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8 April 2010
Federal Court Permanently Bars McRae, Georgia Tax Preparer from Preparing Taxes for OthersRead the Press Release
WASHINGTON—A federal district judge in Dublin, Ga., has permanently barred James King of McRae, Ga., from preparing federal tax returns for others, the Justice Department announced today.
Court papers allege that King prepared tax returns through his business, "James King Tax Service." The court also ordered King to provide his customer lists, and copies of all tax returns prepared for customers, to the government, and to mail copies of the court order to his customers.
The government complaint alleges that King prepared returns that fabricate or inflate deductions and that he prepared returns that unlawfully claim the Earned Income Tax Credit. According to the complaint, the Internal Revenue Service has examined over 100 returns prepared by King and found that the great majority of those resulted in a tax deficiency. The total deficiencies of the audited returns is alleged to be greater than $400,000. Altogether, the government complaint alleges that James King’s activities may have resulted in the tax loss of tens of millions of dollars.
In the past decade, the Justice Department’s Tax Division has obtained more than 460 injunctions against tax fraud promoters and tax return preparers. Information about these cases is available on the Justice Department’s Web Site.
Clinic Manager and Patient Recruiter Plead Guilty for Roles <br /> in $2 Million Medicare Fraud SchemeRead the Press Release
Detroit-area residents Carlos Grana and Dwight Armstrong pleaded guilty today to engaging in a fraudulent medical testing scheme, announced the Departments of Justice and Health and Human Services (HHS).
Grana, 36, and Armstrong, 32, each pleaded guilty today to one count of conspiracy to commit health care fraud before U.S. District Court Judge Lawrence P. Zatkoff in the Eastern District of Michigan. At sentencing, scheduled for July 13, 2010, each defendant faces a maximum penalty of 10 years in prison and a $250,000 fine. Grana and Armstrong were indicted in December 2009, along with Price Marshall, who pleaded guilty on Feb. 23, 2010, for his role in the scheme.
According to the plea documents, Grana managed the day-to-day operations of Careplus LLC, a medical clinic in Livonia, Mich. Grana admitted he that while he managed Careplus, he paid patient recruiters for Medicare beneficiary referrals. According to court documents, the recruiters were expected to find and transport Medicare beneficiaries to Careplus. Grana admitted he paid the recruiters between $100 and $150 per patient referral, and instructed the recruiters to pay the patients $50 from that amount. According to court documents, nearly all of the patients treated at Careplus were secured through the payment of kickbacks.
Grana also admitted that in exchange for the payments, he and his co-conspirators expected the Medicare beneficiaries who received kickbacks to subject themselves to a medical examination and to medically unnecessary tests. Grana told the recruiters to instruct the patients to feign certain symptoms when they arrived at Careplus, which ultimately led to the patients’ medical records containing information about false symptoms. The falsified records then helped Careplus deceive Medicare about the legitimacy and medical necessity of the tests it performed. Between approximately February 2008 and October 2009, Grana and his co-conspirators at Careplus submitted approximately $2.2 million in claims to the Medicare program for unnecessary medical and testing services that were procured through the payment of kickbacks. Medicare paid approximately $2 million of those claims.
According to the plea documents, Armstrong was one of the patient recruiters for Careplus. Armstrong admitted that beginning in approximately June 2008 he began recruiting patients for the owners and/or operators of Careplus and that he paid kickbacks to the Medicare beneficiaries he recruited and later transported to Careplus using money provided by the owners/operators. Armstrong admitted he kept part of the funds he received as a kickback for referring the Medicare beneficiaries he recruited. According to court documents, the owners and operators of Careplus typically paid $100-$150 per patient Armstrong recruited, with Armstrong retaining $50-$75 of that amount as a kickback for the referral.
Armstrong admitted he instructed the beneficiaries he recruited, based on instructions from the owners and operators of Careplus, to claim they had certain symptoms to trigger medically unnecessary tests. The patients Armstrong recruited generated approximately 12 percent of the total amount fraudulently billed by Careplus to the Medicare program, or approximately $342,000 in claims. Medicare paid approximately $250,000 on those claims.
Today’s result was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Andrew G. Arena of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the HHS Office of Inspector General’s (OIG) Chicago Regional Office.
The case was prosecuted by Senior Trial Attorney John K. Neal and Trial Attorney Gejaa T. Gobena of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for approximately $1.1 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.
7 April 2010
Stephen Schultz Sentenced in Connection with<br /> Costa Rica-Based Business Opportunity Fraud VenturesRead the Press Release
WASHINGTON – On April 7, 2010, defendant Stephen Schultzwas sentenced in connection with a series of Costa Rica-based business opportunity fraud ventures, the Justice Department and the U.S. Postal Inspection Service announced today. Schultz was sentenced by United States District Court Judge Paul C. Huck in Miami to a term of 86 months in prison and a term of five years of supervised release. A hearing to determine the amount of restitution owed by Schultz will be scheduled within 90 days.
On Jan. 21, 2010, Schultz entered a guilty plea in federal district court in Miami to 12 counts of an indictment pending against him. Schultz pleaded guilty to one count of conspiracy to commit mail and wire fraud, eight counts of mail fraud and three counts of wire fraud.
Schultz was arrested on Dec. 12, 2008, in Costa Rica following his indictment by a federal grand jury in Miami on Nov. 20, 2008. The indictment charged that he and a co-conspirator, Jeffrey Pearson, purported to sell beverage and greeting card business opportunities, including assistance in establishing, maintaining and operating such businesses. The charges form part of the government’s continued nationwide crackdown on business opportunity fraud. Following his arrest in Costa Rica on the charges in the indictment, Schultz was extradited to the United States.
Schultz worked for USA Beverages Inc., Twin Peaks Gourmet Coffee Inc., and Cards-R-Us Inc. Beginning in 2005, USA Beverages sold business opportunities to own and operate coffee beverage display racks. USA Beverages rented office space in Las Cruces, N.M., and otherwise made it appear to potential purchasers that USA Beverages’ operations were fully within the United States. However, USA Beverages actually operated from Costa Rica.
After USA Beverages, Schultz worked for Twin Peaks Gourmet Coffee Inc., which was a Florida and Colorado corporation. Twin Peaks sold business opportunities to own and operate coffee beverage sale display racks. Twin Peaks rented office space in Fort Collins, Colo., to make it appear to potential purchasers that Twin Peaks’ operations were fully within the United States. However, Twin Peaks was actually operated from Costa Rica.
Schultz also worked for Cards-R-Us Inc., which was a Nevada corporation that sold business opportunities to own and operate greeting card sale display racks. Cards-R-Us rented office space in Reno, Nev., to make it appear to potential purchasers that Cards-R-Us’ operations were fully within the United States. However, Cards-R-Us was actually operated from Costa Rica.
To fraudulently induce others to purchase the business opportunities, Schultz and his co-conspirators made, and caused others to make, numerous false statements to potential purchasers of the business opportunities. Potential purchasers were falsely told that the companies were established years earlier, had a significant number of distributors across the country, and had a track record of success. Potential purchasers were referred to references who told false tales of their success as business opportunity owners. In pleading guilty Schultz admitted that although the calls from potential investors in the United States to these references appeared to be domestic numbers, the calls generally were routed to Costa Rica. Through these and other misrepresentations, purchasers of the business opportunities were led to believe that they would likely earn substantial profits.
"Business opportunity fraud takes advantage of people trying to start their own business and make a living, or supplement their other income, but provides significant financial hardship instead of a new source of funds. Financial frauds as these operating from outside the United States are particularly insidious, but not beyond the reach of United States law," said Tony West, Assistant Attorney General for the Department of Justice’s Civil Division. "The Justice Department is committed to uncovering and vigorously prosecuting individuals who steal from our citizens using telephones and false promises of financial success."
Assistant Attorney General West commended the investigative efforts of the Postal Inspection Service, especially the offices based in Miami and Phoenix. Assistant Attorney General West also commended the Federal Trade Commission, which previously brought a related civil suit and made a criminal referral. This matter is being prosecuted by trial attorneys in the Justice Department’s Office of Consumer Litigation.
Six Miami Residents Charged in $13 Million Health Care Fraud SchemeRead the Press Release
Six Miami-area residents have been charged for their alleged role in a $13.6 million health care fraud scheme involving a Miami-area HIV infusion clinic, announced the Departments of Justice and Health and Human Services (HHS).
In a 16-count indictment returned on March 30, 2010, and unsealed today, the six defendants are charged with conspiring to submit $13.6 million in false and fraudulent claims to the Medicare program for HIV infusion services that were allegedly provided at T & R Rehabilitation Clinic (T&R Rehab) in Miami. Modesto De La Vega, 58; Rolando Nogueira, 48; Joaquin Vega, M.D., 73; Gladis Badia, 39; Jose Nogueira, aka "Tony Nogueira," 52; and Victoria De La Vega, 59, were each charged with one count of conspiracy to defraud the United States, to cause the submission of false claims and to pay health care kickbacks; one count of conspiracy to commit health care fraud; and three counts of submitting false claims to the Medicare program. In addition, Modesto De La Vega and Rolando Nogueira were each charged with one count of conspiracy to launder the proceeds of their crimes and multiple money laundering counts.
Modesto De La Vega, Dr. Joaquin Vega, Gladis Badia and Victoria De La Vega were taken into custody this morning and will make their initial appearances today at 2:00 p.m., before U.S. Magistrate Judge Stephen T. Brown. Ronald and Jose Nogueira are considered fugitives.
According to the indictment, Rolando Nogueira owned and operated T & R Rehab while Modesto De La Vega was the operator of T & R Rehab’s HIV infusion practice. The indictment alleges that Rolando Nogueira and Modesto De La Vega billed the Medicare program for HIV infusion therapy services that were medically unnecessary and were never provided. In addition, Modesto and Victoria De La Vega allegedly paid kickbacks to Medicare beneficiaries to induce them to sign logs at T & R Rehab stating that they had received the treatments that were billed to Medicare when, in fact, they had not. The indictment also alleges that Jose Nogueira managed T&R Rehab’s fraudulent HIV infusion operation.
The indictment alleges that Dr. Joaquin Vega maintained a Medicare provider number at T & R Rehab to submit Medicare claims for the medically unnecessary infusion treatments. Gladis Badia, a medical assistant at T & R, is alleged to have prepared the required documentation to make it appear that the injection and infusion treatments billed by T & R Rehab were medically necessary and provided when, in fact, they were not.
The charge of conspiracy to defraud the United States, to cause the submission of false claims, and to pay health care kickbacks carries a maximum sentence of five years in prison. The charges of conspiracy to commit health care fraud, conspiracy to engage in money laundering and money laundering each carry a maximum sentence of 10 years in prison. The charge of submitting false claims to the Medicare program carries a maximum penalty of five years in prison per count.
An indictment is merely a charge and defendants are presumed innocent until proven guilty.
Today’s indictment was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Jeffrey H. Sloman for the Southern District of Florida; Special Agent in Charge John V. Gillies of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the Miami Regional Office of the HHS Office of Inspector General (OIG).
The case is being prosecuted by Trial Attorneys Michael D. Padula and N. Nathan Dimock of the Criminal Division’s Fraud Section. The case is being investigated by the FBI and HHS-OIG. The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.
Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for approximately $1.1 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.
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Factual Basis for Plea
Plea Agreement
Learning Tree International Inc. Agrees to Pay $4.5 Million to Settle Allegations of Improper Billing Practices and Retention of Federal FundsRead the Press Release
WASHINGTON – Learning Tree International Inc. has agreed to pay the United States $4.5 million to resolve allegations that it violated the False Claims Act when it improperly invoiced federal agencies in advance for information technology training courses and kept federal funds for training courses that were never actually provided, the Justice Department announced today.
Under its contract with the General Services Administration ("GSA"), Learning Tree sells information technology training courses to the federal government in multi-course packages known as "vouchers" or "passports." To prevent the United States from paying for training services that are not actually rendered, the contract specifically requires that Learning Tree invoice the government only after services are provided.
The settlement resolves allegations that Learning Tree knowingly invoiced federal agencies in advance for multi-course training packages before employees of the purchasing agencies had attended the full number of courses available under each. The government further alleged that upon expiration of the training packages, Learning Tree retained federal funds that the company received in connection with unused courses without providing a refund or credit. As a result, Learning Tree received federal funds for training courses that were not, in fact, provided.
"Government contractors must deal fairly and honestly with the United States," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "When federal funds are being misused, we will take action to protect the taxpayers."
This matter was investigated by the General Service Administration Office of Inspector General, the Department of Agriculture Office of Inspector General, the Department of Commerce Office of Inspector General, and the Department of Justice, Civil Division.
Justice Department Highlights<br /> Tax Enforcement ResultsRead the Press Release
WASHINGTON—The Department of Justice today announced highlights of its work during the past year to defend and enforce federal tax laws. The Tax Division has assisted the Internal Revenue Service (IRS) in tracking down tax cheats who use offshore accounts, combating abusive tax shelters, stopping tax defiers and shutting down tax schemes and scams.
It has obtained nearly 500 civil injunctions to stop the promotion of tax scams and the preparation of false and fraudulent tax returns, and has criminally prosecuted numerous tax fraud scheme promoters. During FY 2009, the Tax Division successfully defended refund suits against the United States representing claims of over $665 million, and collected, through affirmative litigation, over $260 million. The division’s budget in that period was less than $102 million. Tax Division prosecutors obtained 135 convictions and guilty pleas during FY 2009. Additionally, Tax Division attorneys participated in sentencings for 133 defendants during FY 2009.
“The Department of Justice is strongly committed to promoting compliance with federal tax laws,” said John DiCicco, Acting Assistant Attorney General for the Tax Division. “The Department will continue to use all available law enforcement tools to recover tax revenue and to punish tax offenders. Those who promote, facilitate, or engage in tax fraud plans or schemes risk penalties and, where appropriate, criminal prosecution.”
“The IRS appreciates the strong support of the Justice Department in our continuing work to enforce the nation's tax laws,” IRS Commissioner Doug Shulman said. “In the past year, there has been an impressive list of actions taken on everything from offshore tax evasion to unscrupulous tax return preparers. The combined efforts of the Justice Department and the IRS make a real difference for the hard-working taxpayers who file and pay their taxes every year."
Shutting Down Offshore Tax Evasion
Over the past year, the Tax Division achieved unprecedented results in its efforts to obtain information about, and prosecute where appropriate, U.S. taxpayers who elected to hide their income and assets offshore. These efforts began in February 2009, in United States v. UBS AG, where UBS AG, Switzerland’s largest bank, entered into a groundbreaking deferred prosecution agreement, admitting guilt on charges of conspiring to defraud the United States by impeding the IRS. As part of the agreement, UBS agreed to immediately provide the United States with the identities and account information for certain United States customers of UBS’s cross-border business. UBS also agreed to exit the business of providing banking services to United States customers with undeclared accounts, and pay $780 million in fines, penalties, interest and restitution.
Immediately following on the heels of the deferred prosecution agreement, the division brought a civil action against UBS, seeking the names of more U.S. taxpayers. After approximately six months, the U.S., UBS and the Swiss government entered into an historic agreement that has put a large chink in the armor of Swiss bank secrecy. Under the settlement, the IRS is to receive account information for thousands of the most significant tax cheats among the U.S. taxpayers who maintain undeclared Swiss bank accounts.
As the UBS matter has generated tremendous publicity and strong forward momentum against bank secrecy worldwide, the division’s strategic successes have delivered an unmistakable message to all taxpayers that the days of hiding offshore funds from tax collection are over. The IRS credits the civil settlement and the deferred prosecution agreement with contributing to the huge increase in the number of taxpayers—to almost 15,000 from fewer than 100 in a typical year—who voluntarily came forward to disclose their foreign accounts and bring themselves back into compliance regarding their offshore holdings for many years to come.
As part of its continuing review of offshore account information, the Tax Division, working in conjunction with various U.S. Attorney’s Offices, is prosecuting bankers and taxpayers who held offshore accounts that they failed to report to the United States:
- In April 2009, Robert Moran pleaded guilty to filing a false income tax return and admitted to concealing more than $3 million in a secret bank account at UBS. He was sentenced to two months in prison.
- In July 2009, Jeffrey Chernick, of Stanfordville, N.Y., pleaded guilty to filing a false tax return, and was sentenced to three months in prison, six months of house arrest, and six months of probation
- In August 2009, former UBS banker Bradley Birkenfeld was sentenced to 40 months in prison for helping an American billionaire real estate developer evade taxes.
- In January 2010, Juergen Homann, of Saddle River, N.J., was sentenced to five years probation for failure to file a Report of Foreign Bank or Financial Accounts (FBAR). Homann concealed more than $6.1 million in Swiss bank accounts.
- In January 2010, Roberto Cittadini, of Bellevue, Washington, was sentenced to six months of home confinement for failing to report income from secret UBS bank accounts under his control.
- In February 2010, Dr. Andrew Silva of Sterling, Va., pleaded guilty to conspiracy to defraud the United States and making a false statement regarding an undeclared foreign bank.
In connection with its continuing investigation of U.S. taxpayers who use offshore accounts to evade their taxes, the Tax Division is aggressively pursuing taxpayers involved in abusive offshore transactions as well as tax professionals, promoters and others who facilitate these schemes. That includes taxpayers with hidden income in offshore banks and brokerage accounts and those using nominee entities, offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities and insurance plans. In furtherance of these efforts, in April 2009, a federal court in Colorado granted the United States authorization to request from First Data Corporation, a credit card processing firm, the names of merchants who request that credit card sales proceeds be deposited in offshore bank accounts. The IRS believes that many of these merchants are using offshore accounts to evade taxes.
Further success against offshore scheme promoters was achieved in May 2009 and February 2010, in United States v. Liddell and United States v. Bright, respectively, where the Ninth Circuit granted the IRS access to business records identifying customers who used offshore credit cards to shield income.
In March of 2010, a federal court in Texas allowed the IRS access to documents and financial records of the Stanford Financial Group, which contained information about offshore accounts in Antigua, a banking secrecy jurisdiction.
Halting Tax Scam Promotion and Fraudulent Return Preparation
The Justice Department has vigorously pursued tax fraud scheme promoters to stop their activity and to warn would-be promoters that promoting tax fraud schemes leads to a federal court injunction or to a long stay in jail. Because ongoing tax scams cause continuing harm to the U.S. Treasury and leave participants owing taxes, interest, and often penalties, the government does not wait until a criminal case has been developed to take action to stop the scam. Rather, the Justice Department brings civil injunction suits to stop both the promotion of tax scams and the preparation of false or fraudulent returns. In appropriate cases, the Justice Department brings criminal charges against the promoters, preparers and scam participants to punish them for their unlawful conduct. These injunctions have stopped promoters from selling tax-evasion schemes on the Internet, at seminars, or through other means.
In October 2009 the Justice Department filed seven cases across the nation seeking to shut down tax preparers who allegedly promoted the “OID” or “Redemption” scheme. Using this scheme, tax fraud promoters assist customers in filing fraudulent documents with the IRS claiming refunds for monies that the IRS never received.
- In September 2009, a Sacramento court found that preparer Teresa Marty had been using the same scheme to generate bogus refunds for her customers, and permanently barred her from preparing tax returns for others.
- In January 2010, an Idaho court shut down tax preparer Penny Lea Jones for using the OID scheme to claim $93 million in bogus refunds for customers.
- In March 2010, a federal court in Los Angeles permanently barred Nyla McIntyre of Covina, Calif. and her business, Approved Financial Services, Inc., from preparing tax returns for others and found that she had requested more than $23 million in fraudulent income tax refunds for customers.
The Tax Division has also targeted scheme promoters who falsely claim First-Time Home Buyer Credits on their customers’ returns. Congress enacted the First-Time Homebuyer Credit in 2008 to strengthen the real estate market and help the economy. It allowed persons who have not owned a home in the previous three years to claim a credit of up to $8,000 against their federal income taxes if they bought a home after April 8, 2008.
- In October 2009, a federal court in Texas permanently barred Ludivina Salinas of Mission, Texas, from preparing returns for others in a case where the Justice Department alleged abuse of the Home Buyer credit and other tax law provisions.
- In March 2010, a federal court in Miami issued a permanent injunction to stop Miami-based tax return preparer Paula Olivette Patrice and her business, To the Max Tax Professionals Inc., from improperly claiming the First-Time Home Buyer Credit.
- In March 2010, a federal court in Miami issued a permanent injunction to stop Miami-based tax return preparer Henry Ernesto Medina Jr. and his business, Medina Group Inc., from improperly claiming the First-Time Home Buyer Credit.
The Tax Division also continues to prosecute fraudulent return preparers:
- In December 2009, Daniel Gleason, the head of Renaissance, the Tax People, a multilevel marketing company, was sentenced to 78 months in prison and ordered to pay more than $3,000,000 in restitution to the IRS for conspiracy and aiding in the preparation of false tax returns.
- In December 2009, a federal court in Alabama sentenced Cardale Bates to 57 months in prison for preparing false tax returns.
- In February 2010, Ather Ali pleaded guilty to conspiracy to defraud the United States for filing fraudulent tax returns. Ali and others working with him filed false tax returns using deceased individuals’ identities, claiming fictitious withholding amounts, and seeking more than $2 million in fraudulent refunds.
- In March 2010, Fe Garrett, a San Diego tax return preparer, was sentenced to 65 months in prison for failing to report her business income and preparing fraudulent tax returns for customers containing false itemized deductions, child care expenses, and rental expenses.
Stopping Tax Defiers
The Tax Defier Initiative, which the Tax Division announced in April 2008, targets persons who attempt to undermine our entire tax system. Tax defier cases traditionally involve individuals who spout rhetoric denying the fundamental validity of the tax laws as an excuse for not paying taxes, while also availing themselves of the benefits and rights that the United States provides to its citizens and residents. Tax defier cases referred for investigation or prosecution continue to be a significant part of the work done by the Tax Division.
The success rate in tax defier prosecutions is very high:
- In November 2009, Las Vegas businessman Robert Kahre was sentenced to 190 months in prison for a payroll scheme that concealed and disguised income received by his employees and the employees of the companies for which he provided payroll services.
- During the scheme, Kahre failed to report to the IRS, and failed to withhold tax on, at least $120 million in cash payments made to his and contractors’ employees.
- In July 2009, tax defier Paul Arceneaux of Louisiana was sentenced to 46 months in prison for filing false tax returns, as well as filing fictitious liens and frivolous lawsuits against the Commissioner of Internal Revenue, an IRS employee, and others.
- In August 2009, Douglas Leiter of Minneapolis was sentenced to 121 months in prison for his role in a conspiracy to defraud the IRS by filing false tax returns and creating fictitious non-profit clubs that purported to eliminate taxable income.
- In January 2010, Bruce Mrusek and Bradley Brennecke, both dentists in Cincinnati, pleaded guity to conspiracy and tax evasion for filing false returns, concealing income and assets from the IRS, and fraudulently claiming credits against federal and local taxes.
- In January 2010, Robert Ledford of South Carolina was sentenced to 30 months in prison and ordered to repay back taxes in excess of $875,000 for not filing tax returns since 1991, and hiding income and assets from the IRS.
Curbing High-End Tax Shelters
During the past year, the Tax Division has continued its civil and criminal enforcement efforts against the promoters and facilitators of abusive tax shelters. Abusive shelters for large corporations and high-income individuals have cost the U.S. Treasury many billions annually, according to Treasury Department estimates. The Tax Division has had great success in federal court defending the U.S. Treasury against tax shelter-related claims of large companies and individual investors, and in prosecuting promoters of these abusive transactions. Among the successes during the past year in this area are the following:
- In January 2010, four former Ernst & Young partners, Robert Coplan, Martin Nissenbaum, Richard Shapiro, and Brian Vaughn, were sentenced to prison for their role in designing and marketing fraudulent tax shelter transactions sold by E&Y.
- In December 2009, Michael Parker, the chief operating officer of TransCapital Corporation, a Northern Virginia tax-advantaged investments company, pleaded guilty to conspiring with Daryl Haynor, a KPMG tax partner, and Jon Flask, a TransCapital attorney, to defraud the IRS with regard to tax shelter transactions.
- In August 2009, a federal court in New Jersey denied Schering-Plough’s $473 million refund claim, finding that its attempted repatriation of foreign-earned income using certain interest rate swap agreements was without economic substance.
- In October 2009, a federal court in Texas, found Southgate Master Fund’s claim to over $1 billion in losses relating to a distressed asset deduction shelter to be lacking economic substance. This was the first DAD shelter transaction to be tried.
- In January 2010, the Court of Federal Claims rejected Wells Fargo’s claim for millions of dollars of tax benefits from its participation in 26 Sale-In, Lease-Out tax shelters. In its opinion, the Court characterized the transactions as “offensive [to it] on many levels”, and expressed “little sympathy for those who have lost out as a result of this decision.”
- In May 2009, the Fifth Circuit denied Klamath Strategic Investment Fund substantial deductions concerning a tax shelter known as Bond Linked Issue Premium Structure (“BLIPS”), after finding the transaction lacked economic substance.
- In November 2009, the Fifth Circuit denied Enbridge Midcoast Energy, Inc. the sizeable tax benefits it sought involving a so-called “intermediary” tax shelter transaction.
- In March 2010, the Federal Circuit denied Jade Trading, LLC the substantial tax benefits it sought in connection with a Son of BOSS tax shelter, by finding that the transaction lacked economic substance.
Other Significant Tax Victories
In addition to our substantial success in combating offshore banking, abusive shelters, tax defiers and tax schemes and scams, the division has had several major victories against taxpayers taking aggressive tax positions:
- In August 2009, in United States v. Textron, Inc., the First Circuit held that tax-accrual workpapers generated by Textron, and the related workpapers of its independent auditor (Ernst & Young), were not protected from disclosure by the work-product privilege.
- In July 2009, a federal court in Texas denied AT&T’s requested $505 million tax refund claim, rejecting AT&T’s argument that payments from governmental entities were capital contributions instead of taxable income. If the United States had lost the case, the amount at stake for later years would exceed $2 billion.
- In June 2009, the Eighth Circuit, reversing a lower court, sustained the validity of a newly issued regulation and held that medical residents are subject to FICA taxes after the effective date of the regulations, in Mayo Foundation for Medical Education and Research v. United States.
Further details about these and other tax enforcement cases are available on the Tax Division’s Web site www.usdoj.gov/tax/, on the IRS’s Web site www.irs.gov, and on the IRS Criminal Division’s Web site www.irs.gov/compliance/enforcement/index.html.
The Department of Justice encourages anyone who has information about suspected tax fraud to report it to the IRS tip line at 1-800-829-0433 or visit the IRS at www.irs.gov and click on the links “Contact IRS” and “How Do You Report Suspected Tax Fraud Activity.”
Former Police Officer Pleads Guilty in Danziger Bridge CaseRead the Press Release
WASHINGTON – Michael Hunter, who until last week was an officer with the New Orleans Police Department (NOPD), has pleaded guilty to conspiracy to obstruct justice and misprision of a felony, for failing to report a crime, in connection with the federal investigation of a police-involved shooting on the Danziger Bridge, the Justice Department today announced.
The incident on the Danziger Bridge, which occurred on Sept. 4, 2005, in the days after Hurricane Katrina, involved one shooting on the east side of the bridge that resulted in the death of one civilian and the wounding of four others, and a second shooting on the west side that resulted in the death of Ronald Madison, a 40-year-old man who had severe disabilities. Ronald Madison’s brother, Lance, was arrested on eight counts of attempting to kill police officers, but he was later released without indictment. The police maintained that they fired at the civilians in self-defense, after the civilians fired at police. However, in the past months, a former Lieutenant and former Detective with NOPD have pleaded guilty to federal charges related to a cover up of the shooting incident. Today, Hunter admitted that he also knew of and participated in a conspiracy to obstruct justice in the investigation of the shooting, and that he knew and covered up that officers on the bridge had engaged in unjustified shootings. Hunter, 33, of Slidell, La., entered his plea in federal court in New Orleans today before U. S. District Court Judge Sarah Vance.
"In times of disaster, we look to our law enforcement officers to protect public safety and keep the peace. Today, this former NOPD Officer has admitted that amidst the devastation that followed in the wake of Hurricane Katrina he watched fellow officers shoot unarmed civilians. And, he admitted covering up about what they did," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "We will continue to aggressively investigate the incident that occurred on the Danziger Bridge and other post-Katrina incidents and we will continue to prosecute any officer who violates federal law."
"Today’s conviction and factual basis of supporting evidence reveal the ever-sharpening focus of our investigation, and a vastly-increasing picture of the conduct of certain officers which resulted in the deaths of two unarmed civilians, the serious injuries to four persons, and the unjust arrest of an innocent, unarmed man," said U.S. Attorney Jim Letten of the Eastern District of Louisiana. "We will forge ahead with our investigation and all necessary prosecutions until all who violated the law and the public trust are brought to justice. My special thanks go to New Orleans District Attorney Leon Cannizzaro for his cooperation and forbearance in making this conviction possible."
Assistant Director Kevin L. Perkins, FBI Criminal Investigative Division stated, "The citizens of New Orleans have the right to expect their law enforcement officers to act legally and in accordance with the Constitution. Nothing justifies or excuses the defendant’s conduct in this case. The FBI is committed to ensuring that violations of any citizen’s civil rights in this matter will continue to be aggressively investigated."
According to admissions the defendant made in a factual basis filed in court today, Hunter drove to the bridge on Sept. 4, 2005, in a large Budget rental truck carrying officers in response to a radio call that said officers on the nearby I-10 high-rise bridge had come under fire. In his factual basis, Hunter acknowledges the details of the shootings on the east side of the bridge, which resulted in the death of one civilian and serious injury to others. According to Hunter, officers fired at civilians even though the civilians did not appear to have any weapons. According to Hunter, one officer (referred to only as Sergeant A) at one point leaned over a concrete barrier, held out an assault rifle, and, in a sweeping motion, fired repeatedly at the civilians, who were at that point lying wounded and apparently unarmed on the ground.
Hunter also admits in his factual basis that he fired his weapon repeatedly at civilians who were running away over the bridge. He further admits that he did not see any weapons on these civilians, and that the civilians did not appear to pose a threat to officers as they ran up the bridge.
According to the factual basis, which the defendant admitted was true, Hunter was also present on the west side of the bridge when an officer, identified only as Officer A, shot and killed Ronald Madison, who was running away from officers with his hands in view, and did not have a weapon or pose a threat. Without warning, an officer fired a shotgun at Madison’s back as Madison ran toward a motel at the bottom of the bridge. Hunter also describes having watched as the officer identified as Sergeant A physically abused Ronald Madison as Madison lay on the ground, injured but still alive.
Hunter admitted in court today that, in the wake of the shootings on the bridge, he participated in a conspiracy to cover up the truth about what had happened on the bridge. Specifically, he admitted, among other things, that he and other officers provided false statements about what happened on the bridge; that before giving formal statements on tape, he and other officers met in a gutted-out police station and discussed their false stories; and that he lied to a state grand jury about what happened on the Danziger Bridge.
The two-count bill of information to which Hunter pleaded guilty charged him with conspiracy to obstruct justice and misprision of a felony. The defendant faces a possible maximum sentence of eight years in prison and a fine of $500,000.
This case, which is ongoing, is being investigated by the New Orleans Field Office of the FBI, and is being prosecuted by Deputy Chief Bobbi Bernstein and Trial Attorney Forrest Christian of the Justice Department’s Civil Rights Division, along with Assistant U.S. Attorney Julia K. Evans of the Eastern District of Louisiana.
Former Department of Labor Chief of Staff Pleads Guilty for Failing to Report Gifts from Former Lobbyist Jack AbramoffRead the Press Release
The former chief of staff for the U.S. Department of Labor (DOL) Employment Standards Administration pleaded guilty today to falsely certifying his Fiscal Year 2003 Executive Branch Personnel Public Financial Disclosure Report, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division. Horace M. Cooper, 44, of Lorton, Va., pleaded guilty before U.S. District Judge Ellen S. Huvelle in the District of Columbia to a criminal information charging him with making and using a false certificate or writing.
According to court documents, Cooper was the chief of staff for the DOL’s Employment Standards Administration from December 2002 through August 2005. In that position, Cooper was required by federal regulations to complete annual Executive Branch Personnel Public Financial Disclosure Reports. Cooper admitted that in 2003 he solicited and accepted gifts from Jack A. Abramoff and Neil G. Volz, former Washington lobbyists who had a client with business before the DOL. Cooper admitted he concealed his receipt of these gifts from DOL ethics officials and his supervisors.
Cooper was required to report the gifts he received from Abramoff and Volz on his annual financial disclosure form because the value of these gifts exceeded the limits established by federal regulation. According to court documents, DOL ethics officials and his supervisors were deprived of critical information as a result of Cooper’s failure to report these gifts, which was necessary to determine whether Cooper had an actual or potential conflict of interest between his public responsibilities and his private interests and activities.
The charge to which Cooper pleaded guilty carries a maximum sentence of one year in prison and a $100,000 fine. According to court documents filed in connection with his guilty plea, Cooper agreed that the guidelines for his sentencing should be increased due to his admitted effort to obstruct the government’s investigation into his relationship with and his receipt of gifts from Abramoff and Volz. Specifically, Cooper admitted that the government could prove that he made materially false and misleading statements and representations to FBI agents about his solicitation and receipt of gifts from Abramoff and Volz, and that he later repeated those false and misleading statements and representations in his testimony before a grand jury investigating this matter. Sentencing is scheduled for July 1, 2010.
To date, 19 individuals, including lobbyists and public officials, have pleaded guilty, been convicted at trial, or are awaiting trial in connection with the ongoing investigation into the activities of Abramoff and his associates. Abramoff pleaded guilty in January 2006 to conspiracy to commit honest services fraud, honest services fraud and tax evasion. Abramoff was sentenced in September 2008 to 48 months in prison. Neil Volz pleaded guilty in May 2006 to conspiracy to commit honest services fraud and was sentenced in September 2007 to two years probation.
This case was prosecuted by Trial Attorneys Armando O. Bonilla and Marc E. Levin of the Criminal Division’s Public Integrity Section. The case is being investigated by the FBI.
Indictment
Detroit Clinic Owner Sentenced to Prison <br /> for Role in $18 Million Medicare Fraud SchemeRead the Press Release
A Michigan man was sentenced today in Detroit to 81 months in prison for his role in a wide-ranging conspiracy to defraud the Medicare program, announced the Departments of Justice and Health and Human Services (HHS). U.S. District Court Judge Sean F. Cox also ordered Suresh Chand, of Warren, Mich., to pay $9,769,113 in restitution, jointly with co-defendants, and to serve three years of supervised release following his prison term.
Chand, 46, pleaded guilty on Sept. 2, 2009, to one count of conspiracy to commit health care fraud and one count of conspiracy to launder money. Between approximately January 2003 and March 2007, Chand and his co-conspirators submitted claims to the Medicare program totaling more than $18 million for physical and occupational therapy services that were never provided. Medicare actually paid approximately $8.5 million on those claims.
In addition, co-conspirator Jose Castro-Ramirez submitted approximately $1.2 million in claims to the Medicare program for "home visits" supposedly provided to beneficiaries recruited into the scheme by Chand and his co-conspirators. Medicare paid approximately $780,000 on those claims. After the proceeds of the fraud were obtained from Medicare, Chand acknowledged that he laundered the funds through a series of transactions using shell companies designed to conceal the nature, source, location, ownership and control of the tainted funds.
According to court documents, Chand owned and controlled a company operating in Warren called Continental Rehab Services, Inc. (CRS), which purported to provide physical and occupational therapy services to Medicare beneficiaries. He later started another corporation at the same address in Warren called Pacific Management Services Inc. (PM), which also purported to provide physical and occupational therapy services to Medicare beneficiaries. Chand admitted that, beginning in approximately January 2003, he and his associates at CRS, and later PM, began to create fictitious therapy files, appearing to document physical and occupational therapy services provided to Medicare beneficiaries, when in fact no such services were provided. The fictitious services reflected in the files were billed to Medicare through sham Medicare providers controlled by Chand and two of his co-conspirators.
In his plea, Chand admitted that in order to create the fictitious therapy files, he and his co-conspirators recruited and paid cash kickbacks and other inducements to Medicare beneficiaries, in exchange for the beneficiaries’ Medicare numbers and signatures on documents falsely indicating that they had visited CRS or PM for the purpose of receiving physical or occupational therapy. Chand acknowledged recruiting hundreds of Medicare beneficiaries for this purpose, and paying them for their signatures with cash and prescriptions for controlled substances, including Vicodin, Xanax and Soma. Chand and his co-conspirators obtained the prescriptions for these drugs from co-conspirator physician Jose Castro-Ramirez, who prescribed controlled substances for beneficiaries he had never seen, for the purpose of recruiting those beneficiaries into the scheme. Chand also prepared fictitious therapy prescriptions and other documents, which when signed by Castro-Ramirez, falsely indicated he had ordered and monitored physical or occupational therapy services that were provided to the Medicare beneficiaries. To complete the fictitious files, Chand admitted that he and his co-conspirators obtained signatures from licensed physical or occupational therapists on "progress notes" and other documents in the therapy files, falsely indicating that the therapists had provided therapy services to the Medicare beneficiaries on those dates. Chand recruited a number of licensed physical and occupational therapists into the scheme, and paid these therapists a set fee per file that they helped falsify.
On March 11, 2010, a federal jury convicted Dr. Jose Castro-Ramirez of conspiracy to commit health care fraud, health care fraud and money laundering for his role in the conspiracy.
At sentencing, scheduled for June 29, 2010, Castro-Ramirez faces a maximum penalty of 10 years in prison and a $250,000 fine on the health care fraud conspiracy and substantive health care fraud counts. He faces a maximum penalty of 20 years in prison and a $250,000 fine on the money laundering conspiracy count.
Today’s result was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Andrew G. Arena of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services, Office of Inspector General’s (HHS-OIG) Chicago Regional Office.
This case is being prosecuted by Senior Trial Attorney John K. Neal and Trial Attorney Gejaa T. Gobena and Special Assistant U.S. Attorney Thomas Beimers from the Eastern District of Michigan. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for approximately $1.1 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
Detention Officer Sentenced for Repeated Sexual Abuse of DetaineesRead the Press Release
WASHINGTON – The Justice Department announced today that U.S. District Judge Gray H. Miller sentenced Robert Luis Loya to three years in prison and five years of supervised release for violating the civil rights and the sexual abuse of females in his custody. Loya, a former guard at the Port Isabel Detention Center in Los Fresnos, Texas, pleaded guilty in September 2009, to a six-count criminal information charging him with three counts of abusive sexual contact and three counts deprivation of rights under color of law.
In his guilty plea, Loya, 43, who lives in Rio Honda, Texas, admitted that on several occasions in March and April 2008, he snuck into medical isolation rooms at the detention center infirmary to grope female patients. He frequently volunteered for infirmary duty so that he would be alone with the victims and his victims were usually asleep when he entered the room. Loya lied to his victims, assuring them that he had been ordered to examine them by a physician and instructing them to disrobe. He then touched intimate parts of their bodies in a sexual manner. Loya admitted that his actions caused the victims psychological pain and embarrassment.
Loya worked at the detention center for six and-a-half years as a guard and was employed by a private company that contracted with the United States government. When confronted by agents from U.S. Customs and Immigration Enforcement’s Office of Professional Responsibility, Loya admitted to sexually touching five different women.
"Correctional officers are given a great deal of power in order to carry out their critical responsibilities, but this officer abused that power to violate the civil rights of individuals under his supervision. Our laws protect the constitutional rights of all individuals, including those in state or local custody," said Assistant Attorney General Thomas E. Perez of the Civil Rights Division. "We will vigorously prosecute any guard or detention officer who uses his position of trust to prey upon vulnerable individuals."
"Loya flagrantly violated the most vulnerable of victims who have a right to expect to be safe and protected from harm while in custody and most certainly from one with the duty to provide those protections," said José Angel Moreno,U.S. Attorney for the Southern District of Texas. "This office will aggressively investigate and prosecute those who violate the civil rights of others to ensure that expectation. Nothing less can be tolerated."
The case was investigated by Senior Special Agent Arturo Martinez of the Office of Professional Responsibility of U.S. Immigration and Customs Enforcement. Trial Attorney Michael J. Frank of the Justice Department’s Civil Rights Division and Assistant U.S. Attorney Ruben R. Perez prosecuted this case.
Attorney General Holder Signs First Criminal Law Enforcement Agreement Between United States and AlgeriaRead the Press Release
Attorney General Eric Holder and Algerian Minister of Justice Tayeb Belaiz today signed a treaty between the United States and Algeria on mutual legal assistance in criminal matters, the first ever criminal law enforcement agreement between the two countries. The treaty strengthens the two countries’ common efforts in the fight against terrorism and transnational crime by enabling the most modern procedures for law enforcement cooperation.
"The proliferation of both terrorism and traditional criminal acts across national borders makes international cooperation essential to bringing to justice those who threaten our safety and security," said Attorney General Holder. "Algeria is an important partner in the fight against terrorism and transnational crime. This treaty will help us ensure that terrorists and other criminals are not able to avoid justice by simply hiding evidence beyond our borders."
The mutual legal assistance treaty, or MLAT, will be an effective tool in the investigation and prosecution of terrorism, cybercrime, white collar offenses and other crimes. Among other tools, the treaty will help law enforcement officials from the two countries obtain testimonies and statements; retrieve evidence, including bank and business records; provide information and records from governmental departments or agencies; and provide a means of inviting individuals to testify in a requesting country.
The formal treaty signing took place at the Ministry of Justice in Algiers, Algeria. Additional representatives from the Department of Justice and the Algerian Ministry of Justice attended today’s ceremony. To date, the United States has negotiated and signed more than 50 bilateral MLATs with law enforcement partners around the world.
6 April 2010
Medical Assistant Pleads Guilty for Role in Detroit <br /> Infusion and Injection Therapy Scheme to Defraud MedicareRead the Press Release
A Detroit-area resident pleaded guilty today for her role in an infusion and injection therapy scheme to defraud Medicare, announced the Departments of Justice and Health and Human Services (HHS).
Miriam Freytes, 49, pleaded guilty today to one count of conspiracy to commit health care fraud before U.S. District Court Judge Denise Page Hood of the Eastern District of Michigan. At sentencing, scheduled for Aug. 5, 2010, Freytes faces a maximum sentence of 10 years in prison and a $250,000 fine.
According to the plea documents, Freytes entered into an agreement in approximately December 2005 to provide services to Dearborn Medical Rehabilitation Center (DMRC), a business that purported to provide infusion and injection therapy services to Medicare beneficiaries. According to court documents, the Medicare beneficiaries were recruited by co-conspirators and paid to sign paperwork stating that they had received infusions and injections of specialty medications that they did not receive.
Freytes admitted that as a medical assistant at DMRC she administered infusions and injections of specialty medications to Medicare beneficiaries billed by the clinic. Freytes also admitted she allowed co-conspirators at DMRC to submit fraudulent bills to Medicare using her and her son’s identification numbers for services that were not necessary or provided. Freytes’ conduct resulted in DMRC billing more than $1 million to Medicare and being paid approximately $727,000 for unnecessary services and for services that were never provided.
Today’s result was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Andrew G. Arena of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services, Office of Inspector General’s (HHS-OIG) Chicago Regional Office.
This case was prosecuted by Senior Trial Attorney John K. Neal and Trial Attorney Gejaa T. Gobena of the Criminal Division’s Fraud Section and Special Assistant U.S. Attorney Thomas Beimers from the Eastern District of Michigan. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for approximately $1.1 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
Former Purchasing Official at a New York City Hospital Indicted for Bid Rigging and Fraud ConspiracyRead the Press Release
WASHINGTON — A New York City federal grand jury returned an indictment against a former Mount Sinai Medical Center and School of Medicine purchasing official today for participating in bid-rigging and fraud conspiracies related to contracts for work performed at Mount Sinai, the Department of Justice announced.
The three-count indictment returned today in U.S. District Court in New York City, charges Mario Perciavalle, a former purchasing official at Mount Sinai, with engaging in a conspiracy to rig bids on Mount Sinai contracts for maintenance and insulation services between June 2004 and September 2005. Perciavalle and his co-conspirators took steps to create the appearance that Mount Sinai was awarding contracts based on competition, when, in fact, they submitted, or caused to be submitted, intentionally high, non-competitive bids to Mount Sinai on these contracts.
The indictment further charges that between March 2003 and September 2005, Perciavalle and a co-conspirator engaged in a mail fraud conspiracy, in which Perciavalle awarded work at Mount Sinai to that co-conspirator’s company at the same time he was asking for and receiving cash kickbacks from the co-conspirator. Perciavalle is also charged with mail fraud as a result of payments mailed by Mount Sinai to Percivalle’s co-conspirator for work done on the rigged contracts.
The bid-rigging violation that Perciavalle is charged with carries a maximum penalty of 10 years in prison and a $1 million fine. The fraud conspiracy that Perciavalle is charged with carries a maximum penalty of 20 years in prison and a $1 million fine. The maximum fine for both of the charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim of the crime, if either of those amounts is greater than the statutory maximum fine.
The charges announced today resulted from an ongoing federal antitrust investigation of bid rigging, fraud, bribery and tax-related offenses relating to construction, maintenance and service contracts administered by the Engineering Department of Mount Sinai and the Facilities Operations Department and the Engineering Department at New York Presbyterian Hospital (NYPH). To date, eight individuals and three companies have pleaded guilty to charges arising out of this ongoing investigation. Additionally, two individuals were charged in a three-count indictment unsealed on March 31, 2010, for participating in bid-rigging and tax fraud conspiracies related to contracts at NYPH. The investigation is being conducted by the Antitrust Division’s New York Field Office, the FBI and the Internal Revenue Service Criminal Investigation’s New York Field Office.
Anyone with information concerning bid rigging, bribery, tax offenses or fraud related to contracts administered by the Facilities Operation Department at NYPH or the Engineering Departments at Mount Sinai or NYPH should contact the Antitrust Division’s New York Field Office at 212-264-9308 or the FBI’s New York Division at 212-384-1000 or visit http://www.justice.gov/atr/contact/newcase.htm.
5 April 2010
U.S. Joins Lawsuit Against Waycross, Georgia, Medical Center & Physician for Alleged False Claims Billings to Medicare and MedicaidRead the Press Release
WASHINGTON - The United States has intervened in a False Claims Act lawsuit alleging that Satilla Health Services Inc., dba Satilla Regional Medical Center, and Dr. Najam Azmat submitted claims for medically substandard and unnecessary services to Medicare and Medicaid, the Justice Department announced today. Specifically, the complaint alleges, among other things, that the defendants submitted claims for medical procedures performed by Dr. Azmat in Satilla’s Heart Center that the physician was neither qualified nor properly credentialed to perform. As a result, at least one patient died and others were seriously injured.
The complaint states that Satilla placed Dr. Azmat on staff even after learning that the hospital where he previously worked had restricted his privileges as a result of a high complication rate on his surgical procedures. The complaint also states that after Dr. Azmat joined the Satilla staff, the hospital management allowed him to perform endovascular procedures in the hospital’s Heart Center even though he lacked experience in performing such procedures and did not have privileges to perform them. Endovascular procedures are complex medical procedures that are performed within arteries and veins accessed by a puncture site in the skin and require specialized training.
According to the complaint, at least one of Dr. Azmat's endovascular patients died as a result of his lack of training and competence. The complaint alleges that Dr. Azmat perforated the patient's renal artery, causing her to bleed to death. Dr. Azmat allegedly did not even recognize that he had perforated the patient’s artery and failed to take appropriate action to address the complication.
The complaint further states that the nurses in Satilla’s Heart Center recognized that Dr. Azmat was incompetent to perform endovascular procedures and repeatedly raised concerns with hospital management. Despite the nurse’s complaints and Dr. Azmat’s high complication rate, Satilla’s management continued to allow him to perform endovascular procedures and to bill federal health care programs for these services.
"In this case, the defendants allegedly not only provided substandard and unnecessary medical services - they caused harm to patients," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "We are committed to bringing to justice those who put profits ahead of patient health and safety."
This lawsuit was originally filed by Lana Rogers, a nurse who formerly worked in Satilla’s Heart Center. Under the qui tam, or whistleblower, provisions of the False Claims Act, a private citizen can file an action on behalf of the United States and receive a portion of any recovery. The act permits the United States to recover three times the amount of its losses, plus civil penalties.
"The fraud alleged in this case not only caused financial loss to the government, but sadly also endangered the lives of federal health care program beneficiaries," said U.S. Attorney Edward Tarver.
The investigation in this case is being conducted by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Southern District of Georgia, and the Office of Inspector General of the Department of Health and Human Services.
The United States’ intervention is part of the government’s emphasis on combating health care fraud. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $2.3 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 have topped $3 billion.
Mobil Oil Companies to Pay U.S. $32.2 Million to Resolve Allegations of Underpayment of Royalties from American Indian and Federal LandsRead the Press Release
WASHINGTON – Mobil Natural Gas Inc., Mobil Exploration & Producing U.S. Inc. and their affiliates have agreed to pay the United States $32.2 million to resolve claims that they violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and American Indian leases, the Justice Department announced today. The Mobil companies are alleged to have systematically under reported the value of natural gas taken from the leases from March 1, 1988, to Nov. 30, 1999, and, consequently, paid less royalties than owed to the United States and various American Indian tribes.
The settlement with the Mobil companies arises from a lawsuit filed by Harold Wright on behalf of the United States. The qui tam or whistleblower provisions of the False Claims Act allow private citizens to file actions on behalf of the United States and to share in any recovery. Because Mr. Wright is deceased, his heirs will receive a $975,000 share of the settlement.
The Justice Department partially intervened against the Mobil defendants in the Wright lawsuit, and previously settled with Burlington Resources Inc. for $105.3 million, Shell Oil Co. for $56 million, Chevron Corporation, Texaco and Unocal Incorporated for $45.5 million and Dominion Exploration and Production Co. for $2 million. The Mobil companies were merged into and became subsidiaries of ExxonMobil, the world’s largest publically traded international oil and gas company in November 1999.
"The message to those who seek to evade their mineral royalty obligations is this: We will aggressively pursue you," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "We at the Justice Department are committed to protecting the public trust by ensuring that those who remove valuable minerals, some of which are non-renewable, from American Indian or public lands pay their full, fair, negotiated share for those assets."
The Minerals Management Service (MMS) of the U.S. Department of the Interior is responsible for overseeing the collection of royalties on federal and American Indian leases, as well as federal offshore lands on the Outer Continental Shelf. Each month, companies are required to report to MMS the value of the natural gas produced from their federal and American Indian leases and to pay a percentage of the reported value as royalties. The United States alleged that the Mobil companies used transactions with affiliated entities to falsely reduce the reported value of gas taken from federal and American Indian leases, to claim excessive deductions for the cost of transporting that gas, and to otherwise understate the value they reported each month for their natural gas production.
"This settlement closes another important portion of long-standing litigation that MMS participated in to ensure that taxpayers receive their fair share of royalty revenues from energy production that occurs on federal lands," said MMS Director Liz Birnbaum. "The revenues collected from the settlement will be disbursed to appropriate Federal, state and American Indian accounts that were affected by the underpayment of royalties."
The investigation of and settlement with the Mobil Defendants was jointly handled by the U.S. Attorney for the Eastern District of Texas and the Civil Division of the Department of Justice, with the assistance of the Department of the Interior’s Office of Inspector General, Minerals Management Service, and Office of the Solicitor.
The case is U.S. ex rel. Wright v. Chevron USA, Inc. et al., 5:03-CV-264 (E.D. Tex.)
Medical Device Manufacturer Guidant Pleads Guilty<br /> for Not Reporting Defibrillator Safety Problems to FDARead the Press Release
WASHINGTON – Guidant LLC pleaded guilty today in St. Paul, Minn., before U.S. District Court Judge Donovan W. Frank to criminal violations of the Federal Food, Drug and Cosmetic Act, the Justice Department announced. The medical device manufacturer’s admission of criminal wrongdoing is the result of a four-year investigation into Guidant’s handling of short-circuiting failures of three models of its implantable cardioverter defibrillators: the Ventak Prizm 2 DR (Model 1861) and the Contak Renewal (Models H135 and H155). Guidant’s Cardiac Rhythm Management division, which produced the defibrillators, is headquartered in Arden Hills, Minnesota.
Implantable cardioverter defibrillators are lifesaving devices used to detect and treat abnormal heart rhythms that can result in sudden cardiac death, one of the leading causes of mortality in the United States. The devices, once surgically implanted, constantly monitor the electrical activity in a patient’s heart for deadly electrical rhythms and deliver an electrical shock to the heart in an effort to return the heartbeat to normal. If they fail to operate properly when needed, a person can die within minutes.
Under the terms of the plea agreement with the Justice Department to resolve the charges, which must still be approved by Judge Frank, Guidant pleaded guilty today to withholding information from the U.S. Food and Drug Administration (FDA) regarding catastrophic failures in some of its lifesaving devices. Specifically, Guidant admitted to: (1) making a materially false statement in a required submission to the FDA with regard to the Ventak Prizm 2DR device; and (2) failing to notify the FDA of a "correction" to the Contak Renewal devices, which the company made to reduce a risk to health caused by the devices. As a result of these offenses, the agreement calls for Guidant to pay a combined criminal penalty in excess of $296 million.
"Guidant’s guilty plea today is about accountability," said Assistant Attorney General Tony West, who heads the Justice Department’s Civil Division. "This successful prosecution serves as an important wake up call to all those who seek to withhold vital information about public health and safety. We will continue our efforts to prosecute those who jeopardize public health by evading their reporting obligations to the FDA."
Guidant, a wholly-owned subsidiary of Boston Scientific Corporation, was charged in federal district court on Feb. 25, 2010. The guilty plea agreement was then filed with the court on March 11, 2010.
"The guilty plea today should serve as a reminder and deterrent to those who would break the laws requiring honesty and cooperation with government regulators whose mission is to protect the health and safety of the public," said Frank J. Magill, Acting U.S. Attorney in this case for the District of Minnesota . "The health care laws are as important as ever. When medical device and pharmaceutical companies fail to live up to their legal obligations, serious criminal consequences will follow."
Today's entry of a guilty plea by Guidant LLC and the proposed resolution would represent the largest criminal penalty ever imposed on a device manufacturer for violating the Food Drug and Cosmetic Act," said Commissioner of Food and Drugs Margaret A. Hamburg, M.D. "The FDA will continue to commit enforcement resources to seeking this type of criminal resolution and stiff sanctions when device manufacturers fail to adhere to the statutory and regulatory requirements that exist to ensure the safety and efficacy of their products."
The case was investigated by the FDA’s Office of Criminal Investigations and is being prosecuted by AUSA Robert M. Lewis of the U.S. Attorney’s Office for the District of Minnesota, and Justice Department Trial Attorneys Ross S. Goldstein and Matthew S. Ebert of the Civil Division’s Office of Consumer Litigation. Additional assistance is being provided by Steven Tave of FDA’s Office of Chief Counsel.
Cincinnati Area Return Preparer Charged with Tax CrimesRead the Press Release
WASHINGTON - Idrissa Bassoum, a former resident of Cincinnati, made his initial appearance in federal district court in Cincinnati on tax charges, the Justice Department and Internal Revenue Service (IRS) announced. In December 2009, a sealed indictment was returned charging Bassoum with fifteen counts of aiding in the preparation of false income tax returns, one count of filing a false tax return and one count of failure to file a tax return. The indictment was unsealed on March 18, 2010, following the defendant’s arrest in Atlanta.
According to the indictment, from February 2003 through 2005, Bassoum operated Bassoum’s Consulting Service (BCS), a tax preparation business run out of his residence catering primarily to immigrants. Bassoum prepared and electronically filed tax returns for his clients that included inflated or wholly fictitious deductions, such as moving expenses, which resulted in his clients claiming inflated fraudulent tax refunds.
According to the indictment, Bassoum received substantial tax preparation fees through BCS that were typically subtracted from the refund amounts obtained for his clients and were directly deposited into Bassoum’s personal bank account. Despite preparing hundreds of tax returns for clients during tax years 2003 and 2004, Bassoum failed to report any income derived from his tax preparation activities on his personal tax returns.
Judge S. Arthur Spiegel, who is presiding over the matter, has not scheduled a trial date. If convicted, Bassoum faces a maximum sentence of three years in prison and a maximum fine of $250,000 as to each of the fifteen counts of aiding in the filing of a false tax return. If convicted, Bassoum faces a maximum sentence of three years in prison and a maximum fine of $250,000 for filing a false tax return and a maximum sentence of one year in prison and a maximum fine of $100,000 for failure to file a tax return.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
The case was investigated by IRS - Criminal Investigation Division. The case is being prosecuted by Tax Division trial attorneys Jorge Almonte and Sean R. Delaney.
2 April 2010
Women from Colorado and Pennsylvania Charged with Terrorism Violations in Superseding IndictmentRead the Press Release
A superseding indictment unsealed this afternoon in the Eastern District of Pennsylvania charges Jamie Paulin Ramirez, a U.S. citizen and former resident of Colorado, and Colleen R. LaRose, aka "Fatima LaRose," aka "JihadJane," a resident of Pennsylvania, with conspiracy to provide material support to terrorists. The superseding indictment adds Ramirez as a defendant to what was previously an indictment charging only LaRose.
The new charges were announced by David Kris, Assistant Attorney General for National Security; Michael L. Levy, U.S. Attorney for the Eastern District of Pennsylvania; and Janice K. Fedarcyk, Special Agent-in-Charge of the FBI in Philadelphia.
The superseding indictment charges that LaRose and Ramirez traveled to and around Europe to participate in and in support of violent jihad. According to the superseding indictment, Ramirez exchanged e-mail messages with LaRose during the summer of 2009, in which LaRose invited Ramirez to join her in Europe to attend a "training camp." Ramirez is charged with accepting the invitation and asking to bring along her minor male child. On Sept, 12, 2009, Ramirez traveled to Europe with her child with the intent to live and train with jihadists. The day she arrived in Europe, the indictment alleges, Ramirez married an unindicted co-conspirator whom she had never before met in person.
The superseding indictment charges Ramirez, age 31, with one count of conspiracy to provide material support to terrorists, which carries a maximum penalty of 15 years in prison and a $250,000 fine. The charges against LaRose remain unchanged, and carry a maximum potential sentence of life in prison and a $1 million fine.
Ramirez was arrested this afternoon in Philadelphia after voluntarily flying to the United States from abroad.
This case was investigated by the FBI’s Joint Terrorism Task Force in Philadelphia, the FBI Field Division in New York and the FBI Field Division in Denver. It is being prosecuted by Jennifer Arbittier Williams, Assistant U.S. Attorney from the Eastern District of Pennsylvania, and Matthew F. Blue, Trial Attorney from the Counterterrorism Section in the Justice Department’s National Security Division.
The public is reminded that an indictment is an accusation and a defendant is presumed innocent unless and until proven guilty.
Justice Department Launches Comprehensive Web Site for Tribal CommunitiesRead the Press Release
Attorney General Eric Holder today announced the redesign and enhancement of its Tribal Justice and Safety Web site: www.TribalJusticeandSafety.gov . The Tribal Justice and Safety Web site is a one-stop shop for tribal communities, developed to provide a user-friendly, updated and comprehensive resource for American Indian and Alaska Native tribal communities to help further improve public safety. The site’s enhancements continue the department’s commitment to increase communication and resources available to tribal governments and consortiums.
"Tribal communities have spoken and the Department of Justice has listened and responded. When I met with tribal leaders last year, during the Tribal Nations Listening Session, I pledged that the Justice Department would act quickly to address the issues they identified that could make significant improvements in tribal communities across the United States," said Attorney General Holder. "We have learned from our meetings with tribal leaders that difficulties accessing some of the Justice Department’s information, especially information about grant opportunities, have been an obstacle for many communities. This new Web site will remove this obstacle, and help the Justice Department work more effectively with tribal communities to improve public safety."
The new site features an easy to navigate format and access to the latest announcements, press releases, speeches and information regarding Department of Justice initiatives in tribal communities. It also provides comprehensive resources available through the Office of Tribal Justice and the department’s grant-making divisions: the Office of Justice Programs, Community Oriented Policing Services and the Office on Violence Against Women.
Access to the department’s Combined Tribal Assistance Solicitation (CTAS) is also available on the Web site. Last month, the department announced the creation of CTAS, a newly streamlined grant program for federally-recognized American Indian and Alaska Native tribal communities, governments and consortiums to apply for Fiscal Year 2010 funding opportunities.
Today’s announcement is another step in the Justice Department’s ongoing initiative to increase engagement, coordination and action on public safety in tribal communities.
Detroit-Area Doctor and Patient Recruiter Convicted in Medicare Fraud SchemeRead the Press Release
West Bloomfield, Mich., physician Alan Silber and Detroit resident Hassan Reeves were convicted today by a federal jury for their roles in an $1 million Medicare fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Andrew G. Arena of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services, Office of Inspector General’s (HHS-OIG) Chicago Regional Office.
After a week-long trial, the jury convicted Silber of six counts of health care fraud. Reeves was convicted of one count of conspiracy to commit health care fraud and one count of conspiracy to pay health care kickbacks. Silber was acquitted on one count of conspiracy to commit health care fraud. Each substantive health care fraud charge and the conspiracy charge carry a maximum penalty of 10 years in prison and a $250,000 fine. The charge of conspiracy to pay health care kickbacks carries a maximum penalty of five years in prison and a $250,000 fine. Sentencing has been scheduled for Aug. 6, 2010.
Evidence at trial established that beginning in approximately December 2006, Silber and Reeves began working at a purported infusion clinic called RDM Center Inc. RDM Center existed for the purpose of causing fictitious claims for injection and infusion therapy services to be billed to Medicare. Evidence at trial established that the owners of RDM Center, Miami residents Denisse and Jose Martinez, came to Detroit to start the clinic because of heavy law enforcement scrutiny in Florida of fraudulent infusion clinics. Evidence presented at trial showed that Silber was hired to be the physician at the clinic while Reeves was hired to recruit and pay kickbacks to Medicare beneficiaries to come to the clinic. Denisse and Jose Martinez have previously pleaded guilty for their roles in the scheme.
During the time that RDM Center was open, the clinic routinely billed the Medicare program for services allegedly performed, but in reality were medically unnecessary and/or never provided. Trial evidence showed that the clinic’s owners purchased only a small fraction of the medications for which the clinic billed the Medicare program. According to evidence presented at trial, medications at the clinic were prescribed based not on medical need, but based on what medications were likely to generate Medicare reimbursements. Denisse Martinez, despite having no medical training, completed the clinic’s patient records by filling in, among other things, the "diagnosis" and "treatment" sections of the patient charts, which were then provided to Silber for his signature. Evidence presented at trial showed that Silber signed the diagnosis and treatment forms even though he neither made the diagnosis nor made any independent medical judgment as to the course of treatment. Expert testimony established that there was no legitimate medical basis for the use of the medications that Silber approved at the clinic, and, that in several instances, the medications could have harmed the patients. Evidence at trial established that Silber routinely approved the use of medications for patients despite knowing that the medications were unnecessary.
Evidence at trial also established that Medicare beneficiaries were not referred to RDM Center by their primary care physicians, or for any other legitimate medical purpose, but rather were recruited by Reeves to come to the clinic through the payment of kickbacks. Reeves recruited the beneficiaries in downtown Detroit and drove them approximately 27 miles to RDM Center. Trial evidence showed that in exchange for the kickbacks Reeves paid them, the Medicare beneficiaries visited the clinic and signed documents indicating that they had received the services billed to Medicare. Kickbacks came in the form of cash and prescriptions for controlled substances.
Between approximately December 2006 and March 2007, Silber, Reeves and their co-conspirators caused the submission of approximately $970,631 in false and fraudulent claims to be submitted to the Medicare program for services supposedly provided by RDM Center. Medicare actually paid approximately $649,000 of those claims
The case was prosecuted by Trial Attorney Benjamin D. Singer of the Criminal Division’s Fraud Section and Special Assistant U.S. Attorney Thomas W. Beimers of the U.S. Attorney’s Office for the Eastern District of Michigan.
The FBI and HHS-OIG conducted the investigation. The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Department of Justice Observes April as Sexual Assault Awareness Month<br />Read the Press Release
WASHINGTON – In recognition of Sexual Assault Awareness Month, the Department of Justice today reaffirmed its commitment to ending sexual violence. The month of April is observed as Sexual Assault Awareness Month around the country by advocates, victim service providers, law enforcement, the judiciary, prosecutors and survivors to raise public awareness about sexual violence. President Obama, who was the first U.S. president to proclaim April as Sexual Assault Awareness Month in 2009, made the official announcement in a proclamation distributed last night.
“The Department is proud to commemorate April as Sexual Assault Awareness Month and bring attention to this tragic issue that affects men, women, boys and girls in communities across the country,” said Attorney General Eric Holder. “We know the Department cannot do this work alone, and we stand committed to working with our federal, state, tribal and community partners who are doing critical work in this area every day.”
“Highlighting April as Sexual Assault Awareness Month provides all of us with an opportunity to recognize that through our combined efforts, we can end sexual violence,” said Judge Susan B. Carbon, Director of the Office on Violence Against Women (OVW). “In the fifteen years since the Violence Against Women Act (VAWA) was signed into law, we have made enormous progress combating domestic violence in intimate and family relationships. We have been able to equip communities with the resources to protect survivors and save lives. We are equally committed to making the same significant social and legal improvements around sexual assault so that no one will have to endure the pain and humiliation that accompanies sexual violence.”
The Justice Department’s 2006 National Violence Against Women Survey found that nearly 18 million women and three million men had experienced at least one incident of sexual assault. In 2008, according to the department’s Bureau of Justice Statistics, 57 percent of the sexual assaults against females were committed by an offender whom they knew, and one in five sexual assaults against females (20 percent) was committed by an intimate partner. Less than half (47 percent) of the sexual assaults against females in 2008 were reported to police.
On Sept. 14, 2009, the Department of Justice marked the fifteenth anniversary of VAWA and the creation of OVW. The department launched a year-long effort to raise public awareness, build stronger coalitions among federal, state, local and tribal communities, and redouble efforts to end domestic and dating violence, sexual assault and stalking for men, women and children across the country. Most recently, nine members of the Department of Justice leadership visited 11 universities around the nation throughout the month of March to raise awareness about violent crimes affecting college campuses.
President Obama’s FY2011 budget request provides $461 million for OVW to provide communities with resources to combat sexual assault and violence against women, a 6 percent increase from FY2010. This includes $30 million for the Sexual Assault Services Program (SASP), the first federal funding stream solely dedicated to the provision of direct intervention and related assistance for victims of sexual assault. In FY2009, OVW made the first grant awards under SASP, totaling more than $16 million.
OVW provides leadership in developing the nation’s capacity to reduce violence against women through the implementation of VAWA and subsequent legislation. Created in 1995, OVW administers financial and technical assistance to communities across the country that are developing programs, policies and practices aimed at ending domestic violence, dating violence, sexual assault and stalking. For more information, please visit www.ovw.usdoj.gov/vawa15.htm.
The department’s formal event observing Sexual Assault Awareness Month will be held on Monday, April 12.
1 April 2010
U.S. Sues Kellogg, Brown & Root for Alleged False Claims Act Violations over Improper Costs for Private Security in IraqRead the Press Release
WASHINGTON – The United States has filed a lawsuit against Kellogg Brown & Root Services (KBR) alleging that the defense contractor violated the False Claims Act, the Justice Department announced today. The suit, filed in U.S. District Court in Washington, alleges that KBR knowingly included impermissible costs for private armed security in billings to the Army under the Logistics Civil Augmentation Program (LOGCAP) III contract. The LOGCAP III contract provides for civilian contractor logistical support, such as food services, transportation, laundry and mail, for military operations in Iraq.
The government’s lawsuit alleges that some 33 KBR subcontractors, as well as the company itself, used private armed security at various times during the 2003-2006 time period. KBR allegedly violated the LOGCAP III contract by failing to obtain Army authorization for arming subcontractors and by allowing the use of private security contractors who were not registered with the Iraqi Ministry of the Interior. The subcontractors using private security are alleged to have also violated subcontract terms requiring travel only in military convoys. The government’s lawsuit further alleges that at the time, KBR managers considered the use of private security unacceptable and were concerned that the Army would disallow any costs for such services. KBR nonetheless charged the United States for the costs of the unauthorized services.
“Defense contractors cannot ignore their contractual obligations to the military and pass along improper charges to the United States,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “We are committed to ensuring that the Department of Defense’s rules are enforced and that funds so vital to the war effort are not misused.”
This case is being brought as part of a National Procurement Fraud Initiative. In October 2006, the Deputy Attorney General announced the formation of a National Procurement Fraud Task Force designed to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force is chaired by the Assistant Attorney General for the Criminal Division and includes the Civil Division, U.S. Attorneys’ Offices, the FBI, the U.S. Inspectors General community, and a number of other federal law enforcement agencies.
Along with the Justice Department’s Civil Division, the Defense Criminal Investigative Service, Army Criminal Investigation Division and FBI participated in the investigation of this matter. This case, as well as others brought by members of the task force, demonstrates the Department of Justice’s commitment to helping ensure the integrity of the government procurement process.
Louisiana Civilian Charged in Danziger Bridge Case in New OrleansRead the Press Release
WASHINGTON – A two-count bill of information filed today in federal court charges David Ryder of Opelousas, La., with lying to the FBI and with illegally possessing a firearm, announced Thomas E. Perez, Assistant Attorney General for the Civil Rights Division; Jim Letten, U. S. Attorney for the Eastern District of Louisiana; and David Welker, Special Agent in Charge of the FBI New Orleans Field Office. The charges are in connection with the federal probe into a police-involved shooting that occurred on the Danziger Bridge in the days after Hurricane Katrina.
The Sept. 4, 2005, shooting on the Danziger Bridge left two civilians dead and four others seriously injured. Following the shooting, police arrested Lance Madison, whose brother Ronald had been shot and killed on the bridge, and charged him with shooting at and attempting to kill police officers.
The two-count bill of information filed today alleges that David Ryder, a convicted felon who has never worked as a law enforcement officer, was carrying a gun and wearing a law enforcement tee-shirt on the day of the shooting incident. Count one charges that Ryder lied to the FBI when he claimed that he had chased a group of people through a trailer park near the Danziger Bridge and that one of the people he was chasing had turned and fired a gun at him. Count two charges that Ryder violated federal law by possessing a firearm on Sept. 4, 2005, because he had previously been convicted of a felony.
The defendant faces a possible maximum sentence of 15 years in prison and a fine of $500,000.
This case, which is ongoing, is being investigated by the New Orleans Field Office of the FBI, and is being prosecuted by Deputy Chief Bobbi Bernstein and Trial Attorney Forrest Christian of the Justice Department’s Civil Rights Division, along with Assistant U.S. Attorney Julia K. Evans for the Eastern District of Louisiana. No further details or information will be made available at this time.
Key Member of International Human Trafficking Ring Sentenced to Twenty YearsRead the Press Release
ATLANTA - Francisco Cortes-Meza, 26, of Mexico, was sentenced today by U.S. District Judge Richard W. Story in the Northern District of Georgia for sex trafficking in an organization that targeted young Mexican women.
Thomas E. Perez, Assistant Attorney General for the Civil Rights Division, said, “This defendant preyed on vulnerable women who dreamed of a better life in the United States. Individuals who force women into prostitution commit a heinous crime that will not be tolerated. The Department of Justice is committed to holding accountable traffickers who seek to profit at the expense of the freedom, rights and dignity of others.”
U.S. Attorney for the Northern District of Georgia Sally Quillian Yates said, “Prosecuting human trafficking cases is a priority for the U.S. Attorney’s Office with the dual goals of punishing the traffickers and protecting the victims. Traffickers often prey upon those who may be vulnerable due to their immigration status, unfamiliarity with our legal system, or fear of law enforcement. Every victim of this heinous crime is protected by the laws of the United States, regardless of their citizenship status, and should not fear coming forward to report this criminal abuse. ”
“While we cannot undo the irreparable harm caused to these victims, we hope that today's sentence brings some closure allowing them to heal and move forward,” said Kenneth A. Smith, Special Agent in Charge of the ICE Office of Investigations in Atlanta. “Traffickers worldwide are selling terrible lies to young women luring them with promises of a better future. Through prosecutions like this, we are sending the message to traffickers that their crimes will not go unpunished.”
Cortes-Meza was sentenced to 20 years in prison to be followed by three years of supervised release, and ordered to pay restitution to the victim in the amount of $21,000. Cortes-Meza was convicted of these charges on Dec. 16, 2008 when he entered a guilty plea to one count of sex trafficking by means of force, fraud, or coercion.
According to U.S. Attorney Yates and the information presented in court:
From Spring 2006 through June 2008, Cortes-Meza, and others charged in the conspiracy, recruited and enticed approximately 10 victims to come to the Atlanta area from Mexico to engage in prostitution for the financial benefit of the members of the alleged conspiracy. Often the conspirators would lure the women to the U.S. by promising better lives, legitimate employment or romantic relationships with the defendants. Drivers collected the victims from the homes where they lived with the defendants in Norcross and drove them to apartments and homes where paying clients waited for commercial sex.
Specifically, Cortes-Meza lured one young woman to the United States under the false pretense that she would find a job in a restaurant. Cortes-Meza paid smugglers to bring the victim to the United States. Once she was here, Cortes-Meza compelled her to engage in commercial sex acts with 30-40 men every night, and to give him the money she collected. The evidence in the case showed Cortes-Meza controlled the victim’s daily life and was physically violent with her.
The Department of Justice has identified human trafficking prosecutions such as this one as a top priority in the 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. Three women testified today at the sentencing hearing for Cortes-Meza, and spoke of physical threats, beatings and intimidation, forcing the victim to work as a prostitute, and that she was not allowed to speak to anyone. NOTE: The Department of Homeland Security Tip Line to report trafficking crimes is 1-866-347-2423.
This case was investigated by Special Agents of U.S. Immigration and Customs Enforcement (ICE).
Assistant U.S. Attorney Susan Coppedge and Trial Attorney Karima Maloney of the Civil Rights Division’s Human Trafficking Prosecution Unit prosecuted the case.
Department of Justice Supports<br /> the Associated Press’s Proposed Digital News RegistryRead the Press Release
WASHINGTON – The Department of Justice announced today that it supports a proposal by The Associated Press (AP) to develop and operate a voluntary news registry to facilitate the licensing and Internet distribution of news content created by the AP, its members, and other news originators. The department said that the development and operation of the registry is not likely to reduce competition among news content owners and could provide procompetitive benefits to both participating content owners and content users.
The Department of Justice’s position was stated in a business review letter to counsel for the AP from Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.
The registry would consist of a centralized digital database containing news content from multiple content owners. It would allow content owners to register and list individual items of news content, specify the uses others may make of that content, and detail the terms on which such content may be licensed. The registry would enable content users to determine quickly the licensing and use terms applicable to a specific content owner or to individual items of registered content.
“The AP’s registry may provide a new, efficient way for news content users to identify applicable terms of use and purchase licenses for Internet news content,” said Assistant Attorney General Varney. “The registry may benefit both news originators and content users by reducing the transaction costs associated with securing licenses for Internet use.”
The registry would be a non-exclusive method of accessing, licensing and using content on the Internet. It would be open, on nondiscriminatory terms, to all owners and users of Internet news content. Content owners would be free to select which, if any, content to include in the registry. They would be allowed to offer registered news content outside of the registry. They would also be free to join other competing Internet registry services.
Content owners, including the AP, would not set, formulate, benchmark or suggest any licensing terms for any other content owner’s news items listed in the registry. Each participating content owner would set unilaterally the licensing terms for its own content, without the involvement of either other owners or the AP.
The AP also would institute and maintain firewalls to prevent the registry from being used to disseminate revenue, use, traffic and transactional information among participating content owners. In addition, the AP intends to limit public information sharing among competitors by allowing only registered content users to access public licensing terms.
Under the department’s business review procedure, an organization may submit a proposed action to the Antitrust Division and receive a statement as to whether the division currently intends to challenge the action under the antitrust laws.
A file containing the business review request and the department’s response may be examined in the Antitrust Division’s Antitrust Documents Group, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 1010, Washington, D.C. 20530. After a 30-day waiting period, the documents supporting the business review will be added to the file, unless a basis for their exclusion for reasons of confidentiality has been established under the Business Review Procedure.
Daimler AG and Three Subsidiaries Resolve Foreign Corrupt Practices Act Investigation and Agree to Pay $93.6 Million in Criminal PenaltiesRead the Press Release
WASHINGTON – Daimler AG, a German corporation, and three of its subsidiaries have resolved charges related to a Foreign Corrupt Practices Act (FCPA) investigation into the company’s worldwide sales practices, the Department of Justice announced today.
At a hearing today before U.S. District Court Judge Richard J. Leon in the District of Columbia, Daimler AG’s Russian subsidiary DaimlerChrysler Automotive Russia SAO (DCAR), now known as Mercedes-Benz Russia SAO, and its German subsidiary, Export and Trade Finance GmbH (ETF), each pleaded guilty to criminal informations charging the companies with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of violating those provisions. As part of the plea agreements, DCAR and ETF agreed to pay criminal fines of $27.26 million and $29.12 million, respectively.
Daimler AG entered into a deferred prosecution agreement and agreed to the filing of a criminal information charging that company with one count of conspiracy to violate the books and records provisions of the FCPA and one count of violating those provisions. Daimler AG’s Chinese subsidiary DaimlerChrysler China Ltd. (DCCL), now known as Daimler North East Asia Ltd., also entered into a deferred prosecution agreement and agreed to the filing of a criminal information charging it with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of violating those provisions. In total, Daimler AG and its subsidiaries will pay $93.6 million in criminal fines and penalties.
According to court documents, Daimler AG, whose shares trade on multiple exchanges in the United States, engaged in a long-standing practice of paying bribes to foreign government officials through a variety of mechanisms, including the use of corporate ledger accounts known internally as “third-party accounts” or “TPAs,” corporate “cash desks,” offshore bank accounts, deceptive pricing arrangements and third-party intermediaries. According to court documents, Daimler AG and its subsidiaries made hundreds of improper payments worth tens of millions of dollars to foreign officials in at least 22 countries – including China, Croatia, Egypt, Greece, Hungary, Indonesia, Iraq, Ivory Coast, Latvia, Nigeria, Russia, Serbia and Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan, Vietnam and others – to assist in securing contracts with government customers for the purchase of Daimler vehicles. The contracts were valued at hundreds of millions of dollars. In some cases, Daimler AG or its subsidiaries wire transferred these improper payments to U.S. bank accounts or to the foreign bank accounts of U.S. shell companies, in order for those entities to pass on the bribes. Within Daimler AG and its subsidiaries, bribe payments were often identified and recorded as “commissions,” “special discounts,” and/or “nützliche Aufwendungen” or “N.A.” payments, which translates to “useful payment” or “necessary payment,” and was understood by certain Daimler employees to mean “official bribe.” According to court documents, certain corrupt payments continued as late as January 2008, after the Department of Justice had begun its investigation. In all cases, Daimler AG improperly recorded these corrupt payments in its corporate books and records. Daimler AG admitted that it earned more than $50 million in profits from corrupt transactions with a nexus to the territory of the United States. Daimler AG also admitted that it agreed to pay kickbacks to the former Iraqi government in connection with contracts to sell vehicles to Iraq under the U.N.’s Oil for Food program.
“In a decade-long scheme involving tens of millions of dollars, Daimler AG and three of its subsidiaries brazenly offered bribes in exchange for business around the world,” said Principal Deputy Assistant Attorney General Mythili Raman of the Criminal Division. “Using offshore bank accounts, third-party agents and deceptive pricing practices, these companies saw foreign bribery as a way of doing business. The guilty pleas and deferred prosecution agreements entered today by Daimler AG and its subsidiaries should serve as a message to other companies subject to the FCPA and conducting business around the world that corrupt business is bad business.”
In connection with its guilty plea, DCAR admitted that it made improper payments to Russian federal and municipal government officials to secure contracts to sell vehicles by over-invoicing the customer and paying the excess amount back to the government officials, or to other designated third parties that provided no legitimate services to DCAR or Daimler AG. When requested, DCAR or Daimler AG employees caused the wire transfer of payments from Daimler AG’s bank accounts in Germany to, among other destinations, U.S. and Latvian bank accounts held by shell companies with the understanding that the money, in whole or in part, was for the benefit of Russian government officials.
In connection with its guilty plea, ETF admitted that it made corrupt payments directly to Croatian government officials and to third parties, including two U.S.-based corporate entities, with the understanding that the payments would be passed on, in whole or in part, to Croatian government officials, to assist in securing the sale of 210 fire trucks.
In connection with its deferred prosecution agreement, DCCL admitted that it made improper payments in the form of commissions, delegation travel, and gifts for the benefit of Chinese government officials or their designees in connection with sales of commercial vehicles and Unimogs to various Chinese government customers. DCCL admitted that in certain cases it used U.S.-based agents to facilitate the bribe payments.
Under the terms of its deferred prosecution agreement, Daimler AG agreed to retain an independent compliance monitor for a three-year period to oversee the company’s continued implementation and maintenance of an FCPA compliance program, and to make reports to the company and the Department of Justice. DCAR, ETF and DCCL are covered by the monitoring provisions of the deferred prosecution agreement with their parent company Daimler AG. Daimler AG also agreed to fully cooperate with investigations by U.S. and foreign authorities of the company’s corrupt payments.
Today, Judge Leon also entered a separate judgment against Daimler AG resolving a related civil complaint filed by the U.S. Securities and Exchange Commission (SEC). Daimler AG agreed to pay $91.4 million in disgorgement of profits relating to those violations.
The criminal case is being prosecuted by Assistant Chief John S. (Jay) Darden and Deputy Chief Mark F. Mendelsohn of the Criminal Division’s Fraud Section. The department acknowledges and expresses its appreciation for the significant assistance provided by the staff of the SEC during the course of this investigation. The department also acknowledges the significant contributions to this investigation by former Fraud Section Trial Attorney Amanda L. Riedel.
31 March 2010
Two Shell Chemical Companies Agree to Reduce Harmful Emissions Under Comprehensive Clean Air Act SettlementsRead the Press Release
WASHINGTON - Shell Chemical L.P. and Shell Chemical Yabucoa have agreed to install pollution reduction equipment on two petroleum refining facilities at an estimated cost of $6 million as part of two comprehensive Clean Air Act settlements, the Justice Department and the Environmental Protection Agency today announced.
The two companies will also pay a combined $3.3 million civil penalty to the United States as well as Alabama and Louisiana and $200,000 to Louisiana organizations for environmental education and emergency operations.
Under the settlements, Shell Chemical L.P. will apply new air pollution control technologies and implement other measures to reduce emissions from some of the largest emitting units at its petroleum refining facilities in Saraland, Ala. and St. Rose, La.
“These two settlements are excellent examples of businesses working with government to achieve compliance at their facilities around the country, which will benefit the health of local communities and the environment,” said Ignacia S. Moreno, Environment and Natural Resource Division Assistant Attorney General. “We will continue to work with industry to achieve compliance under the Clean Air Act to remove harmful pollution from the air we breathe.”
“These settlements demonstrate EPA’s continuing commitment to increase compliance and reduce emissions from this industrial sector” said Cynthia Giles, Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance. “As a result of today’s actions, the communities living nearby these refineries can look forward to cleaner, healthier air.”
Shell Chemical Yabucoa operates a facility in Yabucoa, Puerto Rico. For independent business reasons, Shell Chemical Yabucoa decided to shut down its refining operations at the facility in Puerto Rico in the summer of 2009. The company still continues to operate the existing gasoline terminal there. Collectively the three facilities had a combined production capacity of approximately 235,000 barrels per day.
In addition, the two refineries in Alabama and Louisiana, and the terminal operations in Puerto Rico will upgrade their leak-detection and repair practices to reduce harmful emissions from pumps and valves, implement programs to minimize the number and severity of flaring events and adopt new strategies for ensuring continued compliance with benzene waste requirements under the Clean Air Act.
Together, both settlements will reduce air emissions of sulfur dioxide (SO2), nitrogen oxides (NOx) and other harmful pollutants by more than 1,450 tons per year.
The annual emission reductions from all three refineries, including the emissions associated with the shutdown at Yabucoa, are estimated to be approximately 645 tons of SO2 and approximately 813 tons of NOx, as well as additional reductions of volatile organic compounds and benzene.
The settlements are the 25th and 26th in a series of “global” multi-issue, multi-facility settlements being pursued by EPA under its National Petroleum Refinery Initiative. With today’s settlements, 102 refineries operating in 30 states and territories are now covered by global settlements, representing more than 89 percent of the nation’s refining capacity.
For more information on EPA’s Petroleum Refinery Initiative, please visit http://www.epa.gov/compliance/resources/cases/civil/caa/oil/index.html.
The states of Alabama and Louisiana actively participated in and are joining in the settlement with Shell Chemical, which was filed with the U.S. District Court for the Southern District of Texas. The settlement with Shell Chemical Yabucoa was filed with the U.S. District Court for the District of Puerto Rico. Each settlement is subject to a 30-day public comment period and approval by the federal court. Copies of the proposed consent decrees are available on the Justice Department Web site at http://www.justice.gov/enrd/Consent_Decrees.html.
Two Baton Rouge, Louisiana, Tax Preparers Indicted<br /> for Aiding in Preparation of False Tax ReturnsRead the Press Release
WASHINGTON – Two Baton Rouge, La., tax return preparers were indicted today on charges of aiding in the preparation of false tax returns, the Justice Department and Internal Revenue Service (IRS) announced. Cynthia Peters, who worked at Jasmine and Melissa’s Tax Service in Baton Rouge, was charged with seven counts of aiding in the preparation of false tax returns for clients. In a separate indictment, Melissa Edwards, who also worked at Jasmine and Melissa’s Tax Service, was charged with ten counts of aiding in the preparation of false tax returns for clients.
According to the indictment filed against her, Peters prepared fraudulent tax returns for seven clients that reported false amounts of telephone excise tax refund (TETR) credits. The TETR credit was a one-time credit available to taxpayers for the 2006 year. The credit was available in standard amounts ranging from $30 to $60 or in the amount of actual excise tax paid, which was 3% of the cost of long distance and bundled service over the period beginning after Feb. 28, 2003, and before Aug. 1, 2006. According to the indictment, Peters filed taxpayer returns claiming fraudulent TETR credits in amounts ranging from $1,190 to $4,900.
According to the indictment filed against her, Edwards prepared fraudulent tax returns for 10 clients that reported false amounts of TETR credits. The fraudulent TETR credit amounts ranged from $4,800 to $7,475.
An indictment is merely a formal charge by the grand jury. Each defendant is presumed innocent unless and until proven guilty in a U.S. District Court. If convicted, Peters faces a maximum potential sentence of 21 years in prison and a maximum fine of $1,750,000. If convicted, Edwards faces a maximum potential sentence of 30 years in prison and a maximum fine of $2,500,000.
Both cases are being prosecuted by Tax Division attorneys Kevin Lombardi and Matthew Mueller. The cases were investigated by the IRS, Criminal Investigation Division.
Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at www.usdoj.gov/tax/. Additional information about tax fraud schemes to watch out for may be found on the IRS Criminal Investigation Web site.
Settlement Reached at Allied Chemical and Ironton Coke Superfund Site in OhioRead the Press Release
WASHINGTON - A settlement with Honeywell International Inc. estimated to be worth more than $10 million will ensure that cleanup of the remaining areas of the Allied Chemical and Ironton Coke Superfund Site in Ironton, Ohio, will move forward, the Justice Department and U.S. Environmental Protection Agency (EPA) announced today.
The agreement, lodged in U.S. District Court in Cincinnati, resolves federal liability claims against Honeywell for cleanup of the remaining areas of the site. As a result of this settlement with Honeywell and the previous agreements with Honeywell and another potentially responsible party, Amcast Industrial Corp., the United States will recover substantially all of the costs incurred by the government in responding to the contamination at the site. This settlement and the previous agreements will result in cleanup work estimated to cost in excess of $75 million.
The Allied Chemical and Ironton Coke site lies on the banks of the Ohio River near the point where the Ohio, Kentucky and West Virginia borders converge. The facility produced a number of products during its operations including phthalic anhydride, pitch, creosote, naphthalene, anthracene and carbolic acids. The process wastes included anthracene residue, anthracene salts, phthalic anhydride residue and coal tar pitch scrap. The result of operations and waste disposal practices was extensive contamination of soil, sediment (mud) in nearby Ice Creek and ground water.
Under the settlement, Honeywell International Inc. will be responsible for cleanup and containment of the former tar plant area of the site. Honeywell will also pay for all of the United States’ response costs relating to the tar plant area, including oversight costs incurred by EPA. Contaminants released at the tar plant area include polycyclic aromatic hydrocarbons, benzene, toluene, and naphthalene.
The remedy will address soil, soil vapor and Ohio River sediment contaminated by the former tar plant. Contaminated soil in this area will be covered with a cap that complies with Ohio solid waste regulations; land use controls will be put in place to ensure the cap remains intact and thereby protects people from remaining contaminated soil and soil vapor; and dredging, off-site disposal and/or capping will address contaminated sediment in the Ohio River adjacent to the tar plant’s loading dock. The total cost for the selected remedy is estimated to be approximately $10 million.
The tar plant, located on South Third Street, manufactured products from the crude tar produced in the coking process at the now-closed coke plant. During its period of operation, the plant contained approximately 124 above-ground storage tanks and process tanks varying in size from several hundred to 750,000 gallons. The site contains three areas that are major sources of contamination: the tar plant area, which is the subject of this agreement; the coke plant/lagoon area, a dismantled former coke plant; and the Goldcamp disposal area, a former sand and gravel pit used as a disposal area for chemical process wastes. Cleanup activities associated with the coke plant/lagoon area and the Goldcamp disposal area have been performed and response costs related to these areas recovered under separate agreements. The contaminated site-wide groundwater beneath the three source areas is continuously being treated by an on-site waste water treatment plant and monitored for compliance.
“We are pleased that under this agreement Honeywell will perform cleanup of the remaining areas of the Allied Ironton Site and reimburse the government’s costs of overseeing the cleanup. I remind those who are responsible for polluting the environment that they will be held accountable for not only cleanup costs but also for future response and oversight costs,” said Ignacia S. Moreno, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division.
“The cleanup required by this consent decree will complete all work at the site and open the door for the potential reuse of some portions of the property,” said Richard Karl, Superfund Director for EPA Region 5.
The consent decree, lodged in the U.S. District Court for the Southern District of Ohio, is subject to a 30-day public comment period and approval by the federal court. A copy of the consent decree is available on the Justice Department Web site at http://www.justice.gov/enrd/Consent_Decrees.html.
More information on the Allied Ironton Superfund Site can be found at http://www.epa.gov/region5/superfund/sites/alliedironton.
Complaint
Consent Decree
Former Tennessee Corrections Captain Pleads Guilty to Civil Rights Violation and LyingRead the Press Release
WASHINGTON – Harold Hutcheson, a former captain at the Northwest Correctional Complex (NCC), in Tiptonville, Tenn., pleaded guilty today in federal court in Jackson, Tenn., to violating the civil rights of an inmate and then lying about it during the state and federal investigations, the Justice Department announced.
During his guilty plea, Hutcheson admitted that on April 15, 2008, while working as a corrections officer at the NCC, he used unreasonable force when he repeatedly kicked a handcuffed inmate without provocation. Hutcheson agreed that his assault violated the inmate’s constitutional right to be free from cruel and unusual punishment by law enforcement officers. Additionally, Hutcheson admitted that he obstructed justice when he provided false information about the incident to federal investigators.
Hutcheson faces a maximum sentence of six years in prison and a maximum fine of $350,000.
Previously, Ryan Joshua Jones and Roger Forrester, both former corrections officers at NCC, each pleaded guilty for their roles in the assault of the inmate and for lying during the investigation. Jones and Forrester are scheduled to be sentenced on July 22, 2010.
“Correctional officers are given a great amount of authority to effectively carry out their critical public safety responsibilities. The Justice Department will aggressively prosecute those officers who abuse that authority by violating the rights of those under their supervision,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.
Today’s plea resulted from the investigative work of the FBI and the Civil Rights Division’s Criminal Section. The case is being prosecuted by Civil Rights Division Trial Attorneys Jared Fishman and Chris Lomax.
Former Contractor Indicted in Bid-Rigging Conspiracy at New York City Hospital and for Tax FraudRead the Press Release
WASHINGTON — An indictment by a Manhattan grand jury was unsealed today charging a former contractor for participating in a bid-rigging conspiracy related to contracts at New York Presbyterian Hospital (NYPH) and for filing a false tax return. The indictment also charges the former contractor and a co-conspirator for their participation in a conspiracy to defraud the Internal Revenue Service (IRS), the Department of Justice announced today.
The three-count indictment, originally filed under seal on Feb. 18, 2010, was unsealed today in the U.S. District Court in Manhattan. The indictment charges David Porath, a former owner of a maintenance and insulation company, with engaging in a conspiracy to rig bids on NYPH contracts for re-insulation services. According to the indictment, between approximately 2000 and March 2005, NYPH awarded a number of contracts for re-insulation services to Porath’s company. Porath and his co-conspirators created the false appearance that NYPH was awarding contracts based on competitive bids by submitting fraudulently high bids by competitor companies, which allowed Porath’s company to appear to be the low bidder and thus win the contracts.
The indictment further charges Porath and another individual, Andrzej Gosek, with participating in a conspiracy to defraud the IRS. Gosek was the owner of a Langhorne, Pa., company that provides asbestos abatement services. According to the indictment, between October 2000 and February 2005, Porath gave Gosek checks made out to companies in Brooklyn, N.Y., purportedly for work done at NYPH by those companies as sub-contractors to Porath’s company when, in fact, the companies had not performed such work. The Brooklyn companies cashed the checks and Gosek delivered the cash back to Porath. Based upon these checks to the Brooklyn companies, Porath took false deductions on his company’s and his personal federal tax returns, allowing Porath to fraudulently reduce his taxable income. Porath is also charged with filing a false federal tax return on or about Feb. 17, 2005, which substantially understated his income.
The bid-rigging violation that Porath is charged with carries a maximum penalty of 10 years in prison, and a $1 million fine. The tax fraud conspiracy violation that Porath and Gosek are charged with carries a maximum penalty of five years in prison, and a $250,000 fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victim of the crime, if either of those amounts is greater than the statutory maximum fine. Porath’s violation of false subscription on his tax return carries a maximum penalty of three years in prison and a $100,000 fine.
The charges announced today resulted from an ongoing federal antitrust investigation of bid rigging, fraud, bribery and tax-related offenses relating to contracts administered by the Facilities Operations Department and the Engineering Department at NYPH and the Engineering Department at Mount Sinai Medical Center. To date, eight individuals and three companies have pleaded guilty to charges arising out of the same investigation.
The investigation is being conducted by the Antitrust Division’s New York Field Office, the FBI and the IRS Criminal Investigation’s New York Field Office. Anyone with information concerning bid rigging, bribery, tax offenses or fraud related to contracts administered by the Facilities Operation Department or the Engineering Department at NYPH or the Engineering Department at Mount Sinai should contact the Antitrust Division’s New York Field Office at 212-264-9308 or the FBI’s New York Division at 212-384-1000 or visit http://www.justice.gov/atr/contact/newcase.htm.
Federal Government Announces Removal of Obsolete Ships from Suisun BayRead the Press Release
WASHINGTON—The federal government announced today that it would remove the remaining 52 ships that currently sit in the Suisun Bay as part of an agreement with environmental groups that was filed in federal court in Sacramento, Calif., the Department of Justice and Department of Transportation announced today.
The Department of Transportation’s Maritime Administration (MARAD) has already begun removing obsolete ships from Suisun Bay for recycling including four ships that have been removed since November 2009 and a fifth that was removed today.
The agreement outlines MARAD’s commitment to remove 20 of the ships that are in the poorest condition prior to Sept. 30, 2012. Before their removal, these ships will be sent to a local dry-dock for cleaning that involves removing marine growth from the underwater hull and removing flaking paint from areas above the water. All other ships at the site will be cleaned of flaking paint within two years and removed from the fleet by Sept. 30, 2017.
Additionally, MARAD will clean the horizontal surfaces of the ships every 90 days to prevent peeling paint from dropping into the water, inspect the ships on a monthly and quarterly basis and collect water runoff samples for testing. No new ships with excess flaking will be admitted to the site.
“This agreement is evidence of the Obama Administration’s pledge to work with our local partners toward a common goal of better protecting the environment,” said U.S. Secretary of Transportation Ray LaHood.
“The Department of Justice is pleased to have negotiated a resolution of this matter that is good for the environment and a demonstration of effective state and federal cooperation,” said Ignacia S. Moreno, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “All the parties are to be commended for developing a comprehensive program for the management of the Suisun Bay Reserve Fleet.”
“We are following through on our commitment to clean and maintain these vessels in an environmentally sound manner, said David Matsuda, Acting Administrator of the USDOT’s Maritime Administration, the agency tasked with managing the fleet. “We are moving expeditiously to remove the worst-polluting ships first and diligently moving to clean the rest.”
The Suisun Bay Reserve Fleet Site serves as a reserve of ships for national defense and national emergency purposes. MARAD’s two other fleet storage sites are in James River, Va. and Beaumont, Texas.
Eight Promoters of Sham Tax Elimination Scheme Convicted of Tax Fraud Charges in FloridaRead the Press Release
WASHINGTON - Eight promoters of a fraudulent tax and debt elimination scheme were convicted of tax, wire fraud and money laundering charges by a federal jury following a month long trial in Pensacola, Fla., the Justice Department and Internal Revenue Service (IRS) announced today. The defendants, who were indicted in September 2008, promoted fraudulent schemes through Pinnacle Quest International, also known as PQI and Quest International.
The charges and convictions were as follows:
Claudia Constance Hirmer and Mark Steven Hirmer of Niceville, Fla., were each convicted of conspiracy to defraud the United States and to commit wire fraud, conspiracy to commit money laundering, and tax evasion.
Eugene “Gino” Joseph Casternovia of Ashland, Ore., Arnold Ray Manansala of Renton, Wash., Dover Eugene Perry of Renton, Wash., and Michael Guy Leonard of Troy, N.Y., were each convicted of conspiracy to defraud the United States and to commit wire fraud, and conspiracy to commit money laundering.
Mark Daniel Leitner of Fairport, N.Y., and Arthur Ramirez Merino of Renton, Wash., were each convicted of conspiracy to defraud the United States and to commit wire fraud.
According to the evidence presented during trial, PQI was an umbrella organization for numerous vendors of tax and credit card debt elimination scams. Some of the PQI vendors, such as Southern Oregon Resource Center for Education (SORCE), sold bogus theories and strategies for tax evasion. For fees starting at $10,000, SORCE assisted its customers in the creation of a series of sham business entities in the United States and Panama. Other tax-related PQI vendors denied the legitimacy of the income tax system on various theories and provided customers with a purported “reliance defense” that consisted of a paper trail of frivolous correspondence which a client could allegedly use as evidence of good faith if the client were prosecuted.
At trial, the government established that other PQI vendors sold fraudulent schemes for eliminating credit card debt, the most successful of which was Financial Solutions, owned and operated by defendant Arthur Merino. Financial Solutions charged its customers thousands of dollars for a series of letters to send to credit card companies disputing the lawfulness of the underlying debt. The product was wholly ineffective, and customers typically were sued by their creditors and often forced into bankruptcy.
According to the evidence, another PQI vendor, MYICIS, operated as a sophisticated, computerized “warehouse bank.” MYICIS was a single bank account in which customers pooled their money. MYICIS was promoted to PQI’s clients as a method to hide their assets from the IRS as a result of the pooled nature of the account. MYICIS had 3,000 clients and approximately $100 million in deposits over a three year period.
According to the evidence presented during trial, PQI purported to sell only CDs and tickets to offshore conferences. However, PQI acted as a gateway to its fraudulent vendors. PQI clients seeking the tax evasion and debt elimination vendors could only access the product if they joined PQI first. The cost of membership ranged from $1,350 to $18,750, depending on the level of access. In May 2008, a federal district court issued a preliminary injunction against the promoters of Pinnacle Quest International.
As established at trial by the government, defendants Claudia Hirmer, Dover Perry, Arnold Manansala, Michael Leonard and Arthur Merino were members of the executive council of PQI. The executive council selected vendors, guided the day-to-day operations of the company, planned offshore conferences, and fielded customers complaints, which were voluminous. Defendant Mark Hirmer managed PQI’s finances on a day-to-day basis. Between 2002 and 2008, PQI had over 11,000 members throughout the United States. Executive council member Joseph McPhillips pleaded guilty prior to trial.
According to the evidence presented, none of the defendants filed tax returns while they were involved in the PQI conspiracy. Claudia Hirmer and Mark Hirmer were convicted for evading the payment of over $2 million in income taxes, penalties, and interest for years 1996 through 2001. The Hirmers sought to evade the payment of their tax liability in numerous ways, including extensive use of cashier’s checks and cash and extensive use of nominee companies and offshore accounts. Additionally, the Hirmers attempted to strip the equity out of one of their homes by granting a bogus mortgage to a Panamanian nominee entity they controlled.
Judge Rodgers scheduled sentencing for July 6, 2010. Claudia Hirmer and Mark Hirmer each face a maximum sentence of 30 years in prison and a maximum fine of $1 million. Casternovia, Manansala, Perry, and Leonard each face a maximum sentence of 25 years in prison and a maximum fine of $750,000. Leitner and Merino each face a maximum sentence of five years in prison and a maximum fine of $250,000.
“Today’s convictions send a powerful and unequivocal message to those who seek to evade and help others evade their taxes,” said Acting Assistant Attorney General John A. DiCicco of the Justice Department’s Tax Division. “Those who promote tax fraud schemes will be investigated, prosecuted and convicted, and they also face substantial prison sentences.”
“The use of abusive trust schemes and fraudulent debt elimination tactics intended to conceal income from the IRS isn't tax planning; it’s criminal activity. There is no secret formula that can eliminate a person's tax obligations,” said Victor S. O. Song, Chief, IRS Criminal Investigation. “Today's verdict reinforces our commitment to every American taxpayer that we will identify and prosecute those who promote illegal financial transactions designed to evade the payment of taxes.”
Judge Rodgers set aside the jury verdict as to a ninth defendant, Robert Pendell, and acquitted him of all counts.
Acting Assistant Attorney General DiCicco commended the IRS - Criminal Investigation Division special agents who investigated the case, as well as Tax Division trial attorneys Michael J. Watling, Adam F. Hulbig, and Jonathan R. Marx, who prosecuted the case.
30 March 2010
New Orleans Police Officer Charged in Danziger Bridge CaseRead the Press Release
WASHINGTON – A two-count bill of information filed today in federal court charges New Orleans Police Department (NOPD) Officer Michael Hunter with misprision of a felony (for concealing a known felony) and with conspiring with fellow NOPD officers to obstruct justice by covering up a police-involved shooting in the days after Hurricane Katrina, announced Thomas E. Perez, Assistant Attorney General for the Civil Rights Division, Jim Letten, U. S. Attorney for the Eastern District of Louisiana and David Welker, Special Agent in Charge of the FBI New Orleans Field Office.
The Sept. 4, 2005, shooting on the Danziger Bridge left two civilians dead and four others seriously injured. According to the bill of information, the incident involved at least six other NOPD officers whom Hunter, 33, of Slidell, La., drove to the Danziger Bridge in a Budget rental truck. On the east side of the bridge, the officers encountered six civilians (five members of the B Family, and J. B., a friend of the B Family), who were walking across the bridge to get food and supplies from a supermarket.
Officers fired at the group of civilians, killing J. B. and seriously wounding four members of the B Family. Hunter and other officers then traveled to the west side of the bridge, where they encountered Lance and Ronald Madison, who were crossing the bridge on their way to the dentistry office of one of their other brothers. On the west side of the bridge, an officer shot and killed Ronald Madison, a 40-year-old man who had a severe disability.
The two-count bill of information charges Hunter with violating the federal conspiracy statute by agreeing with other officers to provide false and misleading information about the Sept. 4, 2005, shootings on the Danziger Bridge and with covering up other information in order to ensure that the shootings would appear to be legally justified. Hunter also was charged with misprision of a felony. The defendant faces a possible maximum sentence of eight years in prison and a fine of $500,000.
This case, which is ongoing, is being investigated by the New Orleans Field Office of the FBI, and is being prosecuted by Deputy Chief Bobbi Bernstein and Trial Attorney Forrest Christian of the Justice Department’s Civil Rights Division, along with Assistant U.S. Attorney Julia K. Evans for the Eastern District of Louisiana. No further details or information will be made available at this time.
Justice Department Settles with New York School District to Ensure Students Have Equal OpportunitiesRead the Press Release
WASHINGTON - The Justice Department announced today that it has reached an out-of-court settlement in the matter of J.L. v. Mohawk Central School District, a lawsuit which the United States sought to join to address alleged violations of the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution and Title IX of the Education Amendments of 1972, both of which prohibit discrimination based on sex, including discrimination based on gender stereotypes.
On Jan. 14, 2010, in the Northern District of New York, the United States sought to join a lawsuit filed by the New York Civil Liberties Union on behalf of a student, J.L., who was the alleged victim of severe and pervasive student-on-student harassment based on sex. According to the United States’ motion, J.L. failed to conform to gender stereotypes in both behavior and appearance. He exhibited feminine mannerisms, dyed his hair, wore makeup and nail polish, and maintained predominantly female friendships. The United States alleged that the harassment against J.L. escalated from derogatory name-calling to physical threats and violence.
The United States further alleged that the Mohawk Central School District had knowledge of the harassment, that the school district was deliberately indifferent in its failure to take timely, corrective action, and that the deliberate indifference restricted J.L.’s ability to fully enjoy the educational opportunities and benefits of his school. The district denied these allegations.
The settlement among the United States, private plaintiff and the district was approved yesterday by the U.S. District Court in the Northern District of New York and requires the Mohawk Central School District to, among other things: (1) retain an expert consultant in the area of harassment and discrimination based on sex, gender identity, gender expression, and sexual orientation to review the District’s policies and procedures; (2) develop and implement a comprehensive plan for disseminating the District’s harassment and discrimination policies and procedures; (3) retain an expert consultant to conduct annual training for faculty and staff, and students as deemed appropriate by the expert, on discrimination and harassment based on sex, gender identity, gender expression, and sexual orientation; (4) maintain records of investigations and responses to allegations of harassment for five years; and (5) provide annual compliance reports to the United States and private plaintiffs. As part of this settlement, $50,000 will be paid to J.L. and $25,000 in attorneys’ fees will be paid to the New York Civil Liberties Foundation.
“All students have the right to go to school without fearing harassment based on sex, including stereotypes about appropriate gender behavior,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “Such conduct has no place in our schools, and the Justice Department looks forward to working with the District and the NYCLU to ensure that all students enjoy educational opportunities without discrimination or harassment.”
The enforcement of the Equal Protection Clause and Title IX in school districts is a top priority of the Justice Department’s Civil Rights Division. Additional information about the Civil Rights Division of the Justice Department is available on its Web site at http://www.justice.gov/crt.
Justice Department Reaches Consent Decree with Colorado Attorney Resolving Lawsuit Alleging Disability DiscriminationRead the Press Release
WASHINGTON – The Justice Department today announced a federal court has approved a consent decree resolving an Americans with Disabilities Act (ADA) discrimination lawsuit against attorney Patric LeHouillier and his law firm, LeHouillier & Associates, P.C., based in Colorado Springs, Colo. The consent decree was approved by Judge Marcia S. Krieger in U.S. District Court for the District of Colorado.
In its November 2009 complaint, the Justice Department alleged that LeHouillier and his firm violated Title III of the ADA when they unlawfully barred a woman, her husband and her attorney from entering LeHouillier’s law office for a deposition because the woman was accompanied by her service animal, an Australian Shepherd dog. The woman, who is a veterinarian, has a traumatic brain injury and other conditions that affect mobility and balance, and individually trained her service animal to provide disability-related assistance.
Under the terms of the consent decree, LeHouillier and his firm will:
- Adopt an ADA-compliant service animal policy and post the policy in a conspicuous location;
- Post a “Service Animals Welcome” sign;
- Self-report allegations of discrimination to the department;
- Undergo training and provide training to staff;
- Pay $30,000 to the complainant and $10,000 to her husband as a person associated with a person with a disability; and
- Pay a $10,000 civil penalty.
“For almost two decades, the ADA has ensured that individuals with disabilities are guaranteed full and equal access to public accommodations, both large and small," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Justice Department is unrelenting in eradicate discrimination against people with disabilities and ensuring that owners and operators of public accommodations recognize their obligations to provide equal access.”
A service animal is any animal individually trained to work or perform tasks for the benefit of an individual with a disability. Service animals – most commonly dogs – perform a wide variety of functions. Examples of these functions include guiding persons who are blind or have low vision; alerting individuals who are deaf or hard of hearing to sounds; warning persons about impending seizures or other medical conditions; performing a variety of tasks for persons with psychiatric disabilities and picking up items, opening doors, flipping switches, providing physical support and pulling wheelchairs for individuals with mobility disabilities.
More information about today’s lawsuit, the ADA, rights and responsibilities under the ADA relating to service animals, and instructions on filing an ADA complaint with the Justice Department is available on the ADA home page at www.ada.gov. This information includes two publications specifically addressing service animal access: “ADA Business Brief: Service Animals” and “Commonly Asked Questions About Service Animals in Places of Business.” Those interested in obtaining copies of these documents or additional information about the ADA can also call the Justice Department’s toll-free ADA Information Line (800) 514-0301 or (800) 514-0383 (TTY).
Former Executive Indicted for His Role in Color Display Tube Price-Fixing ConspiracyRead the Press Release
WASHINGTON – A federal grand jury in San Francisco today returned an indictment against a former executive of a large Taiwan-based color display tube (CDT) manufacturing company for his participation in a global conspiracy to fix prices of CDTs, a type of cathode ray tube used in computer monitors and other specialized applications, the Department of Justice announced.
The indictment, filed today in the U.S. District Court in San Francisco, charges Chung Cheng (Alex) Yeh, a resident of Taiwan, with conspiring with unnamed co-conspirators to suppress and eliminate competition by fixing prices, reducing output, and allocating market shares of CDTs beginning at least as early as May 1999, until at least March 2005.
According to the charges, Alex Yeh, a former director of sales, and co-conspirators agreed to charge prices of CDTs at certain target levels or ranges and to reduce output of CDTs by shutting down CDT production lines for certain periods of time. The indictment alleges that Yeh and co-conspirators also agreed to allocate target market shares for the CDT market overall and for certain CDT customers. The conspirators are alleged to have exchanged CDT sales, production, market share and pricing information for the purpose of implementing, monitoring and enforcing their agreements. According to the indictment, Yeh and co-conspirators implemented an auditing system that permitted co-conspirators to visit each other’s production facilities to verify that CDT production lines had been shut down as agreed.
Yeh is the third individual to be indicted in connection with the CDT investigation. On Feb. 10, 2009, Cheng Yuan (C.Y.) Lin was indicted for his participation in both the CDT conspiracy and a price-fixing conspiracy in the color picture tube industry. On Aug. 18, 2009, Wen Jun (Tony) Cheng was indicted for his participation in the CDT conspiracy.
Yeh is charged with violating the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million 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 if either of those amounts is greater than the maximum fine.
This case is part of an ongoing joint investigation by the Department of Justice Antitrust Division’s San Francisco Office and the FBI in San Francisco. Anyone with information concerning illegal conduct in the cathode ray tube industry is urged to call the San Francisco Field Office of the Antitrust Division at 415-436-6660 or visit http://www.justice.gov/atr/contact/newcase.htm.
Indictment
Federal Court Permanently Bars Stratham, N.h.,<br /> Tax Preparer from Preparing Taxes for OthersRead the Press Release
WASHINGTON – A federal district judge in New Hampshire has permanently barred Faith A. Bartlett, individually and operating as Atlantic Bookkeeping & Tax Services and Newbury Business Services Inc., from preparing federal tax returns for others, the Justice Department announced today. The court also ordered Bartlett to provide her customer lists to the government and to mail copies of the court order to her clients. Bartlett consented to the civil injunction order.
According to the government complaint in the case, Bartlett had been an enrolled agent with the Internal Revenue Service (IRS) since 1979, but allowed this certification to expire in January 2009. On October 30, 2009, Bartlett was interviewed by representatives of the IRS about her tax preparation activities. Bartlett told IRS representatives that she accepts whatever information her customers provide her without question and that she performs no analysis or review prior to filing the returns to determine if the information on the returns passes a “common sense” test.
In addition, Ms. Bartlett told IRS representatives that she does not always: (1) meet with her customers prior to electronically filing their tax returns; (2) return documents provided to her by her customers; (3) sign the returns which she prepares for others for compensation; and (4) secure authorization from her customers to electronically file their tax returns.
The IRS has examined 62 returns prepared by Bartlett for 37 of her customers for the 2006, 2007 and 2008, tax years. The IRS has incurred an actual tax loss to date from these examined returns of approximately $699,000.
Federal Court Bars St. Louis Tax Firm from Certain ConductRead the Press Release
WASHINGTON - A federal judge in St. Louis has barred two St. Louis tax preparers and their businesses from certain conduct the Justice Department announced today. The order entered by Judge Richard E. Webber of the U.S. District Court for the Eastern District of Missouri bars Frank “Tiger” Zerjav Jr. from preparing tax returns and providing tax advice for three years, and permanently bars his father, Frank Zerjav Sr., from engaging in specified conduct.
The court order, to which the defendants consented, requires one of the Zerjavs’ businesses, The Advisory Group Inc., to be shut down by April 1, 2010. The Zerjavs’ other business, Zerjav & Co., is permanently barred from specified conduct.
Among the specified conduct enjoined is
- claiming business deductions for non-deductible personal expenses;
- improperly deducting restaurant meals, child care expenses and education expenses;
- changing customers’ accounting records without informing the customers of the changes;
- reporting compensation that is not reasonable or related to work performed; and
- claiming deductions for wages paid to children unless services are actually rendered and the wages are reasonable.
The court also imposed a five-year monitoring period during which a neutral monitor, who must be a licensed CPA or attorney, will annually at the defendants’ expense inspect and review a sample of tax returns prepared by defendants to ensure that the court’s order has not been violated.
John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division, thanked Justice Department trial attorneys Michael Pahl, Michael Roessner, Martin Shoemaker and Natalie Sexsmith for handling the case. Mr. DiCicco also thanked Mark Stone and James Graczyk of the Internal Revenue Service’s Small Business/Self Employed Division, who conducted the investigation.
Since 2001, the Justice Department’s Tax Division has obtained more than 460 injunctions against tax-fraud promoters and tax preparers. Information about these cases is available on the Justice Department Web site.
Eritrean Man Pleads Guilty to Alien SmugglingRead the Press Release
WASHINGTON - Samuel Abrahaley Fessahazion, 23, an Eritrean national, has pleaded guilty to helping smuggle illegal aliens to the United States for private financial gain, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney José Angel Moreno of the Southern District of Texas and U.S. Immigration and Customs Enforcement (ICE) Assistant Secretary John Morton.
Fessahazion, aka “Sami,” aka “Sammy,” aka “Alex” and aka “Alex Williams” pleaded guilty yesterday in Houston before U.S. District Court Judge Nancy A. Atlas to one count of conspiracy, and two counts of encouraging and inducing aliens to come to, enter or reside in the United States in violation of law for the purpose of private financial gain.
“By bringing this smuggler to justice, we have broken a chain that runs from Africa to South and Central America, directly into the United States,” said Assistant Attorney General Lanny A. Breuer. “We will not allow these dangerous smuggling organizations to profit from bringing people illegally into the United States.”
“This prosecution strikes a significant blow to a criminal organization engaged in a sophisticated international alien smuggling operation,” said U.S. Attorney José Angel Moreno of the Southern District of Texas, “and highlights the continuing cooperation and success of multiple law enforcement agencies in interdicting such activities.”
“Breaking this global alien smuggling network puts smugglers on notice that we are coming after them and we will shut them down,” said ICE Assistant Secretary John Morton. “ICE will continue to identify the most dangerous international human smuggling organizations for investigation and prosecution.”
According to plea documents, from at least June 2007 until approximately January 2008, Fessahazion was the Guatemalan link of an alien smuggling network that spans East Africa, Central and South America. Specifically, according to the court documents, Fessahazion illegally entered the United States at McAllen, Texas, on March 20, 2008. He applied for asylum on Sept. 30, 2008, claiming in his application that he was traveling across Africa in 2007 and 2008, fleeing persecution in Eritrea. However, according to court documents, Fessahazion was actually in Guatemala during that period facilitating the smuggling of East African aliens to the United States. Fessahazion was granted asylum by the United States on Nov. 13, 2008.
Fessahazion admitted that for profit, he encouraged or induced at least six and up to 24 illegal aliens, primarily East Africans, to come to, enter, or reside in the United States knowing that they were not authorized to do so. Fessahazion admitted he moved aliens from Honduras through Guatemala and into Mexico illegally, at which point he referred aliens to a smuggler who brought the aliens into the United States.
In one instance, according to court documents, Fessahazion and his co-conspirators moved two illegal aliens from South Africa to Sao Paulo, Brazil, then through Venezuela to Honduras where they were instructed to contact Fessahazion. Once in contact, Fessahazion sent a driver to pick up the two aliens and bring them to Guatemala City, Guatemala. I n exchange for $800, Fessahazion took the two aliens by bus to a house bordering Guatemala and Mexico. There, working with a co-conspirator, Fessahazion provided information to the couple on how to cross the border into Mexico illegally and how to proceed once in Mexico to the United States border. Fessahazion and the co-conspirator provided the couple with a guide who physically took them into Mexico and provided contact information for an unidentified smuggler known only by the alias “Matamoros,” who would in turn take the two aliens to the United States from Reynosa, Mexico. In February 2008, the couple was illegally brought to the United States by guides working for “Matamoros.” According to court documents, the guides carried guns and ferried the couple across the river on the Mexico/U.S. border in inner tubes.
In another example, an alien was moved from Dubai to Brazil, then to Honduras via Colombia and Costa Rica. According to court documents, a co-conspirator told the alien he could get him from Dubai to Brazil, at which point others would assist the alien each step of the way to the United States in a “chain like” fashion.
According to court documents, once the alien arrived in Honduras, Fessahazion sent a driver to retrieve him and bring him to Guatemala City. In exchange for $700, Fessahazion took the alien to the Guatemala/Mexico border and, along with a co-conspirator, gave the alien information on how to cross the border into Mexico illegally and how to proceed once in Mexico to the United States border, including contact information for “Matamoros.” The alien then traveled into Mexico, contacted “Matamoros” and traveled to Reynosa as “Matamoros” instructed. In December 2007, according to court documents, guides working for “Matamoros” took the alien and others to the United States illegally by ferrying them across the river on the Mexican/U.S. border in inner tubes. Shortly after crossing the border into the United States, the alien and others were apprehended.
At sentencing, scheduled for June 14, 2010, Fessahazion faces a maximum penalty of 10 years in prison and a $250,000 fine.
The case was prosecuted by Trial Attorney Pragna Soni of the Criminal Division’s Domestic Security Section, with the assistance of Assistant U.S. Attorneys Edward Gallagher and Douglas Davis of the Southern District of Texas.
The investigation was conducted by the ICE Special Agent in Charge (SAC) Washington, with the assistance of SAC San Francisco, the ICE Human Smuggling and Trafficking Unit, ICE Office of Intelligence, ICE Office of International Affairs and U.S. Custom and Border Protection’s Office of Alien Smuggling Interdiction.
Assistant Attorney General Lanny A. Breuer Announces New Human Rights and Special Prosecutions Section in Criminal DivisionRead the Press Release
WASHINGTON – Today Assistant Attorney General Lanny A. Breuer of the Criminal Division announced the formation of the Human Rights and Special Prosecutions Section (HRSP), the first new section to be formed in the Criminal Division since 2008. The new section represents a merger of the Criminal Division’s Domestic Security Section (DSS) and the Office of Special Investigations (OSI).
“Since its founding, the United States has been a steadfast champion for the cause of justice around the world,” said Assistant Attorney General Lanny A. Breuer. “In that great tradition, the new Human Rights and Special Prosecutions Section is poised to be a global leader in combating human rights violations and ensuring that war criminals are held to account for their crimes.”
Current chief of the Domestic Security Section, Teresa L. McHenry, will serve as the chief of the new HRSP section. Current OSI Director Eli M. Rosenbaum will be the Director of Human Rights Enforcement Strategy and Policy. Current deputy chiefs David Jaffe and William Ho-Gonzalez in DSS and Robert G. Thomson and Dr. Elizabeth B. White in OSI will serve as deputy chiefs in the HRSP section.
McHenry has served the Department of Justice with distinction for more than two decades, including since 2002 as the chief of DSS. She previously led the Criminal Division’s Alien Smuggling Task Force and has served as a trial attorney in the Organized Crime and Racketeering Section, an Assistant U.S. Attorney in the District of Columbia and a prosecutor at the International Criminal Tribunal for the former Yugoslavia in The Hague. She graduated magna cum laude from Harvard Law School and Rice University.
Rosenbaum began his legal career as an intern in the Office of Special Investigations and ultimately became its director in 1995. He also served previously as a corporate litigation associate with Simpson Thacher & Bartlett in Manhattan and as general counsel of the World Jewish Congress. Rosenbaum received his juris doctorate from Harvard Law School and graduated summa cum laude from the Wharton School of the University of Pennsylvania, from which he also received his MBA degree.
“The passion and intelligence both Teresa and Eli bring to their work is evident in the extraordinary record of successful investigations and prosecutions amassed by OSI and DSS,” added Breuer. “Together, these two extraordinary leaders and the attorneys they guide will raise our already impressive human rights program to new heights.”
The possible merger was first announced during Assistant Attorney General Breuer’s Oct. 6, 2009, testimony before the Senate Judiciary Subcommittee on Human Rights and the Law. Congress formally approved the merger on March 24, 2010.
OSI was originally created in 1979 to investigate and prosecute participants in World War II-era acts of Nazi-sponsored persecution. In December 2004, its mission was expanded under the Intelligence Reform and Terrorism Prevention Act to include investigating and bringing federal legal actions to revoke the citizenship of any naturalized U.S. citizen who committed, ordered, incited, assisted, or otherwise participated abroad in genocide or, under color of foreign law, torture or extrajudicial killing. OSI has been widely recognized as the world leader in identifying, investigating and prosecuting World War II-era Nazi criminals, and the unit has achieved outstanding results in its “modern” human rights violator enforcement work as well. Since its inception, OSI has won cases against 107 individuals who participated in Nazi-sponsored persecution. In addition, more than 180 suspected participants in Axis crimes who sought to enter the United States have been blocked from doing so as a result of OSI’s “Watchlist” program, which is enforced in cooperation with the Departments of State and Homeland Security.
DSS was formed in 2002 and since that time has worked to ensure the security of the United States through prosecution and policy work in three areas: international human rights violations; certain federal crimes of violence committed outside the United States including those brought under the Military Extraterritorial Jurisdiction Act; and complex immigration and border crimes. HRSP will continue DSS’s work in all three areas. As part of its work against human rights violators, in 2008, DSS trial attorneys, along with their partner Assistant U.S. Attorneys in the Southern District of Florida, obtained the first federal torture conviction against Roy M. Belfast Jr., aka Chuckie Taylor, for crimes related to the torture of people in Liberia between April 1999 and July 2003.
Almighty Latin King and Queen Nation Gang Member<br /> Sentenced to 210 Months in Prison for His Role in Drug ConspiracyRead the Press Release
WASHINGTON - Almighty Latin King and Queen Nation (ALKQN) member John Guzman, 31, of Big Spring, Texas, was sentenced today to 210 months in prison by U.S. District Judge Sam R. Cummings, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney James T. Jacks for the Northern District of Texas.
Guzman pleaded guilty to a superseding indictment charging him with one count of conspiracy to distribute and possess with intent to distribute five kilograms or more of cocaine and 100 kilograms or more of marijuana. Guzman has been in custody since his arrest in February 2009.
According to court documents, Guzman admitted that he was a member of a conspiracy that included Jose Robledo Nava, aka “Chino;” Luis Nava, aka “Flaco;” Reynaldo Nava, aka “Rat;” Robert Allen Ramirez, aka “Nesyo;” Marie Chavez, aka “Shorty;” Carol Ann Rivas Nava; Cecily Dominique Juarez; Jesus Martinez, aka “Solid;” David Hellums, aka “Cutthroat;” Eduardo Daniel Mares, aka “Pitt;” Gabriel Lee Gonzales; Michael Conde, aka “Psycho;” Guerrero Olivas, aka “Screech;” Eliseo Perez, aka “Wicked;” and others. Guzman admitted that he and the other participants in the conspiracy agreed to distribute, and possess with intent to distribute, cocaine and marijuana. Guzman also admitted that he collected drug debts on behalf of the ALKQN. According to the superseding indictment, Guzman and his co-defendants acquired the cocaine and marijuana from Mexico and brought it to the South Texas region, where it was packaged, stored and transported to Big Spring, Lubbock and Midland, Texas for further distribution.
To date, 17 co-defendants have pleaded guilty and been sentenced for their roles in this conspiracy. Nava and Cole were found guilty on Feb. 24, 2010, by a federal jury in Lubbock on two counts of using a firearm to commit murder during and in relation to a drug trafficking crime, and one count of a conspiracy to distribute and possess with intent to distribute five kilograms or more of cocaine and 100 kilograms or more of marijuana. The jury also found Nava guilty on one count of possession with intent to distribute 500 grams or more of cocaine, one count of conspiracy to engage in the business of dealing in firearms and one count of possession of stolen firearms.
Nava and Cole were also found guilty for their involvement in a drive-by shooting in Big Spring on May 4, 2008, in which six people were shot with an AK-47 type rifle. According to the evidence presented at trial, the victims included Michael Cardona and Valerie Garcia, who was 26 weeks pregnant at the time of the shooting. Cardona and Garcia ultimately died as a result of their wounds. Evidence presented at trial proved that after the shootings, Nava ordered two of his co-conspirators to destroy the murder weapon.
Nava and Cole face a maximum statutory sentence of life in prison. A sentencing date has not yet been set by the court.
The case was investigated by the National Gang Targeting, Enforcement and Coordination Center (GangTECC); the Organized Crime Drug Enforcement Task Force; the U.S. Drug Enforcement Administration; the FBI; U.S. Immigration and Customs Enforcement; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the El Paso Intelligence Center; U.S. Customs and Border Protection; the U.S. Marshals Service; the Texas Department of Public Safety; the Police Departments of Lubbock, Midland, Houston, San Antonio and Big Spring, Texas; the Lubbock County, Texas, Sheriff’s Office; and the Howard County, Texas, District Attorney’s Office.
Trial Attorneys Cody L. Skipper and Joseph A. Cooley of the Criminal Division’s Gang Unit and Assistant U.S. Attorney Denise Williams of the U.S. Attorney’s Office for the Northern District of Texas prosecuted the case.
29 March 2010
Tennessee Man Pleads Guilty to Conspiring to Commit Murders of African-AmericansRead the Press Release
WASHINGTON – Daniel Cowart pleaded guilty today to eight counts in a federal indictment charging him with crimes related to a racially-motivated plot to murder dozens of people, the Justice Department announced.
Cowart, 21, of Bells, Tenn., admitted to conspiring with Paul Schlesselman of West Helena, Ark., to engage in a killing spree specifically targeting African-Americans. He further acknowledged that he intended to culminate these attacks by assassinating President Obama, a U.S. Senator and a presidential candidate at the time of the planned attacks.
Cowart also admitted to shooting the window of the Allen Baptist Church in Brownsville, Tenn. Under the plea agreement, Cowart faces a sentence of at least 10 years and could face up to 75 years in prison.
"Despite great civil rights progress, this unthinkable conspiracy serves as a reminder that hate-fueled violence remains all too common in our country," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "Tragedy was averted thanks to the capable work of the Crockett County Sheriff’s Department and their willingness to work with the ATF, the Secret Service and the FBI."
"Crimes committed against individuals because of their race will not be tolerated," said Lawrence J. Laurenzi, U.S. Attorney for the Western District of Tennessee. "I commend the work of the investigative agencies in thwarting what could have been a series of tragic events."
Cowart pleaded guilty to threatening to kill and inflict bodily harm upon a major candidate for the office of President of the United States, conspiracy, interstate transportation of a short-barreled shotgun, interstate transportation of a firearm for the purpose of committing a felony, unlicensed transportation of an unauthorized short-barreled shotgun, possession of a short-barreled shotgun, intentional damage to religious real property, and discharge of a firearm during and in relation to a crime of violence.
Schlesselman pleaded guilty on Jan. 14, 2010, to one count of conspiracy, one count of threatening to kill and inflict bodily harm upon a presidential candidate, and one count of possessing a firearm in furtherance of a crime of violence. Schlesselman is scheduled to be sentenced on April 15, 2010, and faces 10 years in prison under the plea agreement.
The case was investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives; the U.S. Secret Service; the FBI; and the Crockett County, Tenn., Sheriff’s Office. The case is being prosecuted by U.S. Attorney Larry Laurenzi, Assistant U.S. Attorney James Powell and Civil Rights Division Trial Attorney Jonathan Skrmetti.
Pamrapo Savings Bank of New Jersey Pleads Guilty to Conspiracy to Commit Bank Secrecy Act Violations and Forfeits $5 MillionRead the Press Release
WASHINGTON – Pamrapo Savings Bank S.L.A., a wholly-owned subsidiary of Pamrapo Bancorp Inc., based in Bayonne, N.J., pleaded guilty today in U.S. District Court for the District of New Jersey to conspiracy to violate the Bank Secrecy Act and has agreed to forfeit $5 million to the United States.
The announcement was made by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Paul J. Fishman for the District of New Jersey; Special Agent in Charge William P. Offord, Internal Revenue Service (IRS)-Criminal Investigation; Acting Director John E. Bowman of the Office of Thrift Supervision (OTS); and Inspector General Jon T. Rymer, Federal Deposit Insurance Corporation-Office of Inspector General (FDIC-OIG).
"This case is a good example of how disregarding reporting and compliance can turn into a crime," said Assistant Attorney General Lanny A. Breuer of the Criminal Division. "Today’s guilty plea by Pamrapo Savings Bank should remind financial institutions, large and small across the country, of the high price they will pay for ignoring the law."
"Pamrapo Savings Bank’s repeated and blatant violation of the Bank Secrecy Act shielded criminals and their activities from detection and prosecution by law enforcement. This case should send a strong message to banks that we will vigorously investigate and prosecute financial institutions that provide safe harbor to criminals," said U.S. Attorney Paul J. Fishman.
"Law enforcement relies on banks as the first layer of defense against money launderers and other criminal enterprises who choose to utilize our nation’s financial institutions to further their criminal activity," said William P. Offord, Special Agent in Charge, IRS-Criminal Investigation. "Pamrapo Savings Bank’s blatant disregard for the Bank Secrecy Act reporting requirement rules removed that layer of defense, making it more difficult to identify, detect and deter these types of criminals."
According to the criminal information filed today in U.S. District Court in Trenton, N.J., Pamrapo Savings Bank conspired with others to conceal its customers’ illegal or suspicious activities by failing to file currency transaction reports (CTRs) and suspicious activity reports (SARs) and by willfully failing to maintain adequate anti-money laundering programs. Pamrapo Savings Bank admitted that it willfully violated the Bank Secrecy Act to avoid the expenses associated with compliance, despite federal and state banking regulators telling Pamrapo Savings Bank as early as 2004 that its Bank Secrecy Act and anti-money laundering programs contained serious and systemic deficiencies in critical areas required under the law.
Specifically, Pamrapo Savings Bank admitted during its guilty plea that it unlawfully failed to file CTRs and SARs related to approximately $35 million in illegal and suspicious financial transactions, including more than $5 million in structured currency transactions. The bank acknowledged that its willful failure to maintain adequate Bank Secrecy Act and anti-money laundering programs resulted in numerous and repeated violations of the law.
In one specific example outlined in court documents, from approximately March 2005 to September 2006, a co-conspirator cashed approximately 586 checks worth a total of $3.2 million, payable to "cash" at multiple branches of Pamrapo Savings Bank. Each check was under $10,000, thus structured to evade the bank’s obligation to file CTRs. Ultimately, according to the court documents, Pamrapo Savings Bank willfully failed to file a SAR related to these known and repeated violations of the Bank Secrecy Act.
In addition, Pamrapo Savings Bank admitted that it made false and misleading statements to bank regulators, including OTS, to prevent regulatory oversight and enforcement of its deficient Bank Secrecy Act compliance programs.
"Even during an economic downturn, institutions must remain focused on complying with important laws and regulations to ensure that criminals do not use our nation’s financial system for their illicit enterprises," said OTS Acting Director John E. Bowman. "As this enforcement order demonstrates, the OTS takes these obligations very seriously."
"The Federal Deposit Insurance Corporation Office of Inspector General is pleased to join the U.S. Attorney’s Office for the District of New Jersey, the U.S. Department of Justice, and our law enforcement colleagues in defending the integrity of the financial services industry. Prosecutions of entities involved in criminal misconduct helps maintain the safety and soundness of the nation’s financial institutions," stated Inspector General Jon T. Rymer.
OTS assessed a $5 million civil money penalty against Pamrapo Savings Bank for violations of the Bank Secrecy Act, which will be deemed satisfied by the $5 million forfeiture. The Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury is also investigating Pamrapo Savings Bank for noncompliance with the Bank Secrecy Act and may impose additional civil money penalties.
The Bank Secrecy Act is a federal law enacted to prevent banks from being used to facilitate and perpetuate criminal activity, such as narcotics trafficking, organized crime, terrorist financing and other financial crimes. To permit federal law enforcement authorities to detect, investigate, prevent and prosecute such criminal activities, the Bank Secrecy Act requires banks, such as Pamrapo Savings Bank, to file certain reports with the United States, including CTRs and SARs. CTRs must be filed for every currency transaction involving more than $10,000. SARs must be filed related to any possible violation of law, including transactions suspected to be involved in money laundering, tax crimes and "structuring," among other crimes. Structuring involves conducting multiple cash transactions, each in an amount under $10,000, to evade the bank’s obligation to file a CTR and camouflage illegal activities from law enforcement. Additionally, under the Bank Secrecy Act, banks are required to establish and maintain an adequate anti-money laundering compliance program.
Pamrapo Bancorp Inc. is a publicly-held savings and loan holding company traded on the NASDAQ stock market. It is operated through approximately 11 branch offices located in and around Bayonne.
Pamrapo Savings Bank waived indictment, agreed to the filing of the information, and accepted and acknowledged responsibility for its conduct during the plea hearing before Chief Judge Garrett E. Brown Jr. As a result of its guilty plea, Pamrapo Savings Bank faces no less than one but not more than five years probation and a statutory maximum fine equal to the greatest of $500,000; twice the gross amount of any financial gain that any persons derived from the offense; or twice the gross amount of any financial loss sustained by any victims of the offense. The court scheduled sentencing for May 6, 2010.
The case was prosecuted by Senior Trial Attorney John W. Sellers of the Criminal Division’s Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorney Anthony Moscato of the U.S. Attorney’s Office Strike Force in Newark, N.J. The case was investigated by IRS Criminal Investigation Division; FDIC-OIG; FBI; OTS; FinCEN; and the Bayonne Police Department’s Special Investigation Unit.
Nine Members of a Militia Group Charged with Seditious Conspiracy and Related ChargesRead the Press Release
WASHINGTON - Six Michigan residents, along with two residents of Ohio and a resident of Indiana, were indicted by a federal grand jury in Detroit on charges of seditious conspiracy, attempted use of weapons of mass destruction, teaching the use of explosive materials, and possessing a firearm during a crime of violence, Attorney General Eric Holder, U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade and FBI Special Agent in Charge Andrew Arena announced today.
The five count indictment, which was unsealed today, charges that between August 2008 and the present, the defendants, David Brian Stone, 45; his wife, Tina Stone, 44; his son, Joshua Matthew Stone, 21, of Clayton, Mich.; and his other son, David Brian Stone, Jr., 19, of Adrian, Mich.; Joshua Clough, 28, of Blissfield, Mich.; Michael Meeks, 40 of Manchester, Mich.; Thomas Piatek, 46, of Whiting, Ind.; Kristopher Sickles, 27, of Sandusky, Ohio; and Jacob Ward, 33, of Huron, Ohio, acting as a Lenawee County, Mich., militia group called the Hutaree, conspired to oppose by force the authority of the U.S. government. According to the indictment, Hutaree members view local, state, and federal law enforcement as the “brotherhood”, their enemy, and have been preparing to engage them in armed conflict.
The indictment also alleges that the Hutaree planned to kill an unidentified member of local law enforcement and then attack the law enforcement officers who would gather in Michigan for the funeral. According to the plan, the Hutaree would attack law enforcement vehicles during the funeral procession with improvised explosive devices with explosively formed projectiles, which, according to the indictment, constitute weapons of mass destruction. Subsequently, and in furtherance of this plan, David Brian Stone, the Hutaree’s leader, obtained information about such devices over the Internet and e-mailed diagrams of such devices to a person he believed capable of manufacturing the devices. He then had his son, Joshua Matthew Stone, and others gather materials necessary for the manufacturing of such devices.
According to the indictment, in June 2009, David Brian Stone and his other son, David Brian Stone Jr., taught other Hutaree members how to make and use explosive devices intending or knowing that the information would be used to further a crime of violence. In addition, the grand jury charged all nine defendants with carrying or possessing a firearm during a crime of violence on at least one occasion.
“The indictment unsealed today outlines an insidious plan by anti-government extremists to murder a law enforcement officer in order to lure police from across the nation to the funeral where they would be attacked with explosive devices. Thankfully, this alleged plot has been thwarted and a severe blow has been dealt to an dangerous organization that today stands accused of conspiring to levy war against the United States,” said Attorney General Eric Holder.
U.S. Attorney McQuade said, “Because the Hutaree had planned a covert reconnaissance operation for April which had the potential of placing an unsuspecting member of the public at risk, the safety of the public and of the law enforcement community demanded intervention at this time.”
Andrew Arena, FBI Special Agent in Charge, said, “This is an example of radical and extremist fringe groups which can be found throughout our society. The FBI takes such extremist groups seriously, especially those who would target innocent citizens and the law enforcement officers who protect the citizens of the United States. The FBI would like to thank our federal, state and local law enforcement partners who are member of the Joint Terrorism Task Force for their assistance in this case.”
Eight of the nine defendants are in custody and seven of them made their initial appearance before U.S. Magistrate Judge Donald A. Scheer in the Eastern District of Michigan this morning. Joshua Stone is currently a fugitive. Any person with information as to the whereabouts of this individual should contact the FBI at (313) 965-2323.
The charge of seditious conspiracy carries a statutory maximum penalty of 20 years in prison; attempted use of a weapon of mass destruction carries a statutory maximum penalty of life in prison; teaching the use of explosives materials carriers a statutory maximum penalty of 20 years in prison; and possessing a firearm during a crime of violence carries a mandatory minimum penalty of five years in prison.
An indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
The case was investigated by special agents of the FBI and the Michigan State Police.
Mississippi Man Sentenced to 36 Months in Prison for Involuntary Manslaughter of Co-worker in IraqRead the Press Release
WASHINGTON - A Mississippi man was sentenced today by U.S. District Judge Louis Guirola Jr., in the Southern District of Mississippi to 36 months in prison for involuntary manslaughter, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division. Kyle Palmer, 27, of Biloxi, Miss., was also ordered to serve three years of supervised release following the prison term, to pay $2,000 in restitution and to pay a $4,000 fine.
According to factual information provided to the court as part of the plea hearing, Palmer and Justin Pope, the victim, worked as security contractors for DynCorp, a Department of State contractor, at the U.S. embassy regional office in Erbil, Iraq. According to information provided to the court, during an informal party that took place on the night of March 4, 2009, Palmer became considerably intoxicated, in violation of rules in place at the time. During the course of the party, Pope and Palmer engaged in a series of actions in which they pointed a 9 millimeter Glock-19 handgun at each other. According to information provided to the court, at a point during the party, Palmer discharged Pope’s weapon without checking whether the gun was loaded. A bullet was accidentally fired, which struck and killed Pope.
The case was prosecuted by Deputy Chief David Jaffe and Trial Attorney Christine Duey of the Criminal Division’s Domestic Security Section. The case was investigated by the Diplomatic Security Service of the Department of State.
Justice Department Will Not Challenge Cisco’s Acquisition of TandbergRead the Press Release
WASHINGTON – The Department of Justice announced today that it will not challenge Cisco Systems Inc.’s acquisition of Tandberg ASA. The department has concluded that the proposed deal is not likely to be anticompetitive due to the evolving nature of the videoconferencing market and the commitments that Cisco has made to the European Commission (EC) to facilitate interoperability.
During the course of its investigation the Department of Justice cooperated closely with the EC in its parallel review of the transaction, aided by waivers from the parties and industry participants. This permitted the agencies to share information and assessments of likely competitive effects and potential remedies.
"This investigation was a model of international cooperation between the United States and the European Commission," said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. "The parties should be commended for making every effort to facilitate the close working relationship between the Department of Justice and the European Commission."
The Department of Justice’s Antitrust Division analyzed the effect of combining the videoconferencing businesses of Cisco and Tandberg, focusing on a type of videoconferencing known as "telepresence," in which Cisco and Tandberg are competitors. Telepresence is a form of high-definition videoconferencing that provides an immersive experience to users, simulating face-to-face meetings. The department conducted an extensive investigation of this dynamic marketplace, including numerous interviews of industry participants and customers, and review of documents provided by the parties and other firms in the videoconferencing business.
The EC also announced today that it has cleared the transaction. Cisco has made commitments to facilitate interoperability between its telepresence products and those of other companies as part of the EC’s merger clearance process. The commitments are designed to foster the development of open operating standards. The department views those commitments as a positive development that likely will enhance competition among producers of telepresence systems. Open standards lower barriers to entry, and can be especially procompetitive in rapidly evolving high technology markets. The department has taken the commitments into account, along with various market factors, such as the evolving nature of the telepresence business, in reaching its decision to close its investigation.
Cisco, based in San Jose, Calif., is the leading manufacturer of networking equipment and solutions for the Internet, with annual revenues of approximately $35 billion in 2009. It is also the largest provider of telepresence equipment worldwide.
Tandberg, which has dual headquarters in Oslo, Norway, and New York had annual revenues of approximately $900 million in 2009, and is the largest provider of videoconferencing equipment overall worldwide.
26 March 2010
Mobile, Alabama, Man Pleads Guilty to Federal Civil Rights Charges Related to Desecration of SynagogueRead the Press Release
WASHINGTON – Christian Rodney Ice, 19, of Mobile, Ala., pleaded guilty today in federal court in Mobile to one count of violating the Church Arson Act by placing threatening graffitti and neo-Nazi markings on a synagogue in Mobile, the Justice Department and the U.S. Attorney’s office for the Southern District of Alabama announced. Sentencing has been scheduled for Sept. 23, 2010. Ice faces a maximum prison sentence of one-year in prison and a fine of up to $100,000.
During the plea proceedings and in documents filed in court, Ice admitted that during the late night and early morning hours of Jan. 3-4, 2009, he and an associate used spray paint to place anti-Semitic graffiti and neo-Nazi markings on the Congregation Tree of Life Messianic Synagogue in Mobile. The graffiti and markings included the German words "Juden Raus" ("Jews Out"), and the statement "Hitler was right."
"Threats against religious institutions and their members will not be tolerated in this country," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "This case should send a clear message to others who would carry out similar criminal acts that they will be brought to justice and held accountable for their actions."
"The U.S. Attorney’s Office will continue to use all the tools at its disposal to stamp out hate crimes and instances of bigotry," said Kenyen R. Brown, United States Attorney for the Southern District of Alabama.
The case was investigated by special agents from the Mobile Division of the Federal Bureau of Investigation and the City of Mobile Police Department. The case is being prosecuted by Assistant U.S. Attorney George May of the U.S. Attorney’s Office for the Southern District of Alabama and Trial Attorney Donald Tunnage of the Civil Rights Division.
Leader of Hacking Ring Sentenced for Massive Identity Thefts from Payment Processor and U.S. Retail NetworksRead the Press Release
WASHINGTON – The leader of the largest hacking and identity theft ring ever prosecuted by the U.S. government has been sentenced to 20 years and one day in prison for his role in a series of hacks into a major payment processor and several retail networks, announced Assistant Attorney General for the Criminal Division Lanny A. Breuer; U.S. Attorney for the District of Massachusetts Carmen Milagros Ortiz; U.S. Attorney for the Eastern District of New York Benton J. Campbell; U.S. Attorney for the District of New Jersey Paul J. Fishman; and Director of the U.S. Secret Service Mark Sullivan.
On March 25, 2010, Albert Gonzalez, 28, of Miami, was sentenced by U.S. District Court Judge Patti B. Saris in U.S. District Court in Boston to 20 years in prison for conspiracy, computer fraud wire fraud, access device fraud and aggravated identity theft related to hacks into numerous major U.S. retailers, including the TJX Companies, BJ’s Wholesale Club, OfficeMax, Boston Market, Barnes & Noble and Sports Authority.
Thursday’s sentence also addresses the charges brought in the Eastern District of New York and transferred to Boston for plea and sentence. The New York indictment charged Gonzalez with, among other things, conspiracy to commit wire fraud relating to his breach of the electronic payment systems of the Dave and Buster’s restaurant chain. Gonzalez was also ordered to serve three years of supervised release following his prison term and to pay a fine of $25,000.
Today, Gonzalez was sentenced by U.S. District Court Judge Douglas P. Woodlock to 20 years and one day in prison for two counts of conspiracy relating to his efforts to assist others in gaining access to the payment card networks of Heartland Payment Systems, a New Jersey-based card processor; 7-Eleven, a Texas-based nationwide convenience store chain; and Hannaford Brothers Co. Inc., a Maine-based supermarket chain. Gonzalez was also ordered to serve three years of supervised release following his prison term. The prison term and the term of supervised release will run concurrently with the sentence imposed yesterday against Gonzalez. Gonzalez was ordered to pay a fine of $25,000 in addition to the fine imposed yesterday. The charges in this case were originally brought in the District of New Jersey. Restitution in all three cases will be determined by the court at a later date.
"Every day, as cyber criminals try to steal the debit and credit card numbers of unsuspecting American consumers, federal agents and prosecutors are there to catch them," said Assistant Attorney General Lanny A. Breuer. "These sentences – some of the longest ever imposed for hacking crimes – send a powerful message to hackers around the globe that U.S. law enforcement will not allow them to breach American computer networks and payment systems, or illegally obtain identities."
"Investigations of this magnitude – the largest of its kind in the country - remind us that as technology rapidly advances, so do our vulnerabilities. While electronic payments are simply a way of life, we must be mindful that with the stroke of the keyboard, criminal enterprises can strike from anywhere in the world," said U.S. Attorney Carmen M. Ortiz. "I want to assure consumers that we continue to use all available resources to detect and investigate computer hacking crimes, no matter where in the world they are committed."
"Computer hackers and identity thieves pose serious risks to our commercial, personal and financial security," stated U.S. Attorney for the Eastern District of New York Benton J. Campbell. "Today’s sentence should serve as a warning to would-be hackers everywhere, including those who commit their crimes from abroad – you will be found, prosecuted and convicted."
"These sentences reflect the tremendous harm Mr. Gonzalez caused millions of innocent Americans," said U.S. Attorney Paul J. Fishman of the District of New Jersey. "They go a long way to deterring like-minded criminals who mistakenly believe they can escape arrest and prosecution by committing their crimes online and hiding behind a computer screen. This investigation demonstrates the ongoing commitment of the Department of Justice to ensure the safety and security of online commercial transactions."
"Technology has virtually erased geographic boundaries and changed the way we do business," said U.S. Secret Service Director Mark Sullivan. "As we have seen with this case, even with the increasing complexity of network intrusions, it remains difficult for criminals to remain anonymous. The Secret Service continues to seek new and innovative ways to combat emerging cyber threats. Our success in this case and similar investigations is a result of our close work with our worldwide network of law enforcement partners."
According to court documents related to his conviction in the Massachusetts and New York cases, Gonzalez and his co-conspirators broke into retail credit card payment systems through a series of sophisticated techniques, including "wardriving" and installation of sniffer programs to capture credit and debit card numbers used at the victim retail stores. Wardriving involves driving around in a car with a laptop computer looking for unsecure wireless computer networks of retailers. Using these techniques, Gonzalez and his co-defendants were able to steal more than 40 million credit and debit card numbers from victim retailers. According to court documents, Gonzalez and his co-conspirators sold the numbers to others for their fraudulent use and engaged in ATM fraud by encoding the data on the magnetic stripe of blank cards and withdrawing thousands of dollars at a time from ATMs.
Gonzalez and his co-conspirators concealed and laundered their fraud proceeds by using anonymous Internet-based currencies both within the United States and abroad, and by channeling funds through bank accounts in Eastern Europe. Gonzalez’s co-conspirators were located throughout the United States, Estonia and the Ukraine. In the New Jersey case, Gonzalez provided malware to other hackers that allowed them to circumvent anti-virus programs and firewalls, and gain access to the victim companies’ networks. Gonzalez admitted in court documents that it was foreseeable that, based upon his assistance, his co-conspirators would be able to steal tens of millions of credit and debit card numbers, affecting more than 250 financial institutions.
To date, six co-conspirators have pleaded guilty in the United States. One co-conspirator, an Estonian national, was apprehended at the United States’ request by German authorities while he was travelling in Germany. He was subsequently extradited to the United States, where he pleaded guilty to his role in the hacking and identity theft scheme. Another co-conspirator was arrested and convicted in Turkey on related identity theft charges, and was sentenced to 30 years in prison.
The Boston case was prosecuted by Assistant U.S. Attorneys Stephen Heymann and Donald Cabell of the District of Massachusetts. The New York case was prosecuted by Assistant U.S. Attorney William Campos of the Eastern District of New York and by Senior Counsel Kimberly Kiefer Peretti and Trial Counsel Evan Williams of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS). The New Jersey case was prosecuted by Assistant U.S. Attorneys Erez Liebermann and Seth Kosto for the District of New Jersey, Assistant U.S. Attorney Stephen Heymann for the District of Massachusetts and by Senior Counsel Kimberly Kiefer Peretti of CCIPS. All of these cases were investigated by the U.S. Secret Service.
Kentucky Attorney Pleads Guilty for Role in Stock Manipulation Scheme<br /> and Obstruction of JusticeRead the Press Release
WASHINGTON - Louisville, Ky., attorney James Reskin, 51, pleaded guilty late yesterday in U.S. District Court in Tulsa for his role in a scheme to defraud investors through the manipulation of the publicly traded stocks of three companies, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney for the Northern District of Oklahoma Thomas Scott Woodward.
Reskin pleaded guilty to one count of conspiracy to commit wire fraud, securities fraud and money laundering, as charged in the indictment returned by a federal grand jury in Tulsa on Jan. 15, 2009. Reskin also pleaded guilty to one count of obstruction of justice, contained in a criminal information filed March 25, 2010. Specifically, Reskin pleaded guilty to making false and misleading statements to the Internal Revenue Service (IRS) and to the Department of Justice regarding stock promotions and movement of stock proceeds.
Two companies based in Tulsa at the time of the alleged scheme were among those whose stock was manipulated: Deep Rock Oil & Gas Inc., and Global Beverage Solutions Inc., formerly known as Pacific Peak Investments. The third company, National Storm Management Group Inc., is based in Glen Ellyn, Ill.
G. David Gordon, a Tulsa, Okla., attorney; Richard Clark, also of Tulsa; Dean Sheptycki, a resident of the Bahamas; and Dallas-area resident Joshua Wayne Lankford were also charged in the Jan. 15, 2009, indictment for their alleged roles in the scheme. The U.S. Securities and Exchange Commission (SEC) also filed a civil enforcement action against Gordon, Lankford and Sheptycki. Trial for Gordon and Clark is scheduled to begin April 5, 2010. Lankford and Sheptycki remain under indictment. The charges contained in the indictment are merely allegations and the defendants are presumed innocent unless and until proven guilty.
According to the indictment, between April 2004 and December 2006, Reskin and his co-conspirators devised and engaged in a scheme to defraud investors known as a "pump and dump," in which they manipulated three publicly traded penny stocks. A penny stock is a common stock that trades for less than $5 per share in the over the counter market, rather than on national exchanges. According to the indictment, the scheme reaped the defendants more than $41 million.
The co-conspirators allegedly executed the scheme by obtaining a majority of the free-trading shares of stock of the company they intended to manipulate, using fraudulent and deceptive means to acquire the stock and/or remove the trading restrictions on the shares they obtained. Reskin admitted that he authored false documents regarding Global Beverage to further the manipulation of that company’s stock.
The co-conspirators then allegedly "parked" their shares with various nominees, such as friends, relatives or other entities that they owned and controlled to conceal their ownership. After "parking" the shares, the co-conspirators allegedly engaged in coordinated trading in order to create the appearance of an emerging market for these stocks, after which they allegedly conducted massive promotional campaigns in which unsolicited fax and e-mail "blasts" were sent to millions of recipients. The promotions touted the respective stocks without accurately disclosing that the co-conspirators paid for the promotions, controlled the majority of free-trading shares and intended to sell their shares. According to the indictment, the promotions induced unsuspecting legitimate investors to purchase stock in the companies. During and after dissemination of the promotions, the co-conspirators allegedly sold their stock at artificially inflated prices, leaving legitimate investors holding stock of significantly reduced value.
Reskin admitted relocating his brokerage account in order to coordinate stock trading and further the manipulation of Global Beverage stock. He also admitted using his attorney trust account to conceal ownership of Global Beverage and to transfer proceeds from the sale of stock.
The conspiracy charge to which Reskin pleaded guilty carries a maximum sentence of five years in prison and a $250,000 fine or twice the amount of the gain/loss caused by Mr. Reskin’s conduct. The obstruction of justice charge carries a maximum penalty of five years in prison and a $250,000 fine. Sentencing has been scheduled for Aug. 25, 2010.
The case is being prosecuted by Trial Attorney Andrew Warren of the Criminal Division’s Fraud Section, Assistant U.S. Attorney Catherine Depew for the Northern District of Oklahoma, and Special Assistant U.S. Attorney Kevin Muhlendorf, who is detailed to the U.S. Attorney’s Office from the SEC. The case is being investigated by the FBI, the IRS-Criminal Investigation Division and the U.S. Postal Inspection Service.