CALL CENTER SCAM

FROM:  U.S. JUSTICE DEPARTMENT

 
Indian National Pleads Guilty for Role in Multi-Million Dollar India-Based Call Center Scam Targeting U.S. Victims

An Indian national pleaded guilty today to one count of conspiracy to commit money laundering for his role in liquidating and laundering victim payments generated through various telephone fraud and money laundering schemes via India-based call centers.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Abe Martinez of the Southern District of Texas, Executive Associate Director Peter T. Edge of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), Inspector General J. Russell George of the U.S. Treasury Inspector General for Tax Administration (TIGTA) and Inspector General John Roth of the U.S. Department of Homeland Security Office of Inspector General (DHS OIG) made the announcement.

Bharatkumar Patel, aka Bharat Patel, 43, an Indian national who had resided in Midlothian, Illinois, pleaded guilty before U.S. District Court Judge David Hittner of the Southern District of Texas. He also agreed to deportation following his sentence. Sentencing is currently set for July 7, 2017.

According to admissions made in connection with the plea, Patel and his co-conspirators perpetrated a complex scheme in which individuals from call centers located in Ahmedabad, India, impersonated officials from the IRS or U.S. Citizenship and Immigration Services in a ruse designed to defraud victims located throughout the United States. Using information obtained from data brokers and other sources, call center operators targeted U.S. victims who were threatened with arrest, imprisonment, fines or deportation if they did not pay alleged monies owed to the government. Victims who agreed to pay the scammers were instructed how to provide payment, including by purchasing stored value cards or wiring money, and upon payment, the call centers would immediately turn to a network of “runners” based in the U.S. to liquidate and launder the fraudulently-obtained funds.

According to his plea, beginning in or about July 2013, Patel worked as a member of a crew of runners operating in the Chicago area and elsewhere throughout the country. Patel admitted to purchasing reloadable cards or retrieving wire transfers and using the misappropriated personal identifying information of U.S. citizens. Patel also admitted to opening personal bank accounts in order to receive scam proceeds and payments from defrauded victims as well as creating limited liability companies in his name to further the conspiracy. According to his plea, Patel opened one bank account that received more than $1.5 million in deposits over a one-year period and another bank account that received more than $450,000 in deposits over a five-month period.

Patel was charged for his role in the fraud and money laundering scheme alongside 55 other individuals and five call centers in an indictment returned by a federal grand jury in the Southern District of Texas on Oct. 19, 2016. An indictment is merely an allegation and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

HSI, DHS-OIG and TIGTA led the investigation of this case. Also providing significant support was the Ft. Bend County, Texas, Sheriff’s Office; police departments in Hoffman Estates and Naperville, Illinois, and Leonia, New Jersey; San Diego County District Attorney’s Office Family Protection/Elder Abuse Unit; U.S. Secret Service; U.S. Small Business Administration - Office of Inspector General; IOC-2; INTERPOL Washington; U.S. Citizenship and Immigration Services (USCIS); U.S. State Department’s Diplomatic Security Service; and U.S. Attorney’s Offices in Northern District of Alabama, District of Arizona, Central District of California, Northern District of California, District of Colorado, Northern District of Florida, Middle District of Florida, Northern District of Illinois, Northern District of Indiana, District of Nevada and District of New Jersey. The Federal Communications Commission’s Enforcement Bureau also provided assistance in TIGTA’s investigation.

Senior Trial Attorney Michael Sheckels and Trial Attorney Mona Sahaf of the Criminal Division’s Human Rights and Special Prosecutions Section, Trial Attorney Robert Stapleton of the Criminal Division’s Money Laundering and Asset Recovery Section and Assistant U.S. Attorneys S. Mark McIntyre and Craig M. Feazel of the Southern District of Texas are prosecuting the case.

A Department of Justice website has been established to provide information about the case to already identified and potential victims and the public. Anyone who believes they may be a victim of fraud or identity theft in relation to this investigation or other telefraud scam phone calls may contact the FTC via this website.

Anyone who wants additional information about telefraud scams generally, or preventing identity theft or fraudulent use of their identity information, may obtain helpful information on the IRS tax scams website, the FTC phone scam website and the FTC identity theft website.

SYRIAN NATIONAL PLEADS GUILTY IN CASE INVOLVING EXTORTION AND COMPUTER HACKING

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, September 28, 2016

Syrian Electronic Army Hacker Pleads Guilty

Peter Romar, 37, a Syrian national affiliated with the Syrian Electronic Army (SEA), pleaded guilty today to felony charges of conspiring to receive extortion proceeds and conspiring to unlawfully access computers.  Romar was previously extradited from Germany on request of the U.S.

Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Dana J. Boente for the Eastern District of Virginia, Assistant Director James Trainor of the FBI’s Cyber Division and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office, made the announcement after the sentencing by U.S. District Judge Claude M. Hilton.

“Today’s guilty plea is by the latest international offender who believed that he could operate from abroad, behind the perceived veil of anonymity offered by the Internet, and use computers to threaten the security of our citizens and their property,” said Assistant Attorney General Carlin. “It shows that the Department of Justice and the FBI stand behind their pledge to hold accountable foreign actors who assist in the hacking of U.S. victims.”

According to the statement of facts filed with the plea agreement, beginning in approximately 2011, co-defendant Firas Dardar, known online as “The Shadow,” and other members of the SEA engaged in a multi-year criminal conspiracy to conduct computer intrusions against perceived detractors of Syrian President Bashar al-Assad, including media entities, the U.S. government and foreign governments.  Dardar remains at large.

Beginning in approximately 2013, Romar and Dardar engaged in an extortion scheme that involved hacking online businesses in the U.S. and elsewhere for personal profit. Court documents further allege that the conspiracy gained unauthorized access to the victims’ computers and then threatened to damage computers, delete data, or sell stolen data unless the victims provided extortion payments to Dardar and/or Romar.  If a victim could not make extortion payments to the conspiracy’s Syrian bank accounts due to sanctions targeting Syria, Romar acted as an intermediary in Germany to evade those sanctions.

“Cybercriminals cannot hide from justice,” said U.S. Attorney Dana J. Boente for the Eastern District of Virginia. “No matter where they are in the world, the United States will vigorously pursue those who commit crimes against U.S. citizens and hold them accountable for their actions.”

Romar faces a maximum penalty of five years in prison and will be sentenced on October 21. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

The case was investigated by the FBI’s Washington Field Office, with assistance from the NASA Office of the Inspector General, the Department of State Bureau of Diplomatic Security and other law enforcement agencies.

The case was prosecuted by Assistant U.S. Attorneys Maya D. Song and Jay V. Prabhu and Special Assistant U.S. Attorney Brandon L. Van Grack of the Eastern District of Virginia, and Trial Attorneys Scott McCulloch and Nathan Charles of the National Security Division’s Counterintelligence and Export Control Section.  The Justice Department’s Office of International Affairs also provided significant assistance.

HEALTHCARE COMPANY AGREES TO PAY $32.7 MILLION TO SETTLE MEDICARE FRAUD CLAIMS

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, September 28, 2016

Vibra Healthcare to Pay $32.7 Million to Resolve Claims for Medically Unnecessary Services

Vibra Healthcare LLC (Vibra), a national hospital chain headquartered in Mechanicsburg, Pennsylvania, has agreed to $32.7 million, plus interest, to resolve claims that Vibra violated the False Claims Act by billing Medicare for medically unnecessary services, the Department of Justice announced today.

“Medicare beneficiaries are entitled to receive care that is determined by their clinical needs and not the financial interests of healthcare providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “All providers of taxpayer-funded federal healthcare services, whether contractors or direct billers, will be held accountable when their actions cause false claims for medically unnecessary services to be submitted.”

Vibra operates approximately 36 freestanding long term care hospitals (LTCHs) and inpatient rehabilitation facilities (IRFs) in 18 states.  LTCHs provide inpatient hospital services for patients whose medically complex conditions require long hospital stays and programs of care.  IRFs are intended for patients needing rehabilitative services that require hospital-level care.  The government alleged that between 2006 and 2013, Vibra admitted numerous patients to five of its LTCHs and to one of its IRFs who did not demonstrate signs or symptoms that would qualify them for admission.  Moreover, Vibra allegedly extended the stays of its LTCH patients without regard to medical necessity, qualification and/or quality of care.  In some instances, Vibra allegedly ignored the recommendations of its own clinicians, who deemed these patients ready for discharge.

“Pursuing and recovering fraudulent billing for unnecessary services is a priority of my office,” stated U.S. Attorney John E. Kuhn Jr. for the Western District of Kentucky.  “This significant case against Vibra Healthcare and today’s settlement agreement is but one example of the vigorous work against healthcare fraud taking place in the Western District of Kentucky and across the nation.”

As part of the settlement, Vibra also agreed to enter into a chain-wide corporate integrity agreement with the Inspector General of the U.S. Department of Health and Human Services.

“Medical necessity is fundamental if health providers wish to claim taxpayer funds for medical care,” said Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services’ Office of Inspector General (HHS-OIG).  “OIG is committed to protecting precious Medicare dollars and ensuring that beneficiaries receive quality, necessary long term care.”

Part of the allegations resolved by this settlement were originally filed under the qui tam or whistleblower provisions of the False Claims Act by Sylvia Daniel, a former health information coder at Vibra Hospital of Southeastern Michigan.  Daniel filed her suit in the Southern District of Texas, where one of Vibra’s LTCHs was located.  Under the False Claims Act, a private party, known as a relator, can file an action on behalf of the United States and receive a portion of the recovery.  Daniel will receive at least $4 million.  

This settlement illustrates the government’s emphasis on combating healthcare fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $30.7 billion through False Claims Act cases, with more than $18.5 billion of that amount recovered in cases involving fraud against federal healthcare programs.

COURT SHUTS DOWN ALLEGED "ABUSIVE TIME SHARE DONATION SCHEME"

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, September 29, 2016

Federal Court Shuts Down Abusive Tax Scheme Involving Improper Deductions for Donating Timeshares

A federal court in Helena, Montana has permanently barred Montana-based attorney James Tarpey, as well as two companies he founded, including Project Philanthropy Inc., a District of Columbia corporation which does business as Donate for a Cause, and Timeshare Closings Inc., a Colorado corporation which does business as Resort Closings Inc., from promoting an allegedly abusive timeshare donation scheme, the Justice Department announced today.  Tarpey and the two companies agreed to the injunction.

According to the complaint, based on false promises of generous tax savings, Tarpey, Donate for a Cause and Timeshare Closings encouraged timeshare owners to donate their unwanted timeshares to Donate for a Cause, a tax-exempt entity organized and operated by Tarpey.  The complaint alleges that the customers receive an appraisal that grossly overvalues the donated timeshare rights and customers use that appraisal to claim a large charitable donation deduction, even when the true market value of the timeshare right is a small fraction of the appraised value.

According to the complaint, the timeshare donation scheme was aggressively marketed via the Internet and through national and local media outlets, including ABC 7 News in Los Angeles, Fox 10 News in Phoenix, Arizona, the TODAY Show and Fox 4 News in Kansas City, Missouri.

The orders permanently bar Tarpey, Donate for a Cause and Timeshare Closings from promoting or marketing any arrangement that involves charitable contribution deductions claimed on federal tax returns.  The orders also bar Tarpey, Donate for a Cause and Timeshare Closings from preparing, or assisting others in preparing, any property appraisal that will be used in connection with federal taxes.  The orders require Tarpey, Donate for a Cause and Timeshare Closings to post a copy of the injunction on websites that they use to advertise timeshare donations, including but not limited to www.donateforacause.org.  The orders also require that Donate for a Cause notify all of its customers of the injunction and that Tarpey and Timeshare Closings notify their employees involved with timeshare donations of the injunction.

The United States also sued three individuals alleged to be Tarpey’s associates Ron Broyles of California, Curt Thor of Washington and Suzanne Tarpey of Montana.  According to the complaint, these individuals assisted Tarpey in facilitating the timeshare donation scheme.  Thor previously consented to an order permanently barring him from preparing timeshare appraisals and giving advice regarding charitable contribution deductions on federal tax returns.  The government’s claims against Broyles and Suzanne Tarpey remain pending with the court.

The Internal Revenue Service (IRS) warns taxpayers to be wary of scams that involve claiming inflated charitable contribution deductions and recommends anyone who may have improperly claimed such deductions to consult a tax professional.  Guidelines for valuing and deducting property donations to charity can be found in Publication 526 and Publication 561, available on IRS.gov.

Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, thanked Revenue Agent Kate Lopez of the IRS, who conducted the investigation and Trial Attorneys Richard G. Rose, Harris J. Phillips and Gretchen E. Nygaard of the Tax Division, who are litigating this case.

In the past decade, the Tax Division has obtained injunctions against hundreds of tax return preparer and tax fraud promoters.

MAN PLEADS GUILTY TO USING FOREIGN ACCOUNTS TO EVADE PAYING U.S. TAXES

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, September 28, 2016

New York City Resident Pleads Guilty to Using Sham Foreign Entity and Secret Foreign Accounts in Switzerland and Israel to Evade Taxes

Used Secret Foreign Accounts to Hide over $7 Million in Funds and Evade Taxes

A New York City man pleaded guilty today to a criminal information charging him with tax evasion for tax years 2003 through 2005 and 2007 through 2010, announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, and U.S. Attorney Robert L. Capers of the Eastern District of New York.

“Mr. Hager concealed over $7.3 million in undeclared foreign accounts in Switzerland and Israel and used a sham British Virgin Island entity in order to evade over $650,000 in U.S. taxes,” said Principal Deputy Assistant Attorney General Ciraolo. “As this case demonstrates, the Department and the Internal Revenue Service (IRS), together with our global partners, are successfully working on a daily basis to locate such undeclared accounts, identify those responsible and hold them accountable.”

According to information presented in court, between 1987 through 2011, Markus Hager, 68, utilized a series of undeclared foreign financial accounts to evade his individual income taxes by concealing assets and income from the IRS in those accounts.  Between 1987 and 2008, Hager maintained several undeclared accounts at UBS, including two numbered accounts and an account held in the name of Contactus Partnership Associated S.A. (Contactus), a sham British Virgin Islands entity.  By the close of 2004, the value of Hager’s undeclared accounts at UBS exceeded $7.3 million.

Hager closed the UBS accounts in 2008 and transferred the assets to a newly opened account at Clariden Leu, which he controlled and held in the name of Contactus.  Shortly thereafter, Hager closed the Contactus account at Clariden Leu and transferred the assets to a newly opened account held in the name of the same sham entity at a different Swiss bank.  Hager caused that Swiss bank to falsely record Hager’s Belgian cousin as the owner of the assets in the Contactus account.  Approximately six months later, Hager closed the Contactus account at the Swiss bank and transferred the assets to an account at a bank in Israel that Hager caused to be opened in the name of a different Belgian cousin.

From 2005 to 2011, Hager also controlled an undeclared account at Bank Leumi in Israel, which he falsely held under the name of a relative who was not a U.S. person and who resided outside the United States.  In February 2010, after obtaining an Israeli Identity Card, Hager opened an account in his own name at Bank Leumi in Israel but falsely reported that he lived in the United Kingdom and signed a document, under the penalties of perjury, on which he falsely claimed that he was not a U.S. citizen.

According to the information filed, Hager repatriated funds from his undeclared foreign financial accounts by having an attorney draft a sham loan agreement between himself and Contactus and wiring funds from some of his undeclared foreign financial accounts into his attorney’s escrow account.

According to the information filed, Hager filed false federal and New York State income tax returns on which he failed to report the income from his foreign financial accounts and failed to pay tax on that income.  According to the information, Hager evaded approximately $652,580 in federal taxes for tax years 2003 through 2005 and 2007 through 2010.  Hager also failed to report his ownership and control of his foreign financial accounts to the Department of the Treasury on a Report of Foreign Bank and Financial Account even though an accounting firm had informed Hager of his obligation to do so and advised him of the civil and criminal penalties he could suffer for the failure to do so.

“In pleading guilty today, Markus Hager became another example of an individual who attempted to conceal the true source of his money‎ and was caught,” said Chief Richard Weber of  IRS-Criminal Investigation (IRS-CI).  “IRS-CI will continue to take every step necessary to ferret out those who attempt to avoid their reporting obligations under the law.”

Sentencing has been set for ­Jan. 4, 2017.  Hager faces a statutory maximum sentence of five years in prison, as well as a term of supervised release and monetary penalties.  According to the plea agreement, Hager agreed to pay restitution to the IRS.

Principal Deputy Assistant Attorney General Ciraolo and U.S. Attorney Capers commended special agents of IRS-Criminal Investigation, who conducted the investigation, and Senior Litigation Counsel Mark F. Daly and Assistant Chief Andrew Kameros of the Tax Division and Assistant U.S. Attorney Erik Paulsen of the Eastern District of New York, who are prosecuting this case.

CHINESE NATIONALS CHARGED IN CASE INVOLVING THE EVASION OF SANCTIONS AGAINST NORTH KOREA

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, September 26, 2016

Four Chinese Nationals and China-Based Company Charged with Using Front Companies to Evade U.S. Sanctions Targeting North Korea’s Nuclear Weapons and Ballistic Missile Programs

Company Allegedly Violated Sanctions by Facilitating U.S. Dollar Transactions on Behalf of a North Korean Bank with Ties to Weapons of Mass Destruction Proliferators

Four Chinese nationals and a trading company based in Dandong, China, were charged by criminal complaint unsealed today with conspiring to evade U.S. economic sanctions and violating the Weapons of Mass Destruction Proliferators Sanctions Regulations (WMDPSR) through front companies by facilitating prohibited U.S. dollar transactions through the United States on behalf of a sanctioned entity in the Democratic People’s Republic of Korea (North Korea) and to launder the proceeds of that criminal conduct through U.S. financial institutions.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Paul J. Fishman of the District of New Jersey and Assistant Director E.W. Priestap of the FBI’s Counterintelligence Division made the announcement.

On Aug. 3, 2016, a U.S. Magistrate Judge Joseph A. Dickson of the District of New Jersey signed a criminal complaint charging Ma Xiaohong (Ma) and her company, Dandong Hongxiang Industrial Development Co. Ltd. (DHID), and three of DHID’s top executives, general manager Zhou Jianshu (Zhou), deputy general manager Hong Jinhua (Hong) and financial manager Luo Chuanxu (Luo), with conspiracy to violate the International Emergency Economic Powers Act (IEEPA) and to defraud the United States; violating IEEPA; and conspiracy to launder monetary instruments.

Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) also imposed sanctions on DHID, Ma, Zhou, Hong and Luo for their ties to the government of North Korea’s weapons of mass destruction proliferation efforts.

In addition, the department filed a civil forfeiture action for all funds contained in 25 Chinese bank accounts that allegedly belong to DHID and its front companies.  The department has also requested tha the federal court in the District of New Jersey issue a restraining order for all of the funds named in the civil forfeiture action, based upon the allegation that the funds represent property involved in money laundering, which makes them forfeitable to the United States.  There are no allegations of wrongdoing by the U.S. correspondent banks or foreign banks that maintain these accounts.

“The charges and forfeiture action announced today allege that defendants in China established and used shell companies around the world, surreptitiously moved money through the United States and violated the sanctions imposed on North Korea in response to, among other things, its nuclear weapons program,” said Assistant Attorney General Caldwell.  “The actions reflect our efforts to protect the integrity of the U.S. banking system and hold accountable those who seek to evade U.S. sanctions laws.”

“The charges unsealed today reflect our nation’s commitment to using all tools to deter and disrupt weapons of mass destruction proliferators,” said Assistant Attorney General Carlin.  “One of the strengths of our sanctions programs is that they prevent sanctioned wrongdoers from engaging in U.S. dollar transactions.  Denying the use of the U.S. financial system can greatly curtail illegal activities and disrupt efforts to provide weapons of mass destruction to terrorists and rogue nations.  Those who seek to evade our financial sanctions will be fully prosecuted, and we will be unflagging in our efforts to bring them to justice.”

“The FBI takes violations of these laws extremely seriously and will not hesitate to use our full investigative resources to stop this type of illegal activity,” said Assistant Director Priestap.  “In this case agents, analysts and forensic accountants from field offices in Phoenix and Newark, as well as FBI Headquarters, all contributed to a successful investigation.”

According to criminal and civil complaints, DHID is primarily owned by Ma and is located near the North Korean border.  DHID allegedly openly worked with North Korea-based Korea Kwangson Banking Corporation (KKBC) prior to Aug. 11, 2009, when the OFAC designated KKBC as a Specially Designated National (SDN) for providing U.S. dollar financial services for two other North Korean entities, Tanchon Commercial Bank (Tanchon) and Korea Hyoksin Trading Corporation (Hyoksin).  President Bush identified Tanchon as a weapons of mass destruction proliferator in June 2005, and OFAC designated Hyoksin as an SDN under the WMDPSR in July 2009.  Tanchon and Hyoksin were so identified and designated because of their ties to Korea Mining Development Trading Company (KOMID), which OFAC has described as North Korea’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons.  The United Nations (UN) placed KOMID, Tanchon and Hyoksin on the UN Sanctions List in 2006.  In March 2016, KKBC was added to the UN Sanctions List.

In August 2009, Ma allegedly conspired with Zhou, Hong and Luo to create or acquire numerous front companies to conduct U.S. dollar transactions designed to evade U.S. sanctions.  The complaints allege that from August 2009 to September 2015, DHID used these front companies, established in offshore jurisdictions such as the British Virgin Islands, the Seychelles and Hong Kong, and opened Chinese bank accounts to conduct U.S. dollar financial transactions through the U.S. banking system when completing sales to North Korea.  These sales transactions were allegedly financed or guaranteed by KKBC.  These front companies facilitated the financial transactions to hide KKBC’s presence from correspondent banks in the United States, according to the allegations in the complaints.

As a result of the defendants’ alleged scheme, KKBC was able to cause financial transactions in U.S. dollars to transit through the U.S. correspondent banks without being detected by the banks and, thus, were not blocked under the WMDPSR program.

A complaint is merely an allegation and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The FBI is investigating the case.  Trial Attorneys Jennifer Wallis and Michael Parker of the Criminal Division’s Asset Forfeiture and Money Laundering Section, Trial Attorney Christian Ford of the National Security Division’s Counterintelligence and Export Control Section and Chief Barbara Ward and Assistant U.S. Attorneys Joyce Malliet and Sarah Devlin of the District of New Jersey are prosecuting the case.  The Criminal Division’s Office of International Affairs provided valuable assistance in this matter.

DOJ ANNOUNCES CHARGES AGAINST ALLEGED PILL MILL DOCTOR

FROM:  U.S. JUSTICE DEPARTMENT

Department of Justice

Office of Public Affairs

FOR IMMEDIATE RELEASE

Friday, September 23, 2016

Alabama Pill Mill Doctor Charged with Illegal Prescribing and Health Care Fraud

Federal prosecutors on Thursday charged a former north Alabama physician, who was the nation’s highest Medicare prescriber of opioid painkillers at the height of his practice, with illegally prescribing controlled substances and with a health care fraud involving $9.5 million in unneeded and unused urine tests, announced U.S. Attorney Joyce White Vance for the Northern District of Alabama and Special Agent in Charge Roger C. Stanton for the Federal Bureau of Investigations (FBI).

In a two-count information filed in U.S. District Court, the U.S. Attorney’s Office for the Northern District of Alabama charged Shelinder Aggarwal, 48, of Huntsville, Alabama, with one count of distributing a controlled substance outside the scope of professional practice and not for a legitimate medical purpose in July 2012 and with one count of conspiring to execute a health care fraud scheme against Medicare and Blue Cross Blue Shield of Alabama between Jan. 1, 2011, and March 31, 2013.

Prosecutors also filed a plea agreement with Aggarwal in which he agrees that he will plead guilty to the charges and forfeit his former clinic on Turner Street Southwest in Huntsville, along with $6.7 million.  Aggarwal earlier repaid $2.8 million to Medicare and $45,843 to Blue Cross following audits, according to his plea agreement.  The agreement stipulates a 15-year prison sentence.  A federal judge must accept the terms of the agreement before it is final.

Aggarwal surrendered his Alabama medical license in 2013, along with his Alabama and federal Drug Enforcement Administration certificates to prescribe controlled substances, after the Alabama Board of Medical Examiners initiated an investigation.

“Shelinder Aggarwal treated his medical license like a license to deal opiate drugs,” said U.S. Attorney Vance.  “He also defrauded Medicare and Blue Cross Blue Shield of more than $9 million dollars by performing drug tests he never used to treat his patients.  Thanks to this prosecution, Aggarwal is no longer a drug dealer masquerading as a doctor.  His pill mill is closed, he must repay the money he stole from health insurers and he will serve time for his crimes.  I am grateful to our prosecutors and the investigators who brought this individual to justice.”

“Aggarwal was trusted with resources to care for others and used that access to defraud the health care system, thus costing tax payers millions of dollars,” said Special Agent in Charge Stanton.  “In addition, he directly contributed to the opioid drug epidemic which is plaguing our nation, and potentially endangered the lives of his patients.  I applaud the work of my agents and our partners to shut down Aggarwal’s pill mill and hold him accountable for his actions.”

Aggarwal was a pain management doctor who operated Chronic Pain Care Services in Huntsville.  His medical practice was a pill mill, according to the charges and plea agreement.  The documents state that in 2012, about 80 to 145 patients a day visited Aggarwal’s clinic, with Aggarwal seeing the majority of the patients and writing all prescriptions.  Initial patient visits typically lasted five minutes or less, and follow-ups two minutes or less.  The documents state that Aggarwal did not obtain prior medical records for his patients, did not treat patients with anything other than controlled substances, often asked patients what medications they wanted and filled their requests, prescribed controlled substances to patients who he knew were using illegal drugs and did not take appropriate measures to ensure that patients did not divert or abuse controlled substances.  The plea agreement summarizes an interaction with a patient, which was captured on video.  In it, Aggarwal notes that the DEA viewed him as the “biggest pill-pusher in North Alabama” and that many of his patients were “dropping like flies, they are all dying.”

The documents cite the Prescription Drug Monitoring Program (PDMP) for Alabama, which tracks the dispensing of controlled substances, as well as Medicare data, to document Aggarwal’s prescribing practices.

According to the PDMP, Alabama pharmacies filled about 110,013 of Aggarwal’s prescriptions for controlled substances in 2012.  That would equal about 423 prescriptions per day if he worked five days a week, and resulted in about 12.3 million pills.  The PDMP rated Aggarwal as the highest prescriber of controlled substances filled in Alabama in 2012, with the next highest prescriber writing a third as many prescriptions.

Medicare data shows Aggarwal was the highest prescriber in the United States of Schedule II controlled substances under Medicare in 2012.  Schedule II substances include the opioid painkillers oxycodone, oxymorphone, hydromorphone and morphine.

As to Aggarwal’s health care fraud scheme, he is charged with requiring patients to undergo unreasonable and unnecessary urine drug tests that he did not need or use in their treatment.  According to the documents, the tests he ran depended not on patients’ treatment, but on how much he could bill for tests.  Aggarwal often ignored urine test results showing patients were using illegal drugs, the documents state.

Between January 2011 and March 2013, urine drug tests accounted for about 80 percent of paid claims Aggarwal submitted to Medicare and Blue Cross, for a total reimbursement of $9.5 million.  According to his charges and plea agreement, “Aggarwal’s primary motivation for testing patients’ urine specimens, and submitting those claims for payment, was financial gain.”

The FBI investigated the case, based partly on an investigation conducted by the ABME.  Assistant U.S. Attorneys Chinelo Dike-Minor and Russell Penfield are prosecuting.

GUCCIFER GOES TO JAIL

Thursday, September 1, 2016

Romanian Hacker “Guccifer” Sentenced to 52 Months in Prison for Computer Hacking Crimes

Marcel Lehel Lazar, 44, of Arad, Romania, a hacker who used the online moniker “Guccifer,” was sentenced today to 52 months in prison for unauthorized access to a protected computer and aggravated identity theft.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia, Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office, Director Bill A. Miller of the U.S. Department of State’s Diplomatic Security Service (DSS) and Special Agent in Charge Brian J. Ebert of the U.S. Secret Service’s Washington Field Office made the announcement.

Lazar pleaded guilty before U.S. District Judge James C. Cacheris of the Eastern District of Virginia on May 25, 2016.

According to admissions made in connection with his plea agreement, from at least October 2012 to January 2014, Lazar intentionally gained unauthorized access to personal email and social media accounts belonging to approximately 100 Americans, and he did so to unlawfully obtain his victims’ personal information and email correspondence.  Lazar’s victims included an immediate family member of two former U.S. presidents, a former member of the U.S. Cabinet, a former member of the U.S. Joint Chiefs of Staff and a former presidential advisor, he admitted.  In many instances, Lazar publically released his victims’ private email correspondence, medical and financial information and personal photographs, according to the statement of facts filed with his plea agreement.

The FBI, DSS and the Secret Service investigated the case.  Senior Counsel Ryan K. Dickey and Peter V. Roman of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorneys Maya D. Song and Jay V. Prabhu of the Eastern District of Virginia are prosecuting the case.  The Criminal Division’s Office of International Affairs provided significant assistance.  The Justice Department thanks the government of Romania for their assistance in this matter.

SEC CHARGES COMPANY WITH DISCLOSURE, SUPERVISORY FAILURES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Apollo Charged With Disclosure and Supervisory Failures

FOR IMMEDIATE RELEASE

2016-165

Washington D.C., Aug. 23, 2016 — The Securities and Exchange Commission today announced that four private equity fund advisers affiliated with Apollo Global Management have agreed to a $52.7 million settlement for misleading fund investors about fees and a loan agreement and failing to supervise a senior partner who charged personal expenses to the funds.

An SEC investigation found that the Apollo advisers failed to adequately disclose the benefits they received to the detriment of fund investors by accelerating the payment of future monitoring fees owed by the funds’ portfolio companies upon the sale or IPO of those companies.  The lump sum payments received by the Apollo advisers essentially reduced the portfolio companies’ value prior to their sale or IPO and reduced amounts available for distribution to fund investors.

The SEC also found that one of the Apollo advisers failed to disclose certain information about interest payments made on a loan between the adviser’s affiliated general partner and five funds.  The purpose of the loan was to defer taxes on carried interest due the general partner.  The loan agreement obligated the general partner to pay interest to the funds during the course of the loan, and the funds’ financial statements disclosed that interest was accruing as an asset of the funds.  But that interest was instead ultimately allocated solely to the general partner, which made the disclosures in the financial statements misleading.

“A common theme in our recent enforcement actions against private equity firms is their failure to properly disclose fees and conflicts of interest to fund investors,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.  “Investors in Apollo funds were not adequately informed about accelerated monitoring fees and separately allocated loan interest, and therefore were unable to gauge their impact on their investments.”

According to the SEC’s order instituting the settled administrative proceeding, Apollo’s supervisory failures pertain to a then-senior partner at the firm who was twice caught improperly charging personal items and services to Apollo-advised funds and their portfolio companies.  Other than verbally reprimanding the partner and requiring repayment of improperly submitted expenses, Apollo took no further remedial or disciplinary steps on either occasion.  A firm-wide expense review eventually revealed even more personal expenses the partner improperly charged to fund clients, and this led to the partner’s separation from the firm.

“Apollo failed to take appropriate action to protect its clients upon first learning that a partner was improperly expensing personal items and services to the funds, and its failure resulted in repeated misconduct,” said Anthony S. Kelly, Co-Chief of the SEC Enforcement Division’s Asset Management Unit.

Apollo consented to the entry of the SEC’s order finding that it violated Sections 206(2) and 206(4) of the Advisers Act and Rules 206(4)-7 and 206(4)-8.  The order also finds that Apollo failed reasonably to supervise the then-partner pursuant to Section 203(e)(6) of the Advisers Act.  Apollo agreed to cease and desist from further violations without admitting or denying the findings, and must pay $37.527 million in disgorgement, $2,727,552 in interest, and a $12.5 million penalty.  Apollo agreed to distribute the disgorgement and interest amounts to affected fund investors.

The SEC’s investigation, which is continuing, is being conducted by Donna Norman of the Asset Management Unit and supervised by Mr. Kelly.  A related examination of Apollo was conducted by Majid Mahmood, Michael Devaney, Mandy Poon, Igor Rozenblit, and William Delmage.

U.S. MARSHALS SERVICE WARN OF JURY DUTY PHONE SCAM

FROM:  U.S. MARSHALS SERVICE 

For Immediate Release

August 22, 2016

United States Marshals Warn of Jury Duty Phone Scam

Montgomery, AL - The U.S. Marshals Service for the Middle District of Alabama is warning the public of an ongoing jury-duty phone scam where the scammer poses as a U.S. Marshal, deputy marshal, or other law enforcement officer. The scammer calls the victim to advise that he or she has missed federal jury duty, but can avoid arrest by paying a fine immediately.

The scammer will provide information such as titles and badge numbers of a legitimate law enforcement officer or court official, names of federal judges, and courtroom addresses in an attempt to make the scam appear credible. Scammers are even spoofing their phone numbers to appear on caller ID as if they are from the court or a government agency. The U.S. Marshals have received several calls inquiring about this scam over the past few days, and are advising that the public needs to know that this is a scam. If a person receives a jury duty related call, they should not provide any personal identification or money to the caller. Federal Courts do not call prospective jurors or ask for money or personal identification information.

Anyone that receives a “Jury Duty Scam” phone call should report it, with any available caller ID information, to their local United States Marshals Service office, or the local FBI office.

AN HEIR LOCATION COMPANY CHARGED IN CUSTOMER ALLOCATION SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

FOR IMMEDIATE RELEASE

Wednesday, August 17, 2016

Heir Location Services Company and Co-Owner Charged with Customer Allocation Scheme

A Salt Lake City-based heir location services provider and its co-owner have been indicted for participating in a conspiracy to allocate customers with another heir location firm, the Department of Justice announced today.  

According to the one-count felony indictment filed today in the U.S. District Court for the District of Utah, Kemp & Associates Inc. and its co-owner and vice president, Daniel J. Mannix, conspired with a competitor to suppress and eliminate competition by agreeing to allocate customers of heir location services sold in the United States between 1999 and 2014.

Heir location firms identify people who may be entitled to an inheritance from the estate of someone who died without a will.  The heir location firms then enter into agreements with those people to help secure their inheritances in exchange for a fee.

“For over a decade, the defendants schemed to line their pockets at the expense of beneficiaries,” said Acting Assistant Attorney General Renata Hesse of the Justice Department’s Antitrust Division.  “These charges underscore the division’s commitment to hold heir location services executives and their companies accountable for cheating heirs whose relatives died without a will.”

With today’s charges, three executives and two companies have been charged as a result of the ongoing federal antitrust investigation into customer allocation, price fixing, bid rigging and other anticompetitive conduct in the heir location services industry, which is being conducted by the Antitrust Division’s Chicago Office and the FBI’s Salt Lake City Division, with assistance from the U.S. Attorney’s Office of the District of Utah and the U.S. Attorney’s Office of the Northern District of Illinois.

TOOL COMPANY EXECUTIVE SENT TO PRISON FOR PARTICIPATING IN BANK FRAUD SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, August 17, 2016

Former Vice President of Wholesale Tool Company Sentenced to 63 Months in Prison for Role in $9 Million Bank Fraud Scheme

The former vice president of a California wholesale tool company was sentenced to 63 months in prison today for his role in a scheme to defraud East West Bank that resulted in losses of over $9 million.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, Assistant Director in Charge Deidre Fike of the FBI’s Los Angeles Division, Acting Special Agent in Charge Anthony J. Orlando of Internal Revenue Service-Criminal Investigation’s (IRS-CI) Los Angeles Field Office and Special Inspector General Christy Goldsmith Romero of the Troubled Asset Relief Program (SIGTARP) made the announcement.

Chung Yu Yeung, aka Louis Yeung, 39, of San Dimas, California, was sentenced by U.S. District Judge Christina A. Snyder of the Central District of California.  Judge Snyder also ordered Yeung to pay $9,618,908.34 in restitution and to forfeit a San Dimas property that was purchased with proceeds of the scheme.  On March 30, 2016, Yeung pleaded guilty to one count of conspiracy to commit bank fraud and four counts of bank fraud.

As part of his guilty plea, Yeung, a former vice president of Eastern Tools & Equipment Inc. (Eastern Tools) of Ontario, California, admitted that he and his co-conspirators defrauded East West Bank by making material misrepresentations about Eastern Tools’ accounts receivable and its financial statements to obtain and maintain a loan with the bank.  The conspirators created numerous shell corporations to act as purported suppliers and retailers doing business with Eastern Tools, when, in reality, these shell corporations were entirely under the control of Yeung and existed for the sole purpose of creating the illusion of such business, he admitted.  Yeung also admitted that the fictitious companies allowed Yeung and other conspirators to falsely inflate Eastern Tools’ accounts receivable and financial statements in representations to East West Bank.

Yeung admitted that in order to further the scheme, he and others opened post office boxes, phone accounts and email accounts purportedly associated with the shell retail companies, and provided information about them to East West Bank auditors, to promote the illusion that these shell customers were independent entities.

Eastern Tools defaulted on the loan after East West Bank discovered the fraud, causing more than $9 million in losses to the bank, Yeung admitted.

TWO PLEAD GUILTY IN GEORGIA HOME FORECLOSURE BID RIGGING CASE

FROM:  U.S. JUSTICE DEPARTMENT

Two Real Estate Investors Plead Guilty to Rigging Bids at Public Home Foreclosure Auctions

22 Defendants Charged in Ongoing Investigation

Two Georgia real estate investors pleaded guilty today for their roles in bid-rigging and fraud conspiracies committed at public real estate foreclosure auctions in Georgia, the Department of Justice announced.

Ellis Galyon and Christopher Anderson each admitted that they agreed with other real estate investors to rig auctions of foreclosed homes in the Atlanta metro area.  According to court documents filed today in the U.S. District Court of the Northern District of Georgia in Atlanta, the conspirators agreed not to compete for the purchase of selected foreclosed homes so that they could win the auctions for those homes with artificially low bids.  The winning bidders then paid off the other conspirators who had refrained from bidding against them.  As a result of Galyon and Anderson’s actions, conspirators profited from money that otherwise would have gone to mortgage holders and other secured debt holders and, in some cases, to the people who owned the foreclosed homes.

 Galyon admitted to participating in the conspiracy in Fulton County between June 2007 and at least July 2011.  Anderson admitted to participating in the conspiracy in Fulton County between December 2007 and October 2011 and in DeKalb County between September 2009 and November 2011.

Including Galyon and Anderson, twenty-two defendants have been charged in connection with the department’s ongoing investigation into bid rigging and fraudulent schemes involving real estate foreclosure auctions in the Atlanta area.  Twenty of those have either pleaded guilty or agreed to plead guilty.

These charges have been filed as a result of the ongoing investigation being conducted by the Antitrust Division’s Washington Criminal II Section, the FBI’s Atlanta Division and the U.S. Attorney’s Office of the Northern District of Georgia, in connection with the President’s Financial Fraud Enforcement Task Force.  The president established the task force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.

DOJ ANNOUNCES SETTLEMENT WITH HSBC IN SERVICEMEMBER CAR REPOSSESSION CASE

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, August 8, 2016

Justice Department Reaches Settlement to Resolve Allegations Against HSBC for Illegally Repossessing Servicemembers’ Cars

The Justice Department announced today that HSBC Finance Corporation, as successor to HSBC Auto Finance Inc., has agreed to pay $434,500 to resolve allegations that it violated the Servicemembers Civil Relief Act (SCRA) by repossessing 75 cars owned by protected servicemembers without obtaining the necessary court orders.  The settlement is subject to approval by the U.S. District Court of the Northern District of Illinois.

During the investigation, the department learned that HSBC conducted repossessions without court orders even when it had evidence in its own records suggesting that a borrower could be a protected servicemember.  In one such case, HSBC continued with a repossession after learning that an initial attempt was unsuccessful because guards would not allow the “repo truck” to enter a “secured military post” in Indiana, where the car was located.

“HSBC repossessed cars without taking into account their owners’ ongoing service to our country,” said Principal Deputy Associate Attorney General Bill Baer.  “This settlement rights this wrong, compensates the affected servicemembers and honors our commitment to making sure military members are treated fairly at all times.”

“Servicemembers should never have to worry that they will lose their cars while they answer our nation’s call to duty,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “HSBC should have heeded these concerns before repossessing vehicles.  I commend the company for working cooperatively to reach an appropriate resolution once the department raised the issue.”

The settlement covers repossessions that occurred between 2008 and 2010.  HSBC Auto Finance Inc. originated and serviced car loans until 2010, when HSBC sold its car lending operations and assets to Santander Consumer USA Inc.  In February 2015, the department entered a settlement with Santander that provides servicemembers with more than $10.5 million in compensation for repossessions that violated the SCRA.  As part of the investigation of Santander’s repossession practices, the department learned that HSBC sold to Santander the right to collect debts owed by servicemembers after their cars had been repossessed by HSBC without court orders.

The SCRA protects servicemembers against certain civil proceedings that could affect their legal rights while they are in military service.  It requires a court to review and approve any repossession if the servicemember took out the loan and made a payment before entering military service.  The court may delay the repossession or require the lender to refund prior payments before repossessing.  The court may also appoint an attorney to represent the servicemember, require the lender to post a bond with the court and issue any other orders it deems necessary to protect the servicemember.  By failing to obtain court orders before repossessing motor vehicles owned by protected servicemembers, HSBC prevented servicemembers from obtaining a court’s review of whether their repossessions should be delayed or adjusted to account for their military service.

Most of the servicemembers compensated through this settlement received partial compensation through the settlement with Santander, and this agreement requires HSBC to pay $5,500 to each of these servicemembers.  HSBC must pay $11,000 to affected servicemembers who did not receive payments from the Santander settlement.  HSBC also must repair the credit of all affected servicemembers.  An independent settlement administrator will contact servicemembers to be compensated through this settlement in the upcoming months.  The independent administrator will locate victims and distribute payments at no cost to the servicemembers.

The department’s enforcement of the SCRA and other fair lending laws is conducted by the Civil Rights Division’s Housing and Civil Enforcement Section.  Since 2010, the division has provided over $1.4 billion in monetary relief for individual borrowers and affected communities through its enforcement of the Fair Housing Act, the Equal Credit Opportunity Act and the SCRA.

The SCRA provides protections for active duty servicemembers in areas such as evictions, rental agreements, security deposits, prepaid rent, civil judicial proceedings, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosures, automobile leases, life insurance, health insurance and income tax payments.

DOJ ANNOUNCES "SIGNIFICANT KLEPTOCRACY ENFORCEMENT ACTION TO RECOVER MORE THAN $1 BILLION"

FROM:  U.S. JUSTICE DEPARTMENT  

Assistant Attorney General Leslie R. Caldwell Delivers Remarks at Press Conference Announcing Significant Kleptocracy Enforcement Action to Recover More Than $1 Billion Obtained from Corruption Involving Malaysian Sovereign Wealth Fund

Washington, DC United States ~ Wednesday, July 20, 2016

Remarks as prepared for delivery

Thank you, Attorney General [Loretta E.] Lynch.

This is the largest single action ever brought by the Kleptocracy Initiative, and a significant milestone in the department’s ongoing fight against global corruption.  The complaint filed today in federal court details the complex web of transactions these co-conspirators used to launder billions of dollars that they stole from the people of Malaysia.  We have several speakers today who will describe various aspects of this matter.

My remarks will focus on the allegations in the complaint involving two bond offerings in 2012 through which 1MDB (1Malaysia Development Berhad) raised money that was siphoned off by the corrupt officials and their associates.  The stated purpose of the 2012 bond offerings was to allow 1MDB to invest, for the benefit of the Malaysian government, in certain energy assets.  But almost immediately after receiving the proceeds of these two bond issues, roughly 40 percent of the funds raised—approximately $1.37 billion—was transferred out of 1MDB’s accounts.  The money went into the Swiss bank account of a shell company incorporated in the British Virgin Islands.  The complaint alleges that the name of this shell company was intended to suggest an affiliation with a legitimate company involved in the bond offering but, in fact, the Swiss bank account was controlled by corrupt officials.

From Switzerland, the corrupt officials and their associates transferred money using a complex series of transactions that involved still more shell companies and bank accounts across the globe.  Eventually, more than $230 million found its way into accounts controlled by shell companies whose beneficial owner was a close relative of a senior 1MDB official.  That individual used the stolen funds to buy luxury real estate in the United States and other assets, including funding a California-based motion picture company, Red Granite Pictures.

Red Granite Pictures, in turn, used more than $100 million involved in the theft from 1MDB to finance the award-winning 2013 film The Wolf of Wall Street.  Of course, neither 1MDB nor the people of Malaysia ever saw a penny of profit from the film, or from any other investments made with money diverted from 1MDB.  Instead, that money went to a relative and associates of the corrupt officials.  Because the assets used to finance the film were, as alleged, laundered money, future rights to that film are subject to the forfeiture complaint filed today.  According to the allegations in the complaint, this is a case where life imitated art.  The associates of these corrupt 1MDB officials are alleged to have used illicit proceeds of their fraud scheme to fund the production of The Wolf of Wall Street, a movie about a corrupt stockbroker who tried to hide his own illicit profits in a perceived foreign safe haven.  But whether corrupt officials try to hide stolen assets across international borders—or behind the silver screen—the Department of Justice is committed to ensuring that there is no safe haven.

This case is yet another example of what happens when individuals and criminal organizations are able to use shell companies to move, and ultimately conceal, the proceeds of crime and kleptocracy.  Gaps in the legal regimes across the globe—including in the United States—allowed these criminals to avoid disclosing the ultimate beneficial owners of the accounts to which 1MDB funds were diverted.  Stronger laws and more effective frameworks for international cooperation are needed to close these gaps and overcome the challenges faced by law enforcement when we investigate international corruption, money laundering and other cross-border crimes.

In this case, the significant assistance we received from our international partners was critical in identifying and restraining assets.  That cooperation and the action we are taking today should send a message to kleptocrats and other criminals that the United States is not a safe haven for their stolen money, and that they cannot evade law enforcement authorities simply by laundering money through multiple jurisdictions and through a web of nominees, shell corporations and other legal structures designed to frustrate justice.  The department will continue to work to track and seize U.S. and other assets of these corruption schemes wherever they arise, no matter how secretive, no matter how sophisticated and no matter how sprawling.

Criminal Division
Speaker:
Meet The AAG
Updated July 20, 2016

FORMER HSBC EXECUTIVE ARRESTED FOR ROLE IN "FRONT RUNNING SCHEME"

FROM:  U.S. JUSTICE DEPARTMENT

Wednesday, July 20, 2016

Global Head of HSBC’s Foreign Exchange Cash-Trading Desks Arrested for Orchestrating Multi-million-Dollar Front Running Scheme

Charges Also Unsealed Against Former Head of Foreign Exchange Cash-Trading Desk

for Europe, Middle East and Africa

The head of global foreign exchange cash trading at HSBC Bank plc, a subsidiary of HSBC Holdings plc (collectively HSBC), and HSBC’s former head of foreign exchange cash trading for Europe, the Middle East and Africa were charged with conspiring to defraud a client of HSBC through a scheme commonly referred to as “front running.”

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York, Acting Inspector General Frederick W. Gibson of the Federal Deposit Insurance Corporation (FDIC) and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office made the announcement.        

Mark Johnson, 50, a U.K. citizen and U.K. and U.S. resident, and Stuart Scott, 43, a U.K. citizen and resident, were charged by complaint with conspiracy to commit wire fraud.  Johnson was arrested last night at JFK International Airport in Queens, New York, and will be arraigned later today before U.S. Magistrate Judge Lois Bloom of the Eastern District of New York.

“The defendants allegedly betrayed their client’s confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank,” said Assistant Attorney General Caldwell.  “This case demonstrates the Criminal Division’s commitment to hold corporate executives, including at the world’s largest and most sophisticated institutions, responsible for their crimes.”

“As alleged, the defendants placed personal and company profits ahead of their duties of trust and confidentiality owed to their client, and in doing so, defrauded their client of millions of dollars,” said U.S. Attorney Capers.  “When questioned by their client about the higher price paid for their significant transaction, the defendants wove a web of lies designed to conceal the truth and divert attention away from their fraudulent trades.  The charges and arrest announced today reflect our steadfast commitment to hold accountable corporate executives and licensed professionals who use their positions to fraudulently enrich themselves.”

“The Federal Deposit Insurance Corporation Office of Inspector General is pleased to join the Department of Justice and our law enforcement colleagues in announcing this arrest,” said Acting Inspector General Gibson.  “Our collective efforts help ensure public confidence in the financial markets.  It is critically important to hold individuals accountable for their actions, particularly those who abuse their positions of public trust.  We will continue to pursue justice for those involved as this case moves forward.

“These individuals are accused of defrauding clients by misusing confidential information to manipulate currency prices for the benefit of the bank and themselves,” said Assistant Director in Charge Abbate.  “The FBI will continue to work aggressively with our partners to prevent, investigate and prosecute criminal fraud in the financial markets.”

According to the complaint, in November and December 2011, Johnson and Scott misused information provided to them by a client that hired HSBC to execute a foreign exchange transaction related to a planned sale of one of the client’s foreign subsidiaries.  HSBC was selected to execute the foreign exchange transaction – which was going to require converting approximately $3.5 billion in sales proceeds into British Pound Sterling – in October 2011.  HSBC’s agreement with the client required the bank to keep the details of the client’s planned transaction confidential.  Instead, Johnson and Scott allegedly misused confidential information they received about the client’s transaction.  On multiple occasions, Johnson and Scott allegedly purchased Pound Sterling for HSBC’s “proprietary” accounts, which they held until the client’s planned transaction was executed.  The complaint alleges that, as part of the scheme, both Johnson and Scott made misrepresentations to the client about the planned foreign exchange transaction that concealed the self-serving nature of their actions.  Specifically, the complaint alleges that Johnson and Scott caused the $3.5 billion foreign exchange transaction to be executed in a manner that was designed to spike the price of the Pound Sterling, to the benefit of HSBC and at the expense of their client.  In total, HSBC allegedly generated profits of roughly $8 million from its execution of the FX Transaction for the Victim Company, including profits generated from the front running conduct by Johnson, Scott, and other traders whom they directed.

The investigation is being conducted by the FDIC’s Office of Inspector General and the FBI’s Washington Field Office.  Trial Attorney Melissa Aoyagi and Senior Litigation Counsel Carol Sipperly of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jacquelyn Kasulis of the Eastern District of New York’s Business and Securities Fraud Section are prosecuting the case.

The charges in the complaint are merely allegations, and the defendants are presumed innocent unless and until proven guilty.

The charges in this case were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.

MAN RECEIVES PRISON SENTENCE FOR ROLE TO DEFRAUD THE U.S. EXPORT-IMPORT BANK

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, June 9, 2016

Miami Man Sentenced to 144 Months in Prison for Role in Multimillion-Dollar Scheme to Defraud Commercial Lenders and U.S. Export-Import Bank

A Miami man was sentenced today to 12 years in prison for his role in a scheme to defraud two commercial lenders and the Export-Import Bank of the United States (EXIM Bank) out of more than $11 million.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida and Inspector General Michael McCarthy of EXIM Bank made the announcement.

Guillermo A. Sanchez-Badia, 61, was sentenced today by U.S. District Judge Joan A. Lenard of the Southern District of Florida, who also sentenced Sanchez-Badia to three years of supervised release and ordered him to forfeit $41,924,418 and pay $11,503,068 in restitution, joint with co-conspirators Isabel C. Sanchez and Gustavo Girol.  Sanchez-Badia pleaded guilty on March 21, 2016, to one count of conspiracy to commit wire fraud, one count of wire fraud and one count of conspiracy to commit money laundering.

Sanchez-Badia admitted that from 2007 through 2012, he and his co-conspirators utilized companies that they controlled to create fictitious invoices for sales of merchandise that never occurred.  These invoices were sold to two Miami-area commercial lenders in a process called “factoring,” which allowed the conspirators to receive cash for approximately 90 percent of the value of the merchandise listed on the fake invoices.  Sanchez-Badia admitted that, in order to continue the scheme, he and his co-conspirators created additional fictitious invoices, transferred the funds they received through numerous bank accounts under their control and, in a Ponzi-style scheme, used a portion of the new proceeds to pay off prior factored invoices.

Sanchez-Badia admitted that when the Miami lenders refused to extend further credit, he and his co-conspirators created false invoices and shipping documents to obtain a loan guaranteed by the EXIM.  Rather than acquiring, selling and shipping American manufactured goods as required for an EXIM guaranteed loan, Sanchez-Badia and his co-conspirators used the loan proceeds to pay off earlier factored invoices, thereby extending the scheme, and kept the balance of the loan proceeds for themselves, he admitted.  The factoring loans and the EXIM-guaranteed loan ultimately defaulted, causing losses of more than $9 million to the lenders and $2 million to the United States.

Five other individuals have been convicted for their roles in this scheme: Sanchez, 36, and Giral, 38, both of Miami, who await sentencing; and Freddy Moreno-Beltran, 43, of Bogota, Colombia.  Ricardo Beato, 62, of Miami, and Jorge Amad, 48, of Miramar, Florida, were separately charged, pleaded guilty and have been sentenced for their roles in the scheme.

The EXIM Office of Inspector General investigated the case.  Trial Attorney William Bowne and Senior Litigation Counsel Patrick Donley of the Criminal Division’s Fraud Section prosecuted the case.

LOBBYIST TO SERVE TIME FOR CRIME RELATED TO BRIBERY AND FRAUD SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, June 8, 2016

Ohio Lobbyist Sentenced to 15 Months for Extortionate Role in Conduit Campaign Contribution Scheme

An Ohio lobbyist was sentenced today to 15 months for engaging in extortion in connection with a bribery and fraud scheme involving conduit contributions to the campaigns of elected officials.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Benjamin C. Glassman of the Southern District of Ohio and Special Agent in Charge Angela L. Byers of the FBI’s Cincinnati Division made the announcement.

John P. Raphael, 61, of Columbus, Ohio, was sentenced by U.S. District Judge Michael H. Watson of the Southern District of Ohio.  Raphael pleaded guilty to a one-count information charging him with a violation of the Hobbs Act on Oct. 15, 2015.

According to the plea agreement, Raphael was a consultant and lobbyist based in Columbus.  From March 2005 to February 2013, a red light camera enforcement company engaged Raphael to seek and obtain lucrative contracts with the cities of Columbus and Cincinnati, he admitted.  During that time, according to admissions made in his plea, Raphael conveyed to the company specific solicitations for campaign contributions on behalf of elected officials in Columbus and Cincinnati, and repeatedly pressured and induced the company to make contributions by advising the company that it would lose its contracts if it did not.

Raphael admitted that as a result of his actions, the company made over $70,000 in campaign contributions, which were funneled through Raphael in his own name and in the names of his family members, friends and business associates.

Karen L. Finley, the former CEO of the red light camera vendor, previously pleaded guilty to conspiracy to commit federal programs bribery and honest services wire and mail fraud.

The FBI Cincinnati Division’s Columbus Resident Agency investigated the case with the assistance of IRS-Criminal Investigation and the Ohio Bureau of Criminal Investigation.  Trial Attorney Edward P. Sullivan of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney J. Michael Marous of the Southern District of Ohio are prosecuting the case.

TWO SENTENCED FOR ROLES IN FILING FALSE TAX RETURN CONSPIRACY

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, June 8, 2016

Mo Money Tax Return Preparers Sentenced to Prison for Conspiracy to Defraud the United States and Filing False Tax Returns

Two Memphis, Tennessee, area residents were sentenced to prison today for conspiring to defraud the United States and aiding and assisting in the preparation of false tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

Jeremy Blanchard, 35, and Erik Pittman, 35, both of Memphis, were sentenced to serve 70 and 33 months in prison, respectively, to be followed by three years and one year of supervised release, respectively.  Blanchard and Pittman previously pleaded guilty to one count of conspiracy to defraud the United States and one count of aiding and assisting in the preparation of false tax returns.  The defendants were ordered to pay $549,000 in restitution to the Internal Revenue Service (IRS).

“Mr. Blanchard and Mr. Pittman inflated the deductions and credits claimed on their clients’ income tax returns to line their own pockets at the expense of the U.S. Treasury,” said Acting Assistant Attorney General Ciraolo.  “Taxpayers seeking assistance with their returns should expect and are entitled to honest and accurate advice and representation.  When preparers seek to abuse our nation’s tax system for their own personal gain, the department stands ready with its law enforcement partners to investigate, prosecute and hold the offenders accountable for their criminal conduct to the fullest extent of the law.”

“While most tax return preparers provide excellent service to their clients, it only takes a few dishonest return preparers to give the industry a black eye,” said Special Agent in Charge Thomas Jankowski of the IRS-Criminal Investigation’s (CI) Washington, D.C., Field Office. “IRS-CI works year round to investigate dishonest return preparers and protect the American taxpayers’ money.  Return preparers must comply with the same tax obligations as the clients that they serve.  No one is above the law.”

According to court documents, Blanchard and Pittman were partners in a return preparation business, Mo Money Taxes, which operated three locations in the Richmond, Virginia, area.  Blanchard, Pittman and others prepared numerous false tax returns for their customers for the 2011 tax year.  Blanchard and Pittman admitted that they created and inflated fictitious and fraudulent tax credits, including the Earned Income Credit and the American Opportunity Credit, to claim tax refunds that customers were not entitled to receive.  Blanchard and Pittman admitted that their conduct caused a loss to the IRS of more than $250,000, but less than $550,000.

Another participant in this scheme, Corey Taylor, 25, of Richmond, was sentenced on March 22 to serve 20 months in prison for one count of conspiracy to defraud the United States and one count of aiding and assisting in the preparation of a false tax return.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Boente thanked special agents of IRS-CI, the FBI and the U.S. Postal Inspection Service, who investigated the case, and Trial Attorneys Kevin F. Sweeney and Todd P. Kostyshak of the Tax Division and Assistant U.S. Attorney Stephen Miller of the Eastern District of Virginia, who prosecuted the case.

MAN GETS SENT TO PRISON FOR 12 YEARS RELATED TO ATTEMPT TO JOIN ISIL

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, June 7, 2016

California Man Sentenced to 12 Years in Prison for Attempting to Join ISIL

Nicholas Michael Teausant, 22, of Acampo, California, was sentenced today by U.S. District Judge John A. Mendez of the Eastern District of California to 12 years in prison for attempting to provide material support to Islamic State of Iraq and the Levant (ISIL), a designated foreign terrorist organization, announced Assistant Attorney General for National Security John P. Carlin and Acting U.S. Attorney Phillip A. Talbert of the Eastern District of California.

According to court documents, on March 17, 2014, Teausant was arrested traveling to Canada, near the border, with the intent of continuing to travel to Syria to join ISIL.  On March 26, 2014, Teausant was indicted on one count of attempting to provide material support or resources to a terrorist organization.  He pleaded guilty to the single count in the indictment without a plea agreement.  In addition to the prison term, Judge Mendez also sentenced Teausant to 25 years of supervised release.

“With this sentence, Nicholas Michael Teausant will be held accountable for attempting to travel overseas to join ISIL and to provide material support to the designated terrorist organization,” said Assistant Attorney General Carlin.  “The National Security Division’s highest priority is countering terrorist threats, and we will continue to work to stem the flow of foreign fighters abroad and bring to justice those who attempt to provide material support to designated foreign terrorist organizations.”

“Mr. Teausant was fixated on violence as documented by his social media posts, his pre-arrest statements, and the nature of the group he attempted to join,” said Acting U.S. Attorney Talbert.  “His conduct was misguided and unacceptable.  We appreciate the court’s thoughtful consideration of this case and its recognition of the seriousness of the offense.  With the assistance of our investigative partners, we will continue to vigorously prosecute those who seek to provide material support to terrorist organizations.”

This case was the result of an investigation by the FBI; the Modesto, California, Police Department; and the San Joaquin, California, Sheriff’s Office, who are members of the Modesto/Stockton Joint Terrorism Task Force, with significant assistance from U.S. Customs and Border Protection.  The case is being prosecuted by Assistant U.S. Attorneys Jean M. Hobler and Jason Hitt of the Eastern District of California and Trial Attorney Andrew Sigler of the National Security Division’s Counterterrorism Section.

ANOTHER EXEC INDICTED FOR PRICE FIXING AND BID RIGGING RELATED TO OCEAN FREIGHT

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, June 7, 2016

Fourth Ocean Shipping Executive Indicted for Price Fixing and Bid Rigging

An ocean freight executive has been indicted for his participation in a long-running conspiracy to restrain trade in international ocean shipments of roll-on, roll-off cargo to and from the Port of Baltimore and elsewhere in the United States, the Department of Justice announced today.

A grand jury in the District of Maryland returned the indictment.  Mauricio Javier Garrido Garcia (Garrido), an executive of Compañia Sudamericana de Vapores S.A. (CSAV) and resident of Chile, is charged with allocating customers and routes, rigging bids and fixing prices for international ocean shipments of roll-on, roll-off cargo, including cars, trucks and construction and agriculture equipment.  Garrido is accused of participating in the conspiracy from as early as 2000 until at least September 2012.  An indictment is a formal charging document, and the defendant is presumed innocent until proven guilty in a court of law.

Garrido is the eighth executive to be charged in the investigation to date.  Four individuals have already pleaded guilty and been sentenced to prison and three others have been indicted but remain fugitives from justice.  CSAV and two other companies have also pleaded guilty and paid over $136 million in criminal fines.

“This long-running conspiracy restrained trade in one of the main channels of international commerce – the oceans,” said Principal Deputy Assistant Attorney General Renata B. Hesse, head of the Department of Justice’s Antitrust Division.  “Today’s indictment further demonstrates the division’s commitment to holding accountable ocean-shipping executives who participated in this scheme.”

“These charges brought today, and for the prior seven executives charged, outline a deceptive scheme to destabilize competition in the marketplace,” said Special Agent in Charge Kevin Perkins of the FBI’s Baltimore Division.  “Those who engage in this type of criminal activity with the intent on corrupting our economy will be identified and brought to justice.  To ensure we don’t erode the public’s trust in the competitive bidding process, the FBI will continue to work with the Antitrust Division to ensure the integrity of competition across all industries.”

Today’s charge is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the international roll-on, roll-off ocean shipping industry, which is being conducted by the Antitrust Division’s Washington Criminal I Section and the FBI’s Baltimore Division, with assistance from the U.S. Customs and Border Protection Office of Internal Affairs, Washington Field Office/Special Investigations Unit.

DOJ ISSUES DRAFT GUIDANCE REGARDING FORENSIC SCIENCE LAB REPORTS AND TESTIMONY

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, June 3, 2016

Justice Department Issues Draft Guidance Regarding Expert Testimony and Lab Reports in Forensic Science

The Justice Department announced today the release of draft guidance documents governing the testimony and reports of the department’s forensic experts.  These documents, available for public comment through July 8, are designed to ensure that department forensic experts only make statements in the courtroom and in laboratory reports that are supported by sound science.

The drafting of these proposed documents arose out of the department’s ongoing, multi-year effort to strengthen the practice of forensic science.  Once finalized and adopted, these documents, known as the Uniform Language for Testimony and Reports, will apply to all department personnel who issue forensic reports or provide expert forensic testimony, including forensic experts at the FBI, Drug Enforcement Administration (DEA) and Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF).

“Forensic science is a critical component of our criminal justice system, both for identifying the perpetrator of a crime and for clearing the innocent,” said Deputy Attorney General Sally Q. Yates.  “Once finalized and adopted, these guidance documents will clarify what scientific statements our forensic experts may – and may not – use when testifying in court and in drafting reports, in turn strengthening the integrity of our system overall.”

The proposed uniform language documents released today cover seven forensic science disciplines: body fluid testing (serology), drug and chemical analysis (general chemistry), fibers, foot prints/tire treads, glass, latent fingerprints and toxicology.  This summer, the department will release a second round of proposed documents for public comment, which will include draft guidance relating to DNA, explosive devices, hair analysis and handwriting.  The department expects to adopt final versions of these documents later this year.

Once finalized and adopted, the uniform language documents will only apply to department personnel, but the department decided to release the proposed documents for public comment in an effort to promote transparency and to solicit feedback from the broader forensic science community.  As today’s proposed documents make clear, the uniform language documents are not intended to serve as precedent for other forensic laboratories and do not imply that statements by other laboratories are incorrect, indefensible or erroneous.

MAN SENTENCED FOR TAX EVASION AND PILOTING PLANE WITHOUT A LICENSE

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, June 2, 2016

North Carolina Man Sentenced for Tax Evasion and Serving as a Pilot without a License

A North Carolina man was sentenced yesterday to 21 months in prison for tax evasion and four counts of serving as a pilot without an airman’s certificate, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Ripley Rand for the Middle District of North Carolina.

Paul Douglas Tharp, from 2012 through 2014, attempted to evade payment of an outstanding federal income tax debt by filing false documents, including false tax returns, with the Internal Revenue Service (IRS), according to court documents.  After Tharp failed to file tax returns for the years 2003 through 2006, the IRS assessed federal income taxes for those years.  In 2014, Tharp provided a false Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, signed under penalty of perjury, on which Tharp failed to report that he owned an airport and an investment firm and concealed his business bank accounts and rental income.  In 2012 and 2014, Tharp also filed tax returns for the 2011 through 2013 tax years on which he omitted significant income that he received from his airport and rental properties.

As part of his plea, Tharp also admitted that he served as a pilot without the required certification on four different occasions in 2012.  Tharp surrendered his pilot certificate on Aug. 2, 2012.  After that date, Tharp flew four flights in and out of Davidson County Airport in Lexington, North Carolina, without valid registration and while his pilot certificate was suspended.

In addition to his prison term, Tharp was ordered to pay restitution in the amount of $285,028.47 to the IRS.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Rand commended special agents of IRS-Criminal Investigation, who investigated the case and Assistant U.S. Attorney Anand Ramaswamy of the Middle District of North Carolina and Trial Attorney Nathan Brooks of the Tax Division, who are prosecuting this case.

FORMER DEUTSCHE BANK EMPLOYEES INDICTED FOR ROLES IN MANIPULATION OF INTEREST RATES

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, June 2, 2016

Two Former Deutsche Bank Employees Indicted on Fraud Charges in Connection with Long-Running Manipulation of Libor

Two former Deutsche Bank AG (Deutsche Bank) traders—the bank’s supervisor of the Pool Trading Desk in New York and a derivatives trader in London—were indicted for their alleged roles in a scheme to manipulate the U.S. Dollar (USD) London InterBank Offered Rate (LIBOR), a benchmark interest rate to which trillions of dollars in interest rate contracts were tied.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office made the announcement after the indictment was unsealed today.

On May 31, a federal grand jury in the Southern District of New York returned a 10-count indictment charging Matthew Connolly, 51, of Basking Ridge, New Jersey, and Gavin Campbell Black, 46, of London, with one count of conspiracy to commit wire fraud and bank fraud and nine counts of wire fraud for their participation in a scheme to manipulate the USD LIBOR rate in a manner that benefited their own or Deutsche Bank’s financial positions in derivatives that were linked to those benchmarks.  Connolly was taken into custody today and is expected to make his initial appearance this afternoon.  The case has been assigned to Chief U.S. District Judge Colleen McMahon of the Southern District of New York.

Michael Curtler, 43, of London, a former Deutsche Bank derivatives trader and manager of the London Money Market Derivatives (MMD) Desk in London, pleaded guilty in October 2015 to one count of conspiracy to commit wire and bank fraud in connection with his role in the scheme.

“This indictment charges two senior traders with manipulating LIBOR to gain an illegal advantage in the market,” said Assistant Attorney General Caldwell.  “Millions of people around the world rely on LIBOR and other global financial benchmarks as accurate and honestly-reported rates.  Manipulation of these rates undermines the integrity of our financial system and the Justice Department will continue to hold accountable both the financial institutions and the individuals responsible for this conduct.”

“Healthy financial markets are crucial to a successful economy,” said Deputy Assistant Attorney General Snyder.  “By corrupting this important benchmark rate, the defendants undermined the integrity of financial markets here and around the world.  The department is committed to holding individuals accountable for the roles they play in committing complex financial crimes.”

“These federal charges outline the alleged criminal actions perpetrated by two banking insiders to manipulate the LIBOR interest rate, which is used to set interest rates for consumer loan products, including mortgages and credit cards,” said Assistant Director in Charge Abbate.  “This indictment comes as a result of the dedicated and tireless efforts of agents, analysts and prosecutors committed to holding accountable those who deliberately compromise the integrity of our financial markets for personal gain.”

According to the indictment, LIBOR was an average interest rate, calculated based on submissions from leading banks around the world, reflecting the honest and unbiased rates those banks believed they would be charged if borrowing from other banks.  LIBOR was published by the British Bankers’ Association, a trade association based in London.  The published LIBOR “fix” for USD currency was the result of a calculation based upon submissions from a panel of 16 banks, including Deutsche Bank.

According to allegations in the indictment, Connolly was Deutsche Bank’s director of the Pool Trading Desk in New York, where he supervised traders who traded USD LIBOR-based derivative products.  Black was a director on Deutsche Bank’s MMD Desk in London, who also traded USD LIBOR-based derivative products.  In order to increase Deutsche Bank’s profits on derivatives contracts tied to the USD LIBOR, Connolly allegedly directed his subordinates, and Black allegedly asked Curtler and others at Deutsche Bank, to submit false and fraudulent LIBOR contributions consistent with the traders’ or the bank’s financial interests rather than the honest and unbiased costs of borrowing.

The charges in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

In April 2015, Deutsche Bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges and Deutsche Bank Group Services (UK) Limited pleaded guilty to one count of wire fraud, collectively agreeing to pay a $775 million fine, for the bank’s role in engaging in a scheme to defraud counterparties to interest rate derivatives trades by secretly manipulating USD LIBOR and other currencies submissions.

The Justice Department has previously announced resolutions with five other banks for their roles in manipulation of benchmark interest rates, including Barclays Bank PLC, UBS AG, The Royal Bank of Scotland plc, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. and Lloyds Banking Group plc.  The department has also charged 13 individuals as a result of this investigation.  Three of those individuals have pleaded guilty, two have been convicted at trial, and the charges against the others are pending.

Special agents, forensic accountants and intelligence analysts of the FBI’s Washington Field Office are conducting the investigation.  Senior Trial Attorney Carol L. Sipperly and Trial Attorneys Alison L. Anderson and Richard A. Powers of the Criminal Division’s Fraud Section and Trial Attorney Daniel M. Tracer of the Antitrust Division’s New York Office are prosecuting the case.  Fraud Section Deputy Chief Benjamin D. Singer and Assistant Chief Jennifer L. Saulino have also provided valuable assistance in this matter.

The investigation leading to this case has required, and has greatly benefited from, a diligent and wide-ranging assistance among various enforcement agencies both in the United States and abroad.  In particular, the department acknowledges and expresses its appreciation for this assistance from the Commodity Futures Trading Commission’s Division of Enforcement, the U.K. Financial Conduct Authority and the U.K. Serious Fraud Office.  More than 20 individuals have been charged by the U.K. Serious Fraud Office for their roles in engaging in benchmark rate manipulation.

This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.

TWO IRS, SSA SCAMMERS SENT TO PRISON

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, May 31, 2016

Virginia Couple Sentenced to Prison in Tax Fraud Scheme

Defendants Submitted False Information to the IRS and Social Security Administration

Two Bedford, Virginia, residents were sentenced to prison today for criminal offenses arising out of a four-year scheme to defraud the Internal Revenue Service (IRS) and the Social Security Administration, announced Acting Assistant Attorney General Caroline D. Ciraolo and U.S. Attorney John P. Fishwick Jr. of the Western District of Virginia.

Edgar Foxx, 50, and Contina Foxx, 42, were sentenced to prison terms of 41 months and 30 months, respectively, by U.S. District Judge Norman K. Moon of the Western District of Virginia following their convictions by a Lynchburg, Virginia, jury for criminal tax offenses.  Judge Moon also ordered the defendants to pay $147,708 in restitution and serve three years of supervised release following their release from prison.

“Our nation’s tax system relies upon citizens to truthfully, accurately and timely report their income to the IRS,” said Acting Assistant Attorney General Ciraolo.  “When people like Mr. Foxx fail to file their income tax returns or file false tax returns and fail to pay the taxes they owe, and when individuals like Mrs. Foxx submit false information to government agencies in order to obtain benefits, they take advantage of, and plane an undue burden on, honest taxpayers who pay their fair share.  The Justice Department stands ready to prosecute these offenders and hold them accountable for their crimes.”

“Every year, millions of Americans file their taxes and fulfill their civic obligation,” said U.S. Attorney Fishwick.  “They must be able to do this knowing the process is safe and reliable.  When individuals fail to pay their obligations the entire system suffers.  We are proud to work with the Tax Division on holding accountable those who attempt to defraud the tax system.”

“Federal income tax compliance should be equally shared among all Americans,” said Special Agent in Charge Thomas Jankowski for IRS-Criminal Investigation’s (IRS-CI) Washington DC Field Office.  “IRS-CI will continue focusing investigative efforts on individuals who contribute to the tax gap and do not comply with the law.  Today’s sentencing is a reminder that there are detrimental consequences for this type of criminal behavior.”

Edgar and Contina Foxx were convicted on Nov. 6, 2015, following a four-day trial before Judge Moon. Edgar Foxx was convicted of filing a false 2008 income tax return, failing to file his 2009 through 2011 tax returns and theft of government money.  Contina Foxx was also convicted of theft of government money as well as providing a false statement for health care benefits.  According to evidence introduced at trial and witness testimony, the Foxxes, who are married to one another, owned and operated a metal recycling business between 2008 and 2012.  They gathered scrap metal materials including junk cars and old appliances and sold them to recycling facilities in Southwest Virginia and Tennessee.  During the 2008 through 2011 time period, the Foxxes received over $500,000 in payments from several metal recycling companies, and failed to report any of this income on their 2008 through 2011 individual income tax returns.  At the same time, Contina Foxx provided false information to the Social Security Administration by failing to disclose the income earned from the metal recycling business.  As a result, the Foxxes unlawfully received approximately $80,000 in Medicaid benefits between 2010 and 2012.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Fishwick commended special agents of IRS-Criminal Investigation, the Office of Inspector General for the Social Security Administration, the Office of Inspector General for the Department of Health and Human Services, the Bedford Department of Social Services and the Bedford County Sheriff’s Office, who investigated the case and Assistant U.S. Attorneys Patrick Hogeboom and Charlene Day of the Western District of Virginia and Trial Attorney Joseph M. Giannullo of the Tax Division, who prosecuted the case.