Search This Blog

Wednesday, October 31, 2012

MIAMI AREA ASSISTED LIVING FACILITY OWNERS PLEAD GUILTY TO HEALTH CARE FRAUD

FROM:  U.S. DEPARTMENT OF JUSTICE
Friday, October 26, 2012

Miami Area Assisted Living Facility Owners Plead Guilty for Roles in $63 Million Fraud Scheme

WASHINGTON – Two owners of Miami area assisted living facilities (ALF) pleaded guilty today in connection with a health care fraud scheme involving defunct Miami area health provider Health Care Solutions Network Inc. (HCSN), announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Acting Special Agent-in-Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office.

Raymond Rivero, 55, of Homestead, Fla., and Ivon Perez, 50, of Miami, each pleaded guilty before U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida to one count of conspiracy to solicit and receive cash kickbacks. Rivero, who was the owner of Miami-based God Is First ALF, and Perez, who was the owner of Kayleen and Denis Care Corp, admitted to participating in a fraud scheme that was orchestrated by the owners and operators of HCSN, which operated purported partial hospitalization programs (PHPs), a form of intensive mental health treatment for severe mental illness.

Earlier this week, the owner of another ALF in the Miami area that was involved in the HCSN fraud scheme pleaded guilty for his role in the scheme. On Oct. 22, 2012, Daniel Martinez, 45, of Homestead, the owner of Mi Renacer ALF, pleaded guilty before Judge Altonaga to one count of soliciting and receiving cash kickbacks.

According to an indictment unsealed on May 2, 2012, HCSN obtained Medicare beneficiaries to attend HCSN for purported PHP treatment that was unnecessary and, in many instances, not provided. HCSN obtained those beneficiaries by paying kickbacks to owners and operators of ALFs or by otherwise recruiting them from ALFs and nursing homes. Rivero, Martinez and Perez pleaded guilty to referring Medicare and/or Florida Medicaid beneficiaries to HCSN in exchange for cash bribes.

According to court documents, ALF residents referred by Rivero, Martinez and Perez were not qualified to be placed in HCSN’s PHP and were only selected because they had Medicare or state of Florida Medicaid benefits. In some cases, ALF patients suffered from dementia, Alzheimer’s disease or mental retardation or were otherwise unable to benefit from the purported mental health services.

According to court documents, from 2004 through 2011, HCSN billed Medicare and Medicaid approximately $63 million for purported mental health services.

Perez also pleaded guilty before Judge Altonaga in another criminal case to a second count of conspiracy in connection with accepting kickbacks from Superstar Home Health Care Inc. for purported home health services to her ALF residents.

In another related case, a former HCSN employee, Sarah Da Silva Keller, 28, was sentenced by U.S. District Judge Marcia G. Cooke in the Southern District of Florida to a 24 month prison term and ordered to pay $1,067,300 in restitution to the Medicare program. In June 2012, Keller pleaded guilty to an information charging one count of conspiracy to commit health care fraud.

According to court documents, Keller falsified patient attendance and medical records for Medicare beneficiaries who attended HCSN for mental health treatment. The falsified records were then utilized to submit fraudulent billing to the Medicare program. According to Keller’s plea agreement, Keller’s participation in the fraud resulted in more than $2.4 million in fraudulent billing to the Medicare program.

The cases are being prosecuted by Special Trial Attorney William Parente and Trial Attorney Allan J. Medina of the Criminal Division’s Fraud Section. The Superstar Home Health case is being prosecuted by Assistant U.S. Attorney Eric Morales of U.S. Attorney’s Office for the Southern District of Florida. These cases were investigated by the FBI and HHS-OIG and were 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.


Sunday, October 28, 2012

GEORGIA POLICE CHIEF GOES TO PRISON FOR ABUSING PRISONER

FROM: U.S. JUSTICE DEPARTMENT
Monday, October 22, 2012

Former Georgia Police Chief Sentenced for Assaulting Restrained Inmate


Former chief of the Omega, Ga., Police Department, Walter Young, 54, was sentenced today for physically abusing a man in his custody, the Justice Department announced.

U.S. District Judge Hugh Lawson sentenced Young to 24 months in prison for violating the civil rights of a pretrial detainee while acting in his capacity as the chief of police.

According to evidence presented at trial, on March 24, 2011, the former police chief assaulted the detainee, Alfonso Moreno, by repeatedly slapping and punching him in the head and face while he was fully restrained in a restraint chair. Young struck Mr. Moreno a total of eight times, breaking Moreno’s nose. Young’s excessive use of force was captured by the jail’s video surveillance system. A federal jury convicted Young on Aug. 1, 2012.

"There was no excuse for this use of force on a restrained individual and excessive force by those sworn to uphold the law will not be tolerated," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "The Justice Department will continue to vigorously prosecute law enforcement officers who violate the constitutional rights of others."

"We trust our law enforcement officers to protect and serve the people of their community," said Michael J. Moore, U.S. Attorney for the Middle District of Georgia. When we discover violations of that trust, the U.S. Attorney’s Office will use all of our resources to see that those officers who broke the law are made to account for their actions."

This case was investigated by the FBI and prosecuted by Special Litigation Counsel Forrest Christian and Trial Attorney Tona Boyd of the Civil Rights Division of the U.S. Department of Justice, with the assistance of the U.S. Attorney’s Office for the Middle District of Georgia and the support of the Georgia Bureau of Investigations.

ALLEGED COMMODITIES FRAUD

FROM: COMMODITY FUTURES TRADING COMMISSION

CFTC Obtains Federal Court Order against Nicholas Cosmo for Engaging in Unauthorized Futures Trading that Resulted in Tens of Millions of Dollars in Investor Losses

Cosmo ordered to pay a $240 million penalty and permanently barred from the commodities industry

In a related criminal case, Cosmo sentenced to 300 months in prison and ordered to pay over $179 million in restitution to defrauded investors

Washington, DC
- The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Leonard D. Wexler of the U.S. District Court for the Eastern District of New York entered a default judgment and permanent injunction order against defendant Nicholas Cosmo, formerly of Lake Grove, N.Y., charged with defrauding investors of tens of millions of dollars in a commodity futures trading scheme (see CFTC Press Release 5606-09, January 27, 2009).

The court’s order finds that, from at least January 2004 through December 2008, Cosmo engaged in a fraudulent scheme in which tens of millions of dollars were solicited from investors to invest in bridge loans and merchant advances. Instead, Cosmo used investors’ funds, in part, to engage in unauthorized commodity futures trading that resulted in tens of millions of dollars in trading losses, according to the order. The order also finds that Cosmo’s futures trading and trading losses were never disclosed to investors.

The order requires Cosmo to pay a $240 million civil monetary penalty, imposes permanent trading and registration bans, and permanently bars Cosmo from engaging in any commodity-related activity, including trading, and from registering or seeking exemption from CFTC registration.

In a related criminal case, United States of America v. Nicholas Cosmo, Docket No. CR-09-255 (DRH), Judge Denis R. Hurley sentenced Cosmo to 300 months in prison and ordered him to pay restitution to investors in the amount of $179,195,232.63.

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of New York, the Federal Bureau of Investigation, the U.S. Postal Inspection Service, and the U.S. Securities and Exchange Commission.

The CFTC Division of Enforcement staff members responsible for the action are Elizabeth C. Brennan, Philip Rix, Steven Ringer, Lenel Hickson, Jr., Stephen J. Obie, and Vincent McGonagle.

Friday, October 26, 2012

FORMER TEXAS PAROLE OFFICER INDICTED FOR BRIBERY

FROM: U.S. DEPARTMENT OF JUSTICE

Thursday, October 25, 2012

Former Texas Parole Officer Indicted for Bribery Scheme Involving Assigned Parolee

WASHINGTON – A former Texas state parole officer was arrested today in Dallas on charges of engaging in a bribery scheme involving one of her assigned parolees, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

A federal grand jury in the Northern District of Texas returned a two-count indictment yesterday charging Nichelle Derricks, 37, of Cedar Hill, Texas, with one count of honest services wire fraud and one count of federal programs bribery.

According to the indictment, while serving as a Texas Department of Criminal Justice (TDCJ) parole officer, Derricks and one of her assigned parolees developed an improper relationship in which Derricks secretly used her official position with TDCJ to enrich herself and others by soliciting and receiving cash payments, gifts, furniture, household goods and items, food and beverages, and other things of value from the parolee in exchange for favorable official action benefitting the parolee. The scheme, according to the indictment, was conducted without the authorization, knowledge or approval of TDCJ and contrary to TDCJ procedures and requirements.

The indictment further alleges that Derricks repeatedly allowed the parolee to violate the terms of his parole by, among other things, permitting him to travel outside Texas without prior, written approval and by allowing the parolee to engage in prohibited financial transactions. According to the indictment, such favorable treatment allowed the parolee to facilitate a massive scheme to defraud investors through an oil and gas company founded and operated by the parolee while he was on state parole.

If convicted, Derricks faces a maximum potential penalty of 20 years in prison on the honest services wire fraud charge and 10 years in prison on the federal programs bribery charge. Each charge also carries a maximum $250,000 fine.

The case is being prosecuted by Trial Attorneys John P. Pearson, Edward P. Sullivan and Jeffrey E. Tsai of the Criminal Division’s Public Integrity Section. The case is being investigated by the FBI Dallas Field Office, with assistance from the U.S. Secret Service and the TDCJ Office of Inspector General.

The charges and allegations contained in the indictment are merely accusations and the defendant is presumed innocent unless and until proven guilty.

Thursday, October 25, 2012

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES WORKER SENTENCED FOR THEFT

FROM: U.S. DEPARTMENT OF JUSTICE

Tuesday, October 23, 2012
Department of Health and Human Services Employee Sentenced in North Carolina to Prison for Theft of Government Funds

WASHINGTON – An employee of the Department of Health and Human Services (HHS) was sentenced today in Asheville, N.C., to six months in prison for stealing $114,494 in government funds, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and Special Agent in Charge Elton Malone of the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG), Office of Investigations, Special Investigations Branch.

Jihan S. Cover, 34, of Arden, N.C., was sentenced today by U.S. District Judge Martin Reidinger in the Western District of North Carolina. In addition to her prison term, Cover was ordered to forfeit $114,494, pay $114,494 in restitution to HHS and serve three years of supervised release, including six months of home confinement, following her prison term.


Cover pleaded guilty to one count of theft on Aug. 22, 2011.

According to court documents, Cover worked as a purchasing agent with the National Institutes of Health (NIH), National Cancer Institute (NCI), a subdivision of HHS, from approximately 2006 through December 2011. Cover’s sole job function involved procuring authorized items and services for NIH/NCI using assigned government credit cards.

According to plea documents, between June 2009 and December 2010, Cover, who received regular training in the proper use of government credit cards, used and caused to be used NIH/NCI credit cards assigned to her to complete over 250 unauthorized personal transactions totaling approximately $114,494.

During this period of time, according to her plea, Cover used and caused to be used her NIH/NCI purchase cards to make over 170 personal purchases totaling approximately $16,000 from Amazon.com for items that included toys, exercise equipment, books, clothes and other personal times. Almost all of these items were shipped to Cover’s residence in Arden. In addition, Cover admitted using her NIH/NCI purchase cards to pay off over $29,000 in balances she accrued with various cash advance and payday loan vendors.

According to plea documents, Cover also used and caused to be used her NIH/NCI purchase cards to make more than $47,000 in payments to personal accounts she caused to be created on PayPal, an online payment website. Cover directed over $46,000 from these PayPal accounts to be deposited into bank accounts that she controlled. Plea documents also revealed that in an effort to conceal her misuse of assigned purchase cards, Cover created additional PayPal accounts associated with email accounts that she controlled and which she selected to resemble the name of a legitimate NIH/NCI vendor. In this manner, Cover made over $11,000 in additional hidden payments to these PayPal accounts.

According to court documents, Cover also engaged in additional fraudulent personal transactions totaling approximately $11,000.

In addition, Cover admitted that she further sought to conceal her actions by submitting various dispute forms to the bank servicing her purchase cards, claiming that she did not recognize certain charges or did not authorize them, when, in fact, she knowingly made or caused to be made the personal charges. During her plea hearing, Cover admitted that in or about January and June 2011, she lied to investigators, claiming that she had satisfied personal transactions made with her NIH/NCI purchase cards using her personal bank account, which in fact she knew she had not. Previously, when confronted by her supervisor at NIH/NCI regarding suspicious transactions, Cover claimed falsely that she had been the victim of identity theft, when in fact she knew that she had caused the transactions.

This case is being prosecuted by Trial Attorney Eric G. Olshan of the Criminal Division’s Public Integrity Section. This case was investigated by the HHS Office of Inspector General.

Tuesday, October 23, 2012

MAN INDICTED FOR ALLEGED STOLEN IDENTITY REFUND FRAUD

FROM: U.S. DEPARTMENT OF JUSTICE

Wednesday, October 24, 2012

Alabama Man Indicted for Stolen Identity Refund Fraud

A federal grand jury in Montgomery, Ala., returned an indictment charging Kenneth Jerome Blackmon Jr., with aggravated identity theft, wire fraud, access device fraud and misuse of a Social Security number, the Justice Department and the Internal Revenue Service (IRS) announced today.

According to the indictment, from January 2011 through November 2011, Blackmon participated in a scheme to file false tax returns using stolen identities. As alleged, he possessed lists of names, Social Security numbers and dates of birth as well as prepaid debit cards, all for the purpose of obtaining fraudulent tax refunds from the IRS.

An indictment merely alleges that crimes have been committed and the defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Blackmon faces a maximum potential sentence of 20 years in prison for each of the two wire fraud counts, 10 years for the access device fraud count, 5 years for the misuse of a Social Security number count, and a mandatory 2-year sentence for the aggravated identity theft counts. He is also subject to fines and mandatory restitution if convicted.

This case was investigated by special agents of IRS - Criminal Investigation. Trial Attorneys Justin Gelfand and Jason Poole of the Justice Department’s Tax Division are prosecuting the case.

HALFWAY HOUSE OWNER GOES TO PRISON FOR ROLE IN $205 MILLION MEDICARE FRAUD

FROM: U.S. DEPARTMENT OF JUSTICE

Thursday, October 18, 2012

Owner and Operator of Florida Halfway House Company Sentenced to 51 Months in Prison for Role in Medicare Fraud Scheme

WASHINGTON – The owner and operator of New Way Recovery Inc., a Florida corporation that operated several halfway houses, was sentenced today to serve 51 months in prison for his role in a $205 million Medicare fraud scheme involving fraudulent claims for purported partial hospitalization program (PHP) services, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Acting Special Agent-in-Charge of the FBI’s Miami Field Office; and Special Agent-in-Charge Christopher B. Dennis of the HHS Office of Inspector General (HHS-OIG), Office of Investigations Miami Office.

Hassan Collins, 41, was sentenced by U.S. District Judge Kevin Michael Moore in the Southern District of Florida. In addition to his prison term, Collins was sentenced to serve three years of supervised release and ordered to pay $2,413,675 in restitution, jointly and severally with co-conspirators.

On June 14, 2012, Collins pleaded guilty to one count of conspiracy to receive and pay health care fraud kickbacks.

According to court documents, from approximately April 2004 through approximately September 2010, Collins, along with co-conspirators, received kickback payments in exchange for referring Medicare beneficiaries, who did not qualify for PHP treatment, for purported PHP services to American Therapeutic Corporation (ATC), a Florida corporation that operated several purported PHPs throughout Florida. Collins and his co-conspirators caused false and fraudulent claims to be submitted to Medicare for PHP services purportedly provided to Medicare beneficiaries at ATC’s locations, when, in fact, the services were never provided.

In related cases, ATC, its management company, Medlink Professional Management Group Inc. and various owners, managers, doctors, therapists, patient brokers and marketers of ATC, were charged with various health care fraud, kickback, money laundering and other offenses in two indictments unsealed in February 2011. ATC, Medlink and more than 20 of the individual defendants charged in these cases have pleaded guilty or have been convicted at trial.

The case is being prosecuted by Fraud Section Trial Attorney Allan J. Medina. The case was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Monday, October 22, 2012

U.S. MARSHALS SERVICE HERO RECOGNIZED WITH AWARD

FROM: U.S. MARSHALS SERVICE

U.S. Marshals Inspector Awarded for Heroic Acts

Alexandria, VA
– U.S. Marshal Bobby Mathieson announces the U.S. Marshals Service recipient of the Department of Justice, Attorney General’s Award for Exceptional Heroism.

Inspector John Long for the U.S. Marshals’ Capital Area Regional Fugitive Task Force will be recognized today for his extraordinary act of courage and voluntary risk of life during the performance of official duties. The inspector will be presented the award for risking his life in the face of grave danger to protect the life of an area woman on the morning of Dec. 9, 2011. The inspector also received the U.S. Marshals Service Director’s Award for Valor in August regarding this act.

While conducting a fugitive investigation along with members of the USMS Capital Area Regional Fugitive Task Force, Inspector Long observed a woman running out of her home, being closely pursued by fugitive Johnny Jones, who was gripping her hair with one hand and holding a pistol in the other.

The woman, who was screaming for help, ran in the direction of Inspector Long. The inspector immediately stepped out of his vehicle, aimed his service rifle at Jones and announced, "Police, U.S. Marshal, drop the gun." Jones, immediately released the woman (after having ripped hair from her head) and retreated into the house, still holding the weapon.

The inspector secured the woman in his vehicle and summonsed the rest of the team, who were conducting surveillance nearby. It was later determined that Jones had used a brick to break through the woman’s sliding glass door during his attempt to abduct her.

Jones exited out of the rear of the residence, fleeing through the neighborhood and into a section of nearby woods. With the assistance of the Henrico County Police and the Virginia State Police, task force members set up a perimeter and canvassed the area. Inspector Long observed the fugitive crawling out of a nearby shed with pistol still in hand. The inspector aimed his rifle at Jones and gave him commands to drop the weapon and surrender. Jones stood up, tossed the gun and surrendered to the inspector and members of the U.S. Marshals task force.

Jones, a career criminal, was wanted on outstanding warrants for Abduction and Grand Larceny (Petersburg Bureau of Police), Probation Violation after serving time for convictions of Rape, Abduction, Malicious Wounding and Use of a Firearm (Virginia Department of Corrections) and Breaking and Entering and Theft of a Firearm while a fugitive (Dinwiddie County). Jones is also registered for life on the Virginia State Police Sex Offender Registry.

Jones was convicted in December in Henrico County for the offenses committed on Dec. 9, 2011, and sentenced to 6 ½ years imprisonment. He faces considerable time for violation of his probation, as well as pending charges in Petersburg and Dinwiddie County.

This event serves to remind us of the sacrifices that our nation’s law enforcement officers make each and every day to protect our communities.

The U.S. Marshals Service arrested more than 36,200 federal fugitives and 86,400 state and local fugitives in fiscal year 2011.

Sunday, October 21, 2012

HOME HEALTH CARE COMPANY OWNER GOES TO TO PRISON FOR MEDICARE FRAUD

FROM: U.S. DEPARTMENT OF JUSTICE
Monday, October 15, 2012

Owner of Miami Home Health Company Sentenced to 120 Months in Prison for $42 Million Health Care Fraud Scheme

WASHINGTON – The owner and operator of a Miami health care agency was sentenced today to 120 months in prison for his participation in a $42 million home health Medicare fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Acting Special Agent-in-Charge of the FBI’s Miami Field Office; and Special Agent-in-Charge Christopher B. Dennis of the HHS Office of Inspector General (HHS-OIG), Office of Investigations Miami Office.

Eulises Escalona, 44, of Monroe County, Fla., was sentenced today by U.S. District Judge Joan A. Lenard in the Southern District of Florida. In addition to sentencing Escalona to prison, Judge Lenard ordered him to pay $26.5 million in restitution.

On Aug. 2, 2012, Escalona pleaded guilty in the Southern District of Florida to one count of conspiracy to commit health care fraud.

According to court documents, Escalona was the owner of Willsand Home Health Inc., a Florida home health agency that purported to provide home health care and physical therapy services to eligible Medicare beneficiaries. Escalona pleaded guilty to conspiring with patient recruiters for the purpose of billing the Medicare program for unnecessary home health care and therapy services. Escalona and his co-conspirators paid kickbacks and bribes to patient recruiters in return for patients, prescriptions, Plans of Care (POCs) and certifications for medically unnecessary therapy and home health services for Medicare beneficiaries. Escalona and co-conspirators also paid kickbacks and bribes directly to physicians, who provided home health and therapy prescriptions, POCs and medical certifications to Escalona and his co-conspirators. Escalona used these prescriptions, POCs and medical certifications to fraudulently bill the Medicare program for home health care services, which Escalona knew was in violation of federal criminal laws.

According to court documents, at Willsand Home Health, patient files for Medicare beneficiaries were falsified to make it appear that such beneficiaries qualified for home health care and therapy services when, in fact, many of the beneficiaries did not actually qualify for such services. Escalona knew that in many cases the patient files at Willsand Home Health were falsified.

From approximately January 2006 through November 2009, Escalona and his alleged co-conspirators submitted approximately $42 million in false and fraudulent claims to Medicare, which paid approximately $27 million on those claims.

This case is being prosecuted by Senior Trial Attorney Joseph S. Beemsterboer of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.

Saturday, October 20, 2012

KOLON INDUSTRIES EXECUTIVES INDICTED FOR STEALING KEVLAR TRADE SECRETS FROM DUPONT

FROM: U.S. DEPARTMENT OF JUSTICE

Thursday, October 18, 2012
Top Executives at Kolon Industries Indicted for Stealing DuPont’s Kevlar Trade Secrets

Also Charged with Conspiracy to Steal Intellectual Property from Japan-Based Teijin Limited

Kolon Industries Inc. and several of its executives and employees have been indicted for allegedly engaging in a multi-year campaign to steal trade secrets related to DuPont’s Kevlar para-aramid fiber and Teijin Limited’s Twaron para-aramid fiber . The indictment seeks forfeiture of at least $225 million in proceeds from the alleged theft of trade secrets from Kolon’s competitors.

The charges were announced today by U.S. Attorney for the Eastern District of Virginia Neil H. MacBride;Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; and Jeffrey C. Mazanec, Special Agent in Charge of the FBI’s Richmond Field Office .

"Kolon is accused of engaging in a massive industrial espionage campaign that allowed it to bring Heracron quickly to the market and compete directly with Kevlar," said U.S. Attorney MacBride. "This country’s greatest asset is the innovation and the ingenuity and creativity of the American people. The genius of free enterprise is that companies compete on the excellence of their ideas, products and services – not on theft. This indictment should send a strong message to companies located in the United States and around the world that industrial espionage is not a business strategy."

"By allegedly conspiring to steal DuPont’s and Teijin’s intellectual property, Kolon threatened to undermine an economic engine at both companies," said Assistant Attorney General Breuer. "Developing Kevlar and Twaron was resource-intensive work, and required strategic investment and ingenuity. Kolon, through its executives and employees, allegedly acted brazenly to profit off the backs of others. The Justice Department has made fighting intellectual property crime a top priority, and we will continue to aggressively prosecute IP crimes all over the country."

"It’s critical that law enforcement aggressively investigate crimes of intellectual property theft, such as this one," said FBI Special Agent in Charge Mazanec. "If not, intellectual creativity and our economy will be compromised. As a member of the Department of Justice Task Force on Intellectual Property, our office will investigate any company, domestic or international, that steals confidential proprietary information for their own benefit. We will pursue those that prey on the originality and vision of hardworking businesses who conduct their own research, obtain patents and market a successful product."

Headquartered in Seoul, South Korea, Kolon was indicted by a grand jury in Richmond, Va. The indictment charges Kolon with one count of conspiring to convert trade secrets, four counts of theft of trade secrets and one count of obstruction of justice.

Kolon makes a product called Heracron, which is a recent entrant into the para-aramid fiber market as a competitor to products called Kevlar and Twaron. Para-aramid fibers are used to make, for example, body armor, fiberoptic cables and automotive and industrial products. Kevlar is produced by E. I. du Pont de Nemours and Company (DuPont), one of the largest chemical companies in the United States. For decades, Kevlar has competed against Twaron, a para-aramid fiber product produced by Teijin Limited, one of the largest chemical companies in Japan.

According to the indictment, from July 2002 through February 2009, Kolon allegedly sought to improve its Heracron product by targeting current and former employees at DuPont and Teijin and hiring them to serve as consultants, then asking these consultants to reveal information that was confidential and proprietary.

The indictment alleges that in July 2002, Kolon obtained confidential information related to an aspect of DuPont’s manufacturing process for Kevlar, and within three years Kolon had replicated it. This successful misappropriation of DuPont’s confidential information, the indictment alleges, spurred Kolon leadership to develop a multi-phase plan in November 2005 to secure additional trade secret information from its competitors, by targeting people with knowledge of both pre-1990 para-aramid technology and post-1990 technologies.

Kolon is alleged to have retained at least five former DuPont employees as consultants. Kolon allegedly met with these people individually on multiple occasions from 2006 through 2008 to solicit and obtain sensitive, proprietary information that included details about DuPont’s manufacturing processes for Kevlar, experiment results, blueprints and designs, prices paid to suppliers and new fiber technology. In cases where the consultants could not answer Kolon’s specific and detailed questions, Kolon allegedly requested the consultants to obtain the information from current employees at DuPont.

The indictment alleges that during a meeting with one consultant, a Kolon employee surreptitiously copied information from a CD the former DuPont employee had brought with him that contained numerous confidential DuPont business documents, including a detailed breakdown of DuPont’s capabilities and costs for the full line of its Kevlar products, customer pricing information, analyses of market trends and strategies for specific Kevlar submarkets. This wealth of information was allegedly copied and dispersed among several Kolon executives and employees, and the indictment alleges that many of these documents and others associated with the consultants were deleted by the Kolon executives and employees after DuPont filed a civil suit against Kolon in 2009.

Kolon also is accused of attempting to recruit a former employee of a Teijin subsidiary, Teijin Twaron, who reported the requests for trade secret information to Teijin Twaron. Legal representatives from Teijin Twaron sent a letter to Kolon in January 2008 demanding that Kolon cease and desist from seeking to obtain trade secrets related to Twaron. After this incident, the indictment alleges that Kolon continued to try to obtain trade secrets, but took additional steps to attempt to avoid detection of its actions.

The indictment alleges that, in August 2008, Kolon employees met with a current DuPont employee in a hotel room in Richmond and discussed how the DuPont employee could provide trade secrets to Kolon without leaving evidence.

In addition to the corporation itself, the following Kolon executives and employees from Seoul were charged with conspiring together to steal trade secrets and obstruction of justice for deleting information from their computers:

· Jong-Hyun Choi, 56, was a senior executive overseeing the Heracron Business Team. He allegedly met with other top executives at Kolon to develop the directives to secure consultants and directly participated in carrying out the directives.

· In-Sik Han, 50, managed Kolon’s research and development related to Heracron and was allegedly responsible for overseeing the "consulting" sessions with ex-DuPont employees.

· Kyeong-Hwan Rho, 47, worked for Kolon for more than 25 years and served as the head of the Heracron Technical Team beginning in January 2008. He allegedly participated in the consulting sessions.

· Young-Soo Seo, 48, reported to Choi and served as the general manager for the Heracron Business Team beginning in November 2006. He allegedly participated in the consulting sessions.

· Ju-Wan Kim, 40 , was a manager on the Heracron Business Team from September 2007 through February 2009 and reported to Seo. He was the main point of contact at Kolon for at least one of the ex-DuPont employees. He also participated in the consulting sessions.

The conspiracy and theft of trade secrets counts each carry a maximum penalty of 10 years in prison and a fine of $250,000 or twice the gross gain or loss for individual defendants, and a fine of $5 million or twice the gross gain or loss for the corporate defendant. The obstruction of justice count carries a maximum penalty of 20 years in prison and a fine of $250,000 or twice the gross gain or loss for individual defendants, and a fine of $500,000 or twice the gross gain or loss for the corporate defendant.

The indictment seeks at least $225 million in forfeiture, which represents the approximate gross proceeds of the sale of Heracron from January 2006 through June 2012, along with $341,000 in payments made to former DuPont employees in exchange for trade secret information.

The case is being prosecuted by Assistant U.S. Attorneys Timothy D. Belevetz and Kosta S. Stojilkovic of the U.S. Attorney’s Office for the Eastern District of Virginia’s Financial Crimes and Public Corruption Unit and Trial Attorney John W. Borchert of the Criminal Division’s Fraud Section and Senior Counsel Rudolfo Orjales of the Criminal Division’s Computer Crime and Intellectual Property Section. This case is being investigated by the FBI’s Richmond Field Office.

This case is part of efforts being undertaken by the Department of Justice Task Force on Intellectual Property (IP Task Force) to stop the theft of intellectual property. Attorney General Eric Holder created the IP Task Force to combat the growing number of domestic and international intellectual property crimes, protect the health and safety of American consumers, and safeguard the nation’s economic security against those who seek to profit illegally from American creativity, innovation and hard work. The IP Task Force seeks to strengthen intellectual property rights protection through heightened criminal and civil enforcement, greater coordination among federal, state and local law enforcement partners, and increased focus on international enforcement efforts, including reinforcing relationships with key foreign partners and U.S. industry leaders. .

Friday, October 19, 2012

TWO POLICE OFFICERS INDICTED ON FEDERAL CIVIL RIGHTS AND PERJURY CHARGES

FROM: U.S. JUSTICE DEPARTMENT
Monday, October 15, 2012

Two Police of Puerto Rico Officers Indicted on Federal Civil Rights and Perjury Charges

Police of Puerto Rico Lieutenant Erick Rivera Nazario and Officer Jimmy Rodriguez Vega were indicted on civil rights charges alleging that they used excessive force on two men, the Justice Department announced today. Nazario and Vega allegedly violated the constitutional rights of Jose Irizarry Perez and his father Jose Irizarry Muniz while the two were celebrating the local election results at the Las Colinas housing development in Yauco, Puerto Rico, on Nov. 5, 2008. Rivera was also indicted for making false declarations before the federal grand jury during its investigation into the civil rights violations.

The indictment was announced today by Thomas E. Perez, Assistant Attorney General for the Civil Rights Division; Rosa Emilia Rodriguez-Velez, U.S. Attorney for the District of Puerto Rico; and Joseph Campbell, Special Agent in Charge of the FBI San Juan Field Office.

According to the five-count indictment, Rivera and Rodriguez, while acting under color of law, physically struck and assaulted Irizarry Perez and Irizarry Muniz with police batons, which resulted in bodily injury to both of them, and thereby deprived the victims of their constitutionally protected rights to be free from the use of unreasonable force by those acting under color of law. Rivera, who was a sergeant at the time of the incident, was also charged with failing to intervene and keep the victims from harm when Rodriguez, an officer whom Rivera supervised, assaulted the victims in Rivera’s presence. Finally, Rivera was charged for making false declarations to the federal grand jury related to Rivera’s actions and observations during the incident. Although Irizarry Perez died as a result of injuries he sustained on Nov. 5, 2008, the indictment does not include charges that his death resulted from the defendants’ conduct.

If convicted, Rivera faces a maximum penalty of ten years in prison and a fine of $250,000 for each of four charged counts of civil rights violations and a maximum penalty of five years in prison and a $250,000 fine for one charged count of making false declarations before the grand jury. Rodriguez faces a maximum penalty of ten years in prison and a fine of $250,000 for each of two charged counts of civil rights violations.

An indictment is merely an accusation, and the defendants are presumed innocent unless proven guilty.

This case is being investigated by the San Juan Division of the FBI and is being prosecuted by Assistant U.S. Attorney Jose A. Contreras from the U.S. Attorney’s Office for the District of Puerto Rico and Senior Litigation Counsel Gerard Hogan and Trial Attorney Shan Patel from the Civil Rights Division of the U.S. Department of Justice.

Thursday, October 18, 2012

FORMER COLOMBIAN PROSECUTOR PLEADS GUILTY TO ROLE IN DRUG TRAFFICKING

FROM: U.S. DEPARTMENT OF JUSTICE

Monday, October 15, 2012
Former Colombian Prosecutor Pleads Guilty to Role in International Drug Trafficking Conspiracy

WASHINGTON – A former Colombian prosecutor pleaded guilty today to providing law enforcement information to drug traffickers as part of a conspiracy to import cocaine into the United States, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Drug Enforcement Administration (DEA) Special Agent in Charge Mark R. Trouville of the Miami Field Division.

Ramiro Anturi Larrahondo, 55, a Colombian national, pleaded guilty before U.S. District Judge John D. Bates in the District of Columbia to one count of conspiracy to distribute five kilograms or more of cocaine, knowing and intending that the cocaine would be illegally imported into the United States. The plea agreement is subject to court approval.

Anturi Larrahondo is the first Colombian prosecutor ever to be extradited to the United States.

"Ramiro Anturi Larrahondo used his position as a Colombian prosecutor to leak sensitive law enforcement intelligence to large-scale drug traffickers in exchange for his own personal enrichment," said Assistant Attorney General Breuer. "Anturi Larrahondo undermined international law enforcement operations and betrayed the trust placed in him by the Colombian government. As the first case ever in which a Colombian prosecutor is being extradited to the United States, this matter shows how dogged we are in our pursuit of narcotics traffickers and how determined we are to hold accountable those smuggling drugs into this country."

"The DEA will not tolerate any acts that put our agents’ lives in jeopardy," said DEA Special Agent in Charge Trouville. "Mr. Anturi Larrahondo will now face the consequences of his criminal conduct to assist drug traffickers."

Anturi Larrahondo was indicted by a federal grand jury on Jan. 26, 2010, in the District of Columbia. According to court documents, in 2009, while serving as a Colombian prosecutor, Anturi Larrahondo provided sensitive law enforcement investigative information to a major Colombian maritime drug trafficking organization.

According to Anturi Larrahondo’s plea agreement, the drug trafficking organization Anturi Larrahondo conspired with was responsible for transporting cocaine by go-fast vessels from the port city of Buenaventura, Colombia, to Central America, with the ultimate destination being the United States. During the investigation, Colombian judicial wire intercepts recorded Anturi Larrahondo speaking to representatives of the drug trafficking organization and a DEA cooperating source regarding financial payments to Anturi Larrahondo, delivery of documents to the drug trafficking organization and the coordination of meetings between Anturi Larrahondo and representatives of the drug trafficking organization.

As part of his plea agreement, Anturi Larrahondo admitted he received regular monthly payments from the Colombian drug trafficking organization in order for the drug traffickers to find out what, if any, criminal investigation the governments of Colombia or the United States were conducting against the drug traffickers. Anturi Larrahondo further admitted that he received the corrupt payments in order to protect the drug trafficking organization from law enforcement. Members of the Colombian drug trafficking organization made regular monthly cash payments to Anturi Larrahondo of 21 million pesos, the equivalent of approximately $10,000 in U.S. currency.

Anturi Larrahondo’s sentencing hearing has been scheduled for Nov. 26, 2012.

This case is being prosecuted by Trial Attorneys Mark Maldonado, Stephen May and Stephen Sola of the Criminal Division’s Narcotic and Dangerous Drug Section, with significant assistance from the section’s judicial attaches in Bogota, Colombia, the Criminal Division’s Office of International Affairs and the Prosecutor General’s Office of the Republic of Colombia. The case was investigated by DEA’s Bogota Country Office and the Miami Field Division, in coordination with the Judicial Police of the Prosecutor General’s Office in Colombia and the Colombian National Police.

Wednesday, October 17, 2012

FORMER COO AND BROTHER-IN-LAW CHARGED IN MILLION DOLLAR FRAUD SCHEME

FROM: U.S. DEPARTMENT OF JUSTICE

Former COO of Louisiana Construction Management Company and Brother-In-Law Charged in Fraud Scheme

Former COO Sentenced Yesterday to 60 Months in Prison for Role in Related Scheme

WASHINGTON – Mark J. Titus, former Chief Operations Officer of Garner Services Ltd. (GSL), and his brother-in-law Dominick Fazzio, have been charged in a second superseding indictment returned today by a federal grand jury in New Orleans for defrauding GSL of over $1 million, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

The 32-count indictment returned today in U.S. District Court in New Orleans charges Titus and Fazzio with conspiracy, mail fraud, wire fraud, money laundering and tax charges for participating in the fraud scheme. Fazzio has also been charged with a separate tax fraud scheme.

According to the second superseding indictment, between approximately May 2008 and approximately May 2011, Titus and Fazzio defrauded GSL, a construction management company based in Pascagoula, Miss., by creating and submitting fraudulent invoices for services never rendered on construction projects managed by GSL, causing payments to be made from GSL to two companies owned by Fazzio. The two defendants then allegedly laundered the money by engaging in a series of financial transactions for the purpose of concealing the illegal nature of the payments. According to the second superseding indictment, Titus and Fazzio also submitted false tax returns by improperly deducting the disbursement of their fraudulently obtained money as legitimate business activity and failing to report the money received from the fraud scheme as taxable income.

In addition, Fazzio is charged in connection with a tax fraud scheme perpetrated with Hendrikus Ton, the owner of Abe’s Boat Rentals in Belle Chase, La., and two other companies that provide services to offshore oil production facilities. Fazzio and Ton allegedly conspired to under-report income paid to employees of Ton’s by transferring taxable income from Abe's Boat Rentals to a dormant company, improperly deducting that money as legitimate business activity and using that money to pay employees of Abe’s Boat Rentals in order to conceal the actual amount of income paid to the employees, thereby reducing the tax liability of Ton’s companies by over $3.5 million. According to the second superseding indictment, Fazzio prepared the tax returns for Ton’s companies and willfully omitted wages paid out of the dormant company.

In October 2011, Titus pleaded guilty to one count of conspiracy to commit mail fraud, arising from his role in a fraud scheme allegedly related to the scheme set forth in the second superseding indictment returned today. Last month, Titus moved to withdraw his October 2011 guilty plea, but the request was denied yesterday by U.S. District Judge Ivan Lemelle in the Eastern District of Louisiana, and sentencing proceeded yesterday as scheduled. U.S. District Judge Lemelle sentenced Titus yesterday to 60 months in prison on his guilty plea. Judge Lemelle also sentenced Titus to pay a $100,000 fine and ordered Titus to pay $925,320 in restitution to GSL.

An indictment is merely a charge and is not evidence of guilt. The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The case is being prosecuted by Deputy Chief Peter Koski and Trial Attorneys Brian Lichter and Menaka Kalaskar of the Criminal Division’s Public Integrity Section, as well as Assistant U.S. Attorney Gregory Kennedy of the Eastern District of Louisiana. The case is being investigated by the FBI and the New Orleans Office of the Internal Revenue Service-Criminal Investigation Division

Monday, October 15, 2012

FLORIDA THERAPIST GOES TO PRISON FOR CONSPIRACY TO COMMIT MEDICARE FRAUD

 FROM: U.S. DEPARTMENT OF JUSTICE

Thursday, October 11, 2012
Miami-Area Therapist Sentenced to 108 Months in Prison for Participating in $205 Million Medicare Fraud Scheme

WASHINGTON – Miami-area resident Vanja Abreu (Ph.D), former program director at the mental health care company American Therapeutic Corporation (ATC), was sentenced today to 108 months in prison for participating in a $205 million Medicare fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Acting Special Agent-in-Charge Michael B. Steinbach of the FBI’s Miami Field Office; and Special Agent-in-Charge Christopher Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office.

Abreu, 49, of Pembroke Pines, Fla., was sentenced by U.S. District Judge Patricia A. Seitz in the Southern District of Florida. In addition to her prison term, Judge Seitz sentenced Abreu to serve three years of supervised release following her prison term and pay $72,771,469 in restitution, jointly and severally with co-defendants.

On June 1, 2012, after a seven week trial, a federal jury in the Southern District of Florida found Abreu guilty of one count of conspiracy to commit health care fraud.

Evidence at trial demonstrated that Abreu and her co-conspirators caused the submission of false and fraudulent claims to Medicare through ATC, a Florida corporation headquartered in Miami that operated purported partial hospitalization programs (PHPs), intensive treatments for severe mental illness, in seven different locations throughout South Florida and Orlando.

Evidence at trial revealed that ATC secured patients by paying kickbacks to assisted living facility owners and halfway house owners who would then steer patients to ATC. These patients attended ATC, where they were ineligible for the treatment ATC billed to Medicare and where they did not receive the treatment that was billed to Medicare. After Medicare paid the claims, some of the co-conspirators then laundered the Medicare money in order to create cash to pay the patient kickbacks.

Evidence at trial revealed that Abreu was a program director at ATC’s Boca Raton, Fla., center from September 2005 to November 2005. In November 2005, Abreu moved to ATC’s Miami center, where she was the program director until February 2009, at which point she was promoted to corporate leadership and oversaw operations at all ATC centers until April 2010. Evidence at trial revealed that program directors, including Abreu, helped doctors at ATC sign patient files without reading the files or seeing the patients. Evidence further revealed that Abreu and others would assist the owners of ATC in fabricating doctor notes, therapist notes and other documents to make it falsely appear in ATC’s patient files that patients were qualified for this highly specialized treatment and that the patients were receiving the intensive, individualized treatment PHP is supposed to be. Included in these false and fraudulent submissions to Medicare were claims for patients who were in the late stages of diseases causing permanent cognitive memory loss and patients who had substance abuse issues and were living in halfway houses. These patients were ineligible for PHP treatment, and because they were forced by their assisted living facility owners and halfway house owners to attend ATC, they were not receiving treatment for the diseases they actually had.

Abreu was charged in an indictment returned on Feb. 8, 2011. ATC, the management company associated with ATC, and 20 individuals, including the ATC owners, have all previously pleaded guilty or have been convicted at trial.

ATC executives Lawrence Duran, Marianella Valera, Judith Negron and Margarita Acevedo were sentenced to 50 years, 35 years, 35 years and 91 months in prison, respectively, for their roles in the fraud scheme. The 50- and 35-year sentences represent the longest sentences for health care fraud ordered to date. Acevedo, who was one of the first defendants to plead guilty and has been cooperating with the government since November 2010, testified at the doctors’ trial.

ATC and its management company, Medlink Professional Management Group Inc., pleaded guilty in May 2011 to conspiracy to commit health care fraud. ATC also pleaded guilty to conspiracy to defraud the United States and to pay and receive illegal health care kickbacks. On Sept. 16, 2011, the two corporations were sentenced to five years of probation per count and ordered to pay restitution of $87 million. Both corporations have been defunct since their owners were arrested in October 2010.

The case was prosecuted by Trial Attorneys Jennifer L. Saulino, Robert A. Zink and James V. Hayes of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Sunday, October 14, 2012

HEDGE FUND MANAGERS CHARGED WITH LYING TO INVESTORS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Oct. 3, 2012 — The Securities and Exchange Commission separately charged a pair of hedge fund managers and their firms with lying to investors about how they were handling the money invested in their respective hedge funds. The charges are the latest in a series of actions taken by the SEC Enforcement Division and its Asset Management Unit against hedge fund-related misconduct in the markets.

In one case, the SEC alleges that San Francisco-based hedge fund manager Hausmann-Alain Banet and his firm Lion Capital Management stole more than a half-million dollars from a retired schoolteacher who thought she was investing her retirement savings in Banet’s hedge fund. In the other case, the SEC charged Chicago-based hedge fund managers Norman Goldstein and Laurie Gatherum and their firm GEI Financial Services with fraudulently siphoning at least $147,000 in excessive fees and capital withdrawals from a hedge fund they managed.

Since the beginning of 2010, the SEC has filed more than 100 cases involving hedge fund malfeasance such as misusing investor assets, lying about investment strategy or performance, charging excessive fees, or hiding conflicts of interest. The SEC
issued an investor bulletin detailing some of those cases as examples of why investors must rigorously evaluate a hedge fund investment before making one.

"These hedge fund frauds have lured even the most sophisticated investors using the siren song of outsized returns or secured and guaranteed investments," said Robert Khuzami, Director of the SEC’s Division of Enforcement. "As fraudsters increasingly capitalize on the cachet of hedge funds, we will maintain our strong presence in policing this industry."

In the past few weeks alone, the SEC has
charged an Atlanta-based private fund manager and his firm with defrauding investors in a purported "fund-of-funds" and then trying to hide trading losses, charged a hedge fund adviser in Oregon with running a $37 million Ponzi scheme through several hedge funds he managed, and charged a New York-based hedge fund manager who touted a diversified and controlled-risk investment strategy for his fund while in reality misusing investor assets to prop up a failing private company. The New York-based fund manager also failed to disclose conflicts of interest, and he falsely overstated his firm’s assets under management in various magazine articles he authored.

"The most serious hedge fund frauds involve advisers who play fast and loose with investor money," said Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit. "Investors can complement the SEC’s vigilant enforcement against hedge fund misconduct by becoming increasingly wary of hedge fund managers who boast extreme performance measures and asking well-informed questions about investment strategy, fees, and potential conflicts of interest."

According to the SEC’s complaint filed against Banet and Lion Capital Management in federal court in San Francisco, Banet led the teacher to believe that his hedge fund would invest in the stock market using a long/short equity investing strategy. Instead, Banet brazenly took the teacher’s investment totaling $550,000 and used it to pay unauthorized personal and business expenses, including his home mortgage, office rent, and staff salaries. Banet also provided phony account statements showing non-existent investment gains and listing an independent administrator that performed no actual work for the fund.

In a parallel action, the U.S. Attorney’s Office for the Northern District of California today announced criminal charges against Banet. The SEC acknowledges the assistance and cooperation of the U.S. Attorney’s Office, Federal Bureau of Investigation (FBI), and Immigration and Customs Enforcement (ICE).

According to the SEC’s complaint against Goldstein, Gatherum, and GEI Financial Services filed in federal court in Chicago, investors in the hedge fund were not told that its adviser removed various performance hurdles when calculating fees. Furthermore, inappropriate capital withdrawals were made from the fund. Goldstein, Gatherum, and their firm never told their advisory clients that Illinois regulators had stripped Goldstein of his securities registrations in 2011, barring him from providing investment advisory services in the state. But even after losing his registration status, Goldstein continued to make all investment decisions on behalf of clients, and he and Gatherum caused GEI Financial Services to violate compliance rules applicable to SEC-registered investment advisers.

The SEC’s investigation of Lion Capital Management was conducted by Sahil Desai and Robert Leach of the Asset Management Unit in the San Francisco Regional Office. John Yun is leading the SEC’s litigation. The SEC’s investigation of GEI Financial Services – which stemmed from an Asset Management Unit initiative to detect misconduct by pursuing registered investment advisers with repeated compliance examination deficiencies – was conducted by Andrew Shoenthal, Jeson Patel, Malinda Pileggi, Vanessa Horton, and Paul Montoya of the Chicago Regional Office. John E. Birkenheier is leading the litigation.

The SEC’s investor bulletin on hedge funds was prepared by the Office of Investor Education and Advocacy. It recommends that investors understand a hedge fund’s investment strategy and its use of leverage and speculative techniques before making the investment. It also explains the need to evaluate a hedge fund manager’s potential conflicts of interest and take other steps to research those managing the fund.

"Hedge fund investments generally perform differently, involve higher fees and less liquidity, and may carry greater investment and fraud risk than the mutual funds that investors are accustomed to," said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. "This investor bulletin describes the rigorous due diligence steps that financially-qualified investors should consider before making any hedge fund investment."

Saturday, October 13, 2012

TWO MIAMI DOCTORS SENTENCED FOR ROLES IN $205 MILLION MEDICARE FRAUD

FROM: U.S. JUSTICE DEPARTMENT

Monday, October 1, 2012

Two Miami-Area Doctors Sentenced to 10 Years in Prison for Participating in $205 Million Medicare Fraud Scheme

WASHINGTON – Miami-area residents Dr. Mark Willner and Dr. Alberto Ayala, former medical directors at the mental health care company American Therapeutic Corporation (ATC), were each sentenced today to 10 years in prison for participating in a $205 million Medicare fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Special Agent-in-Charge Michael B. Steinbach of the FBI’s Miami Field Office; and Special Agent-in-Charge Christopher Dennis of the HHS Office of Inspector General (HHS-OIG), Office of Investigations Miami office.

Willner, 56, and Ayala, 68, were sentenced by U.S. District Judge Patricia A. Seitz in the Southern District of Florida. Judge Seitz ordered Willner to pay more than $57 million in restitution and Ayala to pay more than $87 million in restitution, both jointly and severally with their co-defendants. Willner and Ayala were also both sentenced to three years of supervised release following their prison terms.

On June 1, 2012, after a seven week trial, a federal jury in the Southern District of Florida found Willner and Ayala each guilty of one count of conspiracy to commit health care fraud.

Evidence at trial demonstrated that the defendants and their co-conspirators caused the submission of false and fraudulent claims to Medicare through ATC, a Florida corporation headquartered in Miami that operated purported partial hospitalization programs (PHPs) in seven different locations throughout South Florida and Orlando. A PHP is a form of intensive treatment for severe mental illness. The defendants and their co-conspirators also used a related company, American Sleep Institute (ASI), to submit fraudulent Medicare claims.

Evidence at trial revealed that ATC secured patients by paying kickbacks to assisted living facility owners and halfway house owners who would then steer patients to ATC. These patients attended ATC, where they were ineligible for the treatment ATC billed to Medicare and where they did not receive the treatment that was billed to Medicare. After Medicare paid the claims, some of the co-conspirators then laundered the Medicare money in order to create cash to pay the patient kickbacks.

The defendants were charged in an indictment returned on Feb. 8, 2011. ATC, the management company associated with ATC, and 20 individuals, including the ATC owners, have all previously pleaded guilty or have been convicted at trial.

Evidence at trial revealed that doctors at ATC, including Willner and Ayala, signed patient files without reading them or seeing the patients. Evidence further revealed that ATC then billed Medicare for more than $100 million in PHP treatment for these patients under the names of Willner and Ayala. Included in these false and fraudulent submissions to Medicare were claims for patients in neuro-vegetative states, along with patients who were in the late stages of diseases causing permanent cognitive memory loss, and patients who had substance abuse issues and were living in halfway houses. These patients were ineligible for PHP treatment, and because they were forced by their assisted living facility owners and halfway house owners to attend ATC, they were not receiving treatment for the diseases they actually had.

Willner and Ayala have been in federal custody since their convictions.

ATC executives Lawrence Duran, Marianella Valera, Judith Negron and Margarita Acevedo were sentenced to 50 years, 35 years, 35 years and 91 months in prison, respectively, for their roles in the fraud scheme. The 50- and 35-year sentences represent the longest sentences for health care fraud ordered to date. Acevedo, who pleaded guilty early on and has been cooperating with the government since November 2010, testified at the doctors’ trial.

ATC and Medlink pleaded guilty in May 2011 to conspiracy to commit health care fraud. ATC also pleaded guilty to conspiracy to defraud the United States and to pay and receive illegal health care kickbacks. On Sept. 16, 2011, the two corporations were sentenced to five years of probation per count and ordered to pay restitution of $87 million. Both corporations have been defunct since their owners were arrested in October 2010.

The case was prosecuted by Trial Attorneys Jennifer L. Saulino, Robert A. Zink and James V. Hayes of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,330 defendants who have collectively billed the Medicare program for more than $4 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Friday, October 12, 2012

ALLEGED MATERIAL MISREPRESENTATIONS OF POTENTIAL PROFITS ON BULK CANDY VENDING MACHINES

FROM: U.S. DEPARTMENT OF JUSTICE

Wednesday, October 10, 2012
Ten Individuals Indicted in National Business Opportunity Fraud Scam

The Justice Department announced today the unsealing of an indictment charging 10 individuals in connection with a vending machine "business opportunity" that defrauded thousands of victims across the country.

The indictment alleges that managers, sales representatives and operators of "locating companies" associated with Multivend LLC, d/b/a Vendstar, made material misrepresentations about the profits customers would make from and the locations customers would receive for bulk candy vending machines. The indictment also alleges that, during these telemarketing calls, Vendstar’s sales representatives falsely claimed to operate their own profitable vending machine businesses.

According to the indictment, Vendstar advertised nationwide in newspapers and on the Internet. Vendstar sales representatives promised to provide consumers with everything they needed to operate a successful business, including vending machines, an initial supply of candy, assistance in finding locations for the vending machines, training and ongoing customer assistance. The locating companies who worked with Vendstar to close deals had no special skills, tools or expertise in finding locations and generally placed consumers’ machines wherever they could as quickly as they could, often in businesses that had not consented to housing the machines and that soon demanded that the machines be removed. The vending machines generated little business and Vendstar’s customers lost nearly all if not all of their investments. The typical customer paid about $10,000 for the business opportunity.

"Business opportunity fraud is a serious crime that insidiously targets Americans in search of a better future for their families. We will continue to work with the Postal Inspection Service and use our law enforcement resources to investigate and uncover business opportunity fraud," said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division, which includes the Consumer Protection Branch that handles criminal cases.

Tony Gomez, Acting Inspector in Charge, U.S. Postal Inspection Service - Miami Division, stated: "The U.S. Postal Inspection Service will continue to work with our partners in law enforcement to ensure that the U.S. Postal Service isn’t used as a conduit to defrauding the American consumer. The protection of our citizens is at the cornerstone of our mission."

"Business opportunity schemes, like this candy vending machine venture, take advantage of individuals through misrepresentations and outright fraud," said Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida. "Instead of becoming successful entrepreneurs, the individual investors become victims of fraud, often losing their life’s savings. In this way, business opportunity schemes tarnish the American Dream of success through hard work. We will help protect the investing public by prosecuting these cases aggressively."

Vendstar was incorporated in Indiana and operated until July 2010 from Deer Park, N.Y., according to the indictment. The indictment was returned by a federal grand jury in Miami. The charges are part of a continuing crackdown by federal authorities on business opportunity fraud that during the last several years has resulted in more than 100 convictions in the Southern District of Florida alone.

Each of the defendants is charged with conspiracy to commit mail and wire fraud, and an enhanced penalty for telemarketing , which together provide for a maximum sentence of 10 years in prison. Weaver, Kaplan, Benowitz, Goldberg, Linick, Raia, Strauss and DiRenzo also are charged with mail fraud, and/or wire fraud, each of which carry a maximum of 20 years in prison.

The indictment contains only accusations against the defendants and is not evidence of guilt. The defendants should be presumed innocent unless and until proven guilty.

Acting Assistant Attorney General Delery commended the investigative efforts of the United States Postal Inspection Service. The case is being prosecuted by Patrick Jasperse and Adrienne Fowler, Trial Attorneys, U.S. Department of Justice, Consumer Protection Branch.

Thursday, October 11, 2012

SEC ALLEGES MAN OFFERERD FRAUDULENT INVESTMENTS IN OIL DRILLING PROJECTS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Oct. 3, 2012 — The Securities and Exchange Commission today announced that it has obtained an emergency court order to freeze the assets of a South Florida man who has been charged with fraudulently offering investments in oil drilling projects.

The SEC’s complaint unsealed today in federal court in West Palm Beach, Fla., alleges that Joseph Hilton made numerous misrepresentations to investors while selling limited partnership units in two oil drilling projects earlier this year through his firm Pacific Northwestern Energy LLC. Hilton falsely told potential investors that Pacific acquired its wells from Exxon Mobil Corp., and he overstated Pacific’s experience in the oil and gas industry and the historical accomplishments of its drillers. Hilton raised approximately $789,000 from investors. The SEC’s action froze the assets of Hilton, Pacific, and the two limited partnerships — Rock Castle Drilling Fund LP and Rock Castle Drilling Fund II LP. Hilton’s securities offerings were not registered with the SEC as required under the federal securities laws.

The SEC’s complaint also includes allegations against Hilton, Pacific, and another company controlled by Hilton called New Horizon Publishing Inc. Through Pacific and New Horizon, Hilton additionally sold $2.5 million worth of investments in oil drilling projects sponsored by United States Energy Corp. while deceiving investors about his identity, the anticipated returns on the investments, the amount of oil being produced by U.S. Energy’s wells, and the existence of natural gas wells. Hilton also operated a boiler room of sales representatives paid on a commission basis.

According to the SEC’s complaint, Hilton changed his name from Joseph Yurkin late last year following a final judgment for fraud in
a previous SEC enforcement action against him for securities offerings he made through another company he worked for — Homeland Communications Corp.

"By changing his name, Hilton thought he could evade further SEC scrutiny and keep the investing public from finding the truth in his background," said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. "The SEC is committed to pursuing repeat offenders and ensuring the open and transparent sale of securities to investors."

The SEC’s complaint charges Hilton, Pacific, Rock Castle I and Rock Castle II with violations of Sections 5(a) and (c) and 17(a)(2) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b). The complaint also charges Hilton with violations of Securities Act Section 17(a)(1), (2), and (3) and Exchange Act Sections 15(a), 10(b) and Rule 10b-5(a), (b) and (c). Pacific and New Horizon are charged with Exchange Act Section 15(a) violations in connection with their historical U.S. Energy related conduct. The SEC is seeking disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, and permanent injunctions against Hilton and his entities.

The court has appointed David Mandel — an attorney with the law firm of Mandel & Mandel LLP in Miami — as a receiver over Pacific, Rock Castle I, and Rock Castle II. Among other things, the receiver is responsible for marshaling and safeguarding assets held by these entities.

The SEC’s investigation was conducted by Senior Counsel Susan Cooke Anderson and Staff Accountant Timothy J. Galdencio under the supervision of Assistant Regional Director Eric R. Busto in the Miami Regional Office. Amie Riggle Berlin will lead the SEC’s litigation efforts.

Tuesday, October 9, 2012

LA MEDICAL EQUIPMENT SUPLIER SENTENCED FOR MEDICARE FRAUD

FROM: U.S. DEPARTMENT OF JUSTICE
WASHINGTON – A Los Angeles medical equipment supplier, who submitted almost $1 million in false claims to Medicare for expensive, high-end power wheelchairs, was sentenced today to serve 30 months in prison, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney AndrĂ© Birotte Jr. of the Central District of California; Glenn R. Ferry, Special Agent-in-Charge for the Los Angeles Region of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG); and Timothy Delaney, Acting Assistant Director in Charge of the FBI’s Los Angeles Field Office.

Adejare Ademefun, 57, was sentenced by U.S. District Judge John F. Walter in the Central District of California. In addition to the prison term, Ademefun was sentenced to three years of supervised release and ordered to pay $499,548 in restitution to Medicare.

In February 2010, Ademefun pleaded guilty to health care fraud. As part of his plea, Ademefun admitted that from January 2006 to his arrest in October 2009, he owned and operated Jamef Medical Supply, a fraudulent durable medical equipment (DME) supply company, which he used to submit almost $1 million in false claims to Medicare. Ademefun admitted he paid illicit kickbacks to co-conspirators for medical prescriptions and other documents he needed to defraud Medicare. Ademefun focused his fraudulent billings on power wheelchairs, which were among the most expensive DME that a Medicare provider could bill to Medicare. In fact, Ademefun admitted that approximately 95 percent of all the claims he submitted to Medicare were for power wheelchairs. Ademefun admitted he supplied these power wheelchairs to Medicare beneficiaries who were illegally solicited by patient recruiters or "marketers" for medical equipment they did not want or need.

Ademefun admitted he was deliberately indifferent to the fact that the power wheelchair claims he submitted to Medicare were false even though Ademefun knew there was a high probability that the doctors whose names appeared on the prescriptions he purchased from his co-conspirators did not prescribe the power wheelchairs. Ademefun also knew that only six doctors were supposedly responsible for referring approximately 50 percent of his business, and that approximately 60 percent of his customers lived more than 100 miles from Jamef. Ademefun admitted he submitted approximately $941,028 in false claims to Medicare during the course of the scheme.

On March 24, 2010, Ademefun’s co-conspirator Leonard Nwafor was sentenced to 108 months in prison for his role in the scheme.

The case is being prosecuted by Trial Attorney Jonathan T. Baum of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Kerry O’Neill of the Central District of California. The case is being investigated by the California Department of Justice 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 Central District of California.

Since its inception in March 2007, strike force operations in nine locations have charged more than 1,480 defendants who collectively have billed the Medicare program for more than $4.8 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.

Monday, October 8, 2012

ARIZONA STATE REPRESENTATIVE ADMITS TO TAKING BRIBES

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, October 5, 2012

Arizona State Representative Pleads Guilty, Admits Taking Bribe to Influence Official Duties

WASHINGTON – Arizona State Representative Paul Ben Arredondo pleaded guilty today in Phoenix federal court, admitting that he solicited and took a bribe in exchange for promises of official action both as a city councilmember and a state representative. Arredondo also pleaded guilty to mail fraud, admitting that he defrauded donors to the Ben Arredondo scholarship fund. The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and Special Agent in Charge James L. Turgal of the FBI’s Phoenix Field Office.

Arredondo pleaded guilty to depriving the citizens of the city of Tempe, Ariz., and the state of Arizona of his honest services as an elected official, and to committing mail fraud. He entered his guilty plea before U.S. Magistrate Judge Frederick J. Martone.

Arredondo, 65, of Tempe, was a Tempe city councilmember for approximately 16 years, until July 2010. In November 2010, Arredondo was elected to the House of Representatives of the Arizona State Legislature.

During his plea, Arredondo admitted that from February 2009 to November 2010, he solicited and accepted things of value, collectively a bribe, from representatives of "Company A," a fictitious company operated by FBI undercover agents that was purportedly seeking to develop real estate projects in Tempe. Arredondo took the bribe with the intent to be influenced in the performance of his official duties, first as a councilmember and later as an elected member of the Arizona House of Representatives. Arredondo admitted that the things he took included tickets to college and professional sporting events, some of which he caused to be mailed to his home, and tables at charity events with his choice of guests.

In exchange for the bribe, Arredondo agreed to take a number of official actions, including revealing confidential information to Company A – such as the price Tempe would be willing to accept for property and the best way to present a purchase proposal. He also agreed to use his position as a councilmember to influence the decisions of other Tempe officials in ways that were favorable to Company A; to contact various Tempe officials to facilitate and promote the company’s efforts to win support for its real estate project; and, following his election to the Arizona House of Representatives, to assure representatives of Company A that he would continue to support Company A’s project. Arredondo did not disclose that he had received anything of value from representatives of the company during any of his interactions with Tempe officials about Company A.

Arredondo also admitted during his plea that he fraudulently used the Arredondo Scholarship Fund – which he established in 2001 and operated through at least 2011 – to benefit his own relatives without informing donors. In support of the fund, Arredondo solicited and received contributions – in part by telling prospective donors that the Fund would pay for college fees and books for "average" students – and assured donors that fund payments would not go to those "whose parents have saved a college fund" or otherwise qualified for scholarships. Arredondo never told prospective donors that a portion of their donations would be used to make scholarship payments for the benefit of his own family members. Through 2011, Arredondo caused the scholarship fund to pay approximately $49,750 to three different educational institutions in Arizona on behalf of seven of his relatives. In furtherance of his scheme to defraud donors, he caused a letter sent to ASU on behalf of the fund which directed how payments should be allocated, stating: "The students are not the children nor any other direct relatives" of the fund’s administrators.

Arredondo pleaded guilty to one count each of honest services mail fraud and mail fraud. Each charge carries a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the amount gained or lost in the scheme. Sentencing has been scheduled for Jan. 22, 2013.

The case is being prosecuted by Deputy Chief M. Kendall Day and Trial Attorney Monique T. Abrishami of the Criminal Division’s Public Integrity Section, and Assistant U.S. Attorney Frederick A. Battista of the District of Arizona. The case is being investigated by agents from the FBI Phoenix Field Office.

Friday, October 5, 2012

GUAM BAR OWNER GETS LIFE FOR SEX TRAFFICKING AND OTHER CRIMES

FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, September 20, 2012

Guam Bar Owner Sentenced to Life in Prison for Sex Trafficking and Related Crimes

Song Ja Cha, 70, a bar owner in Guam, was sentenced to life in prison for her involvement in a sex trafficking scheme to force young women and one juvenile girl into prostitution, the Department of Justice announced. Cha was also ordered to pay $200,000 in restitution to the victims in this case as well as a $10,000 fine.

On Feb. 17, 2011, a federal jury in Guam found Cha guilty on all 20 counts of an indictment that charged her with sex trafficking, conspiracy to commit sex trafficking, coercion and enticement to travel in interstate or foreign commerce for prostitution and transportation of a minor for prostitution. The trial lasted eight days.

According to court documents, from 2004 through January 2008, Cha and others in the conspiracy recruited and enticed approximately 10 victims to come to Guam from the island of Chuuk in the Federated States of Micronesia. The victims were largely poor, young and uneducated. Cha lured the young women and one 16-year-old girl to Guam by promising them legitimate employment in a restaurant or store. In actuality, Cha was the proprietor of Blue House Lounge, a bar that included approximately six VIP rooms offering commercial sex.

According to evidence presented in court, Cha and her co-conspirators compelled the victims to work in the VIP rooms for 12 to 14 hours a day for the financial benefit of the conspiracy. Upon the victims’ arrival to the Blue House Lounge, Cha stripped the young women of their passports, clothing and identities. Cha then used a variety of means to compel the victims to engage in prostitution, including physical assaults, threats of arrest, manipulation of debt, withholding food and restricted access to the outside world. The victims testified that they were terrified of Cha and her co-conspirators, and that Cha used the fact that police officers frequented the lounge to make the victims believe that she was "connected" and could have them arrested and jailed.

"The sexual exploitation of vulnerable individuals is an affront to fundamental rights and will not be tolerated in our country. The defendant preyed on the hopes and dreams of these young victims, forcing them into a life of prostitution," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "The Department of Justice is committed to vigorously prosecuting the trafficking of human beings to uphold the rights of those held in modern-day slavery, whether for labor or for sexual exploitation."

"Human traffickers trick, lie and coerce young women with a promise of work in a legitimate job," said Alicia Limtiaco, U.S. Attorney for the District of Guam and the Northern Mariana Islands. "In reality, these young women lose their freedom and are horribly demeaned by the sexual acts that they are forced to perform. Defendant Cha preyed on vulnerable victims and used threats and abuse to force them into prostitution. The jury’s verdict makes clear that sex trafficking schemes will not be tolerated. We will continue to find traffickers and hold them accountable for their crimes."

The Department of Justice has identified human trafficking prosecutions as a top priority.

Wednesday, October 3, 2012

SEC CHARGES CHICAGO-BASED INVESTMENT ADVISER AND ITS OWNERS FOR FRAUD

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission on October 3, 2012 charged Chicago-based GEI Financial Services, Inc. (GEI Financial), a registered investment adviser, and its owners, Norman Goldstein (Goldstein) and Laurie Gatherum (Gatherum), for defrauding their advisory clients — including the GEI Health Care Fund 2001, L.P. (Health Care Fund) — by taking at least $147,000 in excessive fees and capital withdrawals from the Fund since 2009. According to the SEC’s Complaint filed in the United States District Court for the Northern District of Illinois, Goldstein and Gatherum failed to disclose to investors in the Health Care Fund that their investment adviser removed performance hurdles — including a bench mark and high water marks — in order to draw additional fees.

The SEC further alleges that GEI Financial, Goldstein, and Gatherum never told their advisory clients that the State of Illinois stripped Goldstein of his securities registrations in 2011, barring him from providing investment advisory services in Illinois. Even after losing his registration as an adviser, Goldstein continued to make all investment decisions for GEI Financial’s clients and for clients of GEI Management, LLC — an affiliated unregistered investment adviser owned by Goldstein and Gatherum.

The Complaint also alleges that Goldstein and Gatherum caused GEI Financial to violate numerous compliance rules and other requirements of the Investments Advisers Act of 1940 (Advisers Act). GEI Financial never had adequate written compliance policies and procedures or a written code of ethics even though SEC examiners alerted the firm and its owners of this deficiency in 2008. GEI Financial also has not updated its Form ADV — a report required by all SEC-registered investment advisers — since November 2008, and never prepared or distributed a required brochure — called a Form ADV Part 2 — to clients.

As a result of the conduct described in the Complaint the SEC alleges that GEI Financial, Goldstein, and Gatherum directly and indirectly violated Sections 204, 204A, 206(1), 206(2), and 206(4) of the Advisers Act and Rules 204-1, 204A-1, 204-2, 204-3, 206(4)-7, and 206(4)-8(a)(1) thereunder. The SEC seeks permanent injunctions, disgorgement including prejudgment interest, and civil penalties from GEI Financial, Goldstein, and Gatherum.

CASSINO FRAUDSTER GETS 36 MONTHS IN PRISON

FROM: U.S. DEPARTMENT OF JUSTICE

WASHINGTON – Van Thu Tran was sentenced today in San Diego to 36 months in prison for her role in a scheme to cheat casinos across the country out of millions of dollars, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Laura E. Duffy for the Southern District of California.

In addition to her prison sentence, Van Thu Tran, 47, was sentenced by U.S. District Judge John A. Houston in the Southern District of California to three years of supervised release and ordered to pay $5,753,416 in restitution, payable to several casinos. The court ordered the forfeiture of her interests in various assets, including jewelry and bank accounts.

Van Thu Tran entered her guilty plea in San Diego on Jan. 14, 2011.

In her plea agreement, Van Thu Tran admitted that in approximately August 2002, she, along with co-conspirators Phuong Quoc Truong, Tai Khiem Tran and others, created a criminal enterprise defined as the Tran Organization, based in San Diego and elsewhere, for the purpose of participating in gambling cheats at casinos across the United States. In her plea agreement, Van Thu Tran also admitted that she and her co-conspirators unlawfully obtained up to $7 million during card cheats.

The investigation of the Tran Organization led to the filing of three separate indictments in 2007, 2008 and 2009. A three-count indictment was returned in San Diego on May 22, 2007, and unsealed on May 24, 2007, which charged Van Thu Tran and 13 others each with one count of conspiracy to participate in the affairs of a racketeering enterprise; one count of conspiracy to commit several offenses against the United States, including conspiracy to steal money and other property from Indian tribal casinos; and one count of conspiracy to commit money laundering. The indictment also charged five separate individuals each with one count of conspiracy to commit several offenses against the United States, including conspiracy to steal money and other property from Indian tribal casinos; and one count of conspiracy to commit money laundering.

According to court documents, the defendants and others executed a "false shuffle" cheating scheme at casinos in the United States and Canada during blackjack and mini-baccarat games. Court documents also show that members of the criminal organization bribed casino card dealers and supervisors to perform false shuffles during card games, thereby creating "slugs" or groups of unshuffled cards. Court documents also show that, after tracking the order of cards dealt in a card game, a member of the organization would signal to the card dealer to perform a "false shuffle," and members of the group would then bet on the known order of cards when the slug appeared on the table. By doing so, members of the conspiracy repeatedly won thousands of dollars during card games, including winning several hundred thousand dollars on one occasion.

Court documents also show that the members of the organization used sophisticated mechanisms for tracking the order of cards during games, including hidden transmitter devices and specially created software that would predict the order in which cards would reappear during blackjack games.

To date, 42 defendants have pleaded guilty to charges relating to the casino-cheating conspiracy: Van Thu Tran, Phuong Quoc Truong, Tai Khiem Tran, Anh Phuong Tran, Phat Ngoc Tran, Martin Lee Aronson, Liem Thanh Lam, George Michael Lee, Tien Duc Vu, Son Hong Johnson, Barry Wellford, John Tran, Willy Tran, Tuan Mong Le, Duc Cong Nguyen, Han Truong Nguyen, Roderick Vang Thor, Sisouvanh Mounlasy, Navin Nith, Renee Cuc Quang, Ui Suk Weller, Phally Ly, Khunsela Prom, Hop Nguyen, Hogan Ho, Darrell Saicocie, Bryan Arce, Qua Le, Outtama Keovongsa, Leap Kong, Thang Viet Huynh, Don Man Duong, Dan Thich, Jimmy Ha, Eric Isbell, Brandon Pete Landry, James Root, Jesus Rodriguez, Jason Cavin, Nedra Fay Landry, Connie Holmes and Geraldo Montaz. These defendants admitted to targeting, with the aid of co-conspirators, a combined total of approximately 29 casinos in the United States and Canada during the course of the conspiracy:

1) Beau Rivage Casino in Biloxi, Miss.;
2) Casino Rama, in Orillia, Ontario, Canada;
3) Foxwoods Resort Casino in Ledyard, Conn.;
4) Gold Strike Casino in Tunica, Miss.;
5) Horseshoe Casino in Bossier City, La.;
6) Horseshoe Casino and Hotel in Tunica, Miss.;
7) Isle of Capri Casino in Westlake, La.;
8) Majestic Star Casino in Gary, Ind.;
9) Mohegan Sun Resort Casino in Uncasville, Conn.;
10) Palace Station Casino in Las Vegas;
11) Resorts East Chicago Hotel and Casino in East Chicago, Ind.;
12) Sycuan Casino in El Cajon, Calif.
13) Cache Creek Indian Bingo and Casino in Brooks, Calif.;
14) Emerald Queen Casino in Tacoma, Wash.;
15) Imperial Palace Casino in Biloxi;
16) Argosy Casino in Baton Rouge, La.;
17) Trump 29 Casino in Coachella, Calif.;
18) Isle of Capri Casino in Bossier City;
19) Agua Caliente Casino in Rancho Mirage, Calif.;
20) Spa Resort Casino in Palm Springs, Calif.;
21) Pechanga Resort and Casino in Temecula, Calif.;
22) L'Auberge du Lac Casino in Lake Charles, La.;
23) Nooksack River Casino in Deming, Wash.;
24) Barona Valley Ranch Casino and Resort in Lakeside, Calif.;
25) Caesars Indiana Hotel and Casino in Elizabeth, Ind.;
26) Monte Carlo Resort and Casino in Las Vegas;
27) Harrah’s Casino in Lake Charles;
28) Golden Moon Casino in Choctaw, Miss.; and
29) Viejas Casino in Alpine, Calif.

Two other defendants, Ha Thuy Giang and Tammie Huynh, pleaded guilty to tax offenses stemming from the investigation, and Khai Hong Tran admitted to the offenses alleged in a 2007 U.S. indictment when he pleaded guilty to casino-cheating offenses in Canada.

On Dec. 15, 2010, defendant Mike Waseleski, a former casino card dealer, was found guilty by a federal jury in San Diego for his role in the Tran Organization’s cheating scheme to steal approximately $1.5 million from Resorts East Chicago Casino.

The case is being investigated by the FBI’s San Diego Field Office; the Internal Revenue Service-Criminal Investigation; the San Diego Sheriff’s Department; and the California Department of Justice’s Bureau of Gambling Control. The investigation has received assistance from federal, state, tribal and foreign authorities, including: the Ontario Provincial Police; the National Indian Gaming Commission; the U.S. Attorney’s Office for the Southern District of California; the U.S. Attorney’s Office for the Western District of Washington; FBI Resident Agencies in Gulfport, Miss., Tacoma, Wash., and Toledo, Ohio; the Indiana State Police; the Rumsey Rancheria Tribal Gaming Agency; the Sycuan Gaming Commission; the Barona Gaming Commission; the Mississippi Gaming Commission; and the Washington State Gambling Commission.
a href="http://gan.doubleclick.net/gan_click?lid=41000613802101859&pubid=21000000000397724">Furniture Event - Save up to 50% at officemax.com