The following excerpt is from the Department of Justice website:
"Statement of Acting Assistant Attorney General Sharis A. Pozen Before the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet
Washington, D.C. ~ Wednesday, December 7, 2011
Good morning Chairman Goodlatte and members of the Subcommittee. It is a pleasure for me to appear before you today on behalf of the Department of Justice. I am honored to serve as Acting Assistant Attorney General for the Antitrust Division and to work with the talented Antitrust Division staff to ensure that consumers and businesses are protected from violations of the antitrust laws. When the Attorney General announced that he had selected me to lead the division, he said it would be a seamless transition, and that has been my focus—continued, vigorous enforcement of the antitrust laws, as well as transparency and certainty for consumers and business.
I thank you for this opportunity to highlight the Antitrust Division’s accomplishments, answer your questions about our work, and listen to your views about enforcement of the antitrust laws. We appreciate this Committee’s active interest in and strong support of our law enforcement mission.
Competition is an important cornerstone of our nation’s economic foundation. Vigilant antitrust enforcement preserves and protects competition and delivers American consumers lower prices, higher quality goods, and more innovation. The Antitrust Division undertakes this vigilance using a measured approach that relies on sound competition and economic principles. We galvanize the tremendous skills of our lawyers and economists to evaluate each matter carefully, thoroughly, and in light of its particular facts.
The pillars of the division’s work are civil merger and non-merger enforcement, criminal enforcement, competition advocacy, and international activities and we have been active in all those areas. Each is critical; and combined, they ensure consumers and businesses benefit from innovative, high-quality goods at low prices. Through its work, the division has addressed anticompetitive conduct that harms consumers and stymies innovation in industries of crucial importance, including transportation, communications, technology, health care, energy, and financial services, among others.
Merger Enforcement
Efficient and effective merger review and enforcement is a core priority for the Antitrust Division. Indeed, to many Americans merger enforcement is how they know the Antitrust Division. Since the last time the antitrust agencies appeared before this Subcommittee, the division increased its merger activity as represented by investigations and concomitant enforcement actions. In Fiscal Year 2011, merging parties submitted 1,450 Hart-Scott-Rodino (HSR) filings to the Agencies, an increase of approximately 25% over Fiscal Year 2010, in which parties made 1,166 filings.
When we review HSR filings, the division identifies those transactions that raise no competitive issues and lets those proceed as quickly as possible. We then focus our resources on transactions that may harm competition. Just as consumers rely on us to protect them against harmful business combinations, businesses can rely on the division to get to the right decision quickly and efficiently, allowing them to move forward with lawful transactions.
Many proposed transactions do not pose a threat to competition and the division is able to determine quickly that no further action is currently warranted. Fiscal Year 2011 was no different in that regard; the division allowed 98% of the transactions it reviewed to clear its process without requesting any further information from the parties. In the remaining 2% of matters, the division identified potential competitive concerns and requested additional information from the parties to determine if the transaction posed a threat to competition.
From this limited group of transactions, the division identified those transactions that it determined required enforcement action. In many of these matters, the parties proposed remedies that the division agreed would solve the competitive problem it had identified. In those cases, the division entered into a consent decree with the parties that will effectively preserve competition in the relevant markets while allowing the transaction to proceed. In other cases, in which the parties did not propose remedies that would effectively preserve competition, the division went to court to block the transaction. Indeed, our record since former Assistant Attorney General Christine Varney last appeared before the Subcommittee demonstrates the division’s commitment to moving swiftly to bring enforcement actions against transactions that would harm competition when an effective remedy has not been offered by the parties.
Among these actions is the division’s recent win of its first merger case litigated to a favorable court decision since 2003. The division filed a civil antitrust lawsuit on May 23, 2011, to prevent H&R Block from acquiring TaxACT, a digital, do-it-yourself tax preparation provider. The division alleged that TaxACT had competed aggressively with H&R Block and disrupted the relevant market through low pricing and product innovation. The transaction would have left American taxpayers with only two major digital, do-it-yourself tax preparation providers, likely leading to higher prices, lower quality products, and less innovation. The United States District Court for the District of Columbia agreed with the division’s assessment of this deal, ruling in the division’s favor on October 31 with a finding that the proposed transaction violated Section 7 of the Clayton Act. The parties have since announced they would abandon their transaction and would not appeal the court’s decision. This decision marks an important victory by the division on behalf of the American people.
Another notable case that remains in active litigation is our lawsuit to block AT&T Inc.’s proposed acquisition of T-Mobile USA Inc. The division filed its complaint in the U.S. District Court for the District of Columbia on August 31, 2011. While I cannot get into the details of this pending court matter, I can say that, as articulated in our complaint, this transaction, if consummated, would substantially reduce competition in mobile wireless telecommunications services across the United States, resulting in higher prices, less innovation, and lower-quality service in an industry important to millions of American consumers.
In May of this year, the division filed suit to block George’s Incorporated’s acquisition of a Tyson Foods poultry processing plant in Harrisonburg, Virginia. The division determined that the transaction would have had the anticompetitive effect of reducing the prices paid to Shenandoah Valley area farmers who raise chickens for processors such as George’s and Tyson. After the division filed suit, George’s proposed an acceptable settlement agreement, which requires George’s to make capital improvements to the Harrisonburg plant which will enhance the competitive viability and increase the production of that poultry processing plant. This competition translates into more opportunities for farmers to grow and process poultry.
The division also filed suit to block VeriFone Systems’ acquisition of Hypercom, a transaction that would have harmed competition in the sale of point-of-sale terminals. The division moved to block this transaction after the parties proposed a divestiture to the only other significant provider of POS terminals, which we determined would not remedy the competitive concerns associated with the merger. Shortly after the filing of the lawsuit, on May 20, 2011, VeriFone and Hypercom entered into settlement negotiations with the division, and in August the parties reached a settlement that requires divestiture of Hypercom’s U.S. point-of-sale terminals business to a buyer that preserves competition.
In many other matters that the division determined required enforcement action, the division and the parties avoided litigation through tailored remedies that the division agreed would solve the competitive problems it had identified. In those cases, the division entered into consent decrees with the parties that will effectively preserve competition in the relevant markets while allowing the transaction to proceed.
Just last month, the division settled a challenge to an agreement between Blue Cross Blue Shield of Montana and five of six Montana hospitals that own New West Health Services, a health insurer that competes with Blue Cross in Montana. Under the agreement, Blue Cross had proposed to pay $26 million to the hospital defendants in exchange for those hospitals agreeing collectively to stop purchasing health insurance from New West for their own employees and to purchase it instead exclusively from Blue Cross for a period of six years. The division determined that such an agreement would substantially reduce, and perhaps eliminate, New West’s ability to compete in the sale of commercial health insurance by signaling that New West was likely to exit the market. The consent decree permits the defendants to proceed with their agreement, but requires both the divestiture of New West’s commercial health insurance business and that the defendant hospitals contract with the buyer of the divested insurance business, as well as other injunctive relief. The division determined that this remedy will preserve competition in the sale of commercial health insurance in the affected Montana markets.
The division’s settlement with Comcast and NBC Universal is another example. As proposed, this transaction would have blunted NBC’s incentive to distribute programming to Comcast’s video distribution rivals, and could have caused Comcast’s rivals and their customers to face higher prices for that content. The division concluded that Comcast’s rivals need access to NBC’s content, including the NBC broadcast network, to compete effectively against Comcast. The Federal Communications Commission (FCC) also had jurisdiction to review the transaction, and we coordinated closely with them throughout our investigation. Through this coordination, we worked closely with the FCC to reach an efficient and effective resolution to the transaction’s competitive issues, and to achieve complementary results across the agencies that should yield consistent and thorough enforcement of pro-competitive decree conditions. For example, the FCC order requires the joint venture to license NBC content to Comcast’s cable, satellite, and telephone competitors, making it unnecessary for the division to impose those same requirements.
Under the settlement with the division, the Comcast/NBC Universal joint venture must make available to online video distributors (OVDs) the same package of broadcast and cable channels that it sells to traditional video programming distributors. In addition, the joint venture must offer OVDs broadcast, cable, and film content that is similar to, or better than, the content these distributors receive from any of the joint venture’s programming peers, including NBC’s broadcast competitors, the largest cable programmers, and the largest video production studios. In the event of a licensing dispute between the joint venture and an OVD, the division may seek court enforcement of the settlement or permit, in its sole discretion, the aggrieved OVD to pursue a commercial arbitration procedure established under the settlement. In addition, the decree prohibits Comcast from retaliating against any broadcast network, cable programmer, production studio, or content licensee for licensing content to a competing cable, satellite, or telephone company or OVD. Further, Comcast must relinquish its management rights in Hulu, an OVD, and continue to make NBC content available to Hulu that is comparable to content Hulu obtains from Disney and News Corp. Finally, in accordance with recently established Open Internet requirements, the decree prohibits Comcast from unreasonably discriminating in the transmission of an OVD’s lawful network traffic to a Comcast broadband customer
Another example of a matter in which the division agreed to a tailored remedy that addressed its competitive concerns was Google’s acquisition of ITA software. ITA’s software powers airfare search engines for travel websites. The division was concerned that the proposed transaction would threaten competition among airfare comparison and booking websites. To safeguard competition in this arena, the decree requires that Google continue to license ITA’s QPX software to airfare websites on commercially reasonable terms and continue to fund research and development of that product at least at levels similar to what ITA had invested in recent years. In addition, the decree requires that Google further develop and offer ITA’s next generation InstaSearch product to travel websites. Further, Google must implement firewall restrictions within the company to prevent unauthorized use of competitively sensitive information and data gathered from ITA’s customers. Google also is barred from entering into agreements with airlines that would inappropriately restrict the airlines’ right to share seat and booking class information with Google’s competitors. The settlement establishes a formal reporting mechanism for complaints if Google acts unfairly.
A key component included in some of the NBCU/Comcast, Google/ITA and other settlements is compliance monitoring. For that we established, over a year ago, an Office of General Counsel, led by a long-term career attorney who has been a leader at the division. The Office of General Counsel, among other things, works closely with others around the division to ensure compliance with conduct provisions in division consent decrees.
While many of the matters in which the division identified a competitive problem were resolved with a tailored consent decree, in some instances the division’s decision to pursue an enforcement action led the parties to abandon their transaction. For example, the NASDAQ OMX Group and IntercontinentalExchange abandoned their joint bid to acquire NYSE Euronext, which owns the New York Stock Exchange, after the division informed them that it planned to file suit to block the deal. The division’s investigation showed that the transaction would have substantially eliminated competition for a number of important services, including corporate stock listing services.
As I noted, the division is committed to expeditiously assessing and closing investigations where we determine no further action is warranted. For instance, the division closed its investigation into the merger of UAL Corporation, the parent of United, and Continental, after the parties announced an agreement to transfer 36 slots (i.e., takeoff and landing rights) to low-cost carrier Southwest Airlines Co., which resolved the division’s principal concerns with the merger and also created potential benefits to consumers on a number of routes where entry had been unlikely. After thorough investigations, the division also closed its investigations into Microsoft’s acquisition of Skype and Southwest Airlines’ acquisition of AirTran.
The division also seeks continually to improve transparency in merger enforcement. In June 2011, the division released an updated version of the Antitrust Division’s Policy Guide to Merger Remedies. The policy guide is a tool for division staff to use in analyzing proposed remedies in its merger matters, and also provides clarity to the outside world as to the division’s approach to merger remedies.
It has been just over a year since the division and the Federal Trade Commission (FTC) released their revised 2010 Horizontal Merger Guidelines, and that too has been a great help in making the agencies’ processes more transparent for the benefit of merging parties, the antitrust community, and the general public. As the Guidelines explain, and as the division’s cases over the past year and a quarter demonstrate, we continue to apply traditional merger analysis techniques to our matters, including defining relevant markets, looking at all measures of market power, analyzing barriers to entry, and reviewing claimed transaction efficiencies. In addition, from the outset of every matter, the division is open with the parties about our theories of competitive harm, continually keeping parties aware of any concerns as investigations develop and are always willing to listen to the parties’ theories about why a transaction should pass muster.
Civil Non-Merger Enforcement
Another important foundation is the division’s civil non-merger enforcement efforts, through which we vigilantly police the nation’s markets against the many types of conduct that threaten competition and harm American consumers. For example, the division sued the major credit card companies—Visa, MasterCard, and American Express—to challenge rules those companies imposed on merchants prevent merchants from offering discounts to consumers for using a particular brand of card and stifling inter-brand competition among card networks. The division settled that matter with Visa and MasterCard, which agreed to end their imposition of merchant restrictions. Our case against American Express is ongoing.
In another ongoing matter, the division has gone to court to stop Blue Cross Blue Shield of Michigan’s use and enforcement of “most favored nations” clauses in its contracts with Michigan hospitals. We believe that these MFNs distort the competitive process by ensuring that Blue Cross’ competitors cannot obtain hospital services at prices comparable to what Blue Cross pays and by increasing the prices its competitors must pay for those services. The district court recently denied Blue Cross’ motion to dismiss this case, issuing an opinion agreeing with the division’s arguments opposing the motion. Blue Cross is seeking an interlocutory appeal of that decision to the Sixth Circuit, which we have opposed.
In another health care matter, the division challenged a Texas hospital’s use of exclusionary contracts with health insurers to maintain market power in its local market. This marked the first case brought by the division since 1999 challenging a monopolist with engaging in traditional anticompetitive unilateral conduct. United Regional Health Care System of Wichita Falls had entered into a number of contracts with insurers that imposed a significant pricing penalty on those insurers if they contracted with a competing facility in the local region. The impact of these contracts was to slow or prevent expansion and entry by other health care providers, likely leading to higher insurance premiums and health care costs in the Wichita Falls area. After the division challenged these practices, United Regional agreed to enter into a consent decree that prohibits it from engaging in a range of contracting practices that unlawfully hinder its rivals’ ability to compete.
Already, in Fiscal Year 2012, we have reached a settlement in another civil non-merger challenge, which, if approved, will require financial services company Morgan Stanley to disgorge $4.8 million to settle charges that it entered into an anticompetitive agreement with KeySpan Corporation that restrained competition in the New York City electricity capacity market. KeySpan paid $12 million in disgorgement in an earlier settlement with the division that was approved by the court and that established that disgorgement is available as a remedy under the Sherman Act.
These cases demonstrate that the division is carefully monitoring business conduct across a range of critical industries and that, when we discover anticompetitive conduct, we are ready and willing to go to court to put a stop to it.
Criminal Antitrust Enforcement
Another key priority for the division is criminal enforcement of the antitrust laws. Our criminal enforcement program remains busy and successful. In Fiscal Year 2011 the division filed 90 criminal cases (up from 60 cases in FY 2010) and obtained over $520 million dollars in criminal fines, which is roughly the same amount obtained as in FY 2010. In these cases, we charged 27 corporations and 82 individuals, and courts imposed 21 jail terms totaling 10,544 days of jail time. These cases and the underlying investigations were brought in a range of important industries, including real estate, auto parts, and financial services, to name a few.
For example, the division has been conducting an international cartel investigation into price-fixing and bid-rigging in the auto parts industry. This investigation, which is ongoing, already has resulted in one corporate and three individual guilty pleas, $200 million in fines, and three separate jail terms for executives involved in a conspiracy to rig bids and fix prices for automotive parts. As described in the information filed in this matter’s Furukawa case, this was hard core, pernicious price fixing that could only have resulted in inflated prices on the parts that are found in every American consumer’s car.
During the past year the division, along with other federal agencies, also has been investigating criminal conspiracies involving bid-rigging in the municipal bond investments market. As a result of that investigation, JPMorgan Chase entered into an agreement with the division to resolve its role in a conspiracy and agreed to pay a total of $228 million in restitution, penalties, and disgorgement to federal and state agencies. Earlier in the year, UBS AG agreed to pay a total of $160 million in restitution, penalties, and disgorgement as a result of this investigation, and Bank of America previously agreed to pay $137.3 million. The investigation into the municipal bonds industry is ongoing and is being conducted by the division, the FBI and the Internal Revenue Service (IRS)-Criminal Investigation division. The division is coordinating this investigation with the Securities Exchange Commission (SEC), the IRS, the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank of New York, and 25 State Attorneys General.
In the real estate industry, the division continues its investigations into bid rigging conspiracies at public real estate foreclosure auctions and tax lien auctions. With the help of the FBI, we have ferreted out the ways participants were coordinating their bids in these auctions. For example, we have brought charges against a number of individuals who, at real estate foreclosures, conspired with other real estate speculators not to bid at certain auctions, with the purpose of suppressing and restraining competition and obtaining selected real estate at non-competitive prices. As a result of real estate foreclosure and tax lien investigations, to date, 32 defendants have pleaded guilty to conspiracies that suppress and restrain competition in ways that harm our communities and already-financially distressed homeowners.
The division’s criminal investigations and cases have focused on a variety of other industries important to American businesses and consumers, including air transportation services, freight forwarding, and liquid crystal display (LCD) panels. The division’s air transportation services investigation is an example of the division’s focus on the investigation and prosecution of large international cartels that inflict massive harm on consumers and the American economy. Collusion in the air transportation industry affected billions of dollars of U.S. commerce and affected shipments for products used by businesses and consumers every day, including electronics, produce, medicines, textiles, and heavy equipment. As a result of the division’s efforts to date, a total of 22 airlines and 21 executives have been charged for their involvement in cartels in the air cargo and air passenger industries. More than $1.8 billion in criminal fines have been imposed, and four executives have been sentenced to serve prison time. Charges are pending against 17 executives.
In a related industry, freight forwarding, the division’s investigation is focused on illegal agreements to fix the various fees and surcharges imposed on consumers for shipments of goods to the United States from numerous foreign countries, including Germany, Switzerland, the United Kingdom, and China. The charges that were fixed include peak season surcharges imposed during the period before the Christmas holiday shopping season in the United States. The conspirators agreed to impose these peak season surcharges and agreed on the approximate amount and timing of the surcharges. The freight forwarding investigation has resulted in charges against 13 companies for price fixing on freight forwarding services on air cargo shipments. All 13 companies have agreed to plead and to pay criminal fines totaling nearly $100 million.
The division’s LCD investigation involves collusion in yet another critical consumer industry, TFT-LCD panels. TFT-LCD panels are used in computer monitors and notebooks, televisions, mobile phones and other electronic devices. By the end of the period of the conspiracy under investigation by the division, the worldwide market for sales of TFT-LCD panels was valued at $70 billion. Companies directly affected by the LCD price-fixing conspiracy are some of the largest computer and television manufacturers in the world, including Apple, Dell and Hewlett Packard. As a result of the division’s investigation to date, seven companies have pleaded guilty and have been sentenced to pay criminal fines totaling nearly $900 million. Additionally, 22 executives have been charged to date, ten of whom have been sentenced to serve a total of more than seven years of prison.
The division’s criminal investigations have put a stop to conduct that harmed competition in some of our most important industries and that hurt American municipalities and consumers. The Department thanks this Subcommittee for leading the effort to preserve incentives for corporations to self-report such criminal antitrust violations by extending the division’s Leniency program’s detrebling provisions through a ten-year reauthorization.
The Leniency Program has become one of the Department’s most successful voluntary disclosure programs and the Antitrust Division’s most effective criminal investigative tool, having led to the detection of numerous large international cartels that have targeted U.S. businesses and consumers. The division encourages firms to establish and maintain effective antitrust compliance programs, thoroughly instructing employees about the requirements of the antitrust laws and setting up internal controls protecting against cartel activity.
The division’s cartel cases demonstrate that the division’s criminal matters continue to grow in size and complexity, both domestically and internationally. Larger teams of attorneys and support staff are needed to review and challenge matters that increasingly span the nation or the world. As our criminal workload evolves, the division intends to evolve with it and is seeking ways to harness more effectively and efficiently the division’s criminal resources to meet these evolving challenges. The division fully expects to continue providing the government and American public with protection from civil and criminal antitrust violations, including maintaining its track record of annual criminal fines in the hundreds of millions of dollars.
As part of Attorney General Eric Holder’s call for cost-cutting measures to streamline operations and reduce spending, the Department of Justice sent a proposal to Congress that would consolidate four of the division’s field offices into our remaining offices. That proposal provides for jobs and moving expenses to our affected employees and up to a year’s severance and health benefits to those, who for whatever reason, cannot move. The primary purpose of the reorganization is to realign the Division’s field office structure to meet most efficiently and effectively the requirements of its evolving workload in a fiscally constrained environment. Let me be clear—vigorous criminal antitrust enforcement both domestically and internationally will continue. The criminal program remains a priority in which we have and will continue to invest significant resources.
Competition Advocacy
The division promotes competition principles through its advocacy efforts. Our competition advocacy program increases awareness and understanding of the importance of competition and healthy markets among both federal and state governments and regulators, the courts, the antitrust bar, the business community, and international jurisdictions. As with our enforcement mission, we focus our advocacy efforts on industries and sectors that are important to American’s everyday lives, such as health care, agriculture, and finance.
This past year has been an active one for our advocacy program. In the health-care arena, the division worked closely with the Federal Trade Commission (FTC), the U.S. Department of Health and Human Services, and other federal agencies to ensure that sound competition principles will help guide reform, encouraging innovation in health-care delivery systems while preserving competitive markets. As part of this effort, the division is working with the Center for Medicare and Medicaid Innovation and its parent entity, the Centers for Medicare and Medicaid Services, to ensure that the creation of Accountable Care Organizations (ACOs) or other innovative health care delivery systems does not result in price-fixing or anticompetitive consolidation among providers. The division and the FTC released a joint Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, which provides valuable guidance to healthcare providers interested in forming procompetitive ACOs that participate in the Medicare and commercial markets.
As a key part of the division’s work to protect competition in agriculture industries, the Department of Justice and the U.S. Department of Agriculture (USDA) conducted a successful series of workshops in 2010, held in locations around the United States, to discuss competition and regulatory issues in these industries. The joint competition workshops allowed officials from both agencies to listen and learn from farmers, ranchers, cooperatives, processors, and retailers while further solidifying a strong working relationship. Through new efforts such as the Agriculture Competition Joint Task Force, which consists of USDA staff and attorneys from DOJ’s Antitrust and Civil division, USDA and DOJ have been able to explore new opportunities for harnessing each other’s expertise and improving enforcement of laws designed to protect producers. By taking advantage of the resources available to each entity, the Task Force has already begun streamlining the process for considering producer complaints, has analyzed possible legal theories to address producer concerns, and provided assistance to USDA on proposed regulations.
Thanks to the workshops, we gained a more complete and detailed understanding of the agriculture sector. This understanding will better ensure that farmers, processors, and consumers reap the benefits of competitive agricultural markets. This keener appreciation of the dynamics of agricultural markets has already proven valuable to the division’s enforcement work, such as our challenge to the proposed acquisition by George’s of a Tyson’s processing plant and our merger challenge to Dean’s acquisition of Foremost, which settled after a year of litigation. Going forward, the division will continue to build on this foundation to further improve its enforcement in the agriculture sector and to reap the benefits of increased cooperation with USDA.
In the financial services sector, the division filed comments in December 2010 on rules proposed by the (SEC) and the Commodity Futures Trading Commission regarding implementation of the derivatives title of the Dodd-Frank financial reform law, seeking to ensure that competition was safeguarded in this important sector.
Global Antitrust Enforcement and Policy
Not only is the division championing consumers and competition domestically, but we also are actively engaging with the global antitrust community, which has increased as the scope of international business operations has grown. Today, roughly 120 competition agencies enforce competition laws, including new agencies in China and India, and it is becoming increasingly common for many agencies to investigate the same matter. We recognize that the decisions of one competition agency can affect consumers and businesses elsewhere and have sought to more fully integrate the consideration of international issues into the Antitrust Division’s day-to-day investigation and policy work. This has meant intensifying the division’s cooperative relationships with other competition agencies and encouraging our staffs to be mindful of the international implications of our actions from the start of an investigation through the remedial phase.
Cooperation with our international counterparts is at an all-time high on enforcement matters. Virtually every day the division is in close contact with its counterparts all around the world on a variety of matters, including both investigations and policy matters. For example, with waivers from the parties, the division worked closely with the German Federal Cartel Office on an investigation into the acquisition of certain patents and patent applications from Novell by CPTN, marking the first significant merger enforcement cooperation the division had with Germany in twenty years. And, leading up to the division’s complaint and consent decree involving Unilever and Alberto-Culver Co., also with party waivers, we were aided by discussions with our counterparts in Mexico, the United Kingdom, and South Africa abut product markets and competitive issues that varied over the different jurisdictions affected by the merger. In addition, extensive international cooperation has taken place in our criminal investigations, including the on-going auto parts, refrigerant compressor, and liquid crystal display (LCD) global cartel investigations.
Other recent accomplishments include a Memorandum of Understanding (MOU) that the division and the FTC signed with all three competition agencies in China on July 27, 2011. The MOU outlines the commitment of these five agencies to work together when we can and creates a framework for enhanced cooperation among our agencies.
In October 2011, the division, FTC, and the European Commission issued an updated set of Best Practices on Cooperation in Merger Investigations for use in coordinating our merger reviews. October also marked the 20th anniversary of our bilateral cooperation agreement with the EC, an on-going success story marked by consistent enforcement policies directed at the goal of promoting consumer welfare.
The division is an active participant and leader in international competition groups, including the Organization for Economic Co-operation and Development (OECD), the International Competition Network (ICN), the United Nations Conference on Trade and Development (UNCTAD), as well as international competition agencies, to promote competition and consumer interests across the globe. The division and the Italian and Irish Competition Authorities currently co-chair the ICN’s Merger Working Group and the division is closely involved with all aspects of OECD’s competition work.
Since 2009, the division has led the global dialogue on procedural fairness and transparency issues. The OECD Competition Committee’s working party on enforcement and cooperation, of which I was elected chair in October, held a roundtable discussion in October focused on recent developments, highlighting concrete steps that many competition authorities around the world have taken to ensure the transparency of their investigations. The OECD’s Competition Committee also has addressed a wide range of other important issues over the past year, such as the use of economic evidence in merger analysis, quantification of harm in antitrust cases, information exchanges, standard setting, bid rigging, and merger remedies. The division filed papers and commented actively in these and other discussions.
The Antitrust division continues to look for ways to deepen our collaboration with our counterparts. In November, a senior division attorney completed two weeks working in the European Commission’s Directorate-General for Competition (DG Comp), and we currently are hosting a DG Comp attorney for two weeks. The exchange is part of our new Visiting International Enforcers Program, which we call VIEP. This program builds on our existing relations and takes the division to a new phase of effective cooperation with the participating jurisdictions.
Conclusion
I emphasize in closing that none of what I have discussed could have been accomplished without the dedicated men and women of the Antitrust Division. It is because of their experience, talent, and dedication to the mission of protecting consumers that we have been able to achieve the successes we have. It is an honor and privilege to serve with them.
Given the important role we assign to competition in our nation’s economy, the Antitrust division must be a vigorous, formidable, and effective enforcer of our laws to ensure that the competitive playing field is open and fair, giving consumers more and better choices. While I am pleased with all that we have accomplished thus far, the hallmark of any successful organization is continued improvement. In that regard I look forward to working with the members of this Subcommittee and your respective staff.
Saturday, December 31, 2011
Friday, December 30, 2011
GARLAND SALES INC., SETTLES DISCRIMINATION ALLEGATIONS WITH DOJ
The following excerpt is from the Department of Justice website:
“December 30, 2011
“WASHINGTON – The Justice Department announced a settlement today with Garland Sales Inc., a Georgia rug manufacturer, resolving allegations that it engaged in discrimination by imposing unnecessary documentary requirements on individuals of Hispanic origin when establishing their eligibility to work in the United States, and that it retaliated against a worker for protesting his discriminatory treatment. According to the settlement, Garland has agreed to pay $10,000 in back pay and civil penalties, and to undergo training on proper employment eligibility verification practices.
In its complaint, the department alleged that the charging party, a naturalized U.S. citizen of Hispanic descent, applied for a job with Garland in May 2009. At the time of hire, he presented his unexpired driver’s license and an unrestricted Social Security card—a combination of documents sufficient to prove his identity and his authorization to work in the United States. The complaint alleged that Garland demanded that the he provide his “green card,” even though U.S. citizens do not have green cards. After Garland made further requests for documents, the worker objected to the company’s demands, and Garland then rescinded the job offer. The worker, along with another individual who was denied employment with Garland when the company rejected the individual’s valid documentation, will receive full back pay out of the $10,000 settlement.
The department’s complaint also alleged that Garland required newly hired non-U.S. citizens and foreign-born U.S. citizens to present specific and additional work authorization documents beyond those required by federal law. The Immigration and Nationality Act (INA) requires employers to treat all authorized workers in the same manner during the hiring process, regardless of their national origin or citizenship status.
“Employers may not treat authorized workers differently during the hiring process based on their national origin or citizenship status,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “It is also illegal when employers take action against workers for asserting their federally protected rights, and that type of behavior will be vigorously investigated and prosecuted.”
12 OHIO RESIDENTS INDICTED FOR ASSAULTS ON THE AMISH
The following excerpt is from the Department of Justice website:
December 20, 2011
WASHINGTON - The Justice Department announced today that a federal grand jury in Cleveland returned a seven-count indictment charging 10 men and two women, all residents of Ohio, with federal crimes arising out of a series of religiously-motivated assaults on practitioners of the Amish religion. The indictment addresses five separate assaults that occurred between September through November 2011. In each assault, defendants forcibly removed beard and head hair from the victims with whom they had ongoing religious disputes. As set forth in the indictment, the manner in which Amish men wear their beards and Amish women wear their hair are symbols of their faith.
“Every American has the right to worship in the manner of his or her choosing without fear of violent interference,” said Assistant Attorney General for the Civil Rights Division Thomas E. Perez. “The Civil Rights Division will aggressively investigate allegations of religiously motivated violence.”
“For nearly 500 years, people have come to this land so that they could pray however and to whomever they wished,” said U.S. Attorney for the Northern District of Ohio Steven M. Dettelbach. “Violent attempts to attack this most basic freedom have no place in our country.”
“One of our most fundamental rights is freedom of religion,” said Stephen Anthony, Special Agent in Charge of the FBI – Cleveland Field Office. “The FBI, along with our law enforcement partners, are committed to protecting this fundamental right against those who would use violence and intimidation to attack it.”
The indictment charges Samuel Mullet Sr., Johnny S. Mullet, Daniel S. Mullet, Levi F. Miller, Eli M. Miller, Emanuel Shrock, Lester Miller, Raymond Miller, Freeman Burkholder, Anna Miller and Linda Shrock with conspiracy to violate the Matthew Shepard-James Byrd Hate Crimes Prevention Act, which prohibits any person from willfully causing bodily injury to any person, or attempting to do so by use of a dangerous weapon, because of the actual or perceived religion of that person, and Title 18, U.S. Code, Section 1512, which prohibits obstruction of justice, including witness tampering and the destruction or concealment of evidence. The indictment also charges various groups of defendants with each separate assault, and charges Samuel Mullet Sr., Lester Mullet, Levi Miller and Lester Miller with concealing or attempting to conceal various items of tangible evidence, including a camera, photographs and an over-the-counter medication that was allegedly placed in the drink of one of the assault victims.
According to the indictment, Samuel Mullet Sr. is the Bishop of the Amish community in Bergholz, Ohio, while the remaining defendants are all members of that community. Mullet Sr. exerted control over the Bergholz community by taking the wives of other men into his home, and by overseeing various means of disciplining community members, including corporal punishment. As a result of religious disputes with other members of the Ohio Amish community, the defendants planned and carried out a series of assaults on their perceived religious enemies. The assaults involved the use of hired drivers, either by the defendants or the alleged victims, because practitioners of the Amish religion do not operate motor vehicles. The assaults all entailed using scissors and battery-powered clippers to forcibly cut or shave the beard hair of the male victims and the head hair of the female victims. During each assault, the defendants restrained and held down the victims. During some of the assaults, the defendants injured individuals who attempted to intervene to protect or rescue the victims. Following the attacks, some of the defendants participated in discussions about concealing photographs and other evidence of the assaults.
The maximum potential penalty for the conspiracy count is five years in prison. The maximum penalty for the hate crime charges is life in prison. The maximum penalty for the obstruction charge is 20 years in prison.
This case is being investigated by the Cleveland Division of the FBI and is being prosecuted by Assistant U.S. Attorneys Thomas Getz and Bridget M. Brennan of the U.S. Attorney’s Office for the Northern District of Ohio and Deputy Chief Kristy Parker of the Civil Rights Division’s Criminal Section.
A criminal complaint is merely an accusation. All defendants are presumed innocent of the charges until proven guilty beyond a reasonable doubt in court.”
Thursday, December 29, 2011
REFINING COMPANY TO PAY $12 MILLION FOR OBSTRUCTING JUSTICE AND VIOLATING THE CLEAN AIR ACT
The following excerpt is from the EPA website:
“WASHINGTON — Pelican Refining Company LLC, was sentenced to pay $12 million for felony violations of the Clean Air Act and to obstruction of justice charges in federal court in Lafayette, La. announced Cynthia Giles, assistant administrator for the U.S. Environmental Protection Agency’s Office of Enforcement and Compliance Assurance, and Ignacia S. Moreno, assistant attorney general of the Environment and Natural Resources Division of the Department of Justice.
“Facilities have a responsibility to protect their employees and local residents by following our nation’s environmental laws,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. "Corporations that choose to cut corners and ignore these critical safeguards will face significant consequences.”
“This corporation operated without even the most basic requirements of an environmental compliance plan and endangered the public and its own employees by implementing unsafe practices in violation of its permit and reporting requirements,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. “Today's plea demonstrates that the Justice Department will continue to vigorously prosecute those who violate environmental and workplace safety laws.”
Pelican was sentenced to pay a $12 million penalty, which includes a $10 million criminal fine and $2 million in community service payments that will go toward various environmental projects in Louisiana, including air pollution monitoring. The criminal fine is the largest ever in Louisiana for violations of the Clean Air Act. Pelican is also prohibited from future operations unless it implements an environmental compliance plan, which includes independent quarterly audits by an outside firm and oversight by a court-appointed monitor.
In a joint factual statement filed in court, Pelican, headquartered in Houston, Texas, admitted that the company had knowingly committed criminal violations of its operating permit at the refinery located in Lake Charles, La. The violations were discovered during a March 2006 inspection by the Louisiana Department of Environmental Quality (LDEQ) and the Environmental Protection Agency (EPA), which identified numerous unsafe operating conditions. Pelican also pleaded guilty to obstruction of justice for submitting materially false deviation reports to LDEQ, the agency that administers the federal Clean Air Act in Louisiana.
Pelican admitted to the following:
Pelican had no company budget, no environmental department and no environmental manager;
In order to comply with a permit issued under the Clean Air Act, the refinery was required to use certain key pollution prevention equipment, but that equipment was either not functioning, poorly maintained, improperly installed, improperly placed into service and/or improperly calibrated;
It was a routine practice for over a year to use an emergency flare gun to re-light the flare tower at the refinery designed to burn off toxic gasses and provide for the safe combustion of potentially explosive chemicals; because the pilot light was not functioning properly, employees would take turns trying to shoot the flare gun to relight the explosive gasses;
Sour crude oil was stored in a tank that was not properly placed into service and remained in the tank after the roof sank;
A caustic scrubber designed to remove hydrogen sulfide from emissions was bypassed;
A continuous emission monitoring system (CEMS) designed to measure the hydrogen sulfide levels in refinery emissions was not working properly, and
Pelican provided false information to the State of Louisiana and the State of Texas concerning the laboratory testing of asphalt.
Byron Hamilton, the Pelican vice-president who oversaw operations at the Lake Charles refinery since 2005 from an office in Houston, Texas pleaded guilty on July 6, 2011, to negligently placing persons in imminent danger of death and serious bodily injury as a result of negligent releases at the refinery. Hamilton faces up to one year in prison and a $200,000 fine for each of the two Clean Air Act counts. On Oct. 31, 2011, Pelican’s former asphalt facilities manager, Mike LeBleu, also pleaded guilty to a negligent endangerment charge under the Clean Air Act.
The government’s investigation of the Pelican Refinery continues. Under the Crime Victims’ Rights Act, crime victims are afforded certain statutory rights, including the opportunity to attend all public hearings and provide input to the prosecution. Any person adversely impacted is encouraged to learn more about the case and the Crime Victims’ Rights Act or contact the Victim Witness Coordinator for the U.S. Attorney’s Office, Western District of Louisiana.
The criminal investigation is being conducted by the EPA Criminal Investigation Division in Baton Rouge and the Louisiana State Police, with assistance from the Louisiana Department of Environmental Quality. The case is being prosecuted by U.S. Attorney Stephanie Finley, Richard A. Udell, Senior Trial Attorney of the Environmental Crimes Section of the Environment and Natural Resources Division of the U.S. Department of Justice, Trial Attorney Christopher Hale with the Environmental Crimes Section“.
L.A. FEDERAL COURT BARS THE SALE OF BOGUS FEDERAL TAX CREDITS
The following excerpt is from the Department of Justice website:
December 28, 2011
"WASHINGTON– A federal court in Los Angeles has permanently barred Lamar Ellis of Brea, Calif., from promoting a scheme involving sales of bogus federal tax credits, the Justice Department announced today. According to the government’s complaint , Ellis fraudulently claimed to have billions of dollars in federal research tax credits that the United States supposedly granted him for purported scientific breakthroughs.
The suit alleged that Ellis advertised the sale of these bogus credits on the Internet and issued phony documents to people purporting to give them credits that could reduce their tax obligations. The government also alleged that Ellis partnered with the Southwest Louisiana Business Development Center, a nonprofit organization in Jennings, La., to try to sell $24 billion of the fictitious credits.
The civil injunction order entered against Ellis bars him from telling prospective customers that he can transfer tax credits to them. He is also required to give the government a list of the names, addresses and social security or tax identification numbers of everyone to whom he purported to distribute tax credits.
In the last decade, the Justice Department’s Tax Division has obtained hundreds of injunctions to stop tax fraud promoters and unscrupulous tax preparers. "
Wednesday, December 28, 2011
ARMY CAPTAIN SENTENCED TO PRISON FOR TAKING BRIBES IN AFGHANISTAN
The following excerpt is from the Department of Justice website:
Monday, December 12, 2011
“Former US Army National Guard Captain Sentenced to 15 Months in Prison for Receiving Bribes at Bagram Airfield, Afghanistan
WASHINGTON – A former captain in the U.S. Army National Guard was sentenced today in federal court in Chicago to 15 months in prison for receiving bribes from military contractors in return for the award of Department of Defense (DOD) contracts during his deployment to Bagram Airfield, Afghanistan, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division.
John Mihalczo, 47, of Homosassa, Fla., was sentenced by U.S. District Judge Matthew F. Kennelly of the Northern District of Illinois. In addition to his prison term, Mihalczo was sentenced to one year of supervised release and was ordered to pay $115,000 in restitution to the Department of Defense.
Mihalczo pleaded guilty in June 2009 to a criminal information charging him with three counts of bribery. According to the information and other documents filed in the case, Mihalczo was deployed to Bagram Airfield from March 2003 until March 2004. Mihalczo was, among other things, the motor pool officer, who controlled a large fleet of leased vehicles, as well as a contracting officer’s representative, who oversaw the delivery of various goods at Bagram Airfield, including concrete barriers.
While serving in Afghanistan, Mihalczo accepted approximately $35,000 in cash and money orders from two different military contractors in return for exercising his influence in the award of DOD contracts. Mihalczo also participated in another scheme with another military contractor, in which Mihalczo fraudulently verified the delivery of concrete barriers that were never delivered to Bagram Airfield. As part of this scheme, Mihalczo and the military contractor split $80,000 in overpayments made by DOD. In total, the loss to the United States from these offenses was at least as much as $115,000. Mihalczo is the ninth defendant sentenced in this investigation. Nine additional defendants remain to be sentenced.
This case is being prosecuted by Trial Attorney Mark W. Pletcher of the Criminal Division’s Fraud Section , and investigated by the Army Criminal Investigations Division, the Defense Criminal Investigative Service and the Department of the Air Force, Office of Special Investigations, with assistance from the Special Inspector General for Afghanistan Reconstruction.”
Monday, December 12, 2011
“Former US Army National Guard Captain Sentenced to 15 Months in Prison for Receiving Bribes at Bagram Airfield, Afghanistan
WASHINGTON – A former captain in the U.S. Army National Guard was sentenced today in federal court in Chicago to 15 months in prison for receiving bribes from military contractors in return for the award of Department of Defense (DOD) contracts during his deployment to Bagram Airfield, Afghanistan, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division.
John Mihalczo, 47, of Homosassa, Fla., was sentenced by U.S. District Judge Matthew F. Kennelly of the Northern District of Illinois. In addition to his prison term, Mihalczo was sentenced to one year of supervised release and was ordered to pay $115,000 in restitution to the Department of Defense.
Mihalczo pleaded guilty in June 2009 to a criminal information charging him with three counts of bribery. According to the information and other documents filed in the case, Mihalczo was deployed to Bagram Airfield from March 2003 until March 2004. Mihalczo was, among other things, the motor pool officer, who controlled a large fleet of leased vehicles, as well as a contracting officer’s representative, who oversaw the delivery of various goods at Bagram Airfield, including concrete barriers.
While serving in Afghanistan, Mihalczo accepted approximately $35,000 in cash and money orders from two different military contractors in return for exercising his influence in the award of DOD contracts. Mihalczo also participated in another scheme with another military contractor, in which Mihalczo fraudulently verified the delivery of concrete barriers that were never delivered to Bagram Airfield. As part of this scheme, Mihalczo and the military contractor split $80,000 in overpayments made by DOD. In total, the loss to the United States from these offenses was at least as much as $115,000. Mihalczo is the ninth defendant sentenced in this investigation. Nine additional defendants remain to be sentenced.
This case is being prosecuted by Trial Attorney Mark W. Pletcher of the Criminal Division’s Fraud Section , and investigated by the Army Criminal Investigations Division, the Defense Criminal Investigative Service and the Department of the Air Force, Office of Special Investigations, with assistance from the Special Inspector General for Afghanistan Reconstruction.”
CONTRACTOR PLEADS GUILTY TO STEERING REPAIR CONTRACTS
The following excerpt is from the Department of Justice website:
“WASHINGTON — A Virginia contractor pleaded guilty today to participating in a scheme to steer contracts to him for repair, maintenance and renovation work at healthcare and nursing home facilities owned by Medical Facilities of America Inc. (MFA), the Department of Justice announced.
According to a two-count felony charge filed today in U.S. District Court for the Western District of Virginia, Gary L. Johns, a resident of Salem, Va., conspired with other individuals to steer contracts for repair, maintenance and renovation at MFA healthcare and nursing home facilities throughout Virginia from about March 2006 until at least December 2006. The department said that as part of the conspiracy, an MFA employee who oversaw the bidding process for repair, maintenance and renovation contracts at MFA facilities steered contracts to Johns’ company, Salem Commercial Design, in return for kickbacks. According to the plea agreement, which is subject to court approval, Johns has agreed to cooperate with the department’s ongoing investigation.
According to the court document, the MFA employee created fictitious competitor bids that were higher than the quotes submitted by Johns and other co-conspirator venders, to create the false appearance of competition. The MFA employee directed subordinates to solicit quotes only from Johns. Johns paid more than $124,000 in kickbacks to the MFA employee and received MFA contracts totaling more than $1 million. The department said that as a result of the kickback scheme, MFA was deprived of competitive pricing to its financial detriment. Johns was also charged with making and subscribing to a false 2006 tax return, which is the year in which Johns received payment on the MFA contracts.
Johns is charged with conspiracy to commit mail fraud for the kickback scheme, which carries a maximum penalty of 20 years in prison and a $250,000 criminal fine. Johns is also charged with making and subscribing to a false tax return, which carries a maximum penalty of three years in prison and a $250,000 criminal fine, together with the cost of prosecution. The maximum fines for each of these charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximums.”
“WASHINGTON — A Virginia contractor pleaded guilty today to participating in a scheme to steer contracts to him for repair, maintenance and renovation work at healthcare and nursing home facilities owned by Medical Facilities of America Inc. (MFA), the Department of Justice announced.
According to a two-count felony charge filed today in U.S. District Court for the Western District of Virginia, Gary L. Johns, a resident of Salem, Va., conspired with other individuals to steer contracts for repair, maintenance and renovation at MFA healthcare and nursing home facilities throughout Virginia from about March 2006 until at least December 2006. The department said that as part of the conspiracy, an MFA employee who oversaw the bidding process for repair, maintenance and renovation contracts at MFA facilities steered contracts to Johns’ company, Salem Commercial Design, in return for kickbacks. According to the plea agreement, which is subject to court approval, Johns has agreed to cooperate with the department’s ongoing investigation.
According to the court document, the MFA employee created fictitious competitor bids that were higher than the quotes submitted by Johns and other co-conspirator venders, to create the false appearance of competition. The MFA employee directed subordinates to solicit quotes only from Johns. Johns paid more than $124,000 in kickbacks to the MFA employee and received MFA contracts totaling more than $1 million. The department said that as a result of the kickback scheme, MFA was deprived of competitive pricing to its financial detriment. Johns was also charged with making and subscribing to a false 2006 tax return, which is the year in which Johns received payment on the MFA contracts.
Johns is charged with conspiracy to commit mail fraud for the kickback scheme, which carries a maximum penalty of 20 years in prison and a $250,000 criminal fine. Johns is also charged with making and subscribing to a false tax return, which carries a maximum penalty of three years in prison and a $250,000 criminal fine, together with the cost of prosecution. The maximum fines for each of these charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximums.”
Tuesday, December 27, 2011
SEC CHARGES HEART TRONICS WITH PUMPING UP IT'S STOCK PRICE
The following excerpt is from the SEC website:
December 20, 2011
“The Securities and Exchange Commission filed a lawsuit today in federal court in Los Angeles charging seven defendants, including California lawyer Mitchell J. Stein, in a series of brazen fraudulent schemes designed to artificially inflate the securities of Heart Tronics, Inc., f/k/a Signalife, Inc. (Heart Tronics), while Stein secretly made millions of dollars from selling the stock. The seven defendants charged are:
Heart Tronics (known during the relevant period as Signalife), a company headquartered in California that purports to sell a heart monitoring device. Heart Tronics common stock was formerly listed on the American Stock Exchange but is now quoted on the OTC Link under the symbol “HRTT.PK”;
Mitchell J. Stein of Hidden Hills, CA, a California attorney who was the architect and principal beneficiary of the fraud schemes. Stein controlled many of Heart Tronics’ business activities and public disclosures;
Willie J. Gault of Encino, CA, a former professional football player and one of Heart Tronics’ co-CEOs from October 2008 through June 2011;
J. Rowland Perkins of Beverly Hills, CA, a former Hollywood executive and the other of Heart Tronics’ co-CEOs since June 2008;
Martin B. Carter of Boca Raton, FL, an unlicensed electrician who worked as Stein’s chauffer and handyman while carrying out the fraud with Stein;
Mark C. Nevdahl of Spokane, WA, the trustee and stock broker for a number of nominee accounts Stein used to unlawfully sell Heart Tronics stock; and
Ryan A. Rauch of San Clemente, CA, a stock promoter paid to tout Heart Tronics stock to investors.
In a parallel criminal investigation, the U.S. Department of Justice and U.S. Postal Inspection Service announced today the arrest of Stein.
The SEC’s complaint alleges that Heart Tronics fraudulently and repeatedly announced millions of dollars in sales orders for its product between 2006 and 2008. In fact, according to the complaint, Heart Tronics never had viable sales orders from actual customers, but Stein and Carter fabricated numerous documents to support the false disclosures to the public. As alleged in the complaint, Stein profited by causing Heart Tronics to unlawfully pay Carter approximately $2 million in cash and Heart Tronics stock pursuant to a sham consulting agreement. Carter kicked-back substantially all the proceeds to Stein.
The complaint also alleges that in 2008 Heart Tronics installed Gault, a celebrity athlete, and Perkins, a founder of a well-known talent agency, as figurehead CEOs to generate publicity for Heart Tronics and foster investor confidence. However, the SEC alleges that Gault and Perkins rarely questioned Stein’s fraudulent agenda and abdicated their fiduciary responsibilities to shareholders by signing, or authorizing to be signed, false SEC filings and false certifications under the Sarbanes-Oxley Act of 2002. In addition, the complaint alleges that Stein and Gault together defrauded an individual investor into making a substantial investment in Heart Tronics based on false representations that his capital would fund the company’s operations. Instead, Stein and Gault diverted the investor’s proceeds for their personal use, including purchasing Heart Tronics stock in Gault’s personal brokerage account to create the appearance of volume and demand for the stock.
Stein also hired promoters to tout Heart Tronics stock on the Internet. According to the complaint, one such promoter, Rauch, solicited numerous investment advisers, retail and institutional brokers, and other investors to buy Heart Tronics stock, but failed to disclose he was being paid by Heart Tronics in exchange for his promotion.
While Stein was orchestrating his campaign of misinformation and other schemes designed to inflate Heart Tronics’ stock price, the complaint alleges that he and his wife, Tracey Hampton-Stein (Hampton-Stein), the company’s majority shareholder, directed the sale of more than $5.8 million worth of Heart Tronics stock, while failing to disclose the sales as required under the federal securities laws. Stein enlisted Nevdahl, a stock broker, to act as trustee for a number of purportedly blind trusts to create the façade that the shares were under the control of an independent trustee. The trusts were blind in name only; according to the complaint, Nevdahl met the Steins’ regular demands for cash by continually selling Heart Tronics stock though the trusts.
The SEC’s complaint charges the following defendants committed the following violations of the federal securities laws:
Heart Tronics violated Sections 5(a) and (c), and Section 17(a) of the Securities Act of 1933 (“Securities Act”); Securities Act Regulation S-T, Rule 302(b); Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 (“Exchange Act”); and Exchange Act Rules 10b-5(b), 12b-11, 12b-20, 13a-1, 13a-11, and 13a-13.
Stein violated Sections 5(a) and (c), and Section 17(a) of the Securities Act; Sections 10(b), 13(b)(5), 13(d), and 16(a) of the Exchange Act; and Exchange Act Rules 10b-5, 13b2-1, 13d-1, and 16a-3; and he aided and abetted violations of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13.
Gault violated Section 17(a) of the Securities Act; Sections 10(b) and 13(b)(5) of the Exchange Act; and Exchange Act Rules 10b-5 and 13a-14; and he aided and abetted violations of Sections 10(b) of the Exchange Act and Exchange Act Rules 10b-5(a) and (c).
Perkins violated Sections 10(b) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b-5(b) and 13a-14; and he aided and abetted violations of Section 13(b)(2)(B) of the Exchange Act.
Carter violated Sections 5(a) and (c), and Sections 17(a)(1) and (3) of the Securities Act; Sections 10(b) and 13(b)(5) of the Exchange Act; and Exchange Act Rules 10b-5(a) and (c), and 13b2-1; and he aided and abetted violations of Sections 10(b), 13(a), 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 10b-5(a) and (c), 12b-20, 13a-1, 13a-11, and 13a-13.Nevdahl violated Sections 17(a)(1) and (3) of the Securities Act; Section 10(b) of the Exchange Act; and Exchange Act Rules 10b-5(a) and (c); and he aided and abetted violations of Sections 10(b) of the Exchange Act and Exchange Act Rules 10b-5(a) and (c).
Rauch violated Section 17(b) of the Securities Act.
The complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil monetary penalties from all defendants. With respect to Stein, Gault and Perkins, the complaint seeks the imposition of permanent officer-and-director bars; with respect to Stein, Gault, Perkins, Carter and Rauch, the complaint seeks the impositions of permanent penny stock bars. The complaint also seeks the return of ill-gotten gains from nine relief defendants, including Hampton-Stein and her company, ARC Finance Group LLC, Heart Tronics’ majority shareholder.
The SEC’s investigation was conducted by Adam Eisner and Rachel Nonaka under the supervision of Charles Cain. The SEC’s litigation will be headed by Mark Lanpher. The Commission acknowledges the assistance of the U.S. Department of Justice’s Fraud Section and the U.S. Postal Inspection Service.”
December 20, 2011
“The Securities and Exchange Commission filed a lawsuit today in federal court in Los Angeles charging seven defendants, including California lawyer Mitchell J. Stein, in a series of brazen fraudulent schemes designed to artificially inflate the securities of Heart Tronics, Inc., f/k/a Signalife, Inc. (Heart Tronics), while Stein secretly made millions of dollars from selling the stock. The seven defendants charged are:
Heart Tronics (known during the relevant period as Signalife), a company headquartered in California that purports to sell a heart monitoring device. Heart Tronics common stock was formerly listed on the American Stock Exchange but is now quoted on the OTC Link under the symbol “HRTT.PK”;
Mitchell J. Stein of Hidden Hills, CA, a California attorney who was the architect and principal beneficiary of the fraud schemes. Stein controlled many of Heart Tronics’ business activities and public disclosures;
Willie J. Gault of Encino, CA, a former professional football player and one of Heart Tronics’ co-CEOs from October 2008 through June 2011;
J. Rowland Perkins of Beverly Hills, CA, a former Hollywood executive and the other of Heart Tronics’ co-CEOs since June 2008;
Martin B. Carter of Boca Raton, FL, an unlicensed electrician who worked as Stein’s chauffer and handyman while carrying out the fraud with Stein;
Mark C. Nevdahl of Spokane, WA, the trustee and stock broker for a number of nominee accounts Stein used to unlawfully sell Heart Tronics stock; and
Ryan A. Rauch of San Clemente, CA, a stock promoter paid to tout Heart Tronics stock to investors.
In a parallel criminal investigation, the U.S. Department of Justice and U.S. Postal Inspection Service announced today the arrest of Stein.
The SEC’s complaint alleges that Heart Tronics fraudulently and repeatedly announced millions of dollars in sales orders for its product between 2006 and 2008. In fact, according to the complaint, Heart Tronics never had viable sales orders from actual customers, but Stein and Carter fabricated numerous documents to support the false disclosures to the public. As alleged in the complaint, Stein profited by causing Heart Tronics to unlawfully pay Carter approximately $2 million in cash and Heart Tronics stock pursuant to a sham consulting agreement. Carter kicked-back substantially all the proceeds to Stein.
The complaint also alleges that in 2008 Heart Tronics installed Gault, a celebrity athlete, and Perkins, a founder of a well-known talent agency, as figurehead CEOs to generate publicity for Heart Tronics and foster investor confidence. However, the SEC alleges that Gault and Perkins rarely questioned Stein’s fraudulent agenda and abdicated their fiduciary responsibilities to shareholders by signing, or authorizing to be signed, false SEC filings and false certifications under the Sarbanes-Oxley Act of 2002. In addition, the complaint alleges that Stein and Gault together defrauded an individual investor into making a substantial investment in Heart Tronics based on false representations that his capital would fund the company’s operations. Instead, Stein and Gault diverted the investor’s proceeds for their personal use, including purchasing Heart Tronics stock in Gault’s personal brokerage account to create the appearance of volume and demand for the stock.
Stein also hired promoters to tout Heart Tronics stock on the Internet. According to the complaint, one such promoter, Rauch, solicited numerous investment advisers, retail and institutional brokers, and other investors to buy Heart Tronics stock, but failed to disclose he was being paid by Heart Tronics in exchange for his promotion.
While Stein was orchestrating his campaign of misinformation and other schemes designed to inflate Heart Tronics’ stock price, the complaint alleges that he and his wife, Tracey Hampton-Stein (Hampton-Stein), the company’s majority shareholder, directed the sale of more than $5.8 million worth of Heart Tronics stock, while failing to disclose the sales as required under the federal securities laws. Stein enlisted Nevdahl, a stock broker, to act as trustee for a number of purportedly blind trusts to create the façade that the shares were under the control of an independent trustee. The trusts were blind in name only; according to the complaint, Nevdahl met the Steins’ regular demands for cash by continually selling Heart Tronics stock though the trusts.
The SEC’s complaint charges the following defendants committed the following violations of the federal securities laws:
Heart Tronics violated Sections 5(a) and (c), and Section 17(a) of the Securities Act of 1933 (“Securities Act”); Securities Act Regulation S-T, Rule 302(b); Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 (“Exchange Act”); and Exchange Act Rules 10b-5(b), 12b-11, 12b-20, 13a-1, 13a-11, and 13a-13.
Stein violated Sections 5(a) and (c), and Section 17(a) of the Securities Act; Sections 10(b), 13(b)(5), 13(d), and 16(a) of the Exchange Act; and Exchange Act Rules 10b-5, 13b2-1, 13d-1, and 16a-3; and he aided and abetted violations of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13.
Gault violated Section 17(a) of the Securities Act; Sections 10(b) and 13(b)(5) of the Exchange Act; and Exchange Act Rules 10b-5 and 13a-14; and he aided and abetted violations of Sections 10(b) of the Exchange Act and Exchange Act Rules 10b-5(a) and (c).
Perkins violated Sections 10(b) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b-5(b) and 13a-14; and he aided and abetted violations of Section 13(b)(2)(B) of the Exchange Act.
Carter violated Sections 5(a) and (c), and Sections 17(a)(1) and (3) of the Securities Act; Sections 10(b) and 13(b)(5) of the Exchange Act; and Exchange Act Rules 10b-5(a) and (c), and 13b2-1; and he aided and abetted violations of Sections 10(b), 13(a), 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 10b-5(a) and (c), 12b-20, 13a-1, 13a-11, and 13a-13.Nevdahl violated Sections 17(a)(1) and (3) of the Securities Act; Section 10(b) of the Exchange Act; and Exchange Act Rules 10b-5(a) and (c); and he aided and abetted violations of Sections 10(b) of the Exchange Act and Exchange Act Rules 10b-5(a) and (c).
Rauch violated Section 17(b) of the Securities Act.
The complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil monetary penalties from all defendants. With respect to Stein, Gault and Perkins, the complaint seeks the imposition of permanent officer-and-director bars; with respect to Stein, Gault, Perkins, Carter and Rauch, the complaint seeks the impositions of permanent penny stock bars. The complaint also seeks the return of ill-gotten gains from nine relief defendants, including Hampton-Stein and her company, ARC Finance Group LLC, Heart Tronics’ majority shareholder.
The SEC’s investigation was conducted by Adam Eisner and Rachel Nonaka under the supervision of Charles Cain. The SEC’s litigation will be headed by Mark Lanpher. The Commission acknowledges the assistance of the U.S. Department of Justice’s Fraud Section and the U.S. Postal Inspection Service.”
FORFEITURE COMPLAINT FILED RELATING TO FIREARMS AND MONEY LAUNDERING CHARGES
December 20, 2011
“WASHINGTON – A 10-count civil forfeiture complaint was filed yesterday in the District of New Mexico seeking forfeiture of assets related to a gun shop in Deming, N.M., whose owner and employees were previously indicted on charges related to firearms smuggling and money laundering, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Kenneth J. Gonzales of the District of New Mexico and Dennis A. Ulrich, acting special agent in charge of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) in El Paso, Texas.
The complaint alleges that, between April 2010 and July 2011, property associated with New Deal Shooting Sports was used in connection with, among other things, a conspiracy to make false statements in connection with the acquisition of firearms and to illegally export firearms to Mexico, a conspiracy to engage in money laundering, and a conspiracy to facilitate the trafficking of narcotics.
According to the complaint, New Deal was owned and operated by Rick Reese. Rick Reese, his wife, Terri Reese, and their two adult sons, Ryin and Remington Reese, worked at New Deal selling firearms, ammunition and other supplies. The complaint alleges, among other things, that the Reeses sold firearms and ammunition to individuals, knowing that these firearms and the ammunition were being illegally sent to Mexico. As set out in the complaint, the investigation of the Reeses included an undercover investigation by federal law enforcement officials. During the undercover investigation, the Reeses sold firearms and ammunition to confidential sources who were working with law enforcement and to undercover law enforcement agents posing as straw purchasers, believing that the confidential sources and agents intended to illegally smuggle the firearms and ammunition to Mexico.
On Aug. 30, 2011, Rick Reese, Terri Reese, Ryin Reese and Remington Reese were arrested on charges contained in a 30-count indictment filed in the District of New Mexico. An indictment is merely a charge and defendants are presumed innocent unless proven guilty.
The civil forfeiture complaint seeks forfeiture of the real property associated with New Deal, and approximately: 1,428 firearms; 1,975,262 rounds of assorted ammunition; 535 canisters of smokeless powder; 4,757 ammunition magazines; $117,823 in gold and silver coins; four vehicles registered to the New Deal; assorted body armor; 17 gun safes; approximately $11,019 from New Deal bank accounts and approximately $106,449 in cash; and one ammunition reloading bench. The properties, except for the real property associated with New Deal, were seized pursuant to seizure warrants issued by a U.S. Magistrate Judge for the District of New Mexico on Aug. 26, 2011, and executed by HSI agents on Aug. 30, 2011. The seized properties are currently in the custody of HSI officials.
The civil case is being prosecuted by Trial Attorneys Jean Weld, Pam Hicks and Kristen Warden and Deputy Chief Frederick Reynolds of the Asset Forfeiture and Money Laundering Section in the Justice Department’s Criminal Division and Assistant U.S. Attorneys Steve Kotz, Nathan Lichvarcik and Maria Y. Armijo of the District of New Mexico. The related criminal case is being prosecuted by Assistant U.S. Attorneys Lichvarcik and Armijo. The case was investigated by U.S. Immigration and Customs Enforcement Homeland Security Investigations with support from the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the U.S. Marshals Service, U.S. Border Patrol, U.S. Customs and Border Protection, New Mexico State Police and the Dona Ana County Sheriff’s Office.”
Monday, December 26, 2011
SAN FRANCISCO GANG LEADER PLEADS GUILTY OF RACKETERING CONSPIRACY
The following excerpt is from the Department of Justice website:
Tuesday, November 29, 2011
“MS-13 Gang Leader in San Francisco Convicted of Racketeering Charges
Co-Defendant Pleaded Guilty to Racketeering Charges During Trial
WASHINGTON – A federal jury today convicted Danilo Velasquez, aka “Triste,” a local leader of La Mara Salvatrucha, or MS-13, in federal court in San Francisco of racketeering conspiracy and related charges, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Melinda Haag for the Northern District of California and Clark Settles, Special Agent in Charge for U.S. Immigration and Custom Enforcement’s (ICE) Homeland Security Investigations (HSI) in San Francisco. His co-defendant and fellow MS-13 member, Luis Herrera, aka “Killer,” pleaded guilty to related charges, including using a firearm that caused the murder of an individual.
After a four-week trial, the federal jury convicted Velasquez of all charges, including conspiracy to participate in a racketeering enterprise, conspiracy to commit murder in aid of racketeering, conspiracy to commit assault with a dangerous weapon in aid of racketeering, and using and discharging a firearm in connection with a crime of violence. The evidence presented during trial showed that the defendants were part of the violent, transnational gang known as MS-13, which claimed part of the Mission District of San Francisco as its territory and operated in the Bay Area since the 1990s. Since its inception, MS-13 members have warred with rival gang members and sought to extort payments from other criminals in the gang’s territory. After the federal government indicted a large number of local MS-13 members on Oct. 22, 2008, Velasquez assumed leadership on the streets and encouraged the remaining members of the gang to engage in violence in order to demonstrate their continued presence in San Francisco despite its loss in numbers due to the federal indictment.
“In a hail of gunfire, Mr. Velasquez and his co-conspirators killed and wounded four unarmed individuals – all in the name of MS-13,” said Assistant Attorney General Breuer. “Senseless acts of violence like those committed by Mr. Velasquez and his fellow gang members are too common across the United States. Through sustained enforcement, we have taken leaders of MS-13 in San Francisco and elsewhere off the streets, and we will continue our efforts to make all our communities safe from violent gangs.”
“This conviction marks the beginning of the end for one San Francisco gang leader who thought he was above the law,” said U.S. Attorney Haag. “Today, the jury has sent a strong message that senseless acts of violence like those committed by Mr. Velasquez in the name of MS-13 will not be tolerated. Life is too valuable to let someone steal it from another. Those who try will be prosecuted to the fullest extent of the law.”
“The gang members targeted in this Homeland Security Investigations-led probe were the worst of the worst, blithely using violence, intimidation and fear to maintain control over their turf,” said Special Agent in Charge Settles for ICE-HSI in San Francisco. “As this jury’s verdict makes clear, we will not allow ruthless thugs to rule our streets. We are joining forces with local law enforcement to bring these criminals to justice and take back our Bay Area neighborhoods.”
The evidence presented at trial also showed how the defendants, with others, conspired to commit a variety of crimes to further the goals of the gang, including attacking and killing rival gang members and others who defied or challenged MS-13 , including four murders that occurred in 2008. The prosecution also presented evidence of three separate shootings committed by Herrera, Velasquez and other MS-13 gang members that took place within just two months, after the October 2008 indictment. One of the shootings resulted in the death of Moises Frias, a college student, in February 2009.
Evidence at trial established that on Feb. 19, 2009, Velasquez and Herrera, accompanied by MS-13 member Jaime Balam, a fugitive, went out looking to kill rival gang members in the San Francisco Bay area. Herrera drove Velasquez and Balam in a stolen vehicle, and Velasquez and Balam both carried semi-automatic guns. The evidence at trial showed that in the Excelsior District of San Francisco, Herrera and Velasquez spotted a car of young Latino professionals, including three college students, a student and a business professional. None of the individuals were gang members themselves.
Witnesses testified that Herrera, Velasquez and Balam followed the victims’ car into Daly City, boxed the car in at a red light, whereby Velasquez and Balam flanked the victims’ car carrying semi-automatic handguns. Velasquez then fired multiple shots at close range at three of the passengers, who survived largely because Velasquez’s semi-automatic gun jammed multiple times. Balam allegedly fired his weapon at the remaining passenger until he ran out of bullets. The victim suffered nine gunshot wounds, including to the head, and was killed. The survivors of the shooting testified at trial that the victim begged for the shooting to stop immediately before he died.
A few days before the shooting, Velasquez and Herrera shot and wounded two individuals in rival gang territory on Feb. 13, 2009. After the Feb. 19, 2009, murder, the evidence showed Velasquez ordered another shooting in which Herrera took part, resulting in the wounding of several victims in rival territory on March 2, 2009. The victims of all the two non-fatal shootings who testified during the trial stated that they were not gang members, but were approached by individuals who exclaimed “La Mara” before shooting them.
Herrera pleaded guilty to seven racketeering related counts, including use of a firearm causing the death of Frias. As part of his plea, Herrera admitted that he was part of the MS-13 hunting party that followed the victims’ car on Feb. 19, 2009, and murdered Frias. The evidence presented at trial before Herrera pleaded guilty showed that he was a member of MS-13 for only two to three months before being arrested. He became a member after his brother, Guillermo Herrera, aka “Sparky,” another MS-13 member, was indicted. Guillermo Herrera was recently convicted of all charges, including murder in aid of racketeering, after a five-month trial that included six other co-defendants. He faces a mandatory life sentence and will be sentenced on Dec. 7, 2011. As part of his guilty plea, Luis Herrera will receive a 35-year prison sentence when he is sentenced on Jan. 24, 2012.
Velasquez faces a maximum sentence of life in prison, with a mandatory minimum sentence of 10 years. Sentencing for Velasquez is scheduled for Feb. 14, 2012, before U.S. District Court Judge William H. Alsup.
The case is being prosecuted by Assistant U.S. Attorneys Andrew Scoble and David Hall of the Organized Crime Strike Force of the U.S. Attorney’s Office for the Northern District of California, and Trial Attorney Theryn G. Gibbons of the Criminal Division’s Organized Crime and Gang Section. The case was investigated by Daly City Police Department, led by Detective Gregg Oglesby, and ICE-HSI, led by Special Agents Alicia MacDonald and Brick Eubank.”
Tuesday, November 29, 2011
“MS-13 Gang Leader in San Francisco Convicted of Racketeering Charges
Co-Defendant Pleaded Guilty to Racketeering Charges During Trial
WASHINGTON – A federal jury today convicted Danilo Velasquez, aka “Triste,” a local leader of La Mara Salvatrucha, or MS-13, in federal court in San Francisco of racketeering conspiracy and related charges, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Melinda Haag for the Northern District of California and Clark Settles, Special Agent in Charge for U.S. Immigration and Custom Enforcement’s (ICE) Homeland Security Investigations (HSI) in San Francisco. His co-defendant and fellow MS-13 member, Luis Herrera, aka “Killer,” pleaded guilty to related charges, including using a firearm that caused the murder of an individual.
After a four-week trial, the federal jury convicted Velasquez of all charges, including conspiracy to participate in a racketeering enterprise, conspiracy to commit murder in aid of racketeering, conspiracy to commit assault with a dangerous weapon in aid of racketeering, and using and discharging a firearm in connection with a crime of violence. The evidence presented during trial showed that the defendants were part of the violent, transnational gang known as MS-13, which claimed part of the Mission District of San Francisco as its territory and operated in the Bay Area since the 1990s. Since its inception, MS-13 members have warred with rival gang members and sought to extort payments from other criminals in the gang’s territory. After the federal government indicted a large number of local MS-13 members on Oct. 22, 2008, Velasquez assumed leadership on the streets and encouraged the remaining members of the gang to engage in violence in order to demonstrate their continued presence in San Francisco despite its loss in numbers due to the federal indictment.
“In a hail of gunfire, Mr. Velasquez and his co-conspirators killed and wounded four unarmed individuals – all in the name of MS-13,” said Assistant Attorney General Breuer. “Senseless acts of violence like those committed by Mr. Velasquez and his fellow gang members are too common across the United States. Through sustained enforcement, we have taken leaders of MS-13 in San Francisco and elsewhere off the streets, and we will continue our efforts to make all our communities safe from violent gangs.”
“This conviction marks the beginning of the end for one San Francisco gang leader who thought he was above the law,” said U.S. Attorney Haag. “Today, the jury has sent a strong message that senseless acts of violence like those committed by Mr. Velasquez in the name of MS-13 will not be tolerated. Life is too valuable to let someone steal it from another. Those who try will be prosecuted to the fullest extent of the law.”
“The gang members targeted in this Homeland Security Investigations-led probe were the worst of the worst, blithely using violence, intimidation and fear to maintain control over their turf,” said Special Agent in Charge Settles for ICE-HSI in San Francisco. “As this jury’s verdict makes clear, we will not allow ruthless thugs to rule our streets. We are joining forces with local law enforcement to bring these criminals to justice and take back our Bay Area neighborhoods.”
The evidence presented at trial also showed how the defendants, with others, conspired to commit a variety of crimes to further the goals of the gang, including attacking and killing rival gang members and others who defied or challenged MS-13 , including four murders that occurred in 2008. The prosecution also presented evidence of three separate shootings committed by Herrera, Velasquez and other MS-13 gang members that took place within just two months, after the October 2008 indictment. One of the shootings resulted in the death of Moises Frias, a college student, in February 2009.
Evidence at trial established that on Feb. 19, 2009, Velasquez and Herrera, accompanied by MS-13 member Jaime Balam, a fugitive, went out looking to kill rival gang members in the San Francisco Bay area. Herrera drove Velasquez and Balam in a stolen vehicle, and Velasquez and Balam both carried semi-automatic guns. The evidence at trial showed that in the Excelsior District of San Francisco, Herrera and Velasquez spotted a car of young Latino professionals, including three college students, a student and a business professional. None of the individuals were gang members themselves.
Witnesses testified that Herrera, Velasquez and Balam followed the victims’ car into Daly City, boxed the car in at a red light, whereby Velasquez and Balam flanked the victims’ car carrying semi-automatic handguns. Velasquez then fired multiple shots at close range at three of the passengers, who survived largely because Velasquez’s semi-automatic gun jammed multiple times. Balam allegedly fired his weapon at the remaining passenger until he ran out of bullets. The victim suffered nine gunshot wounds, including to the head, and was killed. The survivors of the shooting testified at trial that the victim begged for the shooting to stop immediately before he died.
A few days before the shooting, Velasquez and Herrera shot and wounded two individuals in rival gang territory on Feb. 13, 2009. After the Feb. 19, 2009, murder, the evidence showed Velasquez ordered another shooting in which Herrera took part, resulting in the wounding of several victims in rival territory on March 2, 2009. The victims of all the two non-fatal shootings who testified during the trial stated that they were not gang members, but were approached by individuals who exclaimed “La Mara” before shooting them.
Herrera pleaded guilty to seven racketeering related counts, including use of a firearm causing the death of Frias. As part of his plea, Herrera admitted that he was part of the MS-13 hunting party that followed the victims’ car on Feb. 19, 2009, and murdered Frias. The evidence presented at trial before Herrera pleaded guilty showed that he was a member of MS-13 for only two to three months before being arrested. He became a member after his brother, Guillermo Herrera, aka “Sparky,” another MS-13 member, was indicted. Guillermo Herrera was recently convicted of all charges, including murder in aid of racketeering, after a five-month trial that included six other co-defendants. He faces a mandatory life sentence and will be sentenced on Dec. 7, 2011. As part of his guilty plea, Luis Herrera will receive a 35-year prison sentence when he is sentenced on Jan. 24, 2012.
Velasquez faces a maximum sentence of life in prison, with a mandatory minimum sentence of 10 years. Sentencing for Velasquez is scheduled for Feb. 14, 2012, before U.S. District Court Judge William H. Alsup.
The case is being prosecuted by Assistant U.S. Attorneys Andrew Scoble and David Hall of the Organized Crime Strike Force of the U.S. Attorney’s Office for the Northern District of California, and Trial Attorney Theryn G. Gibbons of the Criminal Division’s Organized Crime and Gang Section. The case was investigated by Daly City Police Department, led by Detective Gregg Oglesby, and ICE-HSI, led by Special Agents Alicia MacDonald and Brick Eubank.”
COUPLE PLEAD GUILTY TO FAKE COMMERCIAL DRIVER’S LICENSE RACKET
The following case excerpt came from the Department of Justice Website:
December 23, 2011
“WASHINGTON – A Pennsylvania husband and wife were sentenced yesterday to 30 months and 24 months in prison, respectively, for their participation in a scheme to provide out-of-state residents with Pennsylvania driver’s licenses and Pennsylvania commercial driver’s licenses (CDL), Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania announced today.
Vitaliy Kroshnev, 49, and his wife Tatyana, 46, of Richboro, Penn., were sentenced by U.S. District Judge Norma L. Shapiro. In addition to the prison terms, Judge Shapiro ordered three years of supervised release for each defendant and a forfeiture money judgment of $445,450.
Vitaliy and Tatyana Kroshnev owned and operated the International Training Academy (ITA). From 2007 to 2010, they arranged for hundreds of non-residents of Pennsylvania to fraudulently obtain Pennsylvania commercial driver’s licenses through the ITA. The Kroshnevs paid other members of the conspiracy, who lived in Pennsylvania, to allow out-of-state ITA clients to use the in-state home addresses as proof of Pennsylvania residency. They also employed corrupt translators to ensure Russian-speaking applicants passed the written portion of the CDL test, regardless of the applicants’ actual knowledge.
The couple pleaded guilty to conspiracy to produce and aiding and abetting the production of an identification document without lawful authority. Vitaliy Kroshnev also pleaded guilty to making a material false statement and conspiracy to commit immigration fraud.”
MAN AND COMPANY PAY FINES FOR UNREGISTERED SECURITIES VIOLATIONS
The following is an excerpt from the SEC web site:
November 15, 2011
“The Securities and Exchange Commission announced today that on November 8, 2011, the U.S. District Court for the Northern District of Texas ruled that Timothy Page, of Malibu, California, and his company Testre LP are liable for violating the registration provisions of the federal securities laws. The Court ordered Page to pay $2.49 million in disgorgement and $400,284 in prejudgment interest. The Court also ordered three relief defendants - Reagan Rowland and Rodney Rowland, of Los Angeles, California, and John Coutris, of Irving, Texas - to pay back their ill-gotten gains.
The Commission's complaint alleged that Page and Testre violated the registration provisions of the federal securities laws when they engaged in an unregistered public offering of ConnectAJet.com, Inc., a reverse-merger company that claimed it would "revolutionize the aviation industry" by creating a real-time, online booking system for private jet travel. The Commission alleged that Page and his collaborators purchased tens of millions of shares directly from ConnectAJet.com, Inc. for pennies per share, under a purported registration exemption under the Securities Exchange Act of 1933, Regulation D, Rule 504. The Commission alleged that Page then touted the stock to investors through a national marketing campaign and dumped his shares into the public market when no registration statement was filed or in effect.
The Court ruled that Page and Testre violated Section 5 of the Securities Act of 1933. In addition to the monetary relief granted by the Court, the Commission continues to seek the following additional relief against Page and Testre: civil penalties, penny stock bars, and injunctions from future violations of Section 5 of the Securities Act of 1933. Reagan Rowland and Rodney Rowland were ordered to pay $138,219 and John Coutris was ordered to pay $281,840 in ill-gotten gains they received from Ryan Reynolds, one of Page's collaborators.
The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) in this matter.”
November 15, 2011
“The Securities and Exchange Commission announced today that on November 8, 2011, the U.S. District Court for the Northern District of Texas ruled that Timothy Page, of Malibu, California, and his company Testre LP are liable for violating the registration provisions of the federal securities laws. The Court ordered Page to pay $2.49 million in disgorgement and $400,284 in prejudgment interest. The Court also ordered three relief defendants - Reagan Rowland and Rodney Rowland, of Los Angeles, California, and John Coutris, of Irving, Texas - to pay back their ill-gotten gains.
The Commission's complaint alleged that Page and Testre violated the registration provisions of the federal securities laws when they engaged in an unregistered public offering of ConnectAJet.com, Inc., a reverse-merger company that claimed it would "revolutionize the aviation industry" by creating a real-time, online booking system for private jet travel. The Commission alleged that Page and his collaborators purchased tens of millions of shares directly from ConnectAJet.com, Inc. for pennies per share, under a purported registration exemption under the Securities Exchange Act of 1933, Regulation D, Rule 504. The Commission alleged that Page then touted the stock to investors through a national marketing campaign and dumped his shares into the public market when no registration statement was filed or in effect.
The Court ruled that Page and Testre violated Section 5 of the Securities Act of 1933. In addition to the monetary relief granted by the Court, the Commission continues to seek the following additional relief against Page and Testre: civil penalties, penny stock bars, and injunctions from future violations of Section 5 of the Securities Act of 1933. Reagan Rowland and Rodney Rowland were ordered to pay $138,219 and John Coutris was ordered to pay $281,840 in ill-gotten gains they received from Ryan Reynolds, one of Page's collaborators.
The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) in this matter.”
Saturday, December 24, 2011
GREEK SHIPPING COMPANY AND EMPLOYEE PLEAD GUILTY TO APPS VIOLATION
The following excerpt is from the Department of Justice website:
Tuesday, December 13, 2011
“Greek Shipping Company, Master and Chief Engineer of M/V Agios Emilianos Convicted for Intentional Cover-Up of Oil Pollution and Obstruction of Justice
WASHINGTON – Ilios Shipping Company S.A., pleaded guilty in federal court in New Orleans for violating the Act to Prevent Pollution from Ships (APPS) and obstruction of justice, announced Assistant Attorney General Ignacia S. Moreno and U.S. Attorney Jim Letten.
Ilios operated the M/V Agios Emilianos, a 738 foot, 36,573 ton bulk carrier cargo ship that hauled grain from New Orleans to various ports around the world. According to the plea agreement, from April 2009 until April 2011, oily bilge waste and sludge was routinely discharged from the vessel directly into the sea without the use of required pollution prevention equipment. During that time, the crew intentionally covered up the illegal discharges of oil waste by falsifying the vessel’s oil record book.
The master of the vessel, Valentino Mislang, previously pleaded guilty to conspiracy to obstruct justice for his role in destroying evidence and instructing crewmembers to lie to the Coast Guard during an inspection of the vessel in April 2011. According to Mislang, a senior manager of Ilios directed the destruction of computer records and ordered Mislang to tell crewmembers to lie to the Coast Guard.
The chief engineer of the vessel, Romulo Esperas, previously pleaded guilty to conspiracy to obstruct justice for his role in falsifying the vessel’s oil record book and directing the discharge of oily bilge waste and sludge directly into the sea. According to Esperas, a senior manager of Ilios directed him to discharge the vessel’s oily waste into the sea and refused to provide funding for the proper discharge of the oily waste to shore-side facilities.
All discharges of sludge or oily bilge waste from a vessel are required to be recorded in the vessel’s oil record book. However, none of the illegal discharges were recorded in the oil record book for the M/V Agios Emilianos.
According to Mislang and Esperas, the company directed them to use a complex system to create the impression that the vessel was consuming the maximum amount of fuel under its charter agreements when in fact it was not. The result was that charterers would overpay Ilios for fuel. Mislang would send daily fuel consumption reports: one to Ilios reporting actual fuel consumption and another to the charterer reporting maximum possible fuel consumption. When the vessel was in port, Esperas would direct that engineers install false sounding tubes into the vessel’s fuel tanks so that when the charterer measured the quantity of fuel in the tank, the soundings would show the tank emptier than it actually was.
If the court accepts the terms of the plea agreement, Ilios will pay an overall criminal penalty of $2 million, $250,000 of which will be in the form of an organizational community service payment to the National Fish and Wildlife Foundation and used to fund projects aimed at the restoration of marine and aquatic resources in the Eastern District of Louisiana. Ilios will also be required to implement an environmental compliance plan, which will ensure that any ship operated by Ilios complies with all maritime environmental requirements established under applicable international, flag state, and port state laws. The plan ensures that Ilios’s employees and the crew of any vessel operated by Ilios are properly trained in preventing maritime pollution. An independent monitor will report to the court about Ilios’s compliance with its obligations during the period of probation.
This case was investigated by the U.S. Coast Guard Investigative Service and the Environmental Protection Agency-Criminal Investigation Division. The case was prosecuted by Emily Greenfield from the U.S. Attorney's Office of the Eastern District of Louisiana and by Ken Nelson of the Environmental Crimes Section of the Environment and Natural Resources Division of the Department of Justice.”
Tuesday, December 13, 2011
“Greek Shipping Company, Master and Chief Engineer of M/V Agios Emilianos Convicted for Intentional Cover-Up of Oil Pollution and Obstruction of Justice
WASHINGTON – Ilios Shipping Company S.A., pleaded guilty in federal court in New Orleans for violating the Act to Prevent Pollution from Ships (APPS) and obstruction of justice, announced Assistant Attorney General Ignacia S. Moreno and U.S. Attorney Jim Letten.
Ilios operated the M/V Agios Emilianos, a 738 foot, 36,573 ton bulk carrier cargo ship that hauled grain from New Orleans to various ports around the world. According to the plea agreement, from April 2009 until April 2011, oily bilge waste and sludge was routinely discharged from the vessel directly into the sea without the use of required pollution prevention equipment. During that time, the crew intentionally covered up the illegal discharges of oil waste by falsifying the vessel’s oil record book.
The master of the vessel, Valentino Mislang, previously pleaded guilty to conspiracy to obstruct justice for his role in destroying evidence and instructing crewmembers to lie to the Coast Guard during an inspection of the vessel in April 2011. According to Mislang, a senior manager of Ilios directed the destruction of computer records and ordered Mislang to tell crewmembers to lie to the Coast Guard.
The chief engineer of the vessel, Romulo Esperas, previously pleaded guilty to conspiracy to obstruct justice for his role in falsifying the vessel’s oil record book and directing the discharge of oily bilge waste and sludge directly into the sea. According to Esperas, a senior manager of Ilios directed him to discharge the vessel’s oily waste into the sea and refused to provide funding for the proper discharge of the oily waste to shore-side facilities.
All discharges of sludge or oily bilge waste from a vessel are required to be recorded in the vessel’s oil record book. However, none of the illegal discharges were recorded in the oil record book for the M/V Agios Emilianos.
According to Mislang and Esperas, the company directed them to use a complex system to create the impression that the vessel was consuming the maximum amount of fuel under its charter agreements when in fact it was not. The result was that charterers would overpay Ilios for fuel. Mislang would send daily fuel consumption reports: one to Ilios reporting actual fuel consumption and another to the charterer reporting maximum possible fuel consumption. When the vessel was in port, Esperas would direct that engineers install false sounding tubes into the vessel’s fuel tanks so that when the charterer measured the quantity of fuel in the tank, the soundings would show the tank emptier than it actually was.
If the court accepts the terms of the plea agreement, Ilios will pay an overall criminal penalty of $2 million, $250,000 of which will be in the form of an organizational community service payment to the National Fish and Wildlife Foundation and used to fund projects aimed at the restoration of marine and aquatic resources in the Eastern District of Louisiana. Ilios will also be required to implement an environmental compliance plan, which will ensure that any ship operated by Ilios complies with all maritime environmental requirements established under applicable international, flag state, and port state laws. The plan ensures that Ilios’s employees and the crew of any vessel operated by Ilios are properly trained in preventing maritime pollution. An independent monitor will report to the court about Ilios’s compliance with its obligations during the period of probation.
This case was investigated by the U.S. Coast Guard Investigative Service and the Environmental Protection Agency-Criminal Investigation Division. The case was prosecuted by Emily Greenfield from the U.S. Attorney's Office of the Eastern District of Louisiana and by Ken Nelson of the Environmental Crimes Section of the Environment and Natural Resources Division of the Department of Justice.”
Friday, December 23, 2011
CHINESE NATIONAL GETS PRISON TIME FOR ECONOMIC ESPIONAGE
The following excerpt is from the Department of Justice website:
December 21, 2011
“WASHINGTON – Kexue Huang, a Chinese national and a former resident of Carmel, Ind., was sentenced today to 87 months in prison and three years of supervised release on charges of economic espionage to benefit components of the Chinese government and theft of trade secrets.
The sentencing was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division, Assistant Attorney General for National Security Lisa O. Monaco, U.S. Attorney Joseph H. Hogsett of the Southern District of Indiana, U.S. Attorney B. Todd Jones of the District of Minnesota, and Robert J. Holley, Special Agent in Charge of the Indianapolis Field Office of the FBI.
This is the first prosecution in Indiana for foreign economic espionage. Since its enactment in 1996, there have been a total of eight cases charged nationwide under the Economic Espionage Act.
“Mr. Huang stole valuable trade secrets from two American companies and disseminated them to individuals in Germany and China,” said Assistant Attorney General Breuer. “Economic espionage and trade secret theft are serious crimes that, as today’s sentence shows, must be punished severely. Protecting trade secrets is vital to our nation’s economic success, and we will continue vigorously to enforce our trade secret and economic espionage statutes.”
“The theft of American trade secrets for the benefit of China and other nations poses a continuing threat to our economic and national security,” said Lisa Monaco, Assistant Attorney General for National Security. “Today’s sentence demonstrates our commitment to detect, prosecute and hold accountable those engaged in these illegal activities.”
“The United States Attorney’s Office takes seriously its obligation to protect Hoosier businesses from economic espionage,” U.S. Attorney Hogsett said. “I thank the federal agents and prosecutors who helped bring this landmark case to a successful conclusion.”
“The Kexue Huang investigation and prosecution is an excellent example of how law enforcement and American corporations can work together to protect our corporations from economic espionage and the theft of extremely valuable trade secrets,” FBI Special Agent in Charge Holley stated. “Dow Agrosciences and the FBI cooperated extensively to make this important investigation a success. Economic espionage is a crime that undermines the competiveness of our corporations and our national interest in protecting intellectual property. The FBI will continue to work collaboratively with the private sector to aggressively investigate those individuals that seek to harm our country’s economic interests by stealing our intellectual property and thereby undermining our competitive economic position in the world.”
Huang, 46, was sentenced by the U.S. District Judge William T. Lawrence in the Southern District of Indiana. On Oct. 18, 2011, Huang pleaded guilty to one count of an indictment filed in the Southern District of Indiana for misappropriating and transporting trade secrets from Dow AgroSciences LLC with the intent to benefit components of the People’s Republic of China (PRC). Huang also pleaded guilty to one count of an indictment filed in the District of Minnesota for stealing a trade secret from a second company, Cargill Inc.
According to court documents, from January 2003 until February 2008, Huang was employed as a research scientist at Dow, a leading international agricultural company based in Indianapolis that provides agrochemical and biotechnology products. In 2005, Huang became a research leader for Dow in strain development related to unique, proprietary organic insecticides marketed worldwide.
As a Dow employee, Huang signed an agreement that outlined his obligations in handling confidential information, including trade secrets. The agreement prohibited him from disclosing any confidential information without Dow’s consent. Dow employed several layers of security to preserve and maintain confidentiality and to prevent unauthorized use or disclosure of its trade secrets.
Huang admitted that during his employment at Dow, he misappropriated several Dow trade secrets. According to plea documents, from 2007 to 2010, Huang transferred and delivered the stolen Dow trade secrets to individuals in Germany and the PRC. With the assistance of these individuals, Huang used the stolen materials to conduct unauthorized research with the intent to benefit foreign universities that were tied to the PRC government. Huang also admitted that he pursued steps to develop and produce the misappropriated Dow trade secrets in the PRC, including identifying manufacturing facilities in the PRC that would allow him to compete directly with Dow in the established organic pesticide market.
According to court documents, after Huang left Dow, he was hired in March 2008 by Cargill, an international producer and marketer of food, agricultural, financial and industrial products and services. Huang worked as a biotechnologist for Cargill until July 2009 and signed a confidentiality agreement promising never to disclose any trade secrets or other confidential information of Cargill. Huang admitted that during his employment with Cargill, he stole one of the company’s trade secrets – a key component in the manufacture of a new food product, which he later disseminated to another person, specifically a student at Hunan Normal University in the PRC.
In the plea agreement, Huang admitted that the aggregated loss from the misappropriated trade secrets exceeds $7 million but is less than $20 million.
The case is being prosecuted by Assistant U.S. Attorney Cynthia J. Ridgeway of the Southern District of Indiana, Trial Attorneys Mark L. Krotoski and Evan C. Williams of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS), and Assistant U.S. Attorney Jeffrey Paulsen of the District of Minnesota, with assistance from the National Security Division’s Counterespionage Section. Significant assistance was provided by the CCIPS Cyber Crime Lab and the Office of International Affairs in the Justice Department’s Criminal Division.
The sentence announced today is an example of the type of efforts being undertaken by the Department of Justice Task Force on Intellectual Property (IP Task Force). Attorney General Eric Holder created the IP Task Force to combat the growing number of domestic and international intellectual property crimes, protect the health and safety of American consumers, and safeguard the nation’s economic security against those who seek to profit illegally from American creativity, innovation and hard work. The IP Task Force seeks to strengthen intellectual property rights protection through heightened criminal and civil enforcement, greater coordination among federal, state and local law enforcement partners, and increased focus on international enforcement efforts, including reinforcing relationships with key foreign partners and U.S. industry leaders.”
ASSISTANT ATTORNEY GENERAL TONY WEST DISCUSSES PROTECTING INVESTORS FROM FRAUD
The following is an excerpt from the Department of Justice website:
December 21st, 2011
"The following post appears courtesy of Tony West, the Assistant Attorney General for the Justice Department’s Civil Division.
Some crimes do not leave visible bruises or scars. But they are no less painful. I think about that every day when I hear how many hard-working, honest people have become victims of those who see the financial crisis as an opportunity to exploit hardship for profit.
One of those people was “Ana,” a single mother living in Florida who needed to work from home to care for her ailing daughter. She thought she had finally found a solution when she learned of an opportunity to own an ATM in a profitable, high-traffic location.
All that was required was an upfront investment fee.
Hopeful, Ana signed on and invested her life savings. But, the company never fulfilled its promise. It was only after Ana had lost everything and was left saddled with debt that she discovered that the salespeople provided phony references and lied about the profits that would be earned with their ATMs.
As it ruined the lives of folks like Ana, this company raked in over $4 million in profits.
I’ve heard heartbreaking stories like this one all over the country. That is why, as head of the Civil Division of the Department of Justice, I have worked hard to enhance our role in protecting consumers from these predators. Our hard work has paid off: a nationwide effort by the Department’s Office of Consumer Protection Litigation, the Federal Trade Commission and state attorneys general has resulted in the conviction of over 150 defendants – including the two individuals behind the ATM scam – as well as court orders of over $100 million in criminal restitution for victims like Ana.
Still, prosecution of these criminals only gets us so far. We are also working to educate consumers about business opportunity fraud and how they can avoid it. Under federal law, a business opportunity seller is required to provide a list of former purchasers to prospective buyers – enabling them to talk to someone who invested previously and learn how the business really works. So, if a seller offers a few named references instead of the full list, be wary. In addition, we encourage consumers to ask for earnings’ claims in writing and ask the FTC or their state government whether there are unresolved complaints involving the business.
But we will never be able to truly fight these financial crimes if victims do not come forward and tell their stories.
And many victims still do not. Consumers often feel responsible for their own fate and opt to suffer alone. That is particularly tragic considering that there are hundreds of thousands of victims like them – who pursued opportunities not to get rich quick, but just to make a living.
This was not a violent crime, but her family suffered devastating losses just the same. And, like many victims, Ana felt shame and embarrassment that she may have invited the crime somehow. But, unlike many victims of financial fraud, she found the strength to come forward, tell her story, and seek help.
And by so doing, she prevented someone else from becoming a victim, too.
So, if you have been a victim, I hope you will take the first step. Report the fraud and learn about resources for victims at www.StopFraud.gov, the website for the federal government’s Financial Fraud Enforcement Task Force. File a complaint with the FTC at www.ftccomplaintassistant.gov or at 1-877-FTC-HELP. Then contact your state attorney general to learn your rights and get help. Because justice begins with you".
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