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1 April 2011
Justice Department Reaches Agreement with Hancock Holding Company and Whitney Holding Corporation on DivestituresRead the Press Release
WASHINGTON – The Department of Justice announced today that Hancock Holding Company and Whitney Holding Corporation have agreed to sell eight branch offices in Louisiana and Mississippi, with approximately $202 million in deposits, to resolve antitrust concerns about the companies’ pending merger. The department said that, with the divestitures, the merger would not have an adverse effect on competition in local markets for retail banking or small business banking services. As a result of the proposed acquisition, Hancock will become the 32nd largest bank in the nation, with about $20 billion in assets and about $16 billion in total deposits.
Under the agreement with the Justice Department’s Antitrust Division, the companies will divest Whitney’s entire branch network in the Biloxi and Gulfport area in Mississippi, which includes seven branches in Harrison and Hancock Counties, with $155.4 million of deposits. In addition, the companies will divest one Whitney branch with $46.7 million of deposits in Washington Parish, La. The department said that the divestitures will include the commercial loans associated with the divested branches.
“With the divestiture, consumers and small businesses in local markets in Louisiana and Mississippi will continue to enjoy the benefits of competition in banking services,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.
The proposed merger is subject to the final approval of the Board of Governors of the Federal Reserve System. The department said that it will advise the Federal Reserve Board that it will not challenge the merger provided that the parties divest the branch offices specified in the agreement and associated loans and deposits; and provided that the parties commit to the Federal Reserve Board that they will comply with the agreement with the department.
The Hancock Holding Company, headquartered in Gulfport, is the parent company of Hancock Bank (Florida and Mississippi), Hancock Bank of Louisiana and Hancock Bank of Alabama. Hancock has about $8.2 billion in assets. It offers banking and financial products and services at more than 180 locations.
Whitney Holding Corporation is headquartered in New Orleans and has approximately $11.5 billion in assets. Its primary bank subsidiary is Whitney National Bank, which operates a branch network in Alabama, Florida, Louisiana, Mississippi and Texas.
The branches to be divested are:
Bank
State
County
Address
City
Zip Code
Deposits as of June 30, 2010 (000s)
Whitney
Miss.
Harrison
2605 Pass Road
Biloxi
39531
$16,634
Whitney
Miss.
Harrison
1300 25th Avenue
Gulfport
39501
$40,423
Whitney
Miss.
Harrison
11281 U.S. Highway 49
Gulfport
39503
$14,927
Whitney
Miss.
Harrison
573 Courthouse Road
Gulfport
39507
$16,935
Whitney
Miss.
Harrison
198 Klondyke Road
Long Beach
39560
$14,730
Whitney
Miss.
Hancock
800 Highway 90
Bay Saint Louis
39521
$35,701
Whitney
Miss.
Hancock
4402 Kalani Drive
Diamond-head
39525
$16,051
Whitney
La.
Washington
600 Columbia Street
Bogalusa
70429
$46,658
Founder and Treasurer of Washington D.C. Labor Union Charged with Stealing Pension Funds for Personal Use, Violating a Court Order and Obstructing InvestigationRead the Press Release
WASHINGTON – The founder and treasurer of the National Association of Special Police and Security Officers (NASPSO) was charged today in a superseding indictment with mail fraud, theft from a labor organization, obstruction of justice, criminal contempt and various recordkeeping offenses related to his operation of a pension plan for NASPSO members. NASPSO is a labor union representing private security guards assigned to protect federal buildings in the Washington, D.C., metro area.
The charges were announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; Mabel Capolongo, Director of the Philadelphia Regional Office of the Employee Benefits Security Administration of the Department of Labor; Robert L. Panella, Special Agent in Charge of the Office of Inspector General, Office of Labor Racketeering and Fraud Investigations of the Washington, D.C. Regional Office, and Mark Wheeler, Director of the Washington District Office of the Office of Labor Management Standards.
Caleb Gray-Burriss, 60, of Washington, D.C., will be arraigned on April 4, 2011, in U.S. District Court for the District of Columbia. Gray-Burriss originally was charged in June 2010 with four counts of mail fraud.
According to the superseding indictment, from approximately June 2004 through February 2011, Gray-Burriss wrote numerous checks to himself or to other third parties from the checking account where he had placed funds intended for the NASPSO pension plan. The superseding indictment alleges that Gray-Burriss spent more than $100,000 of the pension plan funds in this way, while at the same time falsely maintaining that it was an operational fund that he was properly administering and that was providing benefits to the beneficiaries. Gray-Burriss previously settled a civil suit which, in part, addressed his unlawful conduct with respect to NASPSO-sponsored health and benefit plans.
The superseding indictment charges Gray-Burriss with criminal contempt of a court order after he allegedly stole money from the NASPSO treasury to pay his personal fines due in the civil settlement. The superseding indictment also alleges that Gray-Burriss resumed his involvement with NASPSO-sponsored health and pension plans after the civil lawsuit was settled, even though he was prohibited by court order from doing so.
In addition, the superseding indictment charges that Gray-Burriss, while an officer and employee of NASPSO, stole more than $115,000 in NASPSO funds through unauthorized salary increases and bonuses to himself, cash withdrawals from ATMs, reimbursement for unauthorized vacations and trips to casinos, personal dental work, and other goods and services. Gray-Burriss also allegedly unlawfully used NASPSO funds to pay his parking tickets and personal fines in a civil lawsuit. Finally, the superseding indictment charges Gray-Burriss with two counts of obstructive of justice for concealing and/or destroying NASPSO records and attempting to induce a witness to withhold testimony and records during the grand jury investigation.
An indictment is merely an allegation, and a defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Gray-Burriss faces a maximum penalty of 20 years in prison and a $250,000 fine on each of the mail fraud and obstruction of justice charges. The theft from a labor organization charge carries a maximum penalty of five years in prison and a $250,000 fine. Gray-Burriss also faces additional penalties if convicted of the criminal contempt and recordkeeping charges.
The investigation leading to the superseding indictment of Gray-Burriss was conducted by investigators from three agencies of the U.S. Department of Labor – the Employee Benefits Security Administration, the Office of Labor Management Standards and the Office of Inspector General, Office of Labor Racketeering and Fraud Investigations. The case is being prosecuted by Trial Attorney Vincent Falvo of the Criminal Division’s Organized Crime and Racketeering Section.
Former TBW Ceo Pleads Guilty to $1.5 Billion Fraud SchemeRead the Press Release
WASHINGTON – Paul Allen, the former chief executive officer at Taylor, Bean & Whitaker (TBW), pleaded guilty today to making false statements and conspiring to commit bank and wire fraud for his role in a $1.5 billion fraud scheme that contributed to the failure of TBW.
The guilty plea was announced today 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, 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 F. O. Song, Chief of the Internal Revenue Service (IRS) Criminal Investigation.
Allen, 55, of Oakton, Va., pleaded guilty to a two-count criminal information before U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. Allen faces a maximum penalty of five years in prison for each count when he is sentenced on June 21, 2011.
According to a statement of facts submitted with his plea agreement, Allen joined TBW in 2003 as its CEO and reported directly to its chairman. He admitted in court that from 2005 through August 2009, he and other co-conspirators engaged in a scheme to defraud financial institutions that had invested in a wholly-owned lending facility called Ocala Funding. Ocala Funding raised money by selling asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas , and used the money to purchase TBW mortgages. The facility was managed by TBW and had no employees of its own.
According to court records, shortly after Ocala Funding was established, Allen learned there were inadequate assets backing its commercial paper, a deficiency referred to internally at TBW as a “hole” in Ocala Funding. Allen admitted that in an effort to cover up the hole and to mislead investors, he told a co-conspirator to produce reports that concealed the hole. He also admitted that he knew that these misleading reports were sent to Ocala Funding investors and other third parties.
Allen also admitted in court that he kept the chairman of TBW informed of the collateral shortfall, and that in the fall of 2008, Allen was told that the hole had been moved from Ocala Funding to Colonial Bank. At the time that TBW ceased operations, the hole was approximately $1.5 billion. According to court documents, as a result of the Ocala Funding fraud scheme, Freddie Mac, Colonial Bank and Ocala Funding investors believed they had an undivided ownership interest in thousands of the same mortgage loans.
Court records state that in March 2009, Allen was directed to approach a private equity investor to secure capital to meet a $300 million private capital requirement the U.S. Department of Treasury set for Colonial Bank to receive $553 million from the Troubled Assets Relief Program (TARP). Although Allen failed to secure the funding from the investor, he admitted in court that the TBW chairman represented to others that the investor was a $50 million participant and that the chairman diverted $5 million from Ocala Funding to an escrow account in the investor’s name. This deception caused Colonial Bank to falsely announce publicly it had met its $300 million capital raise contingency and to send a letter to the FDIC that all investors had met a 10 percent escrow deposit requirement. Colonial Bank never received any TARP funds.
In court today, Allen also admitted to making false statements in a letter he sent to the U.S. Department of Housing and Urban Development, through Ginnie Mae, regarding TBW’s audited financial statements for the fiscal year ending on March 31, 2009. In this letter, Allen omitted that the delay in submitting the financial data was attributed to concerns its independent auditor had raised about the financing relationship between TBW and Colonial Bank. Instead, Allen falsely attributed the delay to a new acquisition and TBW’s switch to a compressed 11-month fiscal year.
To date, five other individuals have pleaded guilty for their roles in this and related fraud schemes.
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 Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.
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 Northern Virginia Resident Arraigned on Charges of Tax Evasion and Impeding the IRSRead the Press Release
WASHINGTON – Thomas J. Ernst, formerly a resident of McLean and Arlington, Va., was arraigned today in the Eastern District of Virginia. Ernst was indicted March 10, 2011, for one count of corruptly endeavoring to impede the Internal Revenue Service (IRS), three counts of tax evasion for 2004, 2005 and 2006, and two counts of failing to file corporate tax returns in 2004 and 2005, the Justice Department and IRS announced today. Ernst appeared today before the Honorable U.S. District Court Judge Claude M. Hilton.
According to the indictment, Ernst was the president and chief executive officer of Medicure Plus Inc., a health insurance benefits administration company. From 2000 through 2006, Medicure operated as a third party administrator of the Postmasters’ Benefits Plan (PBP), the health benefits carrier for the National League of Postmasters (NLP). Medicure and NLP entered into a 10 year guaranty agreement under which Medicure managed PBP’s operations; NLP paid Medicure $166,000 each month plus a $33,000 administrative fee.
According to the indictment, between 2001 and 2007, Ernst corruptly endeavored to obstruct and impede the due administration of the IRS by causing Medicure to make payments from its corporate bank account for numerous personal expenses, including: a summer rental house; more than $1.5 million in payments to himself, his wife, sister-in-law and children; his son’s Georgetown University college education; and various property purchases and rentals. None of these payments were included on any personal income tax return as income to Ernst. Additionally, Ernst used nominee bank accounts, purchased and leased assets in the names of his children and sister-in-law and created fictitious documents to conceal his income and ownership of assets from the IRS.
Ernst did not file U.S. Individual Income Tax Returns, Forms 1040 with the IRS for 2001 through 2006 and is charged with evading his taxes in 2004, 2005 and 2006. Further, Ernst failed to cause Medicure to ever file a corporate income tax return, Form 1120, and he is charged with failing to file a Medicure corporate income tax return in 2004 and 2005.
An indictment is merely a formal charge by the grand jury. The defendant is presumed innocent unless and until proven guilty in U.S. District Court. If convicted, the defendant faces a maximum potential sentence of 20 years in prison. The trial date has been scheduled for Aug. 2, 2011, before Judge Hilton.
This case was investigated by IRS Criminal Investigation and is being prosecuted by Assistant U.S. Attorney Charles Connolly and the Department of Justice’s Tax Division Trial Attorneys Caryn Finley and Thomas Krepp.
More information about the Justice Department’s Tax Division and its enforcement efforts is available at www.usdoj.gov/tax/.
Antitrust Division Issues 2011 Edition of Its Annual NewsletterRead the Press Release
WASHINGTON – The Department of Justice’s Antitrust Division today issued the 2011 edition of its annual newsletter on its website. The newsletter provides information about the recent activities and accomplishments of the Antitrust Division for the general public as well as the legal and business communities.
The newsletter includes a message from Assistant Attorney General Christine Varney as well as articles about the Antitrust Division’s enforcement actions in the criminal, merger and civil non-merger areas over the past year. The newsletter also highlights the division’s accomplishments: the filing of 60 criminal cases and obtaining fines in excess of $550 million against corporations and individuals in FY 2010, filing its first unilateral conduct case arising solely under Section 2 of the Sherman Act since 1999 and maintaining competition in a variety of areas directly affecting U.S. consumers, including health care and health insurance, air and rail transportation, employment, credit cards, access to cable and Internet programming and steel production.
The newsletter also features articles about the division’s international program, the revised Horizontal Merger Guidelines, the joint DOJ/USDA agriculture workshops, the joint DOJ/FTC/PTO workshop and competition advocacy.
The newsletter can be found at www.justice.gov/atr/public/division-update/2011. Within each article, hyperlinks are provided so that the reader can easily access relevant documents such as press releases, court filings and speeches.
31 March 2011
Two New Orleans Police Officers Sentenced in Post-Katrina Shooting and Burning of Henry GloverRead the Press Release
WASHINGTON – Former New Orleans Police Department (NOPD) Officer David Warren was sentenced today in connection with the post-Katrina shooting death of Henry Glover, and current NOPD Officer Greg McRae was sentenced for the subsequent burning of Glover’s remains and obstruction of justice.
Former NOPD Officer Warren was sentenced to 25 years and nine months in prison for his involvement in the Sept. 2, 2005, shooting death of civilian Henry Glover. As part of the restitution order, Warren will also pay $7,642.32 to Glover’s family for funeral expenses. Warren was found guilty by a federal jury of a civil rights violation, resulting in death, for shooting Glover, and for using a firearm to commit manslaughter.
Current NOPD Officer McRae was sentenced to 17 years and three months in prison, three years of supervised release and restitution in the amount of $6,000 for his involvement in the burning of Mr. Glover’s body. McRae was convicted of two civil rights violations, one count of obstructing justice and one count of using fire during the commission of a felony. One of the civil rights counts charged that McRae willfully used fire to destroy a civilian’s property by burning and destroying a car, and the other civil rights count charged that he willfully deprived Glover’s family members of their right to seek redress in the courts for his death.
Evidence presented at trial established that Warren, while stationed on a second floor lookout, shot Glover, who was a floor below him and running away. Glover’s brother and a friend flagged down a passing motorist, “Good Samaritan” William Tanner, who put the wounded Glover in his car to try to get medical attention for him. However, when the group of men drove up to a makeshift police station seeking help for Glover, police officers surrounded the men at gunpoint, handcuffed them and let Glover die in the back seat of the car. McRae then drove off with Tanner’s car, with Glover’s body inside, and burned both the body and the car with a traffic flare.
“Instead of upholding their oath to protect and serve the people of New Orleans in the days after Hurricane Katrina, these officers abused their power, and violated the law and the public trust,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “Today's sentence brings a measure of justice to the Glover family and to the entire city.”
“Today’s sentences send a powerful message that no one is above the law, and that those who are sworn to protect our citizens are never, under any circumstances, relieved of their sacred responsibilities under our Constitution. We will continue to do everything in our power—and use every law and weapon in our arsenal of justice to make certain that our police never abuse power they wield. Today is an important step forward for the courageous Glover family and the people of New Orleans, and an important move toward the city’s healing and rebuilding,” said Jim Letten, U.S. Attorney for the Eastern District of Louisiana.
David Welker, FBI Special Agent in Charge for Louisiana, said, “Today’s sentences are a result of the continued diligence and commitment of the FBI to aggressively and fairly pursue civil rights violations, with the goal of bringing to justice those who abuse the very citizens they are entrusted to protect and serve.”
This case was investigated by the New Orleans Field Office of the FBI, and was prosecuted by Trial Attorney Jared Fishman of the Justice Department’s Civil Rights Division, and Assistant U.S. Attorneys Tracey Knight and Michael Magner for the Eastern District of Louisiana.
Taiwanese Shipping Company Convicted for Discharging Oily Bilge Waste into the Waters of American SamoaRead the Press Release
WASHINGTON – Koo’s Shipping Company S.A., a Taiwanese corporation, pleaded guilty in federal court to charges of making false statements, knowingly failing to fully and accurately maintain an oil record book as required by international treaty and U.S. law, and for knowingly discharging oily bilge waste into Pago Pago Harbor, American Samoa, without using proper pollution prevention equipment, announced Assistant Attorney General Ignacia S. Moreno and U.S. Attorney for the District of Columbia Ronald C. Machen Jr. The plea took place before the Honorable Gladys Kessler in U.S. District Court for the District of Columbia.
The company was sentenced to pay a $750,000 criminal fine and pay $250,000 towards community service projects in American Samoa, and was placed on probation for three years. The community service payment will be split equally between the National Marine Sanctuary Foundation and the National Fish and Wildlife Foundation for environmental restoration and protection projects in American Samoa.
“We will aggressively prosecute vessel companies who willfully violate the laws enacted to protect our oceans,” said Assistant Attorney General Moreno, head of the Environment and Natural Resources Division for the Department of Justice. “Koo’s is paying a just price for knowingly discharging oily waste into the ecologically sensitive harbor of Pago Pago. This penalty will help restore and protect the environment of American Samoa.”
“This million dollar penalty will deter others from illegally dumping oil into our oceans and harbors, while at the same time providing resources to clean up our environment,” said U.S. Attorney Machen. “The sentence also requires Koo’s to establish a comprehensive program to prevent future environmental violations. We hope that forward-looking companies will establish similar programs to protect our natural resources rather than face the threat of criminal prosecution and hefty fines.”
“I am extremely proud of the combined efforts of the U.S. and American Samoa governments, as well as our industry partners in Pago Pago, that resulted in the first conviction of illegal dumping in American Samoan waters,” said Captain Joanna M. Nunan, Commander of the Coast Guard Sector in Honolulu. “The $1 million sentence, including $250,000 in coral reef restoration projects, sends the strong message that polluting our waters will not be tolerated.”
Koo’s Shipping Company S.A. owned and operated a 4,491 gross ton 396 foot commercial ocean going ship named the M/V Syota Maru that carried frozen fish and fish products primarily in the Pacific Ocean and into American Samoa. On Aug. 17, 2010, the U.S. Coast Guard Marine Safety Detachment in American Samoa conducted an inspection of the vessel in Pago Pago. The Coast Guard learned, from inspecting the engine room and interviewing crewmembers, that the crew had been discharging oily bilge waste directly into the ocean without using the required pollution prevention equipment. The Coast Guard inspection lasted several days, and on Aug. 19, 2010 and Aug. 26, 2010, the Coast Guard witnessed and learned that the crew was dumping oily bilge waste directly into Pago Pago Harbor without using proper pollution prevention equipment.
All discharges of oil or oily bilge waste from a vessel into the sea, even if illegal, are required to be recorded in the vessel’s Oil Record Book. None of these discharges were recorded in the Oil Record Book for the M/V Syota Maru.
“The oceans must be protected from shipping companies that look to cut corners by illegally dumping oily waste,” said Nick Torres, Special Agent in Charge of EPA’s criminal enforcement program in American Samoa. “Laws are enacted to prevent the oceans from being used as dumping grounds. Today’s action shows that shipping companies that violate those laws will be held fully accountable for their crimes. The resolution of this case is good news for the American Samoan people and their environment.”
“Today's sentencing was both a success and benchmark, demonstrating the importance of continued joint efforts by federal law enforcement to enforce violations of U. S. and international maritime laws throughout the vast area of the South Pacific,” said Joshua J. Masterson, Special Agent-in-Charge of Coast Guard Investigative Service-Pacific Region. “Considering the volume of commercial fishing companies operating in and around the various U. S. Pacific Islands, we are likely just scratching the surface.”
The National Marine Sanctuary Foundation will receive $125,000 for the benefit of the Fagatele National Marine Sanctuary in American Samoa. The funds will be used for the abatement, cleanup, and remediation of pollution in the sanctuary; and restoration of injured resources, particularly including coral reefs. The National Fish and Wildlife Foundation will also receive $125,000 for the preservation and restoration of coral reefs in or near American Samoa.
“Where criminal activity does damage to natural resources, it is a matter of good public policy that penalties are returned to those resources to mitigate the damage caused and to further protect them,” said Jason Patlis, President and CEO of the National Marine Sanctuary Foundation.
“The National Fish and Wildlife Foundation is pleased to be a recipient of the community service funds resulting from this prosecution,” said Tom Kelsch, Director of Conservation for the Foundation. “These funds will support vital conservation projects that will benefit coral reefs in and around American Samoa.”
During the period of probation, Koo’s will be required to implement a comprehensive Environmental Compliance Plan (ECP) which will ensure that each of the ships owned or operated by Koo’s complies with all maritime environmental requirements established under applicable international, flag state, and port state laws. The ECP establishes training programs for Koo’s employees and a compliance manager who will be responsible for implementing the training program and making certain that Koo’s complies with various audits and laws governing Koo’s seagoing vessels. An independent monitor will report to the court about Koo’s compliance with its obligations during the period of probation.
This case was investigated by the U.S. Coast Guard and the U.S. Environmental Protection Agency. The case was prosecuted by Frederick W. Yette from the U.S. Attorney's Office for the District of Columbia and by Ken Nelson in the Environmental Crimes Section of the Environment and Natural Resources Division of the Department of Justice.
Justice Department Opens Investigation into the Seattle Police DepartmentRead the Press Release
WASHINGTON – The Justice Department announced today that it has opened a pattern or practice investigation into allegations of use of excessive force and discriminatory policing by members of the Seattle Police Department (SPD), pursuant to the pattern or practice provision of the Violent Crime Control and Law Enforcement Act of 1994, the anti-discrimination provisions of the Omnibus Crime Control and Safe Streets Act of 1968 and Title VI of the Civil Rights Act of 1964.
The Justice Department will seek to determine whether there are systemic violations of the Constitution or federal law by officers of the SPD. During the course of our investigation, the Justice Department will consider all relevant information, particularly the efforts that Seattle has undertaken to ensure compliance with federal law. The Justice Department has taken similar steps in a variety of state and local law enforcement agencies, both large and small, in jurisdictions such as New York, Ohio, New Jersey, Pennsylvania, the District of Columbia and California.
Today’s announcement is separate from any ongoing federal criminal investigation involving the Seattle Police Department.
This matter is being investigated jointly by attorneys from the Civil Rights Division’s Special Litigation Section and the U.S. Attorney’s Office for the Western District of Washington. The Department welcomes any information from the community. If you have any comments or concerns, please feel free to contact us at [email protected] or 855-203-4479.
Former TBW Financial Analyst Pleads Guilty to $1.5 Billion Fraud SchemeRead the Press Release
WASHINGTON – Sean W. Ragland, a former senior financial analyst at Taylor, Bean & Whitaker (TBW), pleaded guilty today to conspiring to commit bank and wire fraud for his role in a scheme that defrauded approximately $1.5 billion from financial investors in TBW’s mortgage lending facility, Ocala Funding.
The guilty plea was announced today 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, 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 F. O. Song, Chief of the Internal Revenue Service (IRS) Criminal Investigation.
Ragland, 37, of San Antonio, Texas, pleaded guilty before U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. Ragland faces a maximum penalty of five years in prison when he is sentenced on June 21, 2011.
According to a statement of facts submitted with his plea agreement, in 2005 TBW established a wholly-owned lending facility called Ocala Funding. Ocala Funding raised money by selling asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas , and used the money to purchase TBW mortgages. The facility was managed by TBW and had no employees of its own.
Ragland had tracking and reporting responsibilities with respect to Ocala Funding, and today he admitted that from 2006 through August 2009, he and other co-conspirators engaged in a scheme to mislead investors and auditors as to the financial health of the lending facility. According to court records, shortly after Ocala Funding was established, Ragland learned there were inadequate assets backing its commercial paper. Ragland tracked this deficiency, which was referred to internally at TBW as a “hole” in Ocala Funding. He reported the status of the “hole” to senior TBW executives, including its CEO and CFO. Ragland was also aware that TBW co-conspirators were improperly transferring hundreds of millions of dollars from Ocala Funding to TBW accounts. At the time that TBW ceased operations, the hole was approximately $1.5 billion.
Ragland admitted that, at the direction of other co-conspirators, he prepared documents that inaccurately and intentionally inflated figures representing the aggregate value of the loans held in Ocala Funding or under-reported the amount of outstanding commercial paper. He sent this false information to the financial institution investors, other third parties and an outside audit firm.
To date, four other individuals have pleaded guilty to charges for their roles in this and related fraud schemes.
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 Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.
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 .
Florida Man Indicted for Bankruptcy FraudRead the Press Release
WASHINGTON – A St. Petersburg, Fla., man was arrested today on bankruptcy fraud charges, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Robert E. O'Neill of the Middle District of Florida.
An indictment unsealed today in U.S. District Court for the Middle District of Florida charges Jon Jerald Hammill, 39, with three counts of bankruptcy fraud. If convicted on all counts of the indictment, Hammill faces a maximum penalty of 20 years in prison. The indictment also notifies Hammill that the United States is seeking to forfeit the proceeds of the bankruptcy fraud.
According to the indictment, on or about Feb. 10, 2009, Hammill filed a Chapter 7 bankruptcy petition with the U.S. Bankruptcy Court for the Middle District of Florida. The indictment alleges that throughout the bankruptcy proceeding, Hammill made materially misleading omissions and false statements to conceal funds he received from Botfly LLC and his relationship with Botfly LLC, a Florida corporation that purported to offer investments in the foreign currency markets.
The indictment alleges that Hammill lied under oath in sworn testimony before the bankruptcy trustee, in which he stated that he had disclosed all of his assets but he failed to disclose that he had received more than $100,000 from Botfly prior to the filing of his bankruptcy petition. The indictment also alleges that Hammill made additional materially false statements and omissions in his sworn bankruptcy petition. Hammill allegedly failed to list in his petition his ownership of a Florida shell corporation, Jon J. Hammill P.A., when he was required to do so, and falsely stated that his work for that corporation had ended in 2006. Hammill also failed to disclose his relationship with Botfly. According to the indictment, from February 2008 to April 2010, Hamill and his corporation received approximately $1.5 million from Botfly. These funds were proceeds of investments by Hammill with Botfly and compensation for work which Hammill and his corporation performed on behalf of Botfly.
The president of Botfly, David R. Lewalski, has been charged in a superseding indictment with mail and wire fraud for his participation in a foreign currency investment fraud scheme that he allegedly perpetrated through Botfly.
An indictment is merely a formal charge and the defendant is presumed innocent unless, and until, proven guilty.
This case is being prosecuted by Trial Attorney Glenn Chernigoff of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mandy Riedel of the Middle District of Florida. The case is being investigated by the U.S. Postal Inspection Service, the Florida Department of Law Enforcement and the Florida Office of Financial Regulation, with assistance from the Florida Office of the Attorney General. The Office of the U.S. Trustee in Tampa, Fla., also provided substantial assistance.
Today’s charges are part of efforts under way by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov .
Department of Justice, Federal Trade Commission Seek Public Comment on Proposed Statement of Antitrust Enforcement Regarding Accountable Care OrganizationsRead the Press Release
WASHINGTON – The Department of Justice and the Federal Trade Commission (FTC) today issued a joint statement about how the agencies will enforce U.S. antitrust laws in regard to new Accountable Care Organizations (ACOs) – groups of health care providers that will collaborate under the new Affordable Care Act of 2010 to improve health care quality and reduce costs.
The joint proposed policy statement solicits public comment on the antitrust agencies’ proposed guidance to ensure that newly formed ACOs can innovate to serve Medicare beneficiaries and patients with private health insurance, without raising competitive concerns. The proposed policy statement would create an antitrust “safety zone” for certain ACOs and establish an expedited antitrust review process for others.
“Providing Americans with quality health care at affordable prices has been and will continue to be a priority for this administration, and the intergovernmental effort on providing guidance to ACOs enhances these goals,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The Antitrust Division supports innovative, collaborative and cost saving efforts – that comply with the antitrust laws – to improve health care and reduce costs to all Americans.”
The department vigorously enforces the antitrust laws in the health care sector. Over the past 20 years, the department has conducted more than 60 substantial investigations into the conduct of health insurance plans, hospitals and physicians. These investigations have resulted in a number of enforcement actions, including successful challenges to health plan and hospital mergers and physician boycotts. These actions have protected consumers from anticompetitive conduct, resulting in lower prices for and higher quality of health care services. The department has also provided the industry with substantial guidance. In 1996, the department and the FTC issued joint Statements of Antitrust Enforcement Policy in Health Care. Also, over the past two decades, the department has issued more than 62 business review letters that responded to inquiries from industry participants about the antitrust issues involved in many different types of practices.
The Affordable Care Act of 2010 encourages health care providers to form integrated organizations to jointly offer services in order to reduce costs and improve the quality of patient care in the United States. The goal of these joint provider organizations – ACOs – is to better coordinate care, leading to efficiencies and cost savings for consumers. Under the act, ACOs will serve fee-for-service Medicare beneficiaries through Medicare’s Shared Savings Program and must sign up with the Department of Health and Human Services’ Centers for Medicare and Medicaid Services (CMS) to participate in the program for at least three years.
The department and the FTC recognize that ACOs may generate opportunities for health care providers to innovate in both the Medicare and commercial markets to achieve the cost savings Congress intended when establishing the Shared Savings Program. At the same time, however, the agencies also understand that collaborations among otherwise independent health care providers – as will occur through the formation of ACOs – may raise competitive concerns. The department and the FTC have developed jointly the proposed antitrust policy statement to coordinate competition analysis with CMS’s review of ACO applications, to ensure the newly formed organizations do not lead to reduced competition and higher prices for consumers.
The joint policy statement is intended to ensure that health care providers have the antitrust guidance they need to form procompetitive ACOs. It describes: the ACOs to which it will apply; when the department and the FTC will apply particular antitrust analysis to those ACOs; an antitrust safety zone for certain ACOs; an expedited CMS-mandated antitrust review process for other ACOs; and options for ACOs to gain additional antitrust clarity if they fall outside the safety zone but below the CMS-mandated antitrust review trigger, including expedited antitrust review.
The department and the FTC have committed to complete the expedited review within 90 days of receiving the required documents and information from the ACO. The department and the FTC will establish a joint ACO Working Group to collaborate and discuss issues arising out of ACO reviews. This process will allow ACOs to rely on the expertise of both agencies and will ensure efficient, cooperative and expeditious reviews.
In addition, the joint policy statement identifies five types of conduct that an ACO can avoid to reduce significantly the likelihood of antitrust concern.
The department and the FTC are accepting public comment on the proposed policy statement through May 31, 2011. The agencies are seeking comments from health care providers, payers, consumers, antitrust practitioners and other stakeholders on issues including:
– Whether and, if so, why the guidance in the proposed policy statement should be changed;
– Whether other data sources exist that ACO applicants could use to determine relevant primary service area (PSA) shares for: physician services rarely used by Medicare beneficiaries (e.g., pediatrics, obstetrics); and inpatient hospital services located in states where all-payer hospital discharge data are unavailable; and
– Whether providing the documents and information required to obtain an expedited antitrust review will present an undue burden on ACO applicants.
Comments can be submitted electronically at www.ftc.gov/os/publiccomments.shtm. The Federal Register notice announcing the proposed policy statement contains information on submitting comments via mail and can be found at www.ftc.gov/opp/aco/. The proposed policy statement is available at www.justice.gov/atr/public/guidelines/269155.pdf.
Department of Justice and Federal Trade Commission Sign Antitrust Cooperation Agreement with ChileRead the Press Release
WASHINGTON – Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division, today signed an antitrust cooperation agreement with the Chilean antitrust agency on behalf of the Department of Justice. The agreement also was signed by Federal Trade Commission Chairman Jon Leibowitz and Felipe Irarrázabal, Chile’s National Economic Prosecutor. The agreement will enable the antitrust agencies in the two countries to improve their law enforcement relationship.
The new agreement contains provisions for antitrust enforcement cooperation and coordination, conflict avoidance and consultations with respect to enforcement actions, and technical cooperation and is subject to effective confidentiality protections.
The U.S. antitrust agencies and Chile’s Office of the National Economic Prosecutor, the agency that enforces Chile’s competition law, have steadily improved their ties, both bilaterally and under the terms of the U.S.-Chile Free Trade Agreement.
“This new agreement is a significant step in developing a close relationship between the antitrust agencies of the United States and Chile. It is an important tool that will be used to protect consumers in both countries,” said Assistant Attorney General Varney. “Together, the provisions in the agreement provide a sound basis for enhanced cooperation on a day-to-day basis, while minimizing possible conflicts between the two nations’ antitrust enforcement activities. We look forward to working more closely with our Chilean colleagues at a time when sound antitrust enforcement is a high priority in both the United States and Chile.”
“Chile has one of the most advanced antitrust systems in Latin America,” said FTC Chairman Jon Leibowitz. “They are natural partners for us, and I’m pleased that we can formalize and strengthen the great relationship we have with them.”
Highlights of the new agreement include:
- Mutual acknowledgment of the importance of antitrust cooperation, including information sharing and possible coordination of enforcement actions when pursuing enforcement activities with regard to related matters;
- Agreement to take each others’ important interests into account in order to minimize possible conflicts arising out of antitrust enforcement actions; and
- Agreement to maintain the confidentiality of any sensitive information provided by the other party.
The agreement signed today does not change existing law in either country. Chile has had a law dedicated to the preservation of competition since 1973. This cooperation agreement is similar in substance to those previously signed by the U.S. antitrust agencies with Brazil, Canada, the European Union (EU), Israel, Japan and Mexico.
Colombian Narcotics Trafficker Pleads Guilty to Conspiracy to Import Hundreds of Kilograms of Cocaine into the United StatesRead the Press Release
WASHINGTON – Colombian drug trafficker Carlos Ojeda-Herrera pleaded guilty today before U.S. District Judge Ellen S. Huvelle in the District of Columbia to conspiring and attempting to transport shipments of 700- 800 kilograms of cocaine from Isla de Margarita, off the coast of Venezuela, to vessels waiting on the high seas to transport the drugs to Florida, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division.
According to court documents, Ojeda-Herrera was unaware that the transportation organization he hired to import the cocaine was actually a Drug Enforcement Administration (DEA) undercover crew representing themselves to be drug traffickers. Co-defendant Julio Ramirez pleaded guilty on March 25, 2011, to conspiracy for his role in the scheme.
Ojeda-Herrera and Ramirez were charged on Aug. 12, 2004, in a superseding indictment with conspiracy to distribute and possess with intent to distribute cocaine and heroin, knowing and intending that the drugs would be imported into the United States. Ojeda-Herrera was also charged with attempted distribution of five kilograms or more of cocaine, knowing and intending that the drugs would be imported into the United States.
According to court documents, between January 2001 and February 2002, confidential sources and undercover DEA agents posed as a boat crew willing to transport loads of cocaine from international waters off the coast of Venezuela into the United States. This undercover DEA crew was hired by the Ojeda-Herrera organization to transport 700-800 kilogram loads of cocaine from Isla de Margarita to the United States. On Feb. 8, 2001, a boat sent by Ojeda-Herrera to deliver approximately 700-800 kilograms of cocaine to the DEA undercover boat encountered a storm at sea and capsized off the coast of Isla de Margarita.
Arrangements for the delivery of cocaine to the undercover DEA crew continued through March 2002. According to court documents, due to losses of cocaine suffered by the organization in Colombia, however, Ojeda-Herrera temporarily suspended attempts to deliver cocaine to the DEA undercover crew. Instead, the organization began transporting small shipments of cocaine and heroin to Puerto Rico in order to earn enough money to pay the organization’s narcotics-related debts.
On May 22, 2002, a member of the Ojeda-Herrera organization was arrested in San Juan, Puerto Rico, after delivering approximately 18 kilograms of heroin to undercover DEA agents. At the direction of Ojeda-Herrera, a boat captain based on Margarita Island had smuggled approximately 40 kilograms of heroin into Puerto Rico concealed inside of fully operating diesel batteries aboard a sailboat.
According to the plea agreement, Ojeda-Herrera is to be sentenced to 17 years in prison to be followed by five years of supervised release. Ramirez and Ojeda-Herrera are subject to a minimum mandatory sentence of 10 years in prison. The guilty pleas were provisionally accepted by the court, subject to the preparation of pre-sentence investigation reports for each defendant.
The sentencing hearing for Ojeda-Herrera is scheduled for June 16, 2011, at 1:45 p.m. Ramirez’s sentencing is scheduled for June 7, 2011, at 9:15 a.m. Both hearings will be held before Judge Huvelle.
The case was prosecuted by Trial Attorneys Mark Maldonado, Tritia L. Yuen and Stephen May of the Criminal Division’s Narcotic and Dangerous Drug Section. The investigation was led by the DEA Bilateral Case Group, the DEA Orlando District Office and the Florida Department of Law Enforcement.
Alleged Aryan Brotherhood Members <br /> Charged for Roles in Jefferson County, Texas, ShootingRead the Press Release
WASHINGTON - Two alleged members and associates of the Aryan Brotherhood of Texas (ABT) were arraigned today on charges related to their alleged roles in the 2009 shooting of a man in Jefferson County, Texas, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney John M. Bales of the Eastern District of Texas.
The indictment, returned by a federal grand jury on Mar. 17, 2011, and unsealed today, charges Joshua Mark Bodine, aka “Desperado,” 31, of Vidor, Texas, and John Oliver Manning, aka “Fish,” 59, of Pasadena, Texas, with violent crimes in aid of racketeering activity. The alleged activities include conspiracy to assault, assault, using and carrying a firearm during a crime of violence, possession of a firearm after a felony conviction, possession of a stolen firearm, possession with intent to distribute a controlled substance, and possession of a firearm in furtherance of a drug trafficking crime. The defendants have been in custody since their arrest in March 2011 on charges contained in a criminal complaint.
According to the indictment, the ABT is a powerful race-based, state-wide organization that operates inside and outside of state and federal prisons throughout Texas and the United States. The ABT was established in the early 1980s within the Texas prison system. It modeled itself after and adopted many of the precepts and writings of the Aryan Brotherhood, a California-based prison gang that was formed in the California prison system during the 1960s. According to the indictment, previously, the ABT was primarily concerned with the protection of white inmates and white supremacy/separatism. Over time, the ABT expanded its focus to create a criminal enterprise that includes illegal activities for profit.
According to the indictment, the ABT enforces its rules and promotes discipline among its members, prospects and associates through murder, attempted murder, conspiracy to murder, assault, robbery and threats against those who violate the rules or pose a threat to the enterprise. Members, and oftentimes associates, are required to follow the orders of higher-ranking members, often referred to as “direct orders.”
The indictment alleges that on Sep. 7, 2009, Manning shot and wounded ABT associate Matthew Fails in Nederland, Texas, on the orders of Bodine. It is alleged that the order was given because of Fails’ outstanding drug debt.
Bodine and Manning appeared before U.S. Magistrate Judge Earl S. Hines today for arraignment. If convicted, they each face up to life in prison.
This case is being prosecuted by the U.S. Attorney’s Office for the Eastern District of Texas and the Criminal Division’s Gang Unit. The case is being investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives.
An indictment is merely an accusation and defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
30 March 2011
U.S. Government Offers up to $5 Million Reward for Information Regarding Shootings of Two Ice AgentsRead the Press Release
WASHINGTON - The Departments of Justice, State and Homeland Security today jointly announced a reward of up to $5 million for information leading to the arrest and/or conviction of individuals allegedly responsible for the murder of U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) Special Agent Jaime Zapata and the attempted murder of ICE HSI Special Agent Victor Avila.
The FBI, in conjunction with ICE, has established a 24-hour tip line based in the United States to process the information. Individuals in the United States with information are encouraged to call 1-866-859-9778. Individuals in Mexico can provide information by calling +001 800-225-5324. Spanish language speakers will be available using either number. Anyone wishing to email information can do so by visiting: https://tips.fbi.gov . All information is considered confidential.
Also today the Government of Mexico announced a reward of up to 10 million pesos for information leading to the arrest of individuals allegedly responsible for the murder and attempted murder. Individuals can call (55) 53-46-15-44 and (55) 53-46-00-00, extension 4748 in Mexico City. Outside of Mexico City, individuals can call 01-800-831-31-96 to provide information. Information may also be sent to the following email address: [email protected]. More information about the Government of Mexico’s award can be found at www.recompensas.gob.mx.
Zapata and Avila were ambushed in Mexico on Feb. 15, 2011, as they were traveling in their U.S. government-issued vehicle from the state of San Luis Potosi to Mexico City. Mexican authorities have detained several individuals in connection with this incident and the investigation continues at this time.
The U.S. reward is being offered by the U.S. government through the U.S. Department of State’s Narcotics Rewards Program, which was established by Congress in 1986. Additional information on this program can be found at: www.state.gov/p/inl/narc/rewards/index.htm .
Massachusetts Man Indicted on Child Pornography ChargesRead the Press Release
WASHINGTON – Donald F. Slason, 57, of Dedham, Mass., was arrested today on child pornography charges, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney for the District of Massachusetts Carmen M. Ortiz and Bruce M. Foucart, Special Agent in Charge of Homeland Security Investigations (HSI) of the Department of Homeland Security in Boston.
Slason was arrested on an indictment filed under seal in the District of Massachusetts on March 23, 2011, and unsealed today, which charges him with one count of transportation of child pornography and one count of possession of child pornography.
The penalty for transportation of child pornography is a mandatory minimum of five years in prison and a maximum of 20 years in prison. Possession of child pornography carries a maximum of 10 years in prison.
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 Slason was investigated by HSI and the Dedham Police Department. The case is being 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 details contained in the indictment are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
Former Employee of Charlotte, North Carolina-Based Bank Pleads Guilty for His Role in Falsifying Bank Records Involving Proceeds of Municipal BondsRead the Press Release
WASHINGTON — A former bank employee pleaded guilty today for his participation in a conspiracy related to contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.
According to charges filed today in U.S. District Court in New York City, Brian Scott Zwerner, a resident of Atlanta, engaged in a conspiracy to falsify bank records related to the marketing profits for a type of contract, known as an investment agreement, and other municipal finance contracts, including derivative contracts. Public entities throughout the United States, such as state, county and local governments and agencies, invested the proceeds of bonds issued in these contracts. According to the plea agreement, Zwerner has agreed to cooperate with the department’s ongoing investigation.
“Today’s guilty plea demonstrates the Antitrust Division’s commitment to vigorously pursue and prosecute crimes in the financial services industry that harm competition,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.
According to the court document, the Charlotte, N.C.-based bank that employed Zwerner was a provider of investment agreements and other municipal finance contracts to public entities. Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issued, to raise money for, among other things, public projects. Public entities typically hire a broker to conduct a competitive bidding process for the award of the investment agreements. Competitive bidding for these agreements is the subject of regulations issued by the Department of the Treasury and is related to the tax-exempt status of the bonds
The department said in the court document that Zwerner was the manager of the Municipal Derivatives Trading Desk at the bank. According to the court document, Zwerner engaged in the conspiracy from at least as early as January 1999 until approximately May 2002. Among other objectives, Zwerner and co-conspirators falsified bank records related to marketing profits so that the bank could pay kickbacks to brokers, including Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products, a Beverly Hills, Calif.-based financial products and services firm. Specifically, Zwerner understated the marketing profits on trade tickets for certain investment agreements or other municipal finance contracts so that money could be held back and accumulated in an off-the-books account in order to pay the kickbacks. According to the court document, trade tickets are reports that record the essential terms of investment agreements. The department said that the kickbacks were in exchange for brokers, including CDR, manipulating the competitive bidding process so that the bank would be the winning bidder for certain investment agreements and other municipal finance contracts.
The false bank records conspiracy for which Zwerner is charged carries a maximum penalty of five years in prison and a $250,000 fine. The maximum fine for this offense 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.
This is the ninth guilty plea to arise from an ongoing investigation into the municipal bonds industry, which is being conducted by the Antitrust Division’s New York and Cleveland Field Offices, the FBI and Internal Revenue Service-Criminal Investigation. The department is coordinating its investigation with the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.
Three former employees of CDR have pleaded guilty to bid-rigging and fraud conspiracies in relation to the ongoing investigation. Five other individuals have pleaded guilty to charges related to the ongoing investigation. In October 2009, CDR, two of its employees and one former employee were charged for participating in bid-rigging and fraud conspiracies and related crimes. The CDR trial is scheduled to begin on Jan. 9, 2012. In addition, six other former executives at financial service companies or financial institutions have been indicted as a result of this investigation and are awaiting trial.
Today’s guilty plea is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.
Anyone with information concerning bid rigging and related offenses in any financial markets should contact the Antitrust Division’s New York Field Office at 212-264-0390 or the FBI at 212-384-5000, or visit www.justice.gov/atr/contact/newcase.htm.
Alabama Sisters Indicted for Tax Fraud and Identity TheftRead the Press Release
MONTGOMERY, Ala. – Loretta and Tracey Fergerson were indicted by a federal grand jury in the Middle District of Alabama on a variety of charges stemming from an identity theft and tax fraud conspiracy, the Justice Department and the Internal Revenue Service (IRS) announced today. The sisters were charged in a 22-count indictment that was returned on March 23, 2011, and unsealed Tuesday.
The Fergerson sisters were charged with conspiring to defraud the United States, filing false claims, wire fraud and aggravated identity theft. According to the indictment, Loretta Fergerson operated Fast Tax Cash, a tax return preparation business in Montgomery, Ala., from January 2005 to February 2008. The defendants’ conspiracy spanned over one year and involved using stolen identities to file tax returns claiming fraudulent refunds.
The indictment alleges that Tracey Fergerson unlawfully obtained the names and Social Security numbers of individuals. Loretta Fergerson would then electronically file false tax returns using the names and Social Security numbers Tracey provided. Loretta was then able to apply for and obtain refund anticipation loans from banks based on the false tax returns.
An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Loretta and Tracey Fergerson each face a maximum of 129 years in prison.
IRS-Criminal Investigation agents investigated this case, and Justice Department Tax Division Trial Attorneys Charles M. Edgar Jr. and Michael Boteler are prosecuting the case.
More information about the Justice Department’s Tax Division and its enforcement efforts is available at www.usdoj.gov/tax/.
29 March 2011
Virginia Man Pleads Guilty to Child Pornography ChargesRead the Press Release
WASHINGTON – An Orange County, Va., man pleaded guilty yesterday in U.S. District Court for the Western District of Virginia to child pornography charges that originated in three different districts.
The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney Timothy J. Heaphy of the Western District of Virginia, U.S. Attorney Neil H. MacBride of the Eastern District of Virginia and U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.
Anthony C. Jeffries, 24, pleaded guilty to one count of distributing child pornography and one count of possessing child pornography on charges contained in an indictment filed in the Western District of Virginia. In addition, Jeffries pleaded guilty to two separate one-count criminal informations originally filed in the Eastern District of Virginia and the Southern District of Florida charging him with distributing child pornography.
According to information presented in court, Jeffries assisted in running an online forum from his Orange County home that was dedicated to posting pictures and chatting about young girls. The defendant was responsible for one-fourth of the images available on the forum.
In February 2010, undercover FBI agents working in Richmond, Va., and Miami logged onto a peer-to-peer file sharing network and downloaded numerous images of child pornography from Jeffries. In June 2010, a search warrant was obtained and computer equipment was seized from the defendant’s Virginia home. A forensic examination of that equipment revealed thousands of image files, including images of young children engaged in sexual acts with adults.
At sentencing, Jeffries faces a maximum penalty of between five and 20 years in prison for each distribution count and 10 years for each possession count.
The investigation of the case was conducted by the Orange County Sheriff’s Office, the FBI, the Charlottesville Police Department, the University of Virginia Police Department and the High Technology Unit of the Criminal Division’s Child Exploitation and Obscenity Section (CEOS).
Assistant U.S. Attorney Nancy Healey, Trial Attorney Chantel Febus with the Criminal Division’s CEOS and Special Assistant U.S. Attorney Richard Moore are prosecuting the case for the Western District of Virginia. Elizabeth Wu is prosecuting the case for the Eastern District of Virginia and Scott Edenfield is prosecuting the case for the Southern District of Florida.
United States and European Union Launch Formal Negotiations for an Agreement to Protect Personal Information Exchanged in the Context of Fighting Crime and TerrorismRead the Press Release
The following is a joint statement on behalf of the United States and the European Union:
On March 28, 2011, the European Union and the United States opened negotiations on an agreement to protect personal information exchanged in the context of fighting crime and terrorism. The negotiations will build on our long-standing, robust cooperation and agreements in this area. The United States and the European Union are committed to ensuring a high level of protection of personal information, while fighting crime and terrorism. The United States and the European Union are strongly determined to reach, without delay, an agreement that will advance our mutual goals.
U.S. Parole Commission Denies Gargano Application for Mandatory ParoleRead the Press Release
Chevy Chase, MD – On March 25, 2011, the United States Parole Commission denied parole to Henry Gargano, announced Commission Chairman Isaac Fulwood, Jr.
Gargano, who has been incarcerated for 43⅓ years on his current 204-year sentence, applied for release under Section 4206(d) of Title 18. That statute generally requires the Commission to release a prisoner who has served two-thirds or 30 years – whichever is less – on each sentence imposed against him, unless the Commission determines that the prisoner has seriously or frequently violated institution rules or that there is a reasonable probability that the prisoner will commit more crimes.
Gargano was convicted of murder while engaging in an October 27, 1967 bank robbery in Northlake, Illinois. Two police officers died and two others were wounded during that offense. On July 16, 1968, Gargano was sentenced to 199 years for the crime.
In October 10, 1975, he and several other inmates escaped from the federal penitentiary in Marion, Illinois. Before being recaptured, the escapees broke into a private home, tied up the occupants, and stole their car and firearms. Gargano was sentenced to another five years’ imprisonment for the escape. In addition to his actual escape, Gargano also attempted escape on several occasions including the day he was sentenced in 1968, when he was found in possession of a loaded pistol.
Gargano also has over ten years left to serve on his sentences for two prior offenses, a 1956 bank robbery and a 1964 escape. He was on parole from those sentences at the time he committed the 1967 bank robbery.
Chairman Fulwood noted, “As always, public safety is the Commission’s paramount concern. Mr. Gargano’s prison record, on top of his lack of remorse for the crimes that led to his imprisonment, showed that his release would be incompatible with public safety and that he must be denied parole under the statutory standard.”
For more information, please call Johanna Markind at (301) 492-5821 ext. 238.
San Diego Used Car Wholesaler Pleads Guilty to Tax EvasionRead the Press Release
WASHINGTON – Mohammad Jafar Nikbakht, aka Freydoon Nikbakht, pleaded guilty to tax evasion before U.S. District Court Judge John A. Houston in San Diego, the Justice Department and Internal Revenue Service (IRS) announced today. According to the indictment and other documents filed with the court, Nikbakht ran a series of lucrative auto dealerships in the greater San Diego area. Between 1998 and 2007, Nikbakht significantly under-reported income earned from these businesses. The government claims that Nikbakht defrauded the U.S. Treasury of more than $400,000 in income tax revenue through the course of these years.
According to indictment and other documents filed with the court, Nikbakht pleaded guilty to tax evasion for the year 2007. Nikbakht admitted that during that year he earned income through auto dealership operations, including through a dealership called Southern California Car Exchange. Nikbakht further admitted that he willfully failed to file his personal tax return and pay his taxes, and that he engaged in various acts to conceal income from the IRS. For example, Nikbakht admitted that he ran an auto wholesale operation under another dealer’s license and that he instructed the other dealer to write his income payment checks to the order of a third-party or to “cash”.
The government contends that even at his plea hearing, Nikbakht only admitted to a fraction of his misconduct. Additional evidence concerning Nikbakht’s 2007 tax evasion and his alleged tax crimes for prior years as well as allegations that Nikbakht obstructed justice in the tax investigation, will be presented before Judge Houston at a preliminary sentencing hearing scheduled for April 12, 2011.
Nikbakht faces up to five years in prison. In addition, the government is seeking a fine of at least $250,000 and an order requiring Nikbakht to pay full restitution to the IRS as well as the costs of his prosecution.
More information about the Justice Department’s Tax Division and its enforcement efforts is available at www.usdoj.gov/tax/.
Nebraska Man Pleads Guilty and Is Sentenced to 102 Months in Prison for Engaging in a Child Exploitation EnterpriseRead the Press Release
WASHINGTON – Brandon Miller, 23, of Omaha, Neb., was sentenced today to 102 monthsin prison and a lifetime of supervised release after pleading guilty to engaging in a child exploitation enterprise announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney for the Western District of Pennsylvania David J. Hickton, and Homeland Security Investigations (HSI) Special Agent in Charge John Kelleghan.
Before sentencing, Miller pleaded guilty to one count of engaging in a child exploitation enterprise before U.S. District Court Judge Arthur A. Schwab in Pittsburgh. According to court documents and proceedings, Miller and others distributed images and videos of children being sexually abused to other members of an international group that had restricted membership and was formed on a social networking website. Members of the group distributed to one another thousands of sexually explicit images and videos of children, many of which graphically depicted prepubescent, male children, including some infants, being sexually abused and sometimes sodomized or subjected to bondage.
Seven co-defendants have previously pleaded guilty as a result of this investigation. Six have been sentenced to prison and the seventh co-defendant is scheduled to be sentenced in May 2011.
This case was investigated by HSI and the High Technology Investigative Unit of the Criminal Division’s Child Exploitation and Obscenity Section (CEOS). Assistant U.S. Attorney Craig W. Haller and CEOS Trial Attorney Andrew McCormack prosecuted the case.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and CEOS, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov
Los Angeles Woman Pleads Guilty to Participating in a Medicare Fraud Scheme Using Fraudulent Medical Clinics and Stolen Doctor Identities to Defraud Medicare of More Than $6.2 MillionRead the Press Release
WASHINGTON— A Los Angeles woman has pleaded guilty to using fraudulent medical clinics and the stolen identities of physicians to defraud Medicare of more than $6.2 million, the Departments of Justice and Health and Human Services (HHS) announced.
Carolyn Ann Vasquez, 46, pleaded guilty yesterday before U.S. District Judge Terry J. Hatter Jr. in the Central District of California. Vasquez admitted that from 2007 to 2008, she conspired with others to use a series of fraudulent Los Angeles-area medical clinics to defraud Medicare. Vasquez admitted that her co-conspirators used the identities and Medicare provider numbers of physicians who both worked and did not work at the clinics to submit false claims to Medicare for reimbursement for services the physicians did not perform and for power wheelchairs, medical equipment and diagnostic tests that the physicians did not order or prescribe. According to court documents, physician assistants recruited to work at the clinics by Vasquez and working at her direction performed these services and prescribed and ordered the wheelchairs, medical equipment and diagnostic tests.
According to court documents, Vasquez told the physicians she recruited that they would be the medical directors of the clinics, but that if they did not want to work full time, the clinics would hire physician assistants. Vasquez assisted the physicians in obtaining Medicare provider numbers and entering into management agreements that gave Vasquez’s co-conspirators authority to operate and manage the clinics in exchange for 75 percent of the reimbursement payments the physicians received from Medicare.
According to court documents, Vasquez’s involvement in the recruitment of the physicians gave her access to their personal and Medicare information, which Vasquez stole to further the fraud scheme at the medical clinics. Vasquez admitted that in approximately 2007, a physician contacted her about a job at one of the fraudulent medical clinics, but the physician decided not to accept the job. Nevertheless, Vasquez’s co-conspirators printed prescription pads with the physician’s name and Medicare provider number on them. Vasquez admitted that she instructed a physician assistant working at one of the fraudulent medical clinics to use the prescription pads to write fraudulent prescriptions and medical documentation for diagnostic tests, power wheelchairs and other medical equipment in the physician’s name even through Vasquez knew that the physician did not work at the clinic. Vasquez admitted that as a result of her conduct, Medicare was defrauded of approximately $6,268,899.
At sentencing, scheduled for July 11, 2011, Vasquez faces a maximum penalty of 10 years in prison and a $250,000 fine.
According to information contained in court documents in this case, Vasquez pleaded guilty in 1993 to participating in a health care fraud scheme. According to court documents, Vasquez and others used telemarketing or "boiler room" schemes to defraud government-funded health care benefit programs of approximately $41 million.
The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney André Birotte Jr. for the Central District of California; Tony Sidley, Assistant Chief of the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse; Glenn R. Ferry, Special Agent-in-Charge for the Los Angeles Region of the HHS Office of Inspector General (HHS-OIG); and Steven Martinez, Assistant Director in Charge of the FBI’s Los Angeles Field Office.
The case is being prosecuted by Trial Attorney Jonathan T. Baum of the Criminal Division’s Fraud Section. Former Special Trial Attorney Joseph Hudzik participated in the prosecution. The case is being investigated by the FBI.
The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.
Since their inception in March 2007, strike force operations in nine districts have charged 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 HEAT, go to: www.stopmedicarefraud.gov .
Justice Department Settles Americans with Disabilities Act Lawsuit with Virginia’s Inova Health SystemRead the Press Release
WASHINGTON – The Justice Department has reached a settlement with Inova Health System to ensure effective communication with individuals who are deaf or hard of hearing in the provision of medical services. The agreement, under the Americans with Disabilities Act (ADA) and the Rehabilitation Act, resolves a complaint that Inova failed to provide sign language interpreters to an expectant mother and others who are deaf and need interpreters to communicate effectively with health care providers.
The department’s lawsuit, filed yesterday with a consent decree in the U.S. District Court for the Eastern District of Virginia, alleged that Inova Health System violated the ADA and the Rehabilitation Act by failing to provide appropriate auxiliary aids and services, including sign language interpreter services, to deaf individuals at Inova Fairfax Hospital. Because of the hospital’s failure to provide sign language interpreter services, deaf individuals were denied the benefit of effective communication with hospital staff, the opportunity to effectively participate in medical treatment decisions, and the full benefit of health care services provided by Inova Fairfax Hospital, according to the complaint.
“The ADA protects the right of individuals who are deaf or hard of hearing to be able to access medical services, and this settlement is the latest example of the Justice Department’s unwavering commitment to enforcing the ADA,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “This settlement also demonstrates Inova Health System’s commitment to provide effective communication to people who are deaf or hard of hearing.”
“This settlement shows that Inova and the government share the same goal – making sure that deaf and hard of hearing patients can communicate with their doctors, especially at critical moments in their medical care,” said Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia.
The consent decree, which must be approved by the district court, requires Inova Health System to pay $95,000 to aggrieved individuals and a $25,000 civil penalty; provide training to hospital staff on the requirements of the ADA and the Rehabilitation Act; and adopt specific policies and procedures to ensure that auxiliary aids and services are promptly provided to patients or companions who are deaf or hard of hearing. Inova Health System has also separately agreed to pay a total of $25,000 to two other aggrieved individuals.
The ADA and Rehabilitation Act prohibit discrimination against individuals with disabilities by hospitals. Among other things, the ADA requires doctors, hospitals and other health care providers to provide equal access to patients and companions who are deaf or hard of hearing. When medical services involve important, lengthy or complex oral communications with patients or companions, hospitals are generally required to provide qualified sign language interpreters and other auxiliary aids, free of charge, to individuals who are deaf, are hard of hearing or have speech disabilities. The appropriate auxiliary aid to be provided depends on a variety of factors, including the nature, length and importance of the communication; the communication skills and knowledge of the individual who is deaf or hard of hearing; and the individual’s stated need for a particular type of auxiliary aid.
Those interested in finding out more about this settlement or hospitals’ effective communication obligations under the ADA may call the Justice Department’s toll-free ADA information Line at 800-514-0301 or 800-514-0383 (TDD), or access its ADA website atwww.ada.gov . ADA complaints may be filed by email to [email protected] .
Justice Department Reaches Settlement with Dean Foods CompanyRead the Press Release
WASHINGTON – The Department of Justice announced today that it has reached a settlement with Dean Foods Company that requires Dean to divest a significant milk processing plant in Waukesha, Wis., and related assets that it acquired from the Foremost Farms USA Cooperative, including the Golden Guernsey brand name. The proposed settlement also requires that Dean notify the department before it makes any future acquisition of milk processing plants for which the purchase price is more than $3 million. State attorneys general from Illinois, Michigan and Wisconsin joined in the department’s settlement. In addition, the attorney general for the state of Michigan filed a separate settlement to address competitive concerns regarding school milk in that state. The department said that the divestitures and settlement terms will restore competition in the sale of milk to schools, grocery stores, convenience stories and other retailers in Illinois, Michigan and Wisconsin.
The department’s Antitrust Division and state attorneys general from Illinois, Michigan and Wisconsin, filed a proposed settlement in U.S. District Court for the Eastern District of Wisconsin in Milwaukee. If approved by the court, the settlement would resolve the civil antitrust lawsuit filed by the department and the state attorneys general on Jan. 22, 2010, and would resolve the lawsuit’s competitive concerns.
“The proposed settlements restore competition so that school children and consumers in Illinois, Wisconsin and Michigan, will pay lower prices for their milk,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The divestiture of a significant milk processing plant and the provision that requires Dean to notify the department of future milk plant acquisitions will ensure that competition remains in this important industry.”
In April 2009, Dean acquired Foremost’s Consumer Products Division, including its dairy processing plants in Waukesha and De Pere, Wis. The department learned of the transaction, which was not required to be reported under the premerger notification law, shortly after it was completed. After investigating the acquisition, the department and the state attorneys general filed a lawsuit alleging that Dean’s acquisition would eliminate substantial competition between the two companies in the sale of milk to schools, grocery stores, convenience stores and other retailers, in Illinois, Michigan and Wisconsin.
Given its size, location and distribution network, the department determined that the divestiture of the Waukesha dairy plant addressed the competitive concerns in Illinois and Wisconsin. The Waukesha plant is an efficient dairy processing plant that can serve milk retailers and schools in Milwaukee, Green Bay and Chicago, with approximately 92 percent of the population affected by the merger living within the plant’s service area.
Dean is a Delaware corporation with its principal place of business in Dallas. It is one of the largest food and beverage producers in the United States, with revenues of approximately $12 billion in 2010. Dean’s Dairy Group is the country’s largest processor and distributor of milk and other dairy products.
Foremost Farms is a member-owned business association headquartered in Baraboo, Wis., owned by approximately 2,300 farmers located in seven states. In 2008, its Consumer Products Division had net sales of $233.7 million.
The proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register, as required by the Antitrust Procedures and Penalties Act. Any person may submit written comments regarding the proposed final judgment within 60 days of its publication to Joshua H. Soven, Chief, Litigation I Section, Antitrust Division, U.S. Department of Justice, 450 5th Street, N.W., Suite 4100, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the Final Judgment upon a finding that it serves the public interest.
Federal Court Shuts Down Three Alabama Tax PreparersRead the Press Release
WASHINGTON - A federal court has permanently barred John Lewis, Artels James and Perry Wright from preparing federal tax returns for others, the Justice Department announced today. The civil injunction order was entered by U.S. Judge Virginia Emerson Hopkins for the Northern District of Alabama.
The court found that the three men, working under the trade name “Tax World” in Birmingham, Ala., regularly and repeatedly prepared federal tax returns using at least one of three schemes to generate erroneously large tax refunds for their customers. According to the court, in two of the schemes they prepared tax returns with false or overstated claims for the earned income tax credit, and in the third scheme they created fictitious business deductions that falsely reduced their customers’ tax liabilities. The court also found that Lewis, James and Wright failed to identify themselves properly on the returns they prepared under the “Tax World” business name.
The court ordered Lewis, James and Wright to present a copy of the injunction order to each of their customers since Jan. 1, 2008, and to produce a list of their customers to the government. The court also stated that a failure to obey the order may be punished by criminal contempt.
In the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions to stop tax fraud promoters and preparers of false tax returns. Information about these cases is available on the Justice Department website: www.justice.gov/tax/taxpress2011.htm.
FDA Chemist and Son Charged with Trading on Inside InformationRead the Press Release
WASHINGTON – A Food and Drug Administration (FDA) chemist and his son were arrested in Maryland today in connection with an alleged $2.27 million insider trading scheme, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney for the District of Maryland Rod J. Rosenstein; James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office; and Elton Malone, Special Agent in Charge, Department of Health and Human Services, Office of the Inspector General (HHS-OIG), Office of Investigations, Specials Investigations Branch.
A criminal complaint unsealed today in the District of Maryland charges Cheng Yi Liang, 57, and his son, Andrew Liang, 25, both residents of Gaithersburg, Md., with conspiracy to commit securities and wire fraud, securities fraud and wire fraud relating to their trading in the securities of five companies: Clinical Data Inc., Vanda Pharmaceuticals Inc., Progenics Pharmaceuticals Inc., Middlebrook Pharmaceuticals Inc. and Momenta Pharmaceuticals Inc. They were both arrested at their residence this morning and made their initial appearances in U.S. District Court in Greenbelt, Md. Law enforcement agents executed four search warrants today in connection with the investigation.
“Cheng Yi Liang was entrusted with privileged information to perform his job of ensuring the health and safety of his fellow citizens,” said Assistant Attorney General Breuer. “According to the complaint, he and his son repeatedly violated that trust to line their own pockets. Insider trading is an insidious crime. Together with our law enforcement partners, we will continue to root out corruption in our securities markets at every level. Our use of innovative investigative tools like the security software used in this case will provide an additional deterrent the next time someone sits in front of a computer and thinks about committing a crime.”
“It is unacceptable for any government employee to take confidential information and use it for personal gain,” said U.S. Attorney Rosenstein.
“Those in positions of trust, who have access to privileged and valuable information are expected to follow the law,” said Assistant Director in Charge McJunkin of the FBI’s Washington Field Office. “The charges today represent long hours and hard work by the Special Agents and investigators who are tasked with enforcing laws and regulations designed to ensure the fair operation of our financial markets.”
“Profiting based on sensitive, insider information – as Liang is charged with today – is not only illegal, but taints the image of thousands of hard-working government employees,” said Special Agent in Charge Malone of HHS-OIG Special Investigations Branch. “We will continue to insist that federal government employee conduct be held to the highest of standards.”
According to court documents, Cheng Yi Liang has been employed as a chemist since 1996 at the FDA’s Office of New Drug Quality Assessment (NDQA). Through his work at NDQA, Cheng Yi Liang had access to the FDA’s password protected internal tracking system for new drug applications, known as DARRTS. FDA utilizes DARRTS to manage, track, receive and report on new drug applications. The complaint alleges that by accessing DARRTS, and through other unauthorized means, Cheng Yi Liang was able to review confidential non-public documents or inside information, relating to whether and when certain drug applications would be approved.
The complaint alleges that from approximately November 2007 through March 2011, Cheng Yi Liang and Andrew Liang profited from the inside information by repeatedly trading in securities issued by companies with pending drug applications, allegedly reaping illicit profits of more than approximately $2.27million. According to court documents, the trading was executed in accounts held in the name of Andrew Liang, as well as several accounts in the names of four different nominees. The proceeds from the Liangs’ insider trading were then transferred to various bank and brokerage accounts benefitting the father and son.
According to the complaint, on Jan. 6, 2011, HHS-OIG installed software on Cheng Yi Liang’s work computer, allowing it to collect screen shots from that computer, which revealed Liang was accessing the secure DARRTS database to review information related to a pending drug application submitted by Clinical Data Inc. for an anti-depressant drug called Viibryd. In one instance on Jan. 18, 2011, the software captured information that showed Liang accessed the database and reviewed an internal FDA document recommending approval of Viibryd. The complaint alleges that within minutes, several accounts controlled by Liang and his son purchased 4,875 shares of Clinical Data. Altogether, the defendants, through various accounts which they controlled, acquired 48,875 shares of Clinical Data before Viibryd’s approval was announced on Jan. 21, 2011, and subsequently sold their entire position for a profit of more than $379,000.
The complaint also alleges that Cheng Yi Liang and Andrew Liang traded in advance of a May 6, 2009, announcement by Vanda Pharmaceuticals Inc., that the FDA had approved its drug Fanapt. Utilizing Andrew Liang’s account and several nominee accounts, the Liangs allegedly made a nearly 800 percent profit, netting more than $1 million.
As described in the complaint, the defendants used the proceeds from the scheme to pay various personal expenses, including purchasing cars, paying for travel and paying credit cards bills.
The maximum penalty for conspiracy to commit securities and wire fraud is five years in prison and a fine of $250,000, or twice the gross gain from the offence. The maximum penalty for wire fraud is 20 years in prison and a fine of $250,000, or twice the gross gain from the offence. The maximum penalty for securities fraud is 20 years in prison and a fine of $5 million for each count.
A criminal complaint is merely an accusation, and a defendant is presumed innocent unless proven guilty in a court of law.
In a related action, the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS) filed a civil complaint in the District of Maryland for forfeiture of proceeds from and property involved in the insider trading scheme, specifically, seven brokerage accounts, two bank accounts and two pieces of real property. Also, the Securities and Exchange Commission (SEC) today filed a civil enforcement action against Cheng Yi Liang in the District of Maryland.
This case is being prosecuted by Trial Attorneys Kevin Muhlendorf and Thomas Hall of the Criminal Division’s Fraud Section, Assistant U.S. Attorney David Salem for the District of Maryland, and AFMLS Senior Trial Attorney Pamela J. Hicks. The case was investigated by the FBI’s Washington Field Office, the HHS-OIG and the Market Abuse Unit of the SEC’s Enforcement Division. The investigation is ongoing.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov .
California Man Convicted of Conspiracy and Violating the Clean Air Act by Improperly Handling AsbestosRead the Press Release
WASHINGTON – A Santa Clarita, Calif., resident was convicted today of five environmental charges related to the improper renovation of a San Fernando Valley, Calif., apartment complex – work that caused asbestos to be released into the complex and the surrounding community.
Following a two-week trial in U.S. District Court, Charles Yi, 45, was found guilty of five felony offenses, including conspiring to violate the Clean Air Act.
The jury also convicted Yi of failing to notify the Environmental Protection Agency (EPA) and the South Coast Air Quality Management District about a renovation containing asbestos, failing to provide a properly trained person during a renovation containing asbestos, failing to properly remove asbestos and failing to properly dispose of asbestos wastes.
Yi faces a maximum sentence of 25 years in federal prison when he is sentenced on June 6, 2011, by U.S. District Judge Percy Anderson.
Yi was the owner of the now-defunct Millennium Pacific Icon Group, which owned the Forest Glen apartment complex, a 204-unit complex in Winnetka, Calif., that was being converted into condominiums in 2006. Knowing that asbestos was present in the ceilings of apartments in the Forest Glen complex, Yi and his co-conspirators hired a group of workers who were not trained or certified to conduct asbestos abatements. The workers scraped the ceilings of the apartments without knowing about the asbestos and without wearing any protective gear. The illegal scraping resulted in the repeated release of asbestos-containing material throughout the apartment complex and the surrounding area because Santa Ana winds were blowing during the time of the illegal work. After the illegal asbestos abatement was shut down by an inspector from the South Coast Air Quality Management District, the asbestos was cleaned up at a cost of approximately $1.2 million.
“Mr. Yi knowingly violated federal laws that set standards for proper disposal of asbestos and placed the workers that he hired at an unacceptable risk of exposure,” said Assistant Attorney General Ignacia S. Moreno for the Environment and Natural Resources Division. “As this conviction shows, we will aggressively prosecute those who deliberately ignore the nation’s Clean Air Act.”
The federal Clean Air Act requires those who own or supervise the renovation of buildings that contain asbestos to adhere to certain established work practice standards. These standards were created to ensure the safe removal and disposal of the asbestos and the protection of workers.
“Exposure to asbestos can be fatal,” said Nick Torres, Special Agent in Charge of EPA’s criminal enforcement program in California. “The defendant knew his operation produced waste material that contained asbestos and, despite being told by inspectors to stop removing it, the illegal asbestos removal continued. Today’s conviction by a jury shows that the American people will not tolerate those who put illegal financial gain ahead of their obligation to obey the law.”
Previously in this case, two co-conspirators pleaded guilty.
John Bostick, 40, of Santa Clarita, who was the vice president of Millennium Pacific Icon Group, pleaded guilty on February 23, 2011, to conspiring to violate the Clean Air Act. Bostick, who faces a maximum sentence of five years in federal prison, is scheduled to be sentenced by Judge Anderson on May 2, 2011.
On June 14, 2010, Joseph Yoon, 33, of Studio City, Calif., who was the project manager on the Forest Glen conversion, pleaded guilty to conspiracy to violate the Clean Air Act. Yoon, who is scheduled to be sentenced by Judge Anderson on April 25, 2011, faces a maximum sentence of five years in federal prison.
The jury that convicted Yi on the five counts today also acquitted Yi of one count of failing to inspect for asbestos prior to conducting an asbestos renovation.
The case against Yi, Bostick and Yoon was investigated by the EPA’s Office of Criminal Enforcement, the California South Coast Air Quality Management District and the California Department of Toxic Substances Control. The case is being prosecuted by Assistant U.S. Attorney Bayron T. Gilchrist of the Environmental Crimes Section and Senior Trial Attorney David P. Kehoe of the U.S. Justice Department’s Environmental Crimes Section of the Environment and Natural Resources Division.
28 March 2011
Former Owner of Illinois Technology Company Pleads Guilty in Multi-State Scheme to Defraud the Federal E-Rate ProgramRead the Press Release
WASHINGTON – A former owner of an Illinois-based technology company has pleaded guilty to participating in a conspiracy to defraud the federal E-Rate program, the Department of Justice announced today. Tyrone Pipkin was originally charged in U.S. District Court in New Orleans on Nov. 18, 2010, for his role in the conspiracy to defraud the E-Rate program.
Pipkin, a former co-owner of Global Networking Technologies Inc. (GNT), pleaded guilty today in U.S. District Court in New Orleans to conspiring to defraud the E-Rate program by providing bribes and kickbacks to school officials in multiple states. The department said that 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. According to the court document, 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, Illinois and Louisiana. In return, those individuals ceded control of the E-Rate competitive bidding process to Pipkin and his co-conspirator, ultimately allowing them to ensure E-Rate contracts at these schools were awarded to their companies.
The schools and school districts affected by the conspiracy are: in Arkansas - Gould and Holly Grove public school districts; in Illinois - Antioch Center, Fairfield Center, Ingleside Center, St. Mary’s Center, Waukegan Center, Zion Center and Niles Terrace Center; and in Louisiana - All Saints School, St. Augustine High School, St. David School and St. Monica School.
The E-Rate program was created by Congress in the Telecommunications Act of 1996, and is administered by the Universal Service Administrative Company, under the oversight of the Federal Communications Commission (FCC). The program provides subsidies to economically disadvantaged schools and libraries. Depending on the financial needs of the applicant schools, the program pays 20 to 90 percent of the cost for Internet access and telecommunications services, as well as internal computer and communications networks.
As a result of the Antitrust Division’s investigation into fraud and anticompetitive conduct in the E-Rate program, including today’s plea, a total of seven companies and 22 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. Fifteen individuals have been sentenced to serve jail time.
Pipkin is charged with conspiracy, which carries a maximum penalty of five years in prison and a $250,000 criminal fine for individuals. 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 amount is greater than the statutory maximum fine.
The plea announced today 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.
Federal Court Shuts Down Missouri Tax Preparer Who Promoted Tax ScamRead the Press Release
WASHINGTON – A federal court has permanently barred Gerald A. Poynter II of Kansas City, Mo., from preparing federal tax returns for others and from promoting a fraudulent tax scam, the Justice Department announced today.
The court found that Poynter, who uses the business name “Jerry Love Ministries” prepares false Internal Revenue Service (IRS) forms to help his customers claim fraudulent tax refunds based on phony reporting of large income tax withholding. The court order states that Poynter’s scheme is a version of the repeatedly rejected “redemption” scheme used by tax defiers to evade tax obligations or obtain wrongful financial benefits. According to the court, proponents of that scheme claim that the U.S. government is in possession of money rightfully owned by taxpayers. The court found that Poynter told his customers that he could recover that money for them for a fee, and that he then generated fraudulent IRS forms to support false tax refund claims on their behalf.
According to the court, Poynter helped at least 165 customers make fraudulent refund claims totaling more than $64 million. The IRS catches the vast majority of false “redemption” claims, and civil and criminal penalties for taxpayers who file such claims can be severe.
The IRS recently advised taxpayers to beware of tax scams like return preparer fraud. In the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions against tax-fraud promoters and dishonest tax return preparers. Information about these cases is available on the Justice Department website .
California Man Pleads Guilty and Is Sentenced to 7 Years in Prison for Conspiracy to Distribute and Receive Child PornographyRead the Press Release
WASHINGTON – Paul Schwartz, 49, of Lathrop, Calif., was sentenced today to sevenyears in prison after pleading guilty to conspiracy to distribute and receive child pornography, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney for the Western District of Pennsylvania David J. Hickton, and Homeland Security Investigations (HSI) Special Agent in Charge John Kelleghan.
Before sentencing, Schwartz pleaded guilty to one count of conspiracy to distribute and receive child pornography before U.S. District Court Judge Arthur A. Schwab. According to court documents and proceedings, Schwartz and others distributed images and videos of children being sexually abused to other members of an international group that had restricted membership and was formed on a social networking website. Members of the group distributed to one another thousands of sexually explicit images and videos of children, many of which graphically depicted prepubescent, male children, including some infants, being sexually abused and sometimes sodomized or subjected to bondage.
This case was investigated by HSI and the High Technology Investigative Unit of the Criminal Division’s Child Exploitation and Obscenity Section (CEOS). Assistant U.S. Attorney Craig W. Haller and CEOS Trial Attorney Andrew McCormack prosecuted the case.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and CEOS, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov
25 March 2011
Two Russell County, Ala., Sheriff’s Detectives Indicted for Assaulting a Man in CustodyRead the Press Release
WASHINGTON – The Justice Department announced today the arrest of Russell County Sheriff’s Office Detectives Kirby Dollar, 37, and Timothy Watford, 42. A federal grand jury in Montgomery, Ala., returned an indictment on March 22, 2011, charging Dollar and Watford with civil rights offenses related to their assault of a man in custody on Nov. 26, 2010.
If convicted, the defendants face maximum penalties of 10 years in prison on the civil rights charges.
The charges set forth in an indictment are merely accusations and the defendants are presumed innocent until proven guilty.
The case is being investigated by the Mobile, Ala., Division of the FBI – Montgomery Office . The case is being prosecuted by Assistant U.S. Attorney Nathan D. Stump of the Middle District of Alabama and Civil Rights Division Trial Attorney Benjamin J. Hawk.
Statement of the Attorney General on the Retirement of Bureau of Prisons Director Harley LappinRead the Press Release
WASHINGTON – The Attorney General made the following statement today:
During my tenure as both Attorney General and Deputy Attorney General, it has been a privilege to work closely with Director Harley Lappin. For more than a quarter of a century, including eight years as Director, his service to the Bureau of Prisons has helped improve public safety, strengthen our corrections systems, and advance the Justice Department’s most critical goals.
Throughout his career, Director Lappin has lent his invaluable insights and expertise to address prison overcrowding and expand prisoner development and rehabilitation programs. He has worked tirelessly to provide people who have committed crimes with the job skills and educational opportunities necessary to make positive contributions once they reenter our communities. Despite growing demands and unprecedented public safety, national security, and budgetary challenges, he has consistently found ways to reduce costs and increase efficiency. In addition to acting as a sound steward of taxpayer dollars, he has also served as an example of integrity and professionalism.
I am grateful for Director Lappin’s wise counsel, as well as his dedication to the Justice Department. And I am certain that, for years to come, the Bureau of Prisons and the American people will continue to benefit from his enduring contributions.
Miami Doctor Sentenced to 24 Months in Prison for Role in $37 Million Medicare Fraud Scheme Involving Miami-Area Home Health AgenciesRead the Press Release
WASHINGTON – A Miami-area doctor, Fred Dweck, was sentenced to 24 months in prison today for his role in a wide-ranging Medicare fraud scheme involving several Miami-area home health agencies, the Departments of Justice and Health and Human Services (HHS) announced today.
U.S. District Judge Adalberto Jordan also sentenced Dweck to three years of supervised release following his prison term and ordered him to pay $22 million in restitution jointly and severally with his co-defendants and co-conspirators in a related case. The restitution is to be paid to the victim in this case, the Centers for Medicare and Medicaid Services (CMS).
According to court documents, Dr. Dweck was the physician at Courtesy Medical Group, a Miami medical clinic that purported to provide health care services to Miami-area residents. The clinic was at various times owned by two of Dweck’s co-defendants, Auturo Fonseca and Yudel Cayro. At his plea hearing, Dweck admitted that while employed at the clinic, he wrote hundreds of prescriptions and signed hundreds of plans of care and medical certifications for Medicare beneficiaries to receive purported home health services. These services included twice or three-times daily skilled nursing visits to provide diabetic insulin injections. Dweck admitted that, in fact, these Medicare beneficiaries were able to care for themselves and did not actually need or qualify for the expensive home health services. Dweck also admitted to having prescribed unnecessary physical therapy services for many of the same Medicare beneficiaries.
According to court documents, the owners of Courtesy Medical Group would solicit and accept bribes and kickbacks from patient recruiters and the owners of Miami-area home health agencies in return for providing the bogus prescriptions signed by Dweck. Those prescriptions would then be used by dozens of Miami-area home health agencies to fraudulently bill the Medicare program for millions of dollars in unnecessary services.
Dweck admitted that in total, from about August 2006 through December 2009, he referred approximately 858 patients through Courtesy Medical Group and other Miami-area clinics for these unnecessary home health and therapy services, resulting in more than $37 million being fraudulently billed to the Medicare program. Of that amount, more than $22 million was actually paid out by the Medicare program to various Miami-area home health agencies. According to court documents, more than $16 million of those fraudulent billings stemmed from prescriptions issued by Dweck through Courtesy Medical Group, of which close to $10 million was actually paid out by Medicare.
Today’s sentence was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; John V. Gillies, Special Agent-in-Charge of the FBI’s Miami field office; and Special Agent-in-Charge Christopher Dennis of the HHS Office of Inspector General (HHS-OIG), Office of Investigations Miami office.
The case was prosecuted by Trial Attorney N. Nathan Dimock of the Criminal Division’s Fraud Section. The cases were investigated by the FBI and HHS-OIG.
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 Florida and the Criminal Division’s Fraud Section. Since their inception in March 2007, Strike Force operations in nine locations have obtained indictments of more than 1000 defendants 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 .
Massachusetts Man Indicted on Child Pornography ChargesRead the Press Release
WASHINGTON – Chris Allen Oake, 59, of Acton, Mass., was arrested today on child pornography charges, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney for the District of Massachusetts Carmen M. Ortiz, and Bruce M. Foucart, Special Agent in Charge of Homeland Security Investigations (HSI) of the Department of Homeland Security in Boston.
Oake was arrested on an indictment filed under seal in the District of Massachusetts on March 23, 2011, and unsealed today, which charges Oake with one count of transportation of child pornography, two counts of receipt of child pornography and one count of possession of child pornography.
The penalty for each charge of transportation and receipt of child pornography is a mandatory minimum of five years in prison up to a maximum of 20; and a maximum of 10 years in prison for possession of child pornography.
The charges against Oake are a result of “Operation Nest Egg,” an ongoing and joint investigation led by the Criminal Division’s Child Exploitation and Obscenity Section (CEOS), the U.S. Attorney’s Office for the Southern District of Indiana, HSI and the U.S. Postal Inspection Service. Operation Nest Egg, launched in February 2008, targeted approximately 500 individuals located throughout the world for their involvement in an online group dedicated to trading images of child pornography.
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 CEOS, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.
The case against Oake was investigated by HSI, CEOS’s High Technology Investigative Unit, Massachusetts State Police, and the Acton Police Department. The case is being 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 details contained in the indictment are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
Justice Department Sues Bakersfield, Calif., Landlord for Sexual HarassmentRead the Press Release
WASHINGTON – The Justice Department today filed suit against Rawland Leon Sorensen, the owner and manager of more than 50 residential rental properties in Bakersfield, Calif., alleging a pattern or practice of sexual harassment in violation of the Fair Housing Act.
The suit, filed in the U.S. District Court for the Eastern District of California, alleges that Sorensen sexually harassed female tenants by making unwelcome sexual comments and advances; exposing his genitals to female tenants; touching tenants without their consent; granting and denying housing benefits based on sex; and taking adverse action against women who refused his sexual advances. Sorensen has operated his rental business for more than 30 years.
“No person should have to fear sexual harassment from a landlord who holds a key to their home,” said Thomas E. Perez, Assistant Attorney General for the Justice Department’s Civil Rights Division. “Sexual harassment in housing is intolerable, and landlords should be on notice that the Justice Department will vigorously prosecute landlords who engage in this type of discrimination.”
“This type of behavior is unconscionable and unacceptable,” said Benjamin B. Wagner, U.S. Attorney for the Eastern District of California. “The U.S. Attorney’s Office is committed to using all of our legal tools to ensure that no one is subjected to this type of harassment.”
The suit seeks monetary damages to compensate the victims, a civil penalty and a court order barring future discrimination.
Fighting illegal housing discrimination is a top priority of the Justice Department. The federal Fair Housing Act prohibits discrimination in housing based on race, color, religion, national origin, sex, disability and familial status. More information about the Civil Rights Division and the laws it enforces is available at www.justice.gov/crt . Individuals who believe that they may have been victims of housing discrimination can call the Housing Discrimination Tip Line at 1-800-896-7743, email the Justice Department at [email protected] or contact the U.S. Department of Housing and Urban Development at 1-800-669-9777.
Justice Department Files Suit Against Winchester, Va., to Protect Employment Rights of U.S. Marine Corps ReservistRead the Press Release
WASHINGTON - The Department of Justice today filed a lawsuit on behalf of Jon Fultz, a U.S. Marine Corps reservist, against the city of Winchester, Va., alleging that it violated the Uniformed Services Employment and Reemployment Rights Act (USERRA) by failing to properly reemploy Fultz in September 2009 when he returned from military service during which he sustained a knee injury.
Subject to certain conditions, USERRA requires employers to promptly reemploy returning service members in the position they would have held had their employment been not interrupted by military service, or in a position of like seniority, status and pay.
According to the department’s complaint, filed in the U.S. District Court for the Western District of Virginia in Harrisonburg, Va., the city violated USERRA by not reemploying Fultz in his previous pre-service permanent position as a community resource officer assigned to manage its police department’s fleet of motor vehicles. When Fultz returned to work in September 2009, after performing military service where he injured his knee, the city assigned him fleet manager duties. However, the city placed Fultz in a lesser “light duty” status that he did not request, and which subjected him to removal from his job. For the next five months, Fultz satisfactorily performed his fleet manager duties, which were the same as his pre-service duties despite the “light duty” label. During that period, Fultz did not have any workplace problems with his knee that would have caused concern about his job performance, safety or health.
In February 2010, the city, without prior notice, removed Fultz from his position and stopped paying him wages. Although the city told Fultz that its sudden action was due to supposed safety concerns, it did not explain the nature of those concerns or give any factual basis for them. Even when Fultz provided medical information requested by the city to permit his return to work, the city refused to reinstate him, or to identify an alternate city position for which he qualified or could become qualified. The city ultimately terminated Fultz’s employment in October 2010. In its lawsuit, the Justice Department seeks the lost wages and benefits that he would have received if he had been properly reemployed in his pre-service status as a permanent full-duty community resource officer.
“Employers have a legal obligation to reemploy our uniformed service members in the correct position and status after they return from military duty,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Civil Rights Division is committed to protecting the rights of those who, through their bravery and sacrifice, secure the rights of all Americans.”
The Labor Department’s Veterans’ Employment and Training Service investigated and attempted to resolve Fultz’s USERRA complaint before referring it to the Justice Department for litigation.
“Our two agencies work closely together to ensure that our service members are treated right when they return from service” said Ray Jefferson, Assistant Secretary of Labor for Veterans’ Employment and Training.
The Justice Department’s Civil Rights Division has given a high priority to the enforcement of service members’ rights under USERRA. Additional information about USERRA can be found on the Justice Department’s websites at www.usdoj.gov/crt/emp and www.servicemembers.gov, as well as on the Labor Department’s website at www.dol.gov/vets/programs/userra/main.htm
Departments of Justice and Education Reach Settlement with Arizona Department of Education to Ensure That Potential ELL Students Are Properly IdentifiedRead the Press Release
WASHINGTON - The Department of Justice’s Civil Rights Division and the Department of Education’s Office for Civil Rights today entered into a settlement agreement with the Arizona Department of Education (ADE) to ensure that Arizona’s English Language Learner (ELL) students receive the educational services that they need. The agreement requires ADE to revoke its one-question Home Language Survey (HLS), which failed to identify and serve all eligible ELL students, and reinstate its three-question HLS so that all potential ELLs are identified for assessment and service.
“Proper identification of ELLs is the essential first step in ensuring that students receive the services they need to help them overcome language barriers and participate equally in the instructional process,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division at the Department of Justice. “We commend Arizona’s Superintendent of Public Instruction and ADE for voluntarily agreeing to reinstate the three-question HLS and take remedial steps to identify ELL students who were missed by the one-question process.”
“This agreement highlights our commitment to ensuring that all ELL students receive the services they need to learn,” said Russlynn Ali, Assistant Secretary for the Office for Civil Rights at the Department of Education. “All students are entitled to equal opportunities, and this resolution will help to make sure Arizona students receive the education they deserve.”
With the cooperation of ADE and Arizona school districts, the Departments of Justice and Education conducted an extensive investigation of the state’s policies and practices for identifying ELL students. Prior to July 1, 2009, ADE used a three-question Home Language Survey (HLS) that asked:
- “What is the primary language used in the home regardless of the language spoken by the student?”
- “What is the language most often spoken by the student?” and
- "What is the language that the student first acquired?”
Since July 1, 2009, ADE has allowed only a one-question HLS that asks, “What is the primary language of the student?” If a student answered English to this one question, ADE prohibited school districts from assessing the student’s English language proficiency unless and until a teacher documented specific language problems on a form prescribed by ADE, and met with the parents in person to obtain their permission to assess the student.
In the 2009-10 school year, ADE reported almost 100,000 ELL students, which reflected a decline of approximately 33,000 students from the prior school year. School districts attributed at least part of this decrease to the one-question HLS. The federal government’s investigation determined that the one-question HLS failed to identify and serve eligible ELL students in violation of the Equal Educational Opportunities Act of 1974 and Title VI of the Civil Rights Act of 1964. The investigation further revealed that the teacher referral process for the one-question HLS unnecessarily delayed the identification of ELL students, and therefore delayed ELL services, in violation of both laws.
The settlement agreement will ensure that all ELL students who attend Arizona public schools will be identified and served in a timely manner. Under the agreement, ADE will revoke its one-question HLS and its accompanying burdensome teacher referral process and reinstate its three-question HLS and prior HLS policies and practice of giving teachers more flexibility in referring students to be evaluated for English proficiency. ADE has agreed that an answer other than English to any of the three questions on the HLS will trigger timely assessment of the student’s English language proficiency. In order to capture potential ELLs who are now registering for the 2011-2012 school year, ADE will send a directive to each of its local educational agencies in two weeks informing them of the reinstated three-question HLS, and explaining how to identify potential ELL students among those students whose parents already completed the one-question HLS. ADE will also train the local education agencies regarding these changes and monitor them over the next school year to ensure that they are appropriately administering the three-question HLS. As a result of the settlement agreement, new students in Arizona schools who are ELL students will be timely identified, and students who were improperly identified as non-ELL students will be identified and offered ELL services.
The enforcement of the Equal Educational Opportunities Act and Title VI are top priorities of the Justice Department’s Civil Rights Division. Additional information about the Civil Rights Division of the Justice Department is available on its website at www.justice.gov/crt . Enforcement of Title VI is also a top priority of the Department of Education’s Office for Civil Rights. Additional information about the Department of Education’s Office for Civil Rights is available on its website at www.ed.gov/ocr/ .
California Man Sentenced to More Than 10 Years in Prison for Child Pornography ChargesRead the Press Release
WASHINGTON - Charles Douglas Johnson, 47, of Garden Valley, Calif., was sentenced today to 10 years and one month in prison for receiving child pornography, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Benjamin B. Wagner for the Eastern District of California.
U.S. District Judge Edward Garcia also ordered Johnson to serve 10 years of supervised release following his release from prison. Johnson pleaded guilty on Sept. 21, 2010.
According to court documents, images of child pornography were found on Johnson’s work laptop computer after he was terminated for allegedly stealing trade secrets. The computer was returned to the company on July 27, 2007, and the company sent it to a private forensic lab to see if any company trade secrets had been stored improperly on the computer. During this analysis, the forensic analyst found evidence of child pornography. A forensic review revealed 2,100 images of child pornography that had been downloaded onto the computer between Sept. 27, 2005, and June 18, 2007. In addition, 80 videos of child pornography were recovered.
This case was brought as part of Project Safe Childhood (PSC), a nationwide initiative 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), PSC mobilizes federal, state and local resources to locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information, visit www.projectsafechildhood.gov .
This case is the result of a joint investigation by the Folsom, Calif., Police Department; the El Dorado County, Calif., Sheriff’s Department; the FBI’s Cyber Crime Task Force and CEOS’ High Technology Investigative Unit. The case was prosecuted by Assistant U.S. Attorney Michelle Prince for the Eastern District of California and CEOS Trial Attorney Keith Becker of the Justice Department’s Criminal Division.
24 March 2011
Sex Trafficking Ring Leader Sentenced to 40 Years in PrisonRead the Press Release
WASHINGTON – Amador Cortes-Meza, 36, of Tlaxcala, Mexico, was sentenced today by U.S. District Judge Richard W. Story to serve 40 years in federal prison followed by five years of supervised release on charges of sex trafficking of minors; sex trafficking by force, fraud and coercion; transporting minors for the purpose of prostitution; smuggling aliens into the United States for purposes of prostitution; and conspiracy to do the same, announced the Department of Justice.
Cortes-Meza was also ordered to pay restitution to the victims in the amount of $292,000. The sentencing follows Cortes-Meza’s conviction on these charges on Nov. 21, 2010 after a trial.
“The victims suffered sexual abuse, physical assaults, threats of harm to their families, and daily degradation all because of this defendant’s greed and callous disregard for them as individuals. The court’s sentence clearly reflects the seriousness of these awful sex trafficking crimes,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “We are committed to prosecuting sex traffickers and vindicating victims’ rights, as they were vindicated today.”
U.S. Attorney for the Northern District of Georgia Sally Quillian Yates said, “No one wants to believe that there are people who will enslave other human beings and require them to commit innumerable commercial sex acts. Yet this intolerable crime is happening right in our own neighborhoods in metropolitan Atlanta. This defendant tricked young girls and juveniles into leaving their families in Mexico, beat them, and forced them into more than 20 acts of prostitution a night here in Atlanta. These survivors courageously testified against the defendant and played a significant role in bringing him to justice. This defendant earned every day of his 40 year sentence.”
“Few crimes are more heinous than the sex trafficking of human beings," said Brock Nicholson, special agent in charge of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE HSI) in Atlanta. “ICE HSI will vigorously pursue and prosecute any members of a criminal organization engaged in this dangerous, dehumanizing and illegal business.”
According to the charges and other information presented in court, Cortes-Meza was the ring leader of an organization that brought 10 victims, including four juveniles, to the United States and forced them into prostitution. Nine of the victims testified at trial that the defendant, his brother, Juan Cortes-Meza, and a nephew, Francisco Cortes-Meza, would trick and deceive young women in Mexico into coming to the United States. Amador and his family members would pretend to be romantically interested in the young girls, many of whom were from rural areas and some of whom did not have much education. The defendant and his co-conspirators would promise the victims they would have a life together and then tell them they needed to travel to the United States to make money working in restaurants or cleaning homes. Victims testified at trial that Amador Cortes-Meza was physically abusive both in Mexico and the United States if they disagreed with his plans or told him no.
The defendant also obtained false identification for the victims and made arrangements to smuggle the victims and himself into the United States.
Victims identified homes in the Norcross, Ga., area where they were housed by the defendant and his co-conspirators. The co-conspirators took turns monitoring the victims, and various drivers transported the victims to residences of clients where the victims were required to engage in commercial sex. The victims testified that when they refused to engage in prostitution, the defendant or his co-defendants would beat them and threaten them and their families with physical harm. The co-conspirators and the drivers split the proceeds of the prostitution.
Five co-defendants previously pleaded guilty to various human trafficking crimes. Francisco Cortes-Meza was sentenced to 20 years in prison. Juan Cortes-Meza was sentenced to 16 years and eight months in prison. Raul Cortes-Meza, the defendant’s nephew, received 10 years in prison.
This case was investigated by special ICE HSI special agents assigned to the Atlanta special agent in charge office. Assistant U.S. Attorney Susan Coppedge and Deputy Chief Karima Maloney of the Justice Department’s Civil Rights Division Criminal Section prosecuted the case.
Human trafficking prosecutions such as this one are a top priority in the Justice Department. In order to bring defendants to justice, victims of crime may be eligible for immigration status in the United States to assist in the prosecution. The Department of Homeland Security Tip Line to report trafficking crimes is 1-866-347-2423.
Second Caesars Palace Nightclub Host Pleads Guilty to Tax CrimeRead the Press Release
WASHINGTON – Ali “Shawn” Olyaie, a former “VIP host” at the Pure Nightclub located in Caesars Palace Hotel and Casino in Las Vegas, pleaded guilty in Las Vegas before U.S. District Court Judge Kent Dawson to one count of filing a false federal individual income tax return for the 2006 tax year, the Justice Department and Internal Revenue Service (IRS) announced today.
According to information disclosed at Olyaie’s plea hearing, during the years 2005 and 2006, Olyaie’s responsibilities as a VIP host at the Pure Nightclub included promoting the club, booking reservations and catering to the club’s clientele. In addition to paying an admissions fee, some Pure patrons typically made cash payments to Pure door personnel and VIP hosts to bypass the general admissions line and to obtain more desirable seating inside the nightclub. The cash payments were collected, pooled and generally distributed on a weekly basis to Pure managers, door personnel and VIP hosts, including Olyaie. Olyaie’s cash distributions from the pool of money collected from patrons of Pure comprised the bulk of his compensation during the time he worked at Pure. Olyaie concealed the cash payments he received by not reporting the income to the IRS on his individual income tax returns during the years he worked at the Pure Nightclub.
Judge Dawson set Olyaie’s sentencing for June 29, 2011, at 9:00 a.m.
On Nov. 9, 2010, Richard Chu, another former VIP Host at the Pure Nightclub, pleaded guilty to filing a false 2006 federal individual income tax return that did not report the cash payments he received at Pure. Chu is also awaiting sentencing.
This case is being investigated by IRS – Criminal Investigation and is being prosecuted by Tax Division Trial Attorneys Christopher J. Maietta and Joseph A. Rillotta.
More information about the Justice Department’s Tax Division and its enforcement efforts is available at www.usdoj.gov/tax/.
Rhode Island La Cosa Nostra Member Pleads Guilty <br /> in Murder-For-Hire CaseRead the Press Release
WASHINGTON – Anthony St. Laurent Sr. pleaded guilty today in federal court in Providence, R.I., to an attempted murder-for-hire, and acknowledged in a written plea agreement his participation in an extortion conspiracy outlined in a previous criminal complaint in which he, his wife Dorothy St. Laurent, his son Anthony St. Laurent Jr. and others extorted protection money from bookmakers in the Taunton, Mass.-area under the threat of violence. St. Laurent Sr. acknowledged in his plea agreement that he is a “made” member of the New England branch of the La Cosa Nostra (NELCN.)
St. Laurent Sr.’s guilty plea before U.S. District Judge William E. Smith was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney Peter F. Neronha for the District of Rhode Island and Richard DesLauriers, Special Agent in Charge of the FBI’s Boston Field Office.
According to information presented in court, in 2006 and in 2007, St. Laurent Sr. offered money to individuals, including some known to be violent criminals, to murder Robert “Bobby” DeLuca, another “made” member of the NELCN, in retaliation for Deluca having publicly accused St. Laurent Sr. of being a government informant. According to information presented in court, St. Laurent Sr. phoned an individual in Massachusetts to set up a meeting in Rhode Island on April 12, 2006, at which he solicited the individual to kill DeLuca.
St. Laurent Sr., who is presently detained, faces maximum penalties of 10 years in federal prison, a $250,000 fine and three years of supervised release following his prison term.
Anthony St. Laurent Jr. was sentenced in December 2010 to 78 months in prison, followed by three years of supervised release, to include 500 hours of community service each year during the term of supervised release for his role in the extortion conspiracy. Dorothy St. Laurent was sentenced in December 2010 to three years of probation, the first six months of which will be served in home confinement. She also was ordered to perform 500 hours of community service per year during the term of supervised release.
The case is being prosecuted by Trial Attorney Sam Nazzaro of the Criminal Division’s Gang Unit. Assistant U.S. Attorney William J. Ferland for the District of Rhode Island is assisting with the prosecution of this case.
The matter was investigated by the FBI, with the assistance of the Rhode Island State Police and the Providence Police Department.
Massachusetts Man Pleads Guilty to Child Pornography ChargesRead the Press Release
WASHINGTON - Stanley R. MacKinnon, 66, of Haverhill, Mass., pleaded guilty today to five counts of receipt and attempted receipt of child pornography and one count of possession of child pornography, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney for the District of Massachusetts Carmen M. Ortiz and Robert Bethel, Inspector in Charge of the U.S. Postal Inspection Service (USPIS).
MacKinnon pleaded guilty before U.S. District Court Judge Rya W. Zobel in Boston. MacKinnon was indicted on July 14, 2010. The charges against him were the result of an ongoing national investigation by USPIS of individuals who purchase child pornography via U.S. mail. In pleading guilty, MacKinnon admitted to ordering and purchasing child pornography movies depicting prepubescent minors, and receiving the movies via U.S. mail. MacKinnon also admitted to possessing images of child pornography that he had produced himself approximately 30 years ago.
MacKinnon is scheduled to be sentenced on June 16, 2011. MacKinnon faces a mandatory minimum penalty of five years in prison, a fine of $250,000 and possible restitution.
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, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov .
The case against MacKinnon was investigated by USPIS and the Haverhill Police Department. The case is being 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.
Former Administrative Assistant to U.S. Senator Charged with Making Prohibited Communications to Senate OfficeRead the Press Release
WASHINGTON – The former administrative assistant to a U.S. senator was charged today by a federal grand jury in the District of Columbia with violating criminal conflict of interest laws, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Ronald C. Machen of the District of Columbia; and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office.
The indictment charges Douglas Hampton, 48, formerly of Las Vegas, with seven counts of violating the criminal conflict of interest laws. Hampton will be arraigned on March 31, 2011, in U.S. District Court in the District of Columbia.
According to the indictment, from January 2007 to April 30, 2008, Hampton was employed as the administrative assistant to a U.S. senator. The administrative assistant and chief of staff positions were the most senior positions in the senator’s office. While he was serving as administrative assistant, Hampton allegedly signed a form certifying that he had completed training required by the Senate Select Committee on Ethics that included training on the one-year post-employment lobbying restrictions mandated by The Honest Leadership and Open Government Act of 2007.
According to the indictment, that legislation was enacted by Congress for the purpose of providing greater transparency and accountability in both Houses by, among other things, slowing down the “revolving door” between congressional employment and post-employment lobbying activities. The legislation prohibits a senior Senate staffer, for a period of one year after termination of employment with the Senate, from knowingly making any communication to a Senate office with the intent to influence official actions on behalf of another person.
The indictment alleges that on May 1, 2008, Hampton left his employment with the U.S. senator and obtained employment as a government affairs consultant with an airline company and an energy company, both headquartered in Las Vegas.
According to the indictment, between May 1, 2008, and May 1, 2009, while he was subject to The Honest Leadership and Open Government Act’s one-year restriction, Hampton knowingly and willfully made, with the intent to influence, communications to staff members of the U.S. senator on behalf of the Las Vegas airline company and energy company, seeking action by the senator and the staff members in their official capacities.
The indictment alleges that Hampton, on behalf of the airline company, sought the assistance of the senator and the staff members in convincing the Department of Transportation to reconsider its position on a fuel surcharge pricing issue and to delay or withdraw an enforcement action regarding fees charged on the company’s website, as well as to help schedule a meeting in March 2009 involving the secretary of transportation and executives from the airline company.
The indictment also alleges that Hampton, on behalf of the energy company, sought the assistance of the senator and the staff members to convince the Department of Interior to expedite release of an environmental impact statement that would allow the energy company to move forward on its delayed proposal to build a coal-fired power plant in eastern Nevada.
The maximum penalty for each of the seven counts alleged in the indictment is five years in prison. Hampton also faces a maximum fine of $250,000 per count.
An indictment is merely an accusation, and a defendant is presumed innocent unless proven guilty in a court of law.
This case is being prosecuted by Trial Attorneys Deborah Sue Mayer and Edward T. Kang of the Criminal Division’s Public Integrity Section, and Assistant U.S. Attorney Bryan Seeley for the U.S. Attorney’s Office in the District of Columbia. The case was investigated by the FBI’s Washington Field Office.
DC-Area Plumber Charged with Obstructing the IRSRead the Press Release
WASHINGTON - Richard Jaensch, a resident of Annandale, Va., has been indicted by a Alexandria, Va., federal grand jury with one count of corruptly endeavoring to impede the Internal Revenue Service (IRS), one count of filing a false claim for a refund and four counts of failing to file a tax return for 2004 through 2007, the Justice Department and the IRS announced today.
According to the indictment, Richard Jaensch, a self-employed plumber, failed to file personal income tax returns between 2001 and 2007, despite the fact that he was required to do so by law. Between 2002 and October 2009, Jaensch obstructed and impeded the IRS by, among other acts: filing numerous documents and pleadings in Fairfax County, Va.; claiming, that he and his wife, a federal employee, were not persons required to file federal income tax returns; that his wife was not a party to the Constitution of the “united States of America” (sic) and that she was not a taxpayer; providing false information to the IRS; and filing with the IRS a false 2008 federal income tax return, Form 1040.
In addition, Jaensch caused his wife to yearly present a letter to her employer directing them to stop withholding federal income taxes from her salary. The IRS began levying his wife’s paycheck and bank accounts to satisfy her outstanding tax liability, and Jaensch continued his obstructive conduct by filing or causing his wife to file correspondence with the IRS claiming that the IRS could not instruct her employer to withhold taxes from her paycheck. In addition, in April 2009, Jaensch electronically filed with the IRS a false 2008 individual income tax return claiming a tax refund of $774,052, which he knew to be false and fraudulent.
An indictment is merely a formal charge by the grand jury. The defendant is presumed innocent unless and until proven guilty in U.S. District Court. If convicted, the defendant faces a maximum potential sentence of 12 years in prison. The court has not yet set a trial date.
This case was investigated by IRS-Criminal Investigation and is being prosecuted by Department of Justice’s Tax Division Trial Attorney Caryn Finley and Assistant U.S. Attorney Gene Rossi.
More information about the Justice Department’s Tax Division and its enforcement efforts is available at www.usdoj.gov/tax/.
23 March 2011
Second New Jersey Pipe Supply Company and Its Owner Plead Guilty to Fraud and Bribery Conspiracy in Power Generation IndustryRead the Press Release
WASHINGTON — A second New Jersey industrial pipe supply company and its owner pleaded guilty today to participating in a conspiracy to commit fraud and pay bribes to a purchasing manager at Consolidated Edison of New York (Con Edison) in return for the manager’s efforts to steer contracts to the company, the Department of Justice announced today. The owner also pleaded guilty to obstructing the department’s investigation into fraudulent conduct in the power generation industry.
A two-count charge was filed today in U.S. District in Manhattan against Bernard Grobart of New York City and his company, Teneyck Inc., formerly known as Neill Supply Co. Inc. of Lyndhurst, N.J. Grobart and Teneyck pleaded guilty today to participating in a conspiracy to defraud Con Edison. Grobart also pleaded guilty to an obstruction count for instructing a subordinate employee at the company to delete a subpoenaed electronic document. Grobart and Teneyck are scheduled to be sentenced on June 24, 2011.
According to the charge, Grobart and Robert D. Rosenberg, a former sales broker for Neill Supply, paid approximately $297,000 in cash bribes to James M. Woodason, a department manager of the purchasing department at Con Edison. In return, Woodason steered Con Edison industrial pipe supply contracts to Neill Supply by secretly providing Rosenberg with confidential competitor bid information, thereby causing Con Edison to pay higher, non-competitive prices for materials. The department said the conspiracy took place from approximately November 2003 through approximately August 2008. According to the court document, Grobart also directed an employee of Neill Supply to destroy an electronic document that tallied the bribe payments in order to prevent the production of the document to a federal grand jury.
Con Edison is a regulated utility headquartered in Manhattan. It provides electric service to approximately 3.2 million customers and gas service to approximately 1.1 million customers in New York City and Westchester County, N.Y. Con Edison received more than $10,000 in federal funding each year between 2003 through 2010.
Grobart and Teneyck are charged with conspiracy, which carries a maximum fine of $500,000 for companies, and a maximum penalty of five years in prison and a $250,000 fine for individuals. Each of the maximum fines 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. Grobart is also charged with obstruction, which carries a maximum penalty of 20 years in prison and a $250,000 fine.
Today’s pleas arise from an ongoing federal investigation of bid rigging, bribery, fraud and tax-related offenses in the power generation industry. On Nov. 19, 2010, Woodason pleaded guilty to charges that he accepted and agreed to accept bribes from Grobart and Neill Supply, and American Pipe Bending and Fabrication Co. Inc. and its owner, Andrew Martingano. Rosenberg pleaded guilty on Dec. 2, 2010, for his role in the Neill Supply conspiracy. Martingano and American Pipe pleaded guilty on March 14, 2011, to a one-count felony charge for paying and agreeing to pay Woodason $510,000 in bribes in exchange for which Woodason steered an industrial pipe supply contract to American Pipe. The investigation is being conducted by the Antitrust Division’s New York Field Office, with the assistance of the FBI’s New York Division and the Internal Revenue Service-Criminal Investigation. Con Edison cooperated with the department’s investigation.
Anyone with information concerning bid rigging, bribery, tax offenses or fraud in the power generation industry should contact the Antitrust Division’s New York Field Office at 212-264-9308, visit www.justice.gov/atr/contact/newcase.htm or contact the FBI’s New York Division at 212-384-3252.
Pittsburgh Man Pleads Guilty to Racketeering ChargesRead the Press Release
WASHINGTON - A resident of Pittsburgh pleaded guilty today in U.S. District Court for the Western District of Pennsylvania to conspiring to conduct a racketeering enterprise, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney David J. Hickton of the Western District of Pennsylvania.
Kevin Underwood, 29, pleaded guilty to one count of conspiracy before Senior U.S. District Judge Gustave Diamond in Pittsburgh.
According to the guilty plea, Underwood participated in an enterprise, the activities of which affected interstate and foreign commerce, through a pattern of racketeering activity. The enterprise’s activities included multiple acts involving robbery, attempted murder, distribution of controlled substances including cocaine, heroin and crack cocaine, and acts of obstruction of justice and intimidation. Underwood is one of 26 defendants charged in February 2010 with being members of, and conducting racketeering activity through, a criminal organization known as the Brighton Place/Northview Heights Crips street gang that operated on the north side of Pittsburgh.
Underwood is scheduled to be sentenced on July 21, 2011, at 10 a.m. He faces a maximum sentence of 20 years in prison and a fine of $250,000.
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 Gang Unit.
The case was investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives; the City of Pittsburgh Police Department; the Allegheny County, Penn., Police Department; and the Allegheny County Sheriff's Office.
Founder of A&O Entities <br /> Convicted in $100 Million Fraud SchemeRead the Press Release
WASHINGTON – Christian M. Allmendinger, 39, 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.
“Christian Allmendinger stole millions from elderly retirees to buy flashy cars and a multi-million-dollar home,” said U.S. Attorney MacBride. “This was a national fraud case brought by the Virginia Financial and Securities Fraud Task Force that has real implications to dozens of investors in Richmond, who gave most of their life savings and have seen it all disappear. Mr. Allmendinger has now been held accountable for his crimes, and we will continue to pursue other financial fraudsters who prey on those in Virginia and throughout the country.”
“Christian Allmendinger operated a business that relied on deceit, and he used the profits of his fraudulent scheme to spend lavishly on himself,” said Assistant Attorney General Breuer. “Today a federal jury held him to account. Other would-be criminals should take note.”
On Sept. 7, 2010, a federal grand jury returned an 18-count indictment against Allmendinger and two other principals of A&O Resource Management Ltd. and various related entities that acquired and marketed life settlements to investors. Today, Allmendinger was convicted on one count of conspiracy to commit mail fraud, two counts of mail fraud, one count of conspiracy to commit money laundering, two counts of money laundering, and one count of securities fraud. At sentencing on Aug. 12, 2011, Allmendinger faces up to 20 years in prison on each count except the securities fraud count, on which he faces up to 5 years in prison.
Allmendinger’s co-defendant, Adley H. Abdulwahab, 35, is scheduled for a jury trial beginning July 5, 2011. Evidence at Allmendinger’s trial established that during his involvement with the company, A&O obtained approximately $80 million from approximately 500 investors. The indictment alleges that the A&O fraud scheme as a whole exceeds $100 million and affected more than 800 investors, many of whom were elderly.
According to court records and evidence at trial, Allmendinger was a co-founder and vice president 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. Evidence at trial showed that Allmendinger routinely used investor funds for personal enrichment, including a $2 million home, a Lamborghini Spyder, and a 15-carat diamond ring, among other property.
When state regulators began to scrutinize A&O’s investment products, Allmendinger and his co-conspirators decided to sell A&O in August 2007, which ended Allmendinger’s association with the fraud scheme. The indictment alleges that, through a series of sham sales, co-conspirators, including Abdulwahab and David White, continued the fraud scheme through September 2009.
Five individuals have pleaded guilty in connection with the A&O fraud scheme: 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 continuing investigation is being conducted by the U.S. Postal Inspection Service, Internal Revenue Service, and FBI, with significant assistance from the Texas State Securities Board. 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.
Chinese Counterfeit Perfume Importers Indicted for Allegedly Trafficking in Counterfeit GoodsRead the Press Release
WASHINGTON - A federal grand jury in Brooklyn, N.Y., has returned a two- count indictment against Shaoxia Huang, Shaoxiong Zhou and Shaowu Zhou for trafficking in counterfeit goods and conspiracy, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Loretta E. Lynch for the Eastern District of New York.
The Zhous and Huang, all of Guangdong Province, China, allegedly imported more than 37,000 individual units of counterfeit cosmetic fragrances into the United States. According to the indictment returned yesterday, the counterfeit perfume, believed to have been manufactured in China, bore trademarks belonging to well-known fragrance brands, and were packaged in a manner likely to be confused for genuine fragrances sold under these well-known brands.
Huang and Shaoxiong Zhou were arrested in Las Vegas on March 2, 2011, and have been held in custody since their arrest.
If convicted, each defendant faces up to five years in prison on the conspiracy charge, up to 10 years in prison on the counterfeit products charge, and fines of up to $2,250,000. The indictment also seeks forfeiture of profits from illicit trafficking in counterfeit goods as well as the seizure of the goods.
An indictment is merely an accusation, and defendants are presumed innocent unless proven guilty beyond a reasonable doubt.
The case is being investigated by the New York office of U.S. Immigration and Customs Enforcement - Homeland Security Investigations, and is being prosecuted by Senior Counsel Jason Gull of the Criminal Division’s Computer Crime and Intellectual Property Section.
This indictment is part of a larger department-wide effort led 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 http://www.justice.gov/dag/iptaskforce/