of $1,440,632 for conspiring to file false claims for refunds, the Justice Department announced. Wendy Delbridge, also of Montgomery County, was sentenced to five days in jail time and six months home confinement for her role in the same conspiracy and ordered to pay restitution in the amount of $45,219. Both women pleaded guilty in January 2011.
According to court documents, between October 2009 and September 2010, Washington conspired with others to fraudulently obtain tax refunds. The conspiracy involved using stolen identities to file false income tax returns claiming refunds. At the behest of co-conspirator Alchico Grant, Washington opened up a bank account at a local bank to receive tax refunds from the scheme. Sixteen different refunds, issued in the name of 16 different individuals, were deposited into the bank account. When the bank closed the account because of the suspicious nature of the deposits, Washington opened new bank accounts at a credit union in her name and in the name of Central Alabama Financial Services. Over the course of several months, more than 300 false refunds were deposited into these bank accounts, totaling more than $1.4 million in fraudulent refunds. To distribute the fraudulent refunds, Washington wrote checks and obtained official checks payable to various co-conspirators and associates and withdrew refund money in cash as well. She retained a portion of the refunds for herself.
Delbridge played a similar role. At co-conspirator Veronica Dale’s direction, she also set up a bank account at a local bank to receive fraudulent refunds. When the bank closed the account because it was receiving tax refunds that were not in Delbridge’s name, she opened a new bank account at a credit union. Between February 2010 and June 2010, the two bank accounts received more than $50,000 in false tax refunds, which Delbridge withdrew in cash and provided to Dale. In return, Delbridge was paid a portion of the fraudulently obtained refunds.
Along with three other co-defendants, Dale and Grant were indicted in December 2010 for their roles in the conspiracy. Grant was indicted a second time in April 2011 for again being involved in a scheme to fraudulently obtain tax refunds using stolen identities. On April 28, 2011, Grant’s pretrial release was revoked and he was ordered detained. Both Dale and Grant are currently awaiting trial.
Internal Revenue Service-Criminal Investigation agents investigated these cases, and Justice Department Tax Division Trial Attorneys Jason Poole and Michael Boteler, along with Assistant U.S. Attorney Jared Morris, are prosecuting the cases.
For more information about the Tax Division and its enforcement efforts, visit www.justice.gov/tax/ .
15 June 2011
Three Defendants Plead Guilty in Honolulu in Connection with Human Trafficking Scheme That Exploited 600 Thai WorkersRead the Press Release
WASHINGTON – Bruce Schwartz, 53, Sam Wongsesanit, 40, and Shane Germann, 42, have pleaded guilty to human trafficking violations involving the Los Angeles based recruiting company Global Horizons, the Justice Department announced today. Schwartz pleaded guilty to conspiring to commit forced labor, and Germann and Wongsesanit pleaded guilty to conspiring to commit document servitude.
In a superseding indictment unsealed on Jan. 18, 2011, eight defendants were charged in connection with a scheme to lure approximately 600 Thai nationals to enter the United States under the federal agricultural guest worker program between 2001 and 2007. According to the indictment, the defendants conspired to coerce the agricultural labor and services of the Thai nationals by fraudulently inducing the recruits to incur substantial debts secured by the workers’ homes and family land, then confiscating the workers’ passports, and threatening to repatriate the victims to face destitution, homelessness and other serious harm if they did not remain in the defendants’ service for meager earnings.
“These defendants pleaded guilty to participating in the largest human trafficking scheme ever seen by the Department of Justice,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The department is committed to prosecuting cases of human trafficking, both large and small, in order to protect some of the most vulnerable people in our country.”
“Through successful prosecution of those who take advantage of immigrant workers, we strive to ensure that the United States continues to be a land of economic opportunity, as it has for generations of workers preceding them,” said Florence T. Nakakuni, U.S. Attorney for the District of Hawaii.
Schwartz, Wongsesanit and Germann each face maximum sentences of five years in prison. Another associate of the defendants, Podjanee Sinchai, was charged and convicted in Thailand with recruitment fraud and sentenced to four years in prison.
The case is being investigated by the Honolulu Division of the FBI, with the assistance of the Los Angeles Division of the FBI; the Norfolk, Va., Division of the FBI; the Buffalo, N.Y., Division of the FBI; the Department of Homeland Security, Immigration and Customs Enforcement state offices in Los Angeles, Provo, Utah, and Washington; and the U.S. Department of State, Office of Diplomatic Security Field Office in Los Angeles. The victims are receiving assistance from the Thai Community Development Center in Los Angeles; Utah Legal Services in Salt Lake City; and Florida Rural Legal Services in Ft. Myers, Fla.
This case is being prosecuted by Senior Special Counsel Susan French and Trial Attorney Kevonne Small of the Civil Rights Division’s Human Trafficking Prosecution Unit, and Assistant U.S. Attorney Susan Cushman of District of Hawaii.
Montgomery, Alabama, Woman Pleads Guilty for Role in Tax Fraud and Identity Theft ConspiracyRead the Press Release
WASHINGTON – Laquanta Grant, a resident of Montgomery, Ala., has pleaded guilty to one count of conspiring to file false claims for refunds, the Justice Department announced today.
Along with four other defendants, Grant was indicted by a federal grand jury sitting in Montgomery on Dec. 14, 2010, on a variety of charges stemming from a large-scale tax fraud and identity theft conspiracy based in that city. According to the indictment and other court documents, the conspirators used stolen identities to file millions of dollars in false tax returns claiming fraudulent refunds over a two-year period in 2009 and 2010. During the conspiracy, Laquanta Grant was responsible for funneling well over a hundred thousand dollars in fraudulent refunds to her co-conspirators.
In February 2009, Grant caused another person (W.D.) to open a bank account that was used to deposit the fraudulent tax refunds. The false refunds were provided to co-conspirator Veronica Dale and others. Between March 2010 and May 2010, Grant accompanied W.D. to ensure that W.D. withdrew the fraudulent refunds from the bank account and provided the monies to Grant and her co-conspirators. Between March 2010 and July 2010, Grant received more than $100,000 in checks from Betty Washington, who was also helping move fraudulent refunds, and provided some of the money to Alchico Grant and others. Laquanta Grant retained a portion of the false refunds.
Washington pleaded guilty to a criminal information charging her with conspiring to defraud the United States on Jan. 5, 2011. Her sentencing is set for June 16, 2011. The case against Dale and several other co-conspirators is awaiting trial.
A sentencing date for Laquanta Grant has not been set. She faces a maximum of 10 years in prison, three years of supervised release, restitution and a maximum fine of $250,000, or twice the loss caused by the offense.
IRS-Criminal Investigation agents investigated this case, and Justice Department Tax Division trial attorneys Jason Poole and Michael Boteler, and Jared Morris, Assistant U.S. in the Middle District of Alabama are prosecuting the case.
More information about the Tax Division and its enforcement efforts can be found at: www.justice.gov/tax .
Former Executive of Illinois Refuse Container Repair Company Sentenced to Serve 16 Months in Prison for Conspiring to Defraud the City of ChicagoRead the Press Release
WASHINGTON — A former vice president of an Illinois refuse disposal container repair company was sentenced today to serve 16 months in prison and to pay a $40,000 criminal fine for his role in a conspiracy to commit mail and wire fraud in connection with bids on a contract with the city of Chicago, the Department of Justice announced.
Steven Fenzl, a California resident, was also sentenced by U.S. District Court Judge Ruben Castillo to pay $35,302 in restitution for his participation in a conspiracy to defraud the city of Chicago on a contract for the repair of refuse carts from as early as November 2004 to as late as September 2008. Fenzl, along with his business partner Douglas E. Ritter, was charged in an indictment filed on April 21, 2009, in U.S. District Court in Chicago. Fenzl was found guilty by a jury on Sept. 28, 2010, of one count of conspiracy to commit mail and wire fraud, two counts of mail fraud and one count of wire fraud. Ritter, an Illinois resident, pleaded guilty to the conspiracy on June 3, 2010, and was sentenced on May 10, 2011, to serve 16 months in prison and to pay $35,303 in restitution.
According to the indictment, Fenzl, Ritter and their co-conspirator conspired to deceive city of Chicago officials about the number of legitimate, competitive bids submitted for the contract. Specifically, Fenzl and his co-conspirators fraudulently induced other companies to submit bids for the contract at prices determined by Fenzl and his co-conspirators and greater than the price for which Fenzl’s company had submitted a bid. The department said that included in these bids were fraudulent documents indicating that, if awarded the contract, the bidder would enter into subcontracts to purchase goods or services for a specified percentage of the contract from a minority-owned business and a women-owned business, as required by the city of Chicago. According to the indictment, Fenzl and his co-conspirators also fraudulently certified to the city on Fenzl’s company’s bid that it had not entered an agreement with any other bidder relating to the price named in any other bid submitted to the city for the contract.
Today’s sentencing resulted from an investigation of the refuse cart repair industry being conducted by the Antitrust Division’s Chicago Field Office and the city of Chicago’s Office of Inspector General.
Anyone with information concerning bid rigging or other anticompetitive conduct involving government or private contracts with the city of Chicago is urged to call the Antitrust Division’s Chicago Field Office at 312-353-7530 or visit www.justice.gov/atr/contact/newcase.htm.
Federal Jury Imposes Death Sentence Against Connecticut Drug Dealer Convicted of Murder and Related ChargesRead the Press Release
WASHINGTON - A federal jury in New Haven, Conn., today voted unanimously to impose the federal death penalty against Azibo Aquart for his role in the murder of three individuals, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney David B. Fein for the District of Connecticut.
On May 23, 2011, the jury found Aquart, aka “Azibo Smith,” “Azibo Siwatu Jahi Smith,” “D,” “Dreddy” and “Jumbo,” 30, of Bridgeport, Conn., guilty of the Aug. 24, 2005, murders of Tina Johnson, 43; James Reid, 40; and Basil Williams, 54. The trial, before U.S. District Judge Janet Bond Arterton, began on April 20, 2011. The jury voted to impose the federal death penalty on four of the six counts of conviction. The court has not yet scheduled a date for imposition of the sentence.
According to the evidence submitted at trial, Aquart was the founder and leader of a drug trafficking group that primarily sold crack cocaine out of an apartment building located at 215 Charles Street in Bridgeport. Aquart and his associates participated in acts of violence, such as threats and assaults, to maintain their control over the group’s drug distribution activities at the Charles Street apartments. In the summer of 2005, Aquart and his associates became involved in a drug trafficking dispute with Johnson at the Charles Street apartments. According to evidence submitted at trial, Johnson sometimes sold smaller quantities of crack cocaine without the approval of Aquart.
According to the evidence submitted at trial, on the morning of Aug. 24, 2005, Aquart and others entered Johnson’s apartment, bound Johnson, her boyfriend Reid, and her friend Williams with duct tape and brutally beat the victims to death with baseball bats. Aquart and others then drilled the front door of the apartment shut from the inside.
In addition to witness testimony, the government offered extensive forensic evidence gathered from Johnson’s apartment, including fingerprints and evidence that contained DNA from Aquart and his co-conspirators. According to evidence presented at trial, Aquart’s fingerprint was found on a piece of duct tape recovered from the crime scene.
The jury found Aquart guilty of conspiring to commit murder in aid of racketeering and committing the racketeering murders of Johnson, Reid and Williams. The jury also found Aquart guilty of committing three counts of drug-related murder, and one count of conspiracy to possess with intent to distribute 50 grams or more of cocaine base (crack cocaine).
This case was investigated by the FBI; the Bridgeport Police Department; the Connecticut State Police; the Connecticut Department of Correction’s Intelligence Unit; U.S. Immigration and Custom Enforcement, Homeland Security Investigations; the U.S. Marshals Service; the Bridgeport State Attorney’s Office and the U.S. Attorney’s Office.
This case is being prosecuted by Assistant U.S. Attorneys Tracy L. Dayton, Peter D. Markle and Alina P. Reynolds of the U.S. Attorney’s Office for the District of Connecticut, and Trial Attorney Jacabed Rodriguez-Coss of the Criminal Division’s Capital Case Unit.
14 June 2011
United States Files Suit Against Florida-Based Bay Area Sleep Associates LLC and Its OwnerRead the Press Release
WASHINGTON – The United States has filed a complaint under the False Claims Act (FCA) against Bay Area Sleep Associates LLC, dba SomnoMedics LLC, and its owner, Edward Killmer Jr., the Justice Department announced today. The complaint, filed today in U.S. District Court for the Middle District of Florida, alleges that the defendants violated the FCA by knowingly submitting, or causing to be submitted, to the United States false claims for payments from multiple federal health care programs.
The government’s complaint alleges that beginning no later than 2004, the defendants hired unlicensed sleep technicians to perform sleep tests at one or more of their facilities. Medicare regulations require that diagnostic testing services performed at independent diagnostic testing facilities such as SomnoMedics must be performed by a technician licensed or certified by a state or national credentialing body in order to be reimbursed by Medicare. The complaint alleges that SomnoMedics utilized unlicensed sleep technicians to perform sleep tests on Medicare and TRICARE beneficiaries, but knowingly requested payment for these services despite being fully aware that SomnoMedics failed to comply with federal program reimbursement regulations.
“Providers who participate in federal health care programs must play by the rules, not cut corners,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “Billing the government for diagnostic tests performed by unlicensed technicians, as we allege here, is unfair to patients and a misuse of taxpayer dollars.”
“The United States Attorney’s Office is committed to taking the steps necessary to protect Medicare and other federal health care programs from fraud,” said Robert E. O’Neill, U.S. Attorney for the Middle District of Florida. “By bringing FCA cases such as this, we hope to recover funds obtained through the fraud and deter others from attempting similar schemes.”
This lawsuit was originally filed under the qui tam or whistleblower provisions of the FCA by William Revels, a former sleep study technician. Under those FCA provisions, a private party, known as a relator, can file an action on behalf of the United States and receive a portion of the recovery. In May of this year, the United States intervened in part of the lawsuit, and today filed its own complaint. Under the FCA, the United States may recover three times the amount of its losses plus civil penalties.
The government’s complaint is part of the United States’ 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 $5. 8 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are more than $ 7.4 billion.
Contractor Sentenced to 37 Months in Prison<br /> for Death of Afghan National in Kabul, AfghanistanRead the Press Release
WASHINGTON – Christopher Drotleff, 31, of Virginia Beach, Va., was sentenced today to 37 months in prison for his role in shooting and killing an Afghan national while on an unauthorized convoy in Kabul, Afghanistan, on May 5, 2009, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Neil H. MacBride of the Eastern District of Virginia and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office. U.S. District Judge Robert G. Doumar also ordered Drotleff to serve three years of supervised release following his prison term.
On March 11, 2011, Drotleff and Justin Cannon, 29, of Corpus Christi, Texas, were convicted of involuntary manslaughter while working as contractors for the U.S. Department of Defense in Afghanistan. Cannon and Drotleff were acquitted of other charges, including second-degree murder, assault resulting in serious bodily injury and firearms offenses. Cannon is scheduled to be sentenced on June 27, 2011.
“Mr. Drotleff’s criminal conduct led to a tragic loss of innocent life,” said Assistant Attorney General Breuer. “We hope that today’s sentence will bring some measure of comfort to the victims’ families. Reckless violence by those who are employed by our armed forces abroad endangers the lives of innocent civilians and undermines the trust that our international partners have placed in our military efforts. Mr. Drotleff’s conduct stands in stark contrast to the actions of the many brave men and women who serve this country honorably.”
“Christopher Drotleff recklessly fired his nine millimeter pistol at unarmed Afghan civilians, killing two people and shattering the lives of many more,” said U.S. Attorney MacBride. “General Petraeus reminded us that Mr. Drotleff’s senseless killing not only took innocent lives but also seriously harmed our mission in Afghanistan and put the lives of American military and civilians in danger. The jury’s verdict and today’s sentence shows that no one is above the law – even in a combat zone – and that the reckless use of force will be punished.”
“International investigations are very complex, frequently dangerous and take a tremendous amount of dedication and effort on the part of our Special Agents,” said Assistant Director in Charge McJunkin of the FBI’s Washington Field Office. “The FBI in general and the Washington Field Office in particular, is both willing and able to deploy anywhere in the world to investigate violations of U.S. law no matter where they occur or who commits them.”
Cannon and Drotleff were charged under the Military Extraterritorial Jurisdiction Act (MEJA) in a superseding indictment filed on Aug. 5, 2010. Cannon and Drotleff were Department of Defense contractors employed by a subsidiary of Xe (formerly known as Blackwater Worldwide).
According to evidence presented at trial, on May 5, 2009, both men left their military base without authorization to transport local interpreters. The evidence at trial established that, after the lead vehicle in the convoy crashed and was overturned on the side of the road, Cannon and Drotleff fired multiple shots into the back of a civilian car that had attempted to pass the accident scene. The passenger of the car was fatally shot and the driver was seriously injured. An individual who happened to be walking his dog in the area was also killed in the shooting. The jury found the defendants guilty of involuntary manslaughter for the death of Romal Mohammad Naiem, the front-seat passenger. They were acquitted of charges relating to the death of the person walking his dog and injuries to the driver.
According to court records, as contractors, Cannon and Drotleff provided training to the Afghan National Army for the Islamic Republic of Afghanistan in the use and maintenance of weapons and weapons systems.
The case is being prosecuted by Trial Attorney Robert McGovern of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorneys Randy C. Stoker and Alan M. Salsbury from the U.S. Attorney’s Office for the Eastern District of Virginia - Norfolk Division. The case was investigated by the FBI’s Washington Field Office and the U.S. Army Criminal Investigation Command.
13 June 2011
Nigerian Citizen Convicted in Atlanta for Trafficking Young Women from Nigeria to Work for Her as NanniesRead the Press Release
ATLANTA – Bidemi Bello, 41, a former resident of Suwanee, Ga., and a citizen of Nigeria, was convicted on eight counts by a federal jury late on Friday on charges of two counts of forced labor, two counts of trafficking for forced labor, one count of document servitude, one count of alien harboring and two counts of making false statements in an application to become a U.S. citizen. The trial lasted one week.
“The defendant both physically abused and psychologically intimidated these women for her own personal gain,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Department of Justice will continue to vigorously prosecute individuals who force persons to do work against their will.”
U.S. Attorney for the Northern District of Georgia Sally Quillian Yates said of the case, “The evidence showed that this was a case of modern day slavery hidden within an expensive home in an upscale neighborhood. The two women who were abused here thought they were going to be nannies; instead they were treated inhumanely. The laws of the United States protect all victims from such abuse, regardless of where they came from or how they came to be in the United States.”
Brian D. Lamkin, Special Agent in Charge, FBI Atlanta Field Office, said, “The FBI worked very hard to not only apprehend Ms. Bello, who had previously fled the U.S., but to provide the much needed assistance to the victims, one of whom hadn't seen her parents in ten years. The close coordination with the many law enforcement agencies and the U.S. Attorney's Office in bringing Ms. Bello to justice is a testament to those agents that work these difficult and emotionally exhausting human trafficking cases.”
“Few crimes are more shocking than the trafficking of human beings in this country,” said Brock Nicholson, Special Agent in Charge of U.S. Immigration and Customs Enforcement's Homeland Security Investigations (ICE HIS). ”No one should have to live in a world of isolation and forced servitude. Together with our federal, state and local partners, ICE HSI is committed to protecting those who cannot protect themselves.”
According to evidence and testimony at trial, the jury heard from two victims who had been separately recruited in Nigeria by Bello’s offer to come to the United States to work as her nanny. In return, Bello promised she would send the young women to school in the United States, and for one victim, she promised to pay her as well. The first victim, identified in court as “Laome,” traveled with Bello in October 2001 when she as 17 years old, using a fraudulent British passport the defendant had obtained for her. The second victim, identified in court as “Dupe,” traveled with an associate of Bello’s to the United States in November 2004, when she was 20, also using a fraudulent British passport.
The evidence showed that once in the United States, Bello became verbally and physically abusive to both young women. She beat them for not cleaning well, beat them for not responding fast enough to her crying child and beat them if they talked back to her. The young women testified Bello beat them with a large wooden spoon, shoes, electric cords and her hands. One young woman was able to take pictures of her injuries with a disposable camera and in the pictures the jury saw her cut and bloodied lip from when Bello hit her while wearing rings.
Two witnesses, one a friend and one a relative of Bello, also testified about the abuse they witnessed. One woman described seeing Laome with bruises and swollen eyes from defendant’s abuse. Both women counseled Bello to stop abusing the girls. One of the women testified she told Bello about a criminal prosecution in Maryland of a couple for “modern day slavery.” Bello refused to stop her abuse and send the young women home, telling her friend, “I will not live in fear.” This friend helped the first victim, Laome, escape from Bello, by hiding her in the back of another woman’s car, who covered her with blankets, and drove her away. Bello then traveled back to Nigeria for the second victim, Dupe.
The evidence showed that even though Bello’s upscale home had multiple bedrooms and bathrooms, Bello made the young women sleep on the floor or a couch, and would not let them use the shower, but instead required them to bathe with the water in one bucket. Even though the young women cooked all of Bello’s meals, they were not allowed to eat the food they cooked, as Bello made them eat cheaper food or, sometimes, food that had spoiled and was moldy. Laome testified that she often threw up from the food Bello made her eat, and that at on at least one occasion, Bello made her eat that vomit.
The evidence also showed that the victims were sleep deprived, and forced to be on call for Bello’s child all night. The women were given ceaseless tasks such as mopping the floor with rags; washing a privacy fence in Bello’s backyard; cutting the grass with a tool called a cutlass, described as a long knife blade with a wooden handle; and washing the clothes and linens by hand in a bucket. Bello would not let the young women use modern appliances such as the washing machine, dishwasher or the lawn mower. The evidence showed that Bello never sent the young women to school as she had promised and never gave them any money for their years of work. Bello made the young women totally dependent on her for all their basic necessities and would not let them interact with anyone without Bello being present. Dupe finally saved up $60, given to her by friends of Bello, and called a cab. She was assisted by pastors at a church in Marietta, Ga., after taking the cab to the church.
Bello moved out of the United States during the investigation. She was indicted on the charges in September 2010. She was found and arrested at Bush Intercontinental Airport in Houston upon re-entering the United States.
Sentencing for Bello has been set for Aug. 24, 2011, before U.S. District Judge William S. Duffey Jr. The two forced labor charges and the two labor trafficking charges carry a maximum sentence of 20 years in prison and a fine of up to $250,000. The two document servitude counts carry a maximum sentence of five years in prison and a fine of up to $250,000. Lastly, the alien harboring count carries a maximum sentence of 10 years in prison and a fine of up to $250,000.
This case is being investigated by Special Agents of the FBI, ICE HSI and special agents with the U.S. State Department, Diplomatic Security Services. Assistant U.S. Attorney Susan Coppedge and Civil Rights Division’s Criminal Section Deputy Chief Karima Maloney are prosecuting the case.
Hecla Mining Company to Pay $263 Million in Settlement to Resolve Idaho Superfund Site Litigation and Foster CooperationRead the Press Release
WASHINGTON – A settlement has been reached with Hecla Mining Company to resolve one of the largest cases ever filed under the Superfund statute. Under the settlement, Hecla will pay $263.4 million plus interest to the United States, the Coeur d’Alene Tribe and the state of Idaho to resolve claims stemming from releases of wastes from its mining operations. Settlement funds will be dedicated to restoration and remediation of natural resources in the Coeur d’Alene Basin. The agreement, which was lodged in federal district court in Idaho today, brings closure to that lawsuit and establishes a strong basis for future cooperation between Hecla and the governments in the Coeur d’Alene Basin.
The lawsuit was originally brought against Hecla and other mining companies by the Coeur d’Alene Tribe in 1991 and was joined by the United States in 1996. The state of Idaho joined the lawsuit today in order to participate in the settlement and resolve its claims against Hecla. The lawsuit sought damages for injuries to natural resources such as clean water, fish and birds caused by millions of tons of mining wastes that had been released into the South Fork of the Coeur d’Alene River and its tributaries. The U.S. Environmental Protection Agency and Idaho have been performing cleanup work in the Coeur d’Alene Basin since the early 1980s, and the suit also sought to recover cleanup costs.
Prior to reaching this settlement with Hecla, the United States, the tribe and Idaho had settled their claims against other defendants named in lawsuits regarding historic mine releases in the Coeur d’Alene Basin. The current case history included a 78-day trial in 2001 by the United States and the tribe against ASARCO and Hecla on liability issues. ASARCO, the other primary defendant named in the lawsuit, reached settlement with the United States in 2008 while it was emerging from Chapter 11 bankruptcy. After the ASARCO settlement, U.S. District Judge Edward J. Lodge postponed the second phase of the trial against Hecla to allow time to reach a settlement.
The settlement also includes a process for coordinating Hecla’s future mining operations with cleanup activities in the Coeur d’Alene Basin.
“The resolution of these longstanding claims of the Coeur d’Alene Tribe, the state of Idaho and the United States at the Bunker Hill Superfund Site demonstrates the federal government's vigor in enforcing the nation's environmental laws.” said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division at the Department of Justice. “This agreement will help pay for the U.S. government’s clean-up activities, secures natural resource damages, and will restore critical habitats to fish and wildlife in the Coeur d'Alene River Basin.”
“This settlement means cleanup and mining can now move forward together in the Silver Valley,” said Dennis McLerran, EPA Regional Administrator in Seattle. “Today's agreement not only provides more money for cleanup, but helps lay the foundation for a stronger future: one built on mining stewardship, a healthier environment and a growing, vibrant economy.”
The Bunker Hill Superfund site is one of the nation’s largest and most contaminated Superfund sites. At one time, the Upper Basin, or Silver Valley, was one of the largest silver producing districts in the world. As a result, the basin has been contaminated by the release of metals like lead and arsenic, which are widespread. EPA began cleanup at the site in the 1980s, focusing on protecting human health. Although measurable improvements in public and environmental health have been achieved, widespread contamination remains a challenge and cleanup work will continue for many years.
“Twenty years ago tribal leaders were convinced that not enough was being done to clean up the Coeur d’Alene Basin following a century of mining activity in the Silver Valley. Against all odds, the tribe made an unpopular decision to bring one of the largest superfund lawsuits in our nation’s history,” said Chief J. Allan, Chairman of the Coeur d’Alene Tribe. “Today we honor Henry SiJohn, Lawrence Aripa and Richard Mullen, three former leaders who were instrumental in that decision and who all passed away before they could see the results of their remarkable determination. As we move from litigation to restoration, I’m certain they are smiling down on us today. The tribe is hopeful that this settlement marks a new chapter in the stewardship of the land we all hold dear. The tribe stands together with the United States, the state of Idaho and Hecla to restore our natural resources while we continue to provide economic prosperity to the region.”
“This settlement brings decades of litigation to a close and provides a clear path to continue restoring the health of the environment, economy and communities of the Coeur d’Alene Basin,” Idaho Governor C.L. “Butch” Otter said.
The federal agencies responsible for the affected natural resources see this settlement as an opportunity.
“This settlement provides substantial funding that the trustees will use to restore habitat for fish, birds and other natural resources that have been injured for many decades by mining wastes,” said Rachel Jacobson, Acting Assistant Secretary for Fish, Wildlife, and Parks at the U.S. Department of Interior.
Maggie Pittman, Acting Forest Supervisor for the Idaho Panhandle National Forests agreed. “Our agencies brought this case to ensure restoration of the Coeur d’Alene River Basin for the communities it serves, and that is what this settlement provides.”
The consent decree, lodged in the U.S. District Court for the District of Idaho, is subject to a 30-day public comment period and approval by the federal court. A copy of the consent decree is available on the Justice Department Web site at www.justice.gov/enrd/Consent_Decrees.html .
Former U.S. Army Major Pleads Guilty to Bribery<br /> Related to Contracting in Support of Iraq WarRead the Press Release
WASHINGTON - A former U.S. Army major pleaded guilty today to bribery related to his work as a contracting officer’s representative in Kuwait from 2004 to 2006, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.
Derrick L. Shoemake, 49, of Moreno Valley, Calif., pleaded guilty today before U.S. District Court Judge Dolly M. Gee in the Central District of California to a criminal information charging him with two counts of bribery. According to the court document, Major Shoemake was deployed to Camp Arifjan, Kuwait, as a contracting officer’s representative in charge of coordinating and accepting delivery of bottled water in support of U.S. troops in Iraq. While serving in Kuwait, Shoemake agreed to assist a contractor with his delivery of bottled water. In return, the contractor paid Shoemake a total of approximately $215,000, most of which was delivered to Shoemake’s designee in Los Angeles. Shoemake received an additional $35,000 from a second contractor for his perceived influence over the award of bottled water contracts in Afghanistan. In total, Shoemake admitted receiving approximately $250,000 from these two government contractors in 2005 and 2006.
Shoemake faces up to 15 years in prison for each bribery count, as well as a fine of $250,000 or three times the monetary equivalent of the thing of value. Additionally, Shoemake has agreed to criminal forfeiture of $250,000 to the United States. A sentencing date has not yet been scheduled by the court.
As a result of this investigation 17 individuals, including Shoemake, have pleaded guilty or been found guilty at trial for their roles in the schemes at Camp Arifjan.
This case is being prosecuted by Trial Attorney Richard B. Evans of the Criminal Division’s Public Integrity Section, and Trial Attorneys Mark W. Pletcher and Emily W. Allen of the Criminal Division’s Fraud Section. The case is being investigated by the Army Criminal Investigations Division, the Defense Criminal Investigative Service, the FBI, the Special Inspector General for Iraq Reconstruction, the Internal Revenue Service, U.S. Immigration and Customs Enforcement and others.
10 June 2011
Two Officers of Fraudulent Physical Therapy Company<br /> Plead Guilty in Tampa, Fla., to Medicare FraudRead the Press Release
WASHINGTON – Two Miami-area residents who were officers of a fraudulent physical therapy company in Lakeland, Fla., pleaded guilty today for their roles in a scheme to defraud Medicare, the Departments of Justice and Health and Human Services (HHS) announced.
Angel Gonzalez, 43, and Adrian Chalarca, 24, each pleaded guilty before U.S. Magistrate Judge Mark A. Pizzo in Tampa, Fla., to one count of conspiracy to commit health care fraud.
According to court documents, Gonzalez was the owner and vice president of Dynamic Therapy Inc. and Chalarca was the president and administrator of the company. Gonzalez, Chalarca and their co-conspirators purchased Dynamic from its prior owners and transformed it into a fraudulent enterprise. Under Gonzalez and Chalarca, Dynamic purported to provide physical therapy services to Medicare beneficiaries.
According to court documents, from fall 2009 to summer 2010, Gonzalez and Chalarca submitted and caused the submission of $757,654 in fraudulent claims by Dynamic to the Medicare program. Gonzalez and Chalarca admitted that they paid and caused the payment of kickbacks and bribes to Medicare beneficiaries in order to obtain their Medicare billing information and used it to submit claims to Medicare for physical therapy services that were never provided. According to court documents, Gonzalez and others also stole the identities of a physical therapist and Medicare beneficiaries in order to submit additional false claims to Medicare. Gonzalez and Chalarca admitted that they knew the Medicare beneficiaries, on whose behalf claims were submitted to Medicare, never received the services billed to Medicare.
Another vice president of Dynamic, Andres Cespedes, pleaded guilty in May 2011 for his participation in the fraud scheme.
At sentencing, Gonzalez and Chalarca each face a maximum penalty of 10 years in prison and a $250,000 fine. A sentencing date has not yet been scheduled.
Today’s guilty pleas were announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Robert E. O’Neill of the Middle District of Florida; Steven E. Ibison, Special Agent-in-Charge of the FBI’s Tampa Division; and Christopher Dennis, Special Agent-in-Charge of the HHS Office of Inspector General (HHS-OIG), Office of Investigations’ Miami Office.
This case was prosecuted by Acting Assistant Chief Benjamin D. Singer of the Criminal Division’s Fraud Section and Special Assistant U.S. Attorney Christina M. Burden of the Middle District of Florida. The case was investigated by the HHS-OIG, Defense Criminal Investigative Service and FBI, 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 Florida.
Since their inception in March 2007, Medicare Fraud Strike Force operations in nine locations have charged more than 1,000 defendants who collectively have falsely billed the Medicare program for more than $2.3 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov .
South Florida Corrections Officers Indicted on Federal Civil Rights and Obstruction ChargesRead the Press Release
WASHINGTON - The Justice Department announced today the indictment of South Florida Reception Center (SFRC) officers Alexander McQueen, 30; Guruba Griffin 31; Scott Butler, 32; and Steven Dawkins, 30, on charges of conspiring to violate the civil rights of inmates at SFRC. McQueen and Dawkins are also charged with obstruction of justice.
The indictment alleges that on Feb. 25, 2009, defendants McQueen, Griffin, Butler and Dawkins conspired to violate the civil rights of inmates at SFRC by physically abusing inmates and forcing them to fight one another. The indictment further alleges that defendants McQueen and Dawkins filed false reports to obstruct an investigation into the prisoner abuse, and that McQueen attempted to corruptly persuade a witness.
If convicted, each defendant faces a maximum penalty of 10 years in prison on the felony civil rights charge. Additionally, McQueen and Dawkins face maximum penalties of 20 years in prison on their respective obstruction charges.
An indictment is merely an accusation, and the defendants are presumed innocent unless proven guilty.
This case was investigated by the FBI and the Inspector General’s Office, Florida Department of Corrections, and is being prosecuted by Assistant U.S. Attorney Susan Rhee Osborne of the U.S. Attorney’s Office for the Southern District of Florida and Senior Litigation Counsel Gerard Hogan and Trial Attorney Henry Leventis of the Civil Rights Division.
Jackson County, Michigan, Man Charged with Gun Crime and Obstructing the Internal Revenue ServiceRead the Press Release
WASHINGTON – A Detroit grand jury has returned a superseding indictment charging Karl Herrington, of Parma, Mich., with being a felon in possession of six different firearms, the Department of Justice, the Treasury Inspector General for Tax Administration (TIGTA) and the Internal Revenue Service (IRS) announced. Herrington is charged with possessing the firearms on May 25, 2011, which was the day of his arrest on two counts of corruptly endeavoring to obstruct the administration of the Internal Revenue laws and five counts of filing false tax forms with the IRS.
According to the superseding indictment, Herrington was previously convicted of a felony offense. On May 25, 2011, when he was arrested on the underlying tax charges, Herrington possessed six different firearms, including five shotguns and a magnum rifle.
According to the superseding indictment, Herrington submitted false forms to the IRS to intimidate and harass state and local government officials and employees. These included Forms 1099-OID falsely reporting that Herrington paid original issue discount, which is taxable as interest, to law enforcement personnel and judges involved in a criminal case against him in Jackson County. In that case, Herrington was charged with being an accessory after the fact for harboring his wife, who was wanted for outstanding arrest warrants.
The superseding indictment also alleges that Herrington sent false Forms 1099-OID to federal attorneys prosecuting a criminal tax case against his wife in the Northern District of Ohio in order to interfere with that case. Among the false tax forms Herrington is accused of filing was an individual income tax return for himself falsely reporting federal tax withheld of more than $8 million.
If convicted, Herrington faces a maximum potential sentence of 31 years in prison, a maximum fine of $1.5 million and forfeiture of the firearms. An indictment is merely an allegation, and Herrington is presumed innocent unless and until proven guilty beyond reasonable doubt in a court of law.
Tax Division Trial Attorneys Kenneth Vert and Jeffrey McLellan are litigating the case for the United States.
Hedge Fund Manager of A&O Entities Convicted in $100 Million Fraud SchemeRead the Press Release
WASHINGTON – Adley H. Abdulwahab, 35, of Houston, was convicted by a federal jury today for his role in a $100 million fraud scheme with more than 800 victims across the United States and Canada.
The conviction was announced today by U.S. Attorney for the Eastern District of Virginia Neil H. MacBride and Assistant Attorney General Lanny A. Breuer of the Criminal Division.
“Today’s quick verdict found Mr. Abdulwahab guilty of a $100 million fraud and stealing the life savings of elderly retirees and hundreds of others who have seen everything they worked years for disappear,” said U.S. Attorney MacBride. “This case, involving victims in dozens of states, clearly demonstrates that a national fraud case can have real implications to everyday people. That is why we created the Virginia Financial and Securities Fraud Task Force last year to go after national cases that impact ordinary citizens on Main Street as well as Wall Street.”
“Mr. Abdulwahab participated in a $100 million fraud scheme, cheating more than 800 victims across the United States and Canada,” said Assistant Attorney General Breuer. “While lying to investors about his education and criminal history, he was off buying fancy cars with their money. Today, a jury let him know that financial crime has consequences, and that investment fraud will not be tolerated.”
On Sept. 7, 2010, a federal grand jury returned an 18-count indictment against Abdulwahab and two other principals of A&O Resource Management Ltd. and various related entities that acquired and marketed life settlements to investors. Today, Abdulwahab was convicted on all counts, including: one count of conspiracy to commit mail fraud, five counts of mail fraud, one count of conspiracy to commit money laundering, five counts of money laundering and three counts of securities fraud. The Court will set the sentencing at a later date. At sentencing, Abdulwahab faces up to 20 years in prison on each count except the securities fraud counts, on which he faces up to five years in prison.
Abdulwahab’s co-defendant, Christian Allmendinger, 39, was convicted by a jury on March 23, 2011. Allmendinger will be sentenced on Aug. 14, 2011. Evidence at Abdulwahab’s trial established that during his involvement with the company, A&O obtained approximately $100 million from approximately 800 investors, many of whom were elderly.
According to court records and evidence at trial, Abdulwahab was part owner of A&O and was active in the day-to-day management of the companies, as well as in the marketing of A&O life settlement investment products to investors. He and others engaged in a scheme to defraud investors by making misrepresentations about such things as A&O’s prior success, its size and office locations, its number of employees, the risks of its investment offerings, and its safekeeping and use of investor funds. Abdulwahab also lied to investors about having a college degree in Economics, as well as failing to disclose to investors that he previously pleaded guilty to a felony forgery of a commercial instrument in a state court in Texas. Evidence at trial showed that Abdulwahab routinely used investor funds for personal enrichment, including a lavish home, a Ferrari and a BMW.
When state regulators began to scrutinize A&O’s investment products, Abdulwahab and others manufactured a sham sales transaction to “sell” A&O to a shell corporate entity named Blue Dymond and later to another shell corporate entity named Physician’s Trust. However, A&O and Physician’s Trust was still secretly controlled by Abdulwahab and his co-conspirators.
Five individuals have pleaded guilty in connection with the A&O fraud scheme: David White, the former President of A&O; Brent Oncale, former vice president of A&O; Russell E. Mackert, an attorney for A&O; Eric M. Kurz, a wholesaler of A&O investment products; and Tomme Bromseth, an A&O sales agent in the Richmond area.
This investigation was conducted by the U.S. Postal Inspection Service, Internal Revenue Service, and FBI, with significant assistance from the Texas State Securities Board and the Virginia Corporation Commission. These cases are being prosecuted by Assistant U.S. Attorneys Michael S. Dry and Jessica Aber Brumberg from the Eastern District of Virginia and Trial Attorney Albert B. Stieglitz Jr., of the Criminal Division’s Fraud Section.
The investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia. The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force, an interagency national task force.
President Obama established the Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
Former Treasurer and President of Taylor, Bean & Whitaker<br /> Each Sentenced to Prison for Fraud SchemeRead the Press Release
WASHINGTON – The former treasurer and the former president of Taylor, Bean & Whitaker (TBW) were sentenced today to 72 months in prison and 30 months in prison, respectively, for their roles in a more than $2.9 billion fraud scheme that contributed to the failures of TBW and Colonial Bank. TBW was one of the largest privately-held mortgage lending companies in the United States in 2009.
Desiree Brown, the former treasurer of TBW, and Raymond Bowman, the former president of TBW, were each sentenced today by U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. The sentences were announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Acting Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Acting Inspector General of the Department of Housing and Urban Development (HUD-OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA-OIG); and Victor S. O. Song, Chief of the Internal Revenue Service-Criminal Investigation (IRS-CI).
Brown, 45, of Hernando, Fla., pleaded guilty in February 2011 to one count of conspiracy to commit bank, wire and securities fraud. Bowman, 45, of Braselton, Ga., pleaded guilty in March 2011 to one count of conspiracy to commit bank, wire and securities fraud and one count of making false statements to federal agents. Both admitted to conspiring with Lee Bentley Farkas, the former chairman of TBW, and others, to fraudulently obtain funding for TBW to cover expenses related to operations and servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities.
Farkas was convicted on April 19, 2011, on 14 counts of fraud for his role in masterminding the scheme, which was one of the largest bank frauds in the country. Farkas is scheduled to be sentenced on June 27, 2011. The Securities and Exchange Commission (SEC) has a civil action pending against Farkas in the Eastern District of Virginia.
Co-conspirators Paul Allen, the former chief executive officer of TBW; Catherine Kissick, a former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division (MWLD); Teresa Kelly, a former operations supervisor for Colonial Bank’s MWLD; and Sean Ragland, a former senior financial analyst at TBW, have also pleaded guilty for their participation in the scheme.
“Raymond Bowman and Desiree Brown used their positions as high-level executives at TBW to help Lee Farkas perpetrate a sprawling $2.9 billion fraud,” said Assistant Attorney General Breuer. “Their crimes contributed to the failure of Colonial Bank and the collapse of TBW, harming hundreds of shareholders, investors and employees. Today’s prison sentences reflect the seriousness of their conduct, while also recognizing the substantial assistance they ultimately provided to the government in investigating and prosecuting Mr. Farkas and other co-conspirators.”
“These TBW executives helped pull off one of the largest, longest-running bank fraud schemes in history that led to the collapse of Colonial Bank and TBW,” said U.S. Attorney MacBride. “They knew that without their fraud scheme, TBW would fail. They helped Lee Farkas do what they knew was wrong, and now they will pay for their crimes. At the same time, these defendants agreed to cooperate with the government and that cooperation was clearly taken into account in the sentences imposed today.”
According to court documents and information presented at trial, Bowman and Brown participated in the scheme from 2003 through August 2009. The fraud scheme caused Colonial Bank and Colonial BancGroup to purchase tens of millions of dollars of worthless assets, caused Colonial BancGroup to report false information in its financial statements, and artificially inflated the value of TBW’s mortgage servicing rights.
According to court documents and information presented at trial, TBW began running overdrafts in its master bank account at Colonial Bank because of TBW’s inability to meet its operating expenses, which included payroll, servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities and other obligations. In or about 2002, Farkas, Bowman and other co-conspirators, engaged in a series of fraudulent actions to cover up the overdrafts, first by sweeping overnight money from one TBW account with excess funds into another, and later through the fictitious “sales” of mortgage loans to Colonial Bank, a fraud scheme the conspirators dubbed “Plan B.” Brown joined the conspiracy in late 2003 shortly after Plan B commenced. The conspirators accomplished Plan B by selling Colonial Bank mortgage loans that did not exist or that TBW had already committed or sold to other third-party investors.
As Plan B evolved, co-conspirators at TBW also caused TBW to engage in sham sales of groups of mortgage loans, known as “pools,” to Colonial Bank that other entities already owned. As a result, false information was entered on Colonial Bank’s books and records, giving the appearance that the bank owned interests in legitimate pools of mortgage loans, when in fact the pools had no value and could not be securitized or sold. Additionally, the conspirators, including Brown, caused TBW to misappropriate more than $1.5 billion in collateral from Ocala Funding LLC, a mortgage lending facility owned by TBW. The misappropriation caused Colonial Bank and the Federal Home Loan Mortgage Corporation (Freddie Mac) to falsely believe that they each had an undivided ownership interest in thousands of the same loans worth hundreds of millions of dollars.
According to court documents, the fraud scheme also included an effort by certain conspirators in the fall of 2008 to obtain $570 million in taxpayer funding through the Capital Purchase Program (CPP), a sub-program of the U.S. Treasury Department’s TARP. In connection with the application, Colonial BancGroup submitted financial data and filings that included materially false information related to mortgage loan and securities assets held by Colonial Bank as a result of the fraudulent activity at TBW. Colonial BancGroup never received the TARP funding.
In August 2009, the Alabama State Banking Department, Colonial Bank’s regulator, seized the bank and appointed the FDIC as receiver. Colonial BancGroup also filed for bankruptcy in August 2009.
The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. This case was investigated by SIGTARP, FBI’s Washington Field Office, FDIC-OIG, HUD-OIG, FHFA-OIG and the IRS-CI. The department recognizes the substantial assistance of the SEC. The department also recognizes the assistance of the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury.
This prosecution was brought in coordination with 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
Former NSA Senior Executive Pleads Guilty to Unauthorized Access of Government ComputerRead the Press Release
WASHINGTON - Former National Security Agency (NSA) senior executive Thomas A. Drake pleaded guilty today in U.S. District Court in Baltimore to a one-count criminal information charging him with unauthorized access of an NSA computer, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.
Drake, 54, pleaded guilty before U.S. District Court Judge Richard D. Bennett to the misdemeanor offense of intentionally exceeding the authorized access of a computer. Sentencing is scheduled for July 15, 2011, at 3:00 p.m. EDT.
“Today, Thomas Drake admitted that he illegally accessed classified NSA computer systems to obtain information that he then provided to another person who had no authorization to receive it As today’s guilty plea shows, in cases involving classified information, we must always strike the careful balance between holding accountable those who break our laws, while not disclosing highly-sensitive information that our intelligence agencies conclude would be harmful to our nation’s security if used at trial,” said Assistant Attorney General Breuer. “Individuals who are granted special access to our nation’s most sensitive information cannot unilaterally decide to disregard the law and agreements they make with the government on how that information may be handled.”
According to the statement of facts, Drake worked as an employee of the NSA from August 2001 through April 2008. In connection with his employment, Drake was granted a Top Secret clearance and had access to classified computer systems, such as the NSA’s internal intranet or NSANet. Drake received various security briefings regarding the handling restrictions and requirements involving official NSA information, and knew that the NSA restricted the use of and access to its computers and NSANet for official use only.
According to the statement of facts, from approximately February 2006 through March 2007, Drake intentionally accessed NSANet, obtained NSA information and provided the information to another person not permitted or authorized to receive it.
Also today, in exchange for the defendant’s guilty plea, the government filed a motion to dismiss, at the time of sentencing, the pending indictment against Drake. Drake was charged in an April 2010 indictment with willful retention of classified information, obstruction of justice and false statements.
According to the government’s motion, pre-trial rulings by the court under the Classified Information Procedures Act (CIPA) would have required that highly classified information appear, without substitution, in exhibits made publicly available at trial. The NSA concluded that such disclosure would harm national security. According to the filing, in CIPA litigation, the parties indicate what classified information they reasonably expect to disclose thorough evidence, and the court makes determinations on how and what classified information may be used at trial. The government then must make a determination whether the disclosure of that classified information could harm national security, and accordingly how the prosecution is impacted.
The case is being prosecuted by Senior Litigation Counsel William M. Welch II of the Criminal Division and Trial Attorney John P. Pearson of the Criminal Division’s Public Integrity Section. This case was investigated by the FBI and the NSA Office of Security & Counterintelligence. The National Security Division also provided assistance in this matter.
Danish Pharmaceutical Novo Nordisk to Pay $25 Million<br /> to Resolve Allegations of Off-Label Promotion of NovosevenRead the Press Release
WASHINGTON – Novo Nordisk Inc., a Danish pharmaceutical manufacturer, has agreed to pay $25 million to resolve its civil liability arising from the illegal promotion of its hemostasis management drug, NovoSeven, the Justice Department announced today. The Food and Drug Administration (FDA) approved NovoSeven to treat certain bleeding disorders in hemophiliacs. Once approved by the FDA, a manufacturer may not market or promote a drug for any use not specified in its new drug application and approved by the FDA. Such unapproved uses are also known as “off-label” uses.
The U.S. subsidiary, Novo Nordisk Inc., which is located in Princeton, N.J., promoted NovoSeven to health care professionals for off-label uses, including as a coagulatory agent for trauma patients, general surgery, cardiac surgery, liver surgery, liver transplants and intra-cerebral hemorrhage. As a result of this unlawful promotion, Novo Nordisk caused false claims to be submitted to government health care programs that were not reimbursable by those programs. Medicare and Medicaid paid for off-label prescriptions throughout the United States as a result of Novo’s focused campaign to influence doctors and hospitals. The federal share of the civil settlement is $21,425,790.59, and the state Medicaid share of the civil settlement is $3,574,209.41.
“Pharmaceuticals should be marketed only for uses that the FDA has approved as safe and effective,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “The off-label promotion alleged here not only wasted taxpayer dollars, but also undermined the FDA’s important role in ensuring that drugs are properly marketed to government agencies and members of the public.”
The settlement resolves a whistleblower lawsuit filed under the qui tam or whistleblower provisions of the False Claims Act that is pending in the District of Maryland: U.S. ex rel. Black and Montiel v. Novo Nordisk, Inc. As part of today’s resolution, the whistleblowers will receive payments totaling more than $3.5 million from the federal share of the civil recovery.
“Federal law prohibits pharmaceutical manufacturers from marketing drugs for unapproved uses, and restricts them from creating a financial incentive for doctors that may conflict with the interests of their patients,” added United States Attorney for the District of Maryland Rod J. Rosenstein. “Drugs should be marketed only for purposes for which they have been deemed safe and effective and prescribed only because they are expected to benefit the patient.”
Also as part of the settlement, Novo Nordisk has agreed to enter into an expansive corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services. That agreement provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to this matter.
“Our separate Novo Nordisk corporate integrity agreement requires company board members to assure their compliance program is effective,” said Daniel R. Levinson, Inspector General of the Department of Health & Human Services. “This should focus high-level attention on preventing future off-label drug promotion. As an added measure, an independent review organization will provide extensive monitoring.”
The civil settlement was reached by the Justice Department’s Civil Division and the U.S. Attorney’s Office for the District of Maryland. The Corporate Integrity Agreement was negotiated by the Office of Inspector General of the Department of Health and Human Services. Investigative support was provided by Department of Defense Criminal Investigative Services, U.S. Army Criminal Investigation Command, Major Procurement Fraud Unit and the Office of Inspector General of the Department of Health and Human Services. Assistance also was provided by the National Association of Medicaid Fraud Control Units and offices of various state Attorneys General.
This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of 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 $5.7 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $7.3 billion.
9 June 2011
U.S. Subsidiary of Belgian Pharmaceutical Manufacturer Pleads Guilty to Off-Label Promotion; Company to Pay More Than $34 MillionRead the Press Release
WASHINGTON – The U.S. subsidiary of Belgian pharmaceutical manufacturer UCB SA. pleaded guilty today to the off-label promotion of its epilepsy drug Keppra and will pay more than $34 million to resolve criminal and civil liability arising out of its illegal conduct, the Justice Department announced today.
Under the terms of the plea agreement before the U.S. Court for the District of Columbia, UCB Inc., which has its headquarters in Smyrna, Ga., pleaded guilty to a misdemeanor in connection with the company’s misbranding of Keppra, in violation of the Food, Drug and Cosmetic Act. Keppra was approved by the Food and Drug Administration (FDA) as an anti-epileptic drug, for the treatment of seizures in adults and children suffering from epilepsy. Keppra is not approved for the treatment of migraine, headache, psychiatric conditions or pain conditions. Once approved by the FDA, a manufacturer may not market or promote a drug for any use not specified in the FDA-approved product label. These uses are also known as unapproved or “off-label” uses.
The government alleged that UCB promoted the sale of Keppra for off-label use in the treatment of migraine by generating and disseminating posters representing that Keppra was safe and effective for treating migraine based on purportedly independent investigator-initiated studies. The posters did not disclose UCB’s sponsorship of these studies or that UCB’s own clinical trial had failed to demonstrate that Keppra was effective in treating migraine. UCB will pay a $7.55 million criminal fine for the misbranding of Keppra and an asset forfeiture of $1.078 million.
In addition, UCB will pay $25.7 million to resolve civil allegations under the False Claims Act that the company illegally promoted Keppra and caused false claims to be submitted to government healthcare programs for a variety of off-label uses that were not medically accepted indications and therefore not covered by those programs, including headache, migraine, pain, bipolar, mood disorders and anxiety. The federal share of the civil settlement is $15,871,208, and the state Medicaid share of the civil settlement is $9,893,322.
“Patients have a right to know that the drugs they are prescribed have been approved by the FDA as safe and effective for a particular use,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “Off-label promotion of pharmaceuticals undermines the FDA’s important role in protecting the public and is a drain on taxpayer dollars.”
“UCB put its pursuit of profits ahead of its obligations to patients,” said Ronald C. Machen Jr., U.S. Attorney for the District of Columbia. “Today’s guilty plea and UCB’s $34 million payout should remind drug companies that try to cleverly design off-label marketing schemes that we will not allow them to compromise patient safety.”
“This settlement demonstrates the ongoing efforts to pursue violations of the False Claims Act and recover taxpayer dollars for Medicaid and other federal health care programs,” noted Dwight C. Holton, U.S. Attorney for the District of Oregon. “Our office will continue to work with whistleblowers and law enforcement to stop health care fraud.”
The civil settlement resolves two whistleblower lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act that are pending in Washington, D.C., and Oregon: United States ex rel. Root v. UCB, Civil Action No. 1:07-cv-1056, and United States ex rel. Maly v. UCB, Inc., Civil Action No. 1:08–cv-1161. As part of today’s resolution, the whistleblowers will receive payments totaling more than $2.8 million from the federal share of the civil recovery.
Also as part of the resolution accepted by the court, UCB has entered into an expansive corporate integrity agreement (CIA) with the Office of Inspector General of the Department of Health and Human Services. That agreement provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to this matter.
“Patients have a right to be prescribed drugs based on sound medical judgment - not on drug company payoffs or off-label promotions,” said Daniel R. Levinson, Inspector General of the Department of Health & Human Services. “Taxpayers shouldn't have to pay for unlawful conduct.”
“Today’s guilty plea and settlement is evidence of the government’s continued commitment to hold pharmaceutical companies accountable when they undermine the drug approval process by promoting drugs for uses not approved by the FDA as safe and effective," said Acting Director Kathleen Martin-Weis of FDA’s Office of Criminal Investigations. “We will continue to join forces with the Department of Justice and our law enforcement counterparts to seek this kind of criminal resolution when pharmaceutical companies put profits ahead of the public health and safety.”
The criminal case was handled by the U.S. Attorney’s Office for the District of Columbia and the Justice Department’s Office of Consumer Protection Litigation. The civil settlement was reached by the U.S. Attorney’s Offices for the District of Columbia and the District of Oregon and the Commercial Litigation Branch of the Justice Department’s Civil Division. The CIA was negotiated by the Office of Inspector General of the Department of Health and Human Services. The investigation was conducted by the Department of Veterans Affairs Office of Inspector General, the FBI’s Washington Field Office and FDA Office of Criminal Investigations. Assistance was provided by the National Association of Medicaid Fraud Control Units and the offices of various state Attorneys General.
This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of 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 $5.7 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are more than $7.3 billion.
Tyler, Texas, Tax Preparer Sentenced for Filing False Tax ReturnsRead the Press Release
WASHINGTON -- Charles Hollie, a resident of Tyler, Texas, was sentenced by U.S. District Judge Michael H. Schneider to 24 months in prison for filing false tax returns, the Justice Department and Internal Revenue Service (IRS) announced today. Judge Schneider also ordered Charles Hollie to pay $84,668 in restitution to the IRS and to serve one year of supervised release. Hollie was indicted for aiding and assisting in the preparation of false tax returns on April 7, 2010, and subsequently pleaded guilty to aiding and assisting in the preparation of false tax returns on November 9, 2010.
According to the indictment, plea agreement and other court documents, between 2004 and 2007, Hollie worked as an independent contractor at the Tyler and Athens offices of Preferred Choice Income Tax, holding himself out to the public as a Tax Consultant and expert in preparing individual income tax returns. Hollie prepared more than 1,300 returns that claimed fictitious itemized deductions, home businesses, Earned Income Credits and–in the case of each return for the 2006 tax year–inflated telephone excise tax refund (TETR) credits, a one-time credit available to taxpayers to refund excise taxes paid on long distance and bundled service for the 41-month period from February 2003 to August 2006.
John A. DiCicco, Principal Deputy Assistant Attorney General of the Justice Department’s Tax Division and John M. Bales, U.S. Attorney for the Eastern District of Texas commended the IRS Criminal Investigation special agents who investigated the case as well as Tax Division Trial Attorney Pete Madriñan and Assistant U.S. Attorney Gregg Marchessault, who prosecuted the case.
Additional information about the Justice Department’s Tax Division and its enforcement efforts can be found at www.usdoj.gov/tax .
Tahawwur Rana Guilty of Providing Material Support to Terror Group and Playing Supporting Role in Denmark Terror ConspiracyRead the Press Release
CHICAGO — A Pakistani native who operated a Chicago-based immigration business was convicted today of participating in a conspiracy involving a terrorism plot against a Danish newspaper and providing material support to a terrorist organization based in Pakistan. The defendant, Tahawwur Hussain Rana, was found guilty by a federal jury that deliberated two days following a trial that began May 16, 2011, in U.S. District Court. The jury acquitted Rana of conspiracy to provide material support to the November 2008 terrorist attacks in Mumbai, India, that killed more than 160 people, including six Americans.
Rana, 50, a Canadian citizen, was convicted of one count of conspiracy to provide material support to the terrorism plot in Denmark and one count of providing material support to a designated foreign terrorist organization, Lashkar e Tayyiba (Lashkar.) He faces a maximum sentence of 30 years in prison on the two counts combined and remains in federal custody without bond. U.S. District Judge Harry Leinenweber ordered the defense to file post-trial motions by Aug. 15. 2011. No sentencing date was set.
“Today’s verdict demonstrates our commitment to hold accountable not only terrorist operatives, but also those who facilitate their activities. As established at trial, Tahawwur Rana provided valuable cover and support to David Headley, knowing that Headley and others were plotting terror attacks overseas,” said Todd Hinnen, Acting Assistant Attorney General for National Security. “We will not rest in our efforts to identify and bring to justice those who provide support to terrorists.”
“The message should be clear to all those who help terrorists — we will bring to justice all those who seek to facilitate violence,” said Patrick J. Fitzgerald, U.S. Attorney for the Northern District of Illinois.
“The effort to combat terrorism and bring justice to the victims is a global effort, requiring the cooperation and collaboration of many countries and many people. We are grateful for our role and that of the Chicago Joint Terrorism Task Force in bringing some measure of justice,” said Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the FBI.
Rana is the second defendant to be convicted among a total of eight co-defendants who have been indicted in this case since late 2009. Co-defendant David Coleman Headley, 50, pleaded guilty in March 2010 to all 12 counts against him, including aiding and abetting the murders of the six American victims. Headley, who is facing a maximum sentence of life in prison, has cooperated with the government since he was arrested in October 2009, and testified as a government witness at Rana’s trial.
The six remaining defendants are all believed to be in Pakistan.
Headley testified that he attended training camps in Pakistan operated by Lashkar, a designated foreign terrorist organization, on five separate occasions between 2002 and 2005. In late 2005, Headley received instructions from members of Lashkar to travel to India to conduct surveillance, which he did five times leading up to the Mumbai attacks three years later that killed more than 160 people and wounded hundreds more.
In the early summer of 2006, Headley and two Lashkar members discussed opening an immigration office in Mumbai as a cover for his surveillance activities. Headley testified that he traveled to Chicago and advised Rana, his long-time friend since the time they attended high school together in Pakistan, of his assignment to scout potential targets in India. Headley obtained approval from Rana, who owned First World Immigration Services in Chicago and elsewhere, to open a First World office in Mumbai as cover for his activities. Rana directed an individual associated with First World to prepare documents supporting Headley’s cover story of opening a First World office in Mumbai, and advised Headley how to obtain a visa for travel to India, according to Headley’s testimony, as well as emails and other documents that corroborated his account.
Starting Nov. 26, 2008, and continuing through Nov. 28, 2008, 10 attackers trained by Lashkar carried out multiple assaults with firearms, grenades and improvised explosive devices against multiple targets in Mumbai, including the Taj Mahal and Oberoi hotels, the Leopold Café, the Chabad House and the Chhatrapati Shivaji Terminus train station, each of which Headley had scouted in advance. The six Americans killed during the three-day siege were Ben Zion Chroman, Gavriel Holtzberg, Sandeep Jeswani, Alan Scherr, his daughter Naomi Scherr and Aryeh Leibish Teitelbaum.
Regarding the Denmark terror plot, Headley admitted that in early November 2008, he met with a Lashkar member in Karachi, Pakistan, and was instructed to conduct surveillance of the Copenhagen and Aarhus, Denmark, offices of the Danish newspaper Morgenavisen Jyllands-Posten in preparation for an attack in retaliation for the newspaper’s publication of cartoons depicting the Prophet Mohammed.
In late 2008 and early 2009, after reviewing with Rana how he had performed surveillance of the targets attacked in Mumbai, Headley testified that he advised Rana of the planned attack on the Danish newspaper and his intended travel to Denmark to conduct surveillance of its facilities. Headley obtained Rana’s approval and assistance to identify himself as a representative of First World and gain access to the newspaper’s offices by falsely expressing interest in placing advertising for First World in the newspaper. Before departing Chicago, Headley and Rana caused business cards to be made that identified Headley as a representative of the Immigration Law Center, the business name of First World, according to the evidence at trial.
The government’s evidence also included transcripts of recorded conversations, including those in September 2009, when Headley and Rana spoke about reports that co-defendant Ilyas Kashmiri, an alleged Pakistani terrorist leader, had been killed in a drone attack and the implications of his possible death for the plan to attack the newspaper. In other conversations, Rana told Headley that the attackers involved in the Mumbai attacks should receive Pakistan’s highest posthumous military honors. In the late summer of 2009, Rana and Headley agreed that funds that had been provided to Rana could be used to fund Headley’s work in Denmark, and the trial evidence showed that Rana, pretended to be Headley in sending an email to the Danish newspaper.
The government is being represented by Assistant U.S. Attorneys Daniel Collins, Victoria J. Peters and Sarah Streicker, with assistance from the Counterterrorism Section of the Justice Department’s National Security Division. Federal prosecutors in Los Angeles are working jointly with their counterparts in Chicago on the broader investigation into the Mumbai attacks. The investigation has been conducted by the Chicago Joint Terrorism Task Force, led by the Chicago Office of the FBI, with assistance from the FBI offices in Los Angeles and Washington, D.C., as well as both U.S. Customs and Border Protection and the U.S. Immigration and Customs Enforcement (ICE) Office of Homeland Security Investigations.
Owner of Illinois Technology Company Sentenced to Serve 12 Months and a Day in Prison for Role in Conspiracy to Defraud the Federal E-Rate ProgramRead the Press Release
WASHINGTON - An owner of an Illinois-based technology company was sentenced today to serve one year and a day in prison for his participation in a conspiracy to defraud the federal E-Rate program, the Department of Justice announced.
Barrett C. White was also sentenced by U.S. District Court Judge Eldon Fallon to pay a $4,000 criminal fine for conspiring to defraud the E-Rate program by providing bribes and kickbacks to school officials in multiple states. White was charged with the conspiracy in U.S. District Court in New Orleans on Nov. 18, 2010, and he pleaded guilty on March 3, 2011.
As a result of the Antitrust Division’s investigation into fraud and anticompetitive conduct in the E-Rate program, including today’s sentencing, 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. Sixteen individuals, including White, have been sentenced to serve prison time.
According to court documents, White participated in the conspiracy beginning on or about February 2004 through August 2005. The department said that White offered and delivered bribes and kickbacks to school officials responsible for the procurement of Internet access services. In return for those payments, E-Rate contracts were awarded to his co-conspirators’ companies. White’s co-conspirators, Gloria Harper and Tyrone Pipkin, have also pleaded guilty to the conspiracy in separate charges and await sentencing.
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.
Justice Department Reaches Agreement with City of Bedford, Virginia, on Bailout Under the Voting Rights ActRead the Press Release
WASHINGTON – The Justice Department has reached an agreement with the city of Bedford, Va., that, if approved by the court, will allow for the city’s bailout from its status as a “covered jurisdiction” under the special provisions of Voting Rights Act, and thereby exempt the city from the preclearance requirements of Section 5 of the act. The agreement is in the form of a consent decree filed yesterday in the U.S. District Court for the District of Columbia.
Under Section 5 of the Voting Rights Act, certain covered jurisdictions, determined according to Section 4 of the act, are required to seek preclearance for any changes in voting qualifications, standards, practices or procedures from the U.S. District Court in Washington, D.C., or from the U.S. Attorney General, prior to their implementation. Section 4 of the act provides that a covered jurisdiction may seek to “bailout,” or remove itself from such coverage, and therefore be exempted from the preclearance requirements, by seeking a declaratory judgment before a three-judge panel in U.S. District Court in Washington, D.C. Such a bailout judgment can only be issued if the court determines that the jurisdiction meets certain eligibility requirements for bailout contained in the statute, including a 10-year record of nondiscrimination in voting-related actions. The act also provides that the attorney general can consent to entry of a judgment of bailout if, based upon investigation, the attorney general is satisfied that the jurisdiction meets the eligibility requirements.
The city of Bedford, Va., filed its bailout action in U.S. District Court in Washington, D.C. on March 4, 2011. City officials had contacted the attorney general prior to filing its action, indicating that the city was interested in seeking bailout. The city provided the Justice Department with substantial information, and the department conducted an investigation to determine the city’s eligibility. Based on that investigation, the department is satisfied that the city meets the Voting Rights Act’s requirements for bailout.
“In this case, the department carefully evaluated the information the city provided to us and conducted our own investigation, which has satisfied the department that the city is eligible for a bailout,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “I appreciate the cooperation of city officials in providing the department with substantial information, and moving toward a resolution of this matter in the way envisioned by the Voting Rights Act.”
The consent decree details the legal and factual basis for a bailout determination and, if approved, will grant the city’s request. The court will retain jurisdiction of the action for 10 years and can reopen the action upon the motion of the attorney general or any aggrieved person alleging conduct by the city that would have originally precluded the city from bailing out if it had occurred during the 10 year period preceding entry of the consent decree.
Information about bailout, the Voting Rights Act, and other federal voting laws is available on the Department of Justice website at www.justice.gov/crt/voting/. Complaints may be reported to the Voting Section of the Justice Department’s Civil Rights Division at 1-800-253-3931.