EXECUTIVE PLEADS GUILTY TO VIOLATION OF FOREIGN CORRUPT PRACTICES ACT

FROM:  U.S. DEPARTMENT OF JUSTICE
Tuesday, May 29, 2012
Former Head of Worldwide Sales at California Valve Company Pleads Guilty to Foreign Bribery Offense
WASHINGTON – Paul Cosgrove, the former Head of Worldwide Sales at Rancho Santa Margarita, Calif.-based valve company Control Components Inc. (CCI) pleaded guilty today to violating the Foreign Corrupt Practices Act (FCPA), announced the Justice Department’s Criminal Division and the U.S. Attorney’s Office for the Central District of California.

Cosgrove, who resides in Laguna Niguel, Calif., pleaded guilty today before U.S. District Judge James V. Selna in Santa Ana, Calif., to a one-count superseding information charging him with making a corrupt payment to a foreign government official in China in violation of the FCPA.  According to court documents, CCI designed and manufactured service control valves for use in the nuclear, oil and gas, and power generation industries worldwide.  At sentencing, Cosgrove, 65, faces up to 15 months in prison.  Sentencing is scheduled for Aug. 27, 2012.

On Apr. 8, 2009, Cosgrove and five other former executives of CCI were charged in a 16-count indictment for their roles in the foreign bribery scheme.  The five other former CCI executives charged were Stuart Carson, CCI’s former president; Hong “Rose” Carson, CCI’s former director of sales for China and Taiwan; David Edmonds, CCI’s former vice president of worldwide customer service; Flavio Ricotti, the former CCI vice president of sales for Europe, Africa and the Middle East; and Han Yong Kim, the former president of CCI’s Korean office.  On Apr. 28, 2011, Ricotti pleaded guilty to one count of conspiracy to violate the FCPA.  On Apr. 17, 2012, Stuart Carson and Hong “Rose” Carson each pleaded guilty to one count of making a corrupt payment to a foreign government official in violation of the FCPA.  The trial of Edmonds is scheduled for Jun. 26, 2012.  The charges against Kim are pending.  An indictment merely contains allegations and defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

In related cases, two defendants previously pleaded guilty to conspiring to bribe officers and employees of foreign state-owned companies on behalf of CCI.  On Jan. 8, 2009, Mario Covino, the former director of worldwide factory sales for CCI, pleaded guilty to one count of conspiracy to violate the FCPA.  On Feb. 3, 2009, Richard Morlok, the former CCI finance director, also pleaded guilty to one count of conspiracy to violate the FCPA.  Stuart and Rose Carson, Covino, Morlok and Ricotti are scheduled to be sentenced later this year.

On July 31, 2009, CCI pleaded guilty to a three-count criminal information charging the company with conspiracy to violate the FCPA and the Travel Act, and two substantive violations of the FCPA.  CCI was ordered to pay an $18.2 million criminal fine, placed on organizational probation for three years, and ordered to create and implement a compliance program and retain an independent compliance monitor for three years.  CCI admitted that from 2003 through 2007, it made corrupt payments in more than 30 countries, which resulted in net profits to the company of approximately $46.5 million from sales related to those corrupt payments.

The case is being prosecuted by Deputy Chief Charles G. La Bella and Trial Attorney Andrew Gentin of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Douglas McCormick and Gregory Staples of the U.S. Attorney’s Office for the Central District of California.  The case was investigated by the FBI’s Washington Field Office and its team of special agents dedicated to the investigation of foreign bribery cases.

CAR DEALERSHIP OWNER AND CFO PLEAD GUILT TO TAX CRIMES

FROM:  U.S. DEPARTMENT OF JUSTICE
Tuesday, May 29, 2012
Owner of Hawaii Car Dealerships and Chief Financial Officer Plead Guilty to Tax Crimes

Charles Alan Pflueger, owner of Pflueger Inc., Randall Kurata, the company’s chief financial officer, and Julie Kam, Pflueger’s executive assistant, pleaded guilty to filing false federal income tax returns before U.S. District Court Judge Leslie E. Kobayashi in Honolulu, the Justice Department and the Internal Revenue Service (IRS) announced today.

According to the indictment and other documents filed in Honolulu federal court, Charles Alan Pflueger, Randall Kurata, Julie Kam and others caused Pflueger Inc. to pay the personal expenses of Charles Alan Pflueger and others. The three defendants then caused Pflueger Inc. to improperly deduct the personal expenses as business expenses on Pflueger Inc.’s corporate tax returns. Pflueger caused another of his companies, Pacific Auto Distributors LLC, to pay additional personal expenses, and he did not report those payments as income on his personal tax returns.

Pflueger pleaded guilty to one count of filing a false individual federal income tax return for tax year 2005. Kam also pleaded guilty to one count of filing a false individual federal income tax return for tax year 2005 because she failed to report as income personal expenses that Pacific Auto Distributors LLC paid on her behalf.

Kurata pleaded guilty to one count of filing a false corporate federal income tax return for Pflueger Inc. for tax year 2003. Kurata admitted that from 2003 through at least 2005, he knew that Pflueger Inc. was paying for various individuals’ personal expenses, including Pflueger’s. Kurata further admitted that during 2003 he personally signed checks from Pflueger Inc. that paid individuals’ personal expenses.   Kurata filed Pflueger Inc.’s corporate tax return for 2003 knowing that it was false in that it improperly deducted as business expenses significant personal expenses of Pflueger.

Pflueger and Kam’s sentencing is set for Jan. 31, 2013, and Kurata’s sentencing is scheduled for Dec. 20, 2012.

Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division thanked Special Agents of IRS - Criminal Investigation, who investigated the case, Assistant U.S. Attorney Leslie E. Osborne, Jr. and Tax Division Trial Attorneys Timothy J. Stockwell and Dennis R. Kihm, who prosecuted the case.

FORMER BUSINESSMAN FOUND GUILTY OF FILING FALSE TAX RETURNS

FROM:  U.S. DEPARTMENT OF JUSTICE
Tuesday, May 22, 2012
Former Pennsylvania Businessman Convicted of Filing False Returns
Jonathon Felix, formerly of Villanova, Pa., was found guilty by a federal jury of willfully signing and filing false income tax returns, the Justice Department and Internal Revenue Service (IRS) announced today. U.S. District Court Judge for the Eastern District of Pennsylvania Petrese Tucker presided over the trial in Philadelphia.

According to testimony and evidence presented to the jury at trial, Felix operated a corporation called United Professional Plans Inc. (UPPI), located in Philadelphia, which he co-owned with his father until he passed away in 2000. The evidence showed that while operating UPPI, Felix removed significant funds from the company in various ways from 1999 through 2002, causing the failure of UPPI. Felix deposited these business funds into his personal accounts or used them for personal expenditures. Felix willfully signed and filed false individual income tax returns for those years that substantially under-reported his income and did not include the funds he appropriated from UPPI.   Felix’s criminal conduct caused a tax loss to the IRS of about $390,000.
     
Felix faces a maximum potential sentence of 12 years in prison and a $1 million fine.   Judge Tucker scheduled sentencing for Aug. 23, 2012.

Assistant Attorney General Kathryn Keneally of the Justice Department’s Tax Division and Zane David Memeger, U.S. Attorney for the Eastern District of Pennsylvania, thanked special agents of IRS - Criminal Investigation and the Labor Department’s Office of Inspector General, who provided valuable assistance in conducting the investigation, and Tax Division Trial Attorney Patrick J. Murray and Assistant U.S. Attorney Floyd Miller, who prosecuted the case.

MAN ACCUSED BY SEC OF $60 MILLION PONZI-LIKE SCHEME

FROM:  SEC
Washington, D.C., May 24, 2012 – The Securities and Exchange Commission today charged an investment adviser in Scotts Valley, Calif., with running a $60 million investment fund like a Ponzi scheme and defrauding investors by touting imaginary trading profits instead of reporting the actual trading losses he incurred.

The SEC alleges that John A. Geringer, who managed the GLR Growth Fund, used false and misleading marketing materials to lure investors into believing that the fund was earning double-digit annual returns by investing 75 percent of its assets in investments tied to major stock indices. In reality, Geringer’s trading generated consistent losses and he eventually stopped trading entirely. To mask his fraud, Geringer paid millions of dollars in “returns” to investors largely by using money received from newer investors. He also sent investors periodic account statements showing fictitious growth in their investments.

“Geringer painted the picture of a successful fund weathering America’s financial crisis through a diversified, conservative investment strategy,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid private companies, and lied about it in phony account statements.”

According to the SEC’s complaint filed in federal court in San Jose, Geringer raised more than $60 million since 2005, mostly from investors in the Santa Cruz area. Geringer used fraudulent marketing materials claiming that the fund had between 17 and 25 percent annual returns in every year of the fund’s operation through investments tied to well-known stock indices like the S&P 500, NASDAQ, and Dow Jones. Although the fund was started in 2003, marketing materials claimed 25 percent returns in 2001 and 2002 – before the fund even existed. The marketing materials also falsely indicated a nearly 24 percent return in 2008 from investing mainly in publicly-traded securities, options, and commodities, while the S&P 500 Index lost 38.5 percent.

The SEC alleges that Geringer’s actual securities trading was unsuccessful, and by mid-2009 the fund did not invest in publicly-traded securities at all. Instead, the fund invested heavily in illiquid investments in two private startup technology companies. The rest of the money was paid to investors in Ponzi-like fashion and to three entities Geringer controlled that also are charged in the SEC’s complaint.

According to the SEC’s complaint, Geringer further lied to investors on account statements that falsely claimed “MEMBER NASD AND SEC APPROVED.” The SEC does not “approve” funds or investments in funds, nor was the fund (or any related entity) a member of the NASD (now called the Financial Industry Regulatory Authority – FINRA). Geringer also falsely claimed that the fund’s financial statements were audited annually by an independent accountant. No such audits were performed.

The SEC’s complaint alleges Geringer and three related entities violated or aided and abetted violations of the antifraud provisions of the securities laws as well as a statute barring people from claiming that the SEC has passed on the merits of a particular investment. The SEC seeks financial penalties, disgorgement of ill-gotten gains, preliminary and permanent injunctions, and other relief. Geringer, the fund, and two of the related entities consented to the entry of a preliminary injunction and a freeze on the fund’s bank account.

The SEC’s investigation, which is continuing, has been conducted by Robert J. Durham and Robert S. Leach of the San Francisco Regional Office. The SEC’s litigation will be led by Sheila O’Callaghan of the San Francisco Regional Office.

The SEC thanks the U.S. Attorney’s Office for the Northern District of California, Federal Bureau of Investigation, and FINRA for their assistance in this matter.

MAN CONVICTED OF FALSELY CERTIFYING SHIPS SAFETY

FROM:  U.S. JUSTICE DEPARTMENT
Friday, May 25, 2012
Miami Man Convicted for Obstruction of Justice and False Statements for Certifying Ships Safe for Sea

WASHINGTON – A federal jury in Miami yesterday convicted a Miami-based ship surveyor for lying to the Coast Guard and for falsely certifying the safety of ships at sea, announced Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division at the Department of Justice; Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida; Rear Admiral William D. Baumgartner, Commander, 7th Coast Guard District; and Jonathan Sall, Special Agent in Charge, U.S. Coast Guard Investigative Service.

Alejandro Gonzalez, 60, of Miami-Dade County, Fla., was convicted by a federal jury in Miami of three counts of making false statements to the U.S. Coast Guard and one count of obstruction of an agency proceeding. The defendant faces a maximum statutory penalty of five years in prison on each count.

The jury found Gonzalez guilty of lying to U.S. Coast Guard inspectors and a criminal investigator during an interview in April 2009 about the dry-docking of the M/V Cala Galdana, a 68-meter cargo vessel, in San Juan, Puerto Rico.  Gonzalez repeatedly claimed the vessel was dry-docked in Cartagena, Colombia, in March 2006, while evidence at the trial proved conclusively that the vessel was never in Colombia during 2006.

U.S. Coast Guard inspectors in San Juan discovered the vessel taking on water in August 2008 and requested information concerning the last dry-docking of the vessel.  Gonzalez concocted a false story about the vessel being dry-docked in Colombia in 2006 when he knew it was not.

Gonzales was also convicted of falsifying documents in December 2009 for the M/V Cosette, a 92-meter cargo vessel.  As the surveyor on behalf of Bolivia, Gonzalez certified the ship as safe for sea while the vessel was docked in Fort Pierce, Fla., in November 2009.  When the vessel shortly thereafter arrived in New York City harbor, U.S. Coast Guard inspectors discovered exhaust and fuel pouring into the ship’s engine room, endangering the crew and the ship.  For his action, Gonzalez was convicted of making a false statement and obstructing a U.S. Coast Guard Port State Control examination.

Assistant Attorney General Moreno and U.S. Attorney Ferrer commended the investigative efforts of the U.S. Coast Guard and the U.S. Coast Guard Investigative Services.  The prosecution was handled by Assistant U.S. Attorney Jaime Raich and Trial Attorney Kenneth Nelson, of the Environmental Crimes Section of the Justice Department’s Environment and Natural Resources Division.
Sentencing is currently scheduled for Aug. 2, 2012, in Miami.

CALIFORNIA WOMAN ACCUSED OF IMPERSONATION OF A CONGRESSIONAL AIDE

U.S. DEPARTMENT OF JUSTICE
Thursday, May 24, 2012
California Woman Indicted for Allegedly Impersonating a Congressional Aide
WASHINGTON – An Atwater, Calif., woman was charged today in a one-count indictment filed in the Eastern District of California for impersonation of an officer or an employee of the United States, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

The indictment charges Susan Tomsha-Miguel, 51.  An initial appearance and arraignment are scheduled for tomorrow at 9:00 a.m. before Magistrate Judge Dennis L. Beck.
According to the indictment, Tomsha-Miguel operated a tax consulting and bookkeeping business in Atwater.  A client, who owned a commercial business in Merced, Calif., hired Tomsha-Miguel to resolve a tax dispute with the Internal Revenue Service (IRS).  Tomsha-Miguel requested help with the tax problems from the office of U.S.

Representative Dennis A. Cardoza, who represents the 18th Congressional District, which includes Merced County, as well as parts of San Joaquin, Stanislaus, Madera and Fresno Counties.  According to the indictment, Representative Cardoza’s office agreed to help, and transmitted written material, including a form printed under his official Congressional letterhead, to Tomsha-Miguel.  Some time thereafter, Tomsha-Miguel allegedly sent her client a counterfeit letter supposedly written under Representative Cardoza’s official letterhead and purportedly written and signed by an aide to Representative Cardoza.  The letter falsely claimed that due to Tomsha-Miguel’s efforts on behalf of her client, Representative Cardoza’s aide had contacted an IRS official.  The counterfeit letter claimed that the IRS official had agreed to make resolving the client’s tax dispute his “number one priority” after he returned from “Washington, D.C. for an emergency strategy meeting with the U.S. Treasury Secretary and others for a planning session in the event a budget does not get passed by both the House and Senate.”  The indictment alleges that, in reality, the aide did not exist and Tomsha-Miguel had forged the letterhead by copying-and-pasting Representative Cardoza’s official letterhead onto a blank sheet of paper.  The indictment further alleges that Tomsha-Miguel had written the letter from the non-existent aide herself and then sent it to her client in order to mislead her client into believing that she had succeeded in alleviating his tax problems.

Tomsha-Miguel faces a maximum sentence of three years in prison, a fine of $250,000, and supervised release.

An indictment is merely a charge, and a defendant is presumed innocent unless and until proven guilty.

The case is being prosecuted by Trial Attorney Barak Cohen of the Public Integrity Section in the Justice Department’s Criminal Division.  The case is being investigated by the FBI.

MARSHALS ARREST MURDER SUSPECT

FROM:  U.S. MARSHALS SERVICE
Murder Suspect Arrested
Espanola, NM - Deputies with the United States Marshal Service and Task Force Officers with the Santa Fe Police Department arrested Joel Rollins (48) in Espanola, NM. Rollins was wanted by the Sandoval County Sheriff’s Department for allegedly Murdering Elvis Delaney III in October 2007 and then burying Delaney’s body on his property in Sandoval County.

On May 22, 2012 the arrest warrant for Rollins was signed and information was received by the United States Marshals Service that Rollins was potentially in the Espanola, NM area. Investigators from the New Mexico State Police, Sandoval County Sheriff’s office, Santa Fe Police Department and the United States Marshals Service quickly responded and sent Southwest Fugitive Team (SWIFT) Task Force Deputies and Task Force Officers (TFO’s) to Espanola to investigate Rollins’ whereabouts. Rollins was located at his place of employment on May 23, 2012 by Marshals Service Deputies and TFO’s where he was arrested. Rollins was turned over to the Sandoval County Sheriff’s Department so they could continue their investigation.

United States Marshal Conrad E. Candelaria said “justice is one step closer to prevailing, due to the unyielding and tireless efforts of many law enforcement agencies, partnering with the Marshals Service from state, local and county agencies, this fugitive will now answer to the horrible and unconscionable crime committed”.

INSURANCE SALESMAN FOUND GUILTY OF TAX CHARGES

FROM:  U.S. DEPARTMENT OF JUSTICE
Tuesday, May 22, 2012
Ohio Insurance Salesman Guilty of Tax Charges Mansfield Area Man Detained Following Jury Verdict
A jury convicted William A. Herder of Richland County, Ohio, yesterday on federal tax charges, the Justice Department and Internal Revenue Service (IRS) announced.  Trial began on May 11, 2012, before U.S. District Judge Sara Lioi, sitting in Akron, Ohio.  Herder was charged with corruptly endeavoring to impair and impede the due administration of the Internal Revenue laws, tax evasion and five counts of failure to file tax returns.  He was convicted of all counts.

According to the evidence at trial, Herder sold insurance for Aflac Inc, a nationwide supplemental insurance provider, from an office in Mansfield, Ohio.  Herder had not filed a timely or valid tax return in more than a decade.  For the 2000 tax year, Herder filed a tax return on which he falsely claimed that he had not earned any income.  Subsequently, Herder failed to file any tax returns for the 2001-2009 tax years, despite earning income and receiving numerous warnings and notices from the IRS.  The evidence at trial showed that, to prevent the IRS from collecting his unpaid taxes, Herder attempted to conceal his assets and income.  In 2003, Herder transferred title to his house to a bogus foundation he established in Utah called the “Mentor Foundation.”  Herder also cashed out an Individual Retirement Account and a life insurance policy, converted large amounts of cash to silver coins, and paid expenses with cash and money orders, all in an effort to prevent the IRS from collecting his unpaid taxes.

In addition to failing to file valid tax returns and hiding his assets from the IRS, trial evidence showed Herder submitted numerous obstructive letters and documents to the IRS and the insurance companies he represented in an effort to prevent the IRS from assessing and collecting his taxes.  In these letters, Herder falsely claimed, among other things, that the tax laws were not applicable to him.  The evidence at trial showed that Herder obtained some of these materials from Joseph Flickinger, who was previously convicted and sentenced for a tax fraud conspiracy and later enjoined from preparing tax returns for others.

Following the jury verdict, Herder was taken into custody. Sentencing is scheduled for Aug. 23, 2012.

Assistant Attorney General Kathryn Keneally of the Justice Department’s Tax Division thanked special agents of IRS - Criminal Investigation, who provided valuable assistance in conducting the investigation, Tax Division Trial Attorneys Melissa S. Siskind and Jeffrey McLellan, who prosecuted the case, and Tax Division Trial Attorney Sean R. Delaney, currently on detail to a U.S. Attorney’s office, who assisted with the investigation.

SEC CHARGES INDIVIDUALS AND COMPANIES WITH STOCK PRICE MANIPULATION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
May 16, 2012
The Securities and Exchange Commission announced that the SEC filed an action today against SEC recidivist Nicholas Louis Geranio, Keith Michael Field, The Good One, Inc. and Kaleidoscope Real Estate, Inc. for their roles in a $35 million scheme to manipulate the market and to profit from the issuance and sale of certain U.S. companies’ (“Issuers’”) stock through offshore boiler rooms. The scheme ran from approximately April 2007 to October 2009.

According to the SEC’s complaint, the scheme worked as follows:  Geranio organized eight U.S. Issuers, installed management (including Field), and entered into consulting agreements with them through his alter-ego entities The Good One and Kaleidoscope.  Geranio then allegedly set up a common system to raise money through the Issuers’ sale of Regulation S shares to offshore investors by boiler rooms that Geranio recruited.  Field allegedly drafted materially misleading business plans, marketing materials, and website material for the Issuers, which the offshore boiler rooms provided to investors as part of their fraudulent solicitation efforts.

The complaint further alleges that Geranio directed traders, including Field, to engage in matched orders and manipulative trades to establish artificially high prices for at least five of the Issuers’ stock and to deceptively convey to the market the impression that legitimate transactions had created bona fide prices for the stock.  According to the complaint, this manipulation of the publicly-traded stock price allowed the boiler rooms to sell the Regulation S shares at a higher price to the overseas investors.   The complaint alleges that the boiler rooms, teams of unregistered telemarketers operating mostly from Spain, used high-pressure sales tactics and materially false statements and omissions to induce the investors (many of them elderly and located in the United Kingdom) to buy the Issuers’ Regulation S stock.  Investors then sent their money to U.S.-based escrow agents, who paid 60% to 75% of the approximately $35 million in proceeds to the boiler rooms as their sales markups, kept 2.5% as their fee, and paid the remaining proceeds to the Issuers.  The Issuers (or in some cases the escrow agents) then funneled approximately $2.135 million of the proceeds of the Regulation S sales to Geranio, through The Good One and Kaleidoscope, and paid Field approximately $279,000.

The SEC filed its action in the U.S. District Court for the Central District of California, alleging that: Geranio, Field, The Good One and Kaleidoscope violated Sections 17(a)(1) and (3) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5(a) and (c) thereunder; Field also violated Section 17(a)(2) of the Securities Act and aided and abetted the Issuers’ violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder; and Geranio also is liable as a control person of The Good One and Kaleidoscope under Exchange Act Section 20(a). The SEC seeks in its action permanent injunctions, disgorgement plus prejudgment interest, civil penalties, and penny stock bars against all defendants, and also officer and director bars against Geranio and Field. The complaint further seeks disgorgement and prejudgment interest against relief defendant BWRE Hawaii, LLC based on its alleged receipt of investor funds.

The Issuers from April 2007 through October 2009 were: Green Energy Live, Inc.; Spectrum Acquisition Holdings, Inc.; United States Oil & Gas Corp.; Mundus Group, Inc.; Blu Vu Deep Oil & Gas Exploration, Inc.; Wyncrest Group, Inc.; Microresearch Corp.; and Power Nanotech, Inc.

19 YEAR POLICE VETERAN CONVICTED OF PROVIDING SECURITY FOR DRUG TANSACTION

FROM:  U.S. DEPARTMENT OF JUSTICE
Monday, May 14, 2012
Nineteen-Year Police Veteran Convicted in Puerto Rico for Role in Providing Armed Security for Drug Transaction

WASHINGTON – A 19-year veteran of the Police of Puerto Rico was convicted today by a federal jury in San Juan, Puerto Rico, for her role in providing security for a drug transaction, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Rosa E. Rodriguez-Velez of the District of Puerto Rico and Special Agent in Charge Joseph S. Campbell of the FBI’s San Juan Field Office.

Yamil Navedo Ramirez, 39, was convicted of one count of attempting to possess with the intent to distribute more than five kilograms of cocaine and one count of possession of a firearm in furtherance of a drug transaction.  She was acquitted of one count of conspiracy to possess with intent to distribute more than five kilograms of cocaine.
Navedo Ramirez was charged in a superseding indictment returned on Oct. 28, 2010, along with 88 law enforcement officers in Puerto Rico and 42 other individuals, as part of the FBI undercover operation known as Guard Shack.

According to the evidence presented in court, Navedo Ramirez provided security for what she believed was an illegal drug transaction on April 14, 2010.  In fact, the purported drug transaction was part of the undercover FBI operation.  According to information presented at trial, Navedo Ramirez acted as a security guard for what she believed was a 12-kilogram cocaine deal by helping to frisk the buyer, providing armed protection for the deal using her Police of Puerto Rico service weapon, and escorting the buyer in and out of the transaction.

In return for the security she provided, Navedo Ramirez received a cash payment of $2,000.

U.S. District Judge Juan Pérez-Giménez scheduled sentencing for Sept. 21, 2012.  At sentencing, Navedo Ramirez faces a mandatory minimum sentence of 15 years in prison and a maximum penalty of life in prison.

The case was prosecuted by Trial Attorneys Kevin Driscoll and Monique Abrishami of the Public Integrity Section in the Justice Department’s Criminal Division.  The case was investigated by the FBI.  The U.S. Attorney’s Office for the District of Puerto Rico also participated in the investigation and prosecution of this case.

HEALTH CARE COMPANY OWNER CONVICTED OF MEDICARE FRAUD

FROM:  U.S. DEPARTMET OF JUSTICE
Thursday, May 17, 2012
Owner of Houston Health Care Company Convicted of Defrauding Medicare

WASHINGTON – An owner of a Houston health care company was convicted yesterday by a jury in the Southern District of Texas in connection with a $750,000 Medicare fraud scheme, announced the Departments of Justice and Health and Human Services (HHS).

Philip Ware, 31, of Houston, was convicted of one count of conspiracy to commit health care fraud and four counts of substantive health care fraud.

The evidence presented at trial showed that Ware was an owner and operator of Preferred Plus Medical Supply.  Preferred Plus maintained a valid Medicare provider number in order to submit Medicare claims for the costs of durable medical equipment (DME) and purported to provide orthotics and other DME to Medicare beneficiaries.

Preferred Plus submitted claims to Medicare for DME, including orthotic devices, which were medically unnecessary and/or not provided.  Many of the orthotic devices were components of “arthritis kits” and purported to be for the treatment of arthritis-related conditions; however, the devices were neither medically necessary nor appropriate for such conditions.  The arthritis kit generally contained a number of orthotic devices including braces for both sides of the body and related accessories such as heat pads.  In total, from August 2008 through July 2009, Preferred Plus submitted approximately $750,000 in fraudulent claims to Medicare.

At sentencing, scheduled for Sept. 24, 2012, Ware faces a maximum sentence of 50 years in prison.

Ware’s co-owner of Preferred Plus, Simone Ball, previously pleaded guilty to one count of conspiracy to commit health care fraud.  Ball’s sentencing is scheduled for Aug. 8, 2012.

The conviction was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Southern District of Texas Kenneth Magidson; Texas Attorney General Greg Abbott; Acting Special Agent-in-Charge Russell D. Robinson of the FBI’s Houston Field Office; and Special Agent-in-Charge Mike Fields of the Dallas Regional Office of HHS Office of Inspector General (HHS-OIG), Office of Investigations.

This case was prosecuted by Trial Attorneys David Maria, Ben O'Neil and Laura M.K. Cordova of the Fraud Section in the Justice Department’s Criminal Division.  The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section.

Since their inception in March 2007, Medicare Fraud Strike Force operations in nine districts have obtained indictments of more than 1,330 individuals who collectively have falsely billed the Medicare program for more than $4 billion.  In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

COUNTY COMMISSIONER CHARGED WITH ATTEMPTED EXTORTION, BRIBERY AND FALSE STATEMENTS

FROM:  U.S. DEPARTMENT OF JUSTICE
Friday, May 11, 2012
Georgia County Commissioner Charged with Attempted Extortion, Bribery and False Statements
WASHINGTON – A county commissioner in Sumter County, Ga., was indicted today for his alleged role in soliciting illicit payments in exchange for his official efforts to secure government contracts for a private contractor, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney for the Middle District of Georgia Michael J. Moore announced.

Al J. Hurley, 54, is charged in a three-count indictment filed in the Middle District of Georgia with attempted extortion, bribery and false statements.  According to the indictment, Hurley was an elected member of the five-member Sumter County Board of Commissioners in Sumter County.  As the primary governing body for the county, the Board of Commissioners presided over a variety of official matters, including the bidding process for and award of various county contracts.

The indictment alleges that from September to December 2011, Hurley, in his capacity as a county commissioner, solicited and agreed to accept cash payments, including $5,000 on Oct. 23, 2011, and $15,000 on Dec. 19, 2011, from a private contractor, in exchange for Hurley’s use of official action and influence to facilitate the award of county contracting work to the contractor.  In addition, according to the indictment, on Dec. 19, 2011, Hurley lied to special agents of the FBI when he falsely claimed that he never solicited money from the contractor.

If convicted of attempted extortion, Hurley faces 20 years in prison and a $250,000 fine.  On the bribery charge, Hurley faces 10 years in prison and a $250,000 fine.  The false statement charge carries a maximum five year prison sentence and an additional $250,000 fine.

This case is being prosecuted by Trial Attorney Eric G. Olshan of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Crawford L. Seals of the Middle District of Georgia.  This case was investigated by the FBI.

MAN SENTENCED FOR SELLING CONTRACTS TO REDUCE PRISON SENTENCES

FROM:  U.S. DEPARTMENT OF JUSTICE
Friday, May 11, 2012
Nebraska Man Sentenced to 18 Months in Prison
WASHINGTON – An Omaha, Neb., man was sentenced today in Omaha to 18 months in prison for committing wire fraud while serving a term of supervised release as part of a scheme to obtain corrupt payments from an individual facing criminal charges in return for a promised reduction in the individual’s prison sentence, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

Austin Galvan, 30, was sentenced by U.S. District Judge Joseph F. Bataillon for the District of Nebraska.  In addition to his prison term, Galvan was ordered to serve three years of supervised release following the prison term and to pay $1,300 in restitution.

Galvan pleaded guilty on Feb. 6, 2012.  According to court documents, Galvan told an associate who was facing federal criminal charges that Galvan had a law enforcement contact who could secure a substantial reduction in his associate’s prison sentence in exchange for corrupt payments.  Galvan, in fact, had no such contact.  At the time, Galvan was serving a term of supervised release.

According to his plea agreement, in subsequent conversations, Galvan urged his associate not to cooperate with federal authorities.  Galvan admitted that he used the ruse of his fake law enforcement contact to solicit $ 21,300 in corrupt payments.  Galvan also admitted that he provided his associate with what Galvan claimed was official material received from his purported law enforcement contact, including an audio recording of a court hearing and the business card of a federal judge who would assist in securing the sentence reduction.  In fact, the federal judge was not handling the case and the audio recording was available to the public.

The case was prosecuted by Trial Attorneys Kevin Driscoll and Barak Cohen of the Criminal Division’s Public Integrity Section.  The case was investigated by the FBI’s Omaha Division.

SEC ALLEGES PRIME BANK SCHEME INVOLVING NEARLY $2 MILLION IN INVESTMENTS

FROM:  SECURITIES AND EXCHANGE COMMISSION
May 8, 2012
SEC Charges Arizona Resident with Securities Fraud
The Securities and Exchange Commission (“Commission”) filed a civil injunctive action in Atlanta, Georgia on May 8, 2102, alleging that Gerald D. Kegley (“Kegley”) and the company he operates, Prism Financial Services, LLC (“Prism”), participated in a fraudulent “Prime Bank” scheme that violated the antifraud and securities and broker dealer registration provisions of the federal securities laws.

The Commission’s complaint alleges that from at least April 8, 2010 through at least August 20, 2010, the defendants were directly responsible for introducing six individuals, who invested $1.95 million, to the fraudulent scheme. The complaint alleges that in furtherance of the scheme, the defendants forwarded misrepresentations made by others to investors. These misrepresentations included: 1) that investors could draw upon bank issued guarantees worth millions of dollars without having to repay the withdrawn funds; and 2) that investor funds would be held in escrow until the bank guarantees were issued. The complaint alleges that defendants knew or were reckless in not knowing that both of these representations were false because no such bank guarantees existed and investor funds were misappropriated immediately upon receipt.

Defendants also misrepresented that they would be paid commissions only once the investor received the bank guarantee. In fact, defendants were paid commissions relatively soon after the investors transferred the money. Defendants further told investors that they had previously worked on a successful bank guarantee program. Defendants, however, had actually reported this purportedly successful bank guarantee program to the Federal Bureau of Investigation because they believed it was a fraud.

In its Complaint, the Commission alleges that the defendants violated Sections 5(a) and (c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Commission also alleges that defendants aided and abetted violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

SCHOOL SECURITY OFFICER GETS 30 YEARS FOR PRODUCTION OF CHILD PORNOGRAPHY

FROM:  U.S. DEPARTMENT OF JUSTICE
Wednesday, May 9, 2012
Former Birmingham, Ala., School Security Officer Sentenced to 30 Years in Prison for Production of Child Pornography

WASHINGTON – A former security officer in the Birmingham City School System, who was also a substitute bus driver for Shelby County, Ala., schools, was sentenced today to 30 years in prison for producing child pornography, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Joyce White Vance of the Northern District of Alabama, Northern District of Alabama FBI Special Agent in Charge Patrick J. Maley and Birmingham Police Chief A.C. Roper.

U.S. District Judge Inge P. Johnson also sentenced Michael Wayne Wooten, 61, of Alabaster, Ala., to lifetime supervised release following his prison term.  The court noted during the hearing that Wooten had numerous child victims.  Law enforcement efforts have identified 11 children whom he exploited.

Wooten pleaded guilty in January 2012 to the child pornography charge.

“Mr. Wooten used his position as a school security guard to gain access to young children,” said Assistant Attorney General Breuer.  “But rather than protect school students, he sexually abused them and captured this abuse in dozens of photographs.  Today, appropriately, he was sentenced to 30 years in prison.”

“Restoring the innocence and trust this defendant stole from his victims is impossible, but the judge’s sentence punishes him for the harm he did and ensures he will never exploit another child,” said U.S. Attorney Vance.  “This defendant will be eligible for release when he is 91.  Today, we confirm that victimizing children by taking sexually explicit photographs of them is abhorrent criminal behavior and it will be not tolerated.”
“Mr. Wooten used and abused his position of trust to satisfy his own perverse sexual interest in children,” said Special Agent in Charge Maley.  “Working with our law enforcement partners, the FBI will bring to justice those individuals who prey on the innocent.”

“We believe that justice has been served, and this is the appropriate sentence in a case where so many innocent children have been affected,” said Police Chief Roper.  “We appreciate all the various criminal justice agencies that came together to bring this investigation to a successful conclusion.”

According to court documents, Wooten, a retired Birmingham police officer, worked as a security officer for the Birmingham City Schools from July 1997 until May 2011.  Before his November arrest, Wooten had worked as a substitute bus driver in Shelby County schools during the current school year.

Between August 2009 and April 2010, Wooten used an office at Dupuy Elementary School in Birmingham to take modeling photos of numerous juvenile girls, according to court records.  After one of these modeling sessions, one of the victims told her parents of potentially inappropriate conduct by Wooten.  A subsequent search of Wooten’s residence yielded multiple computers containing child pornography images, including images produced by Wooten depicting several victims, between four and nine years of age, engaged in sexually explicit conduct.

The FBI and the Birmingham Police Department investigated the case.  Assistant U.S. Attorney Daniel Fortune of the Northern District of Alabama and Trial Attorney Jeffrey H. Zeeman of the Justice Department Criminal Division’s Child Exploitation and Obscenity Section prosecuted the case.

MAN FOUND GUILTY OF SEXUAL EXPLOITATION OF A MINOR IN BELIZE

FROM:  U.S. DEPARTMENT OF JUSTICE
Wednesday, May 9, 2012 Wisconsin Man Pleads Guilty to Sexual Exploitation of a Minor in Belize

WASHINGTON – A Wisconsin man pleaded guilty today in federal court in Milwaukee to traveling in foreign commerce and engaging in and attempting to engage in illicit sexual conduct with a minor, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney James L. Santelle of the Eastern District of Wisconsin; John Morton, Director of U.S. Immigration and Customs Enforcement (ICE); and Scott Bultrowicz, Director of the U.S. State Department’s Diplomatic Security Service (DSS).

Roland J. Flath, 72, pleaded guilty before U.S. District Judge J.P. Stadtmueller.
According to court documents, Flath, of Fond du Lac, Wis., traveled to Belize in July 2006, and subsequently sexually molested a minor girl from Belize.  Flath was originally charged by a criminal complaint filed in the Eastern District of Wisconsin in October 2010.  He was arrested by the Guatemalan National Civil Police on Feb. 20, 2011, expelled to the United States and arrested in the United States by ICE agents and the U.S. Marshal Service.  Flath was indicted on March 22, 2011, by a grand jury sitting in the Eastern District of Wisconsin.

Flath faces a maximum penalty of up to 30 years in prison and a fine of $250,000.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice.  Led by U.S. Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children, as well as to identify and rescue victims.  For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

This case is being prosecuted by Assistant U.S. Attorney Penelope Coblentz of the Eastern District of Wisconsin and Trial Attorney Mi Yung Park of CEOS.  Assistance was provided by the Office of International Affairs in the Justice Department’s Criminal Division.  This case is a result of investigative efforts led by ICE Homeland Security Investigations (HSI) in Milwaukee and the DSS’s Regional Security Office in Belize, CEOS’s High Technology Investigative Unit, and the Belize Police Department.      

SHERIFF JOSEPH M. ARPAIO ACCUSED OF UNCONSTITUTIONAL AND UNLAWFUL ACTIONS

FROM:  U.S. DEPARTMENT OF JUSTICE
Breaking News
Thursday, May 10, 2012 
Department of Justice Files Lawsuit in Arizona Against Maricopa County, Maricopa County Sheriff’s Office, and Sheriff Joseph Arpaio
The Department of Justice filed a civil lawsuit in federal court today against Maricopa County, the Maricopa County Sheriff’s Office (MCSO) and Sheriff Joseph M. Arpaio, arising from unconstitutional and unlawful actions by the defendants.

The lawsuit follows a comprehensive and independent investigation initiated, in June 2008, under Section 14141 of the Violent Crime Control and Law Enforcement Act of 1994 and Title VI of the Civil Rights Act of 1964.   On Dec. 15, 2011, the department issued a 22 page letter of findings, which found reasonable cause that MCSO and Sheriff Arpaio were engaged in a pattern or practice of unconstitutional conduct and/or violations of federal law.   Following the issuance of the letter of findings, the department attempted to reach a resolution with MCSO and Sheriff Arpaio and provided them with a comprehensive draft settlement agreement.  The proposed agreement contained a number of key reforms that had been successfully implemented elsewhere.  However, negotiations were unsuccessful, primarily because MCSO and Sheriff Arpaio refused to agree to any independent oversight by a monitor.

The complaint alleges that Maricopa County, MCSO and Sheriff Arpaio engaged in and continue to engage in a pattern or practice of:

·          Discriminatory and otherwise unconstitutional law enforcement actions against Latinos who are frequently stopped, detained and arrested on the basis of race, color, or national origin;
·          Discriminatory jail practices against Latino inmates with limited English skills; and
·          Illegal retaliation against their perceived critics, subjecting them to baseless criminal actions, unfounded civil lawsuits, or meritless administrative actions.

According to the complaint, since approximately 2006, MCSO and Sheriff Arpaio have intentionally and systematically discriminated against Latinos.   They have accomplished this by stopping Latinos in their vehicles four to nine times more often than similarly situated non-Latino drivers.   In addition, MCSO stops Latinos on the county’s roads without the required legal justification.   Also, MCSO detains and searches Latinos on the roads, in their homes, and in their workplaces without legal justification for doing so.   Further, MCSO mistreats Latino detainees with limited English proficiency by ignoring important requests if they are not made in English and punishing detainees if they fail to understand orders given in English.   Finally, MCSO files baseless administrative actions, civil actions and criminal cases against its perceived critics in an attempt to chill free speech.

The conduct of MCSO dramatically departs from standard law enforcement practices in numerous ways.   As described in the complaint, “MCSO promotes and is indifferent to the discriminatory conduct of its law enforcement officers, as is demonstrated by inadequate policies, ineffective training, virtually non-existent accountability measures, poor supervision, scant data collection mechanisms, distorted enforcement prioritization [and] an ineffective complaint and disciplinary system.”

Additionally, the complaint alleges that the conduct is the product of a culture of disregard for Latinos that starts at the top and pervades the organization.   MCSO employees frequently use derogatory terms to refer to Latinos, and Sheriff Arpaio and MCSO supervisors, through their words and actions, set the tone and create a culture of bias that contributes to unlawful actions.

In the complaint, the department seeks declaratory and injunctive relief that would ensure that MCSO implements policies and procedures to prevent the pattern or practice of unconstitutional conduct identified in the complaint.

“At its core, this is an abuse of power case involving Sheriff Arpaio and a sheriff’s office that disregarded the Constitution, ignored sound police practices, and did not hesitate to retaliate against perceived critics in a variety of unlawful ways,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.  “Constitutional policing and effective policing go hand in hand.  The complaint outlines how Sheriff Arpaio’s actions were neither constitutional nor effective.  No one in Maricopa County is above the law and the department will fight to ensure that the promise of the Constitution is realized by everyone in Maricopa County.”

This complaint was filed after a thorough and independent investigation of MCSO’s policies and practices.   Department attorneys, investigators and experts conducted interviews with more than 400 individuals including, 75 current and former MCSO supervisors and deputies, including Sheriff Arpaio, and 150 former and current MCSO inmates.   In addition, the department reviewed thousands of pages of documents.   Many of these interviews and much of this review was delayed when MCSO refused to provide required documents and access.   MCSO finally provided the required access and documents after the department filed a lawsuit under Title VI in September 2010.

Section 14141 prohibits law enforcement agencies, such as MCSO, from engaging in activities that amount to a pattern or practice of violating the Constitution or laws of the United States.  Title VI and its implementing regulations provide that recipients of federal financial assistance, such as Maricopa County and MCSO, may not discriminate on the basis of race, color or national origin.

Since releasing its findings in December 2011, the department has repeatedly reached out to MCSO in an effort to achieve voluntary compliance with the Constitution and Title VI.   MCSO ended these efforts in April 2012.   In light of the deeply rooted nature of the problems facing MCSO, the complaint seeks a host of reforms, including a court order requiring that the defendants:

·          Develop and implement new policies and procedures and train MCSO officers in effective and constitutional policing;
·          Implement systems to ensure accountability and improve the quality of policing throughout the county; and
·          Eliminate unlawful bias from all levels of law enforcement decision.

In addition, the Justice Department’s experience has shown that the most effective path to sustainable reform includes the appointment of an independent monitor to work collaboratively with the department and the community to ensure the effective implementation of the provisions of any court order.

This investigation was conducted by the Special Litigation Section and the Federal Coordination and Compliance Section of the Civil Rights Division with the assistance of law enforcement professionals, including former police chiefs, a jail practices consultant and a consultant on statistical analysis.   The investigation into the handling of sexual assaults by MCSO remains ongoing at this time.  Members of the Maricopa County community who may wish to provide information to the Justice Department may call 1-877-613-2137 or emailcommunity.maricopa@usdoj.gov .

SEC CHARGES FORMER DETROIT OFFICIALS AND INVESTMENT ADVISER TO CITY PENSION FUNDS IN INFLUENCE PEDDLING SCHEME

FROM:  SECURITIES AND EXCHANGE COMMISSION
May 9, 2012
The Securities and Exchange Commission (“Commission”) today charged former Detroit mayor Kwame M. Kilpatrick, former city treasurer Jeffrey W. Beasley, and the investment adviser to the city’s public pension funds involved in a secret exchange of lavish gifts to peddle influence over the funds’ investment process.

The Commission’s complaint alleges that Kilpatrick and Beasley, who were trustees to the pension funds, solicited and received $125,000 worth of private jet travel and other perks paid for by MayfieldGentry Realty Advisors LLC, an investment adviser whose CEO Chauncey Mayfield was recommending to the trustees that the pension funds invest approximately $117 million in a real estate investment trust (REIT) controlled by the firm. Despite their fiduciary duties, neither Kilpatrick and Beasley nor Mayfield and his firm informed the boards of trustees about these trips and the conflicts of interest they presented. The funds ultimately voted to approve the REIT investment, and MayfieldGentry received millions of dollars in management fees.

According to the Commission’s complaint filed in U.S. District Court for the Eastern District of Michigan, members of Kilpatrick’s administration began to exert pressure on Mayfield in early 2006 after he supported Kilpatrick’s opponent in his 2005 re-election and hired that candidate’s daughter at MayfieldGentry. The complaint alleges that Beasley met with Mayfield in February 2006 and told him he was “in the dog house” with Kilpatrick and offered to help him “clear the air.” Throughout 2007, Mayfield appeared before the boards of trustees for Detroit’s public pension funds recommending the REIT investment.

Meanwhile, the complaint alleges, MayfieldGentry began footing the bills for trips taken by Kilpatrick, Beasley and others that extended beyond business. In January 2007, Beasley demanded and Mayfield agreed to pay more than $3,000 for hotel rooms in Charlotte, N.C. for Beasley, Kilpatrick, and others. According to the complaint, Beasley told Mayfield that the reason for the trip was to inspect a building recently acquired by one of the pension funds, but in fact Beasley and Kilpatrick never inspected the building. Mayfield knew that Beasley and Kilpatrick never inspected the building, but did not ask any further questions about the matter.

According to the Commission’s complaint, the non-business travel continued:
In April 2007, MayfieldGentry paid for Kilpatrick, Beasley, and their associates to travel by private jet to Las Vegas, where they enjoyed luxury hotel accommodations, two concerts, three rounds of golf, meals, and massages. The Las Vegas trip cost more than $60,000.

In July 2007, MayfieldGentry paid more than $24,000 for a private jet to take Kilpatrick, Beasley’s son and others to Tallahassee, Fla., where Kilpatrick had a second home.

In October 2007, MayfieldGentry paid more than $34,000 for a private jet to fly Kilpatrick and his wife to and from Bermuda, and Kilpatrick’s father and his girlfriend back from Bermuda.

The Commission alleges that neither Kilpatrick nor Beasley nor Mayfield nor MayfieldGentry told anyone associated with the pension funds about any of the travel. The boards of trustees for the funds thus voted to invest approximately $117 million with Mayfield and his firm without the knowledge that they had supplied Kilpatrick, Beasley, and their associates with the extravagant travel and perks during the preceding 10 months.
The Commission’s complaint alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a), 10b-5(b) and 10b-5(c) thereunder.  The Commission also alleges that MayfieldGentry and Chauncey Mayfield violated Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act of 1933. In addition, the Commission charges that MayfieldGentry and Chauncey Mayfield violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and Kilpatrick and Beasley aided and abetted those violations. The Commission seeks disgorgement of ill-gotten gains, penalties, and permanent injunctions, including an injunction against Kilpatrick and Beasley to prohibit them from participating in any decisions involving investments in securities by public pensions.

The Commission’s investigation, which is continuing, has been conducted jointly by the Chicago Regional Office led by Merri Jo Gillette and Timothy L. Warren, the Enforcement Division’s Asset Management Unit led by Bruce Karpati and Robert Kaplan, and the Municipal Securities and Public Pensions Unit led by Elaine C. Greenberg and Mark R. Zehner. The investigative attorneys are Brian D. Fagel, Rebecca R. Goldman and Eric A. Celauro, led by Assistant Directors Peter K.M. Chan and John J. Sikora, Jr. The Commission’s litigation will be led by Timothy S. Leiman and John E. Birkenheier.

MAN CHARGED WITH COMMODITY POOL FRAUD

FROM:  CFTC
CFTC Charges Illinois Resident Dimitry Vishnevetsky and His Company, Oxford Capital, LLC, with Commodity Pool Fraud
Federal court enters emergency order freezing defendants’ assets and protecting books and records
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that on May 1, 2012, the Honorable Ruben Castillo, of the U.S. District Court for the Northern District of Illinois, entered an order freezing the assets of defendants Dimitry Vishnevetsky of Chicago, Ill., and his company, Oxford Capital, LLC (OCL), a defunct Wisconsin limited liability company. The court’s order also prohibits the destruction of books and records.

The court’s order stems from a CFTC civil complaint also filed on May 1, 2012, charging Vishnevetsky and OCL with fraud in connection with the operation of two commodity pools and an additional commodity trading scheme. According to the complaint, from at least the fall of 2006 through the present, the defendants fraudulently solicited and accepted at least $1.74 million from pool participants and commodity customers.
The defendants allegedly defrauded pool participants by representing that their commodity pools had profitable performance records, based on audited results when, in fact, the defendants never conducted any trading for the pools. Vishnevetsky, individually and doing business as Hodges Trading LLC and Hodges Court Trading, also defrauded other pool participants by misrepresenting that Hodges issued Libor Notes and invested in commodity futures contracts to enhance the value of the purported Libor Notes, according to the complaint.

The complaint further alleges that the defendants misappropriated a portion of the pool participants’ monies and issued false account statements to them. The defendants defrauded customers by failing to open and fund commodity trading accounts for them, failing to place commodity trades for them, issuing fictitious account statements to them and misappropriating their monies, the complaint further alleges.

In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, disgorgement of ill-gotten gains, permanent registration and trading bans, and preliminary and permanent injunctions against further violations of the federal commodities laws, as charged.

The CFTC appreciates the assistance of the Federal Bureau of Investigation and the U.S. Attorney’s Office for the Northern District of Illinois, which filed a criminal indictment against Vishnevetsky on May 1, 2012.

CFTC Division of Enforcement staff members responsible for this case are Diane M. Romaniuk, Heather Johnson, Ava M. Gould, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner.

MAN ARRESTED FOR BRIBERY AND GAMBLING CONSPIRACY

FROM:  U.S. DEPARTMENT OF  JUSTICE
Monday, May 7, 2012
Alabama Resident Arrested and Charged with Bribery and Gambling Conspiracy
WASHINGTON – An Alabama man was arrested today on charges of conspiracy, federal programs bribery and operating an illegal gambling business, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

An indictment filed in the Northern District of Alabama and unsealed today charges Robert E. Taylor Jr., 41, of Warrior, Ala., with conspiring to bribe and bribing a public official in order to protect his interest in an illegal gambling business.  According to the indictment, from approximately November 2010 to approximately April 2011, Taylor and several others operated an illegal gambling business in the city of Kimberly, Ala., approximately 20 miles north of Birmingham, by placing numerous video gambling machines in private residences in and around the city.

The indictment further alleges that Taylor conspired with eight other individuals to expand, protect and conceal the illegal gambling business, including by offering and paying bribes to Kimberly’s mayor, a public official.  In exchange for more than a dozen cash payments over the course of 15 weeks totaling $4,000, the mayor was expected to ensure that law enforcement officers from Kimberly and the surrounding area did not interfere with the illegal gambling operation.  In addition, the mayor was expected to notify a member of the conspiracy if Kimberly or any neighboring jurisdictions received complaints or tips regarding the illegal gambling business.

The indictment reveals, however, that the mayor of Kimberly was cooperating with the FBI throughout the entire period of the investigation.

An indictment is merely an accusation, and a defendant is presumed innocent unless proven guilty in a court of law.

This case is being prosecuted by Trial Attorneys Anthony J. Phillips and Richard B. Evans of the Criminal Division’s Public Integrity Section, and investigated by the FBI.

EXECUTIVE PLEADS GUILTY TO OBSTRUCTION AND SUBMITTING FALSE DOCUMENTS IN ATM MERGER INVESTIGATION

FROM:  U.S. DEPARTMENT OF JUSTICE
Thursday, May 3, 2012
Hyosung Corporation Executive Agrees to Plead Guilty to Obstruction of Justice for Submitting False Documents in an ATM Merger Investigation

WASHINGTON – An executive of South Korean-based Hyosung Corporation has agreed to plead guilty and to serve time in a U.S. prison for obstruction of justice charges in connection with an automated teller machine (ATM) merger investigation conducted by the Antitrust Division, the Department of Justice announced today.

According to a two-count felony charge filed today in the U.S. District Court in Washington, D.C., Kyoungwon Pyo, in his role as senior vice president for corporate strategy of Hyosung Corporation, an affiliate of Nautilus Hyosung Holdings Inc. (NHI), altered and directed subordinates to alter numerous existing corporate documents before they were submitted to the Department of Justice and the Federal Trade Commission (FTC) in conjunction with mandatory premerger filings. The department said that Pyo’s actions took place in or about July and August 2008.  At the time, the department was investigating Korea-based NHI’s proposed acquisition of Triton Systems of Delaware Inc.  NHI abandoned the proposed acquisition of competitor Triton Systems before the Antitrust Division reached a decision determining whether to challenge the transaction.

On Oct. 20, 2011, NHI pleaded guilty and paid a $200,000 criminal fine for its role in the obstruction of justice charges. According to the plea agreement, which is subject to court approval, Pyo has agreed to serve five months in prison.

“Maintaining the integrity of the merger review and investigation process is one of our highest priorities,” said Acting Assistant Attorney General Joseph Wayland in charge of the Department of Justice’s Antitrust Division. “Senior corporate executives should understand that anyone who attempts to corrupt the process by falsifying materials submitted to the U.S. government will be held accountable for their actions.”

After receiving the premerger filings, the Antitrust Division opened a civil merger investigation of the proposed acquisition. The department said that in or about August and September 2008, Pyo falsified additional documents in response to a document request from the Antitrust Division with the intention of impairing their integrity and availability for use in an official proceeding. The department said that, among other things, the alterations misrepresented and minimized the competitive impact of the proposed acquisition.

The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, requires companies contemplating mergers and acquisitions valued above certain thresholds to make filings with the Department of Justice and the FTC. The federal antitrust agencies have authority to investigate and challenge such proposed transactions under Section 7 of the Clayton Act, if the transactions may substantially lessen competition.

NHI was previously charged with obstruction of justice, which carries a maximum criminal fine for a corporation of $500,000 per count.  NHI’s agreed-upon criminal fine of $100,000 per count takes into consideration the nature and extent of the company’s disclosure of wrongdoing and its cooperation in the department’s investigation.

Pyo is charged with obstruction of justice, which carries a maximum penalty of 20 years in prison and a criminal fine of $250,000 for individuals.

MAN PLEADS GUILTY TO ODOMETER TAMPERING CHARGES

FROM:  U.S. DEPARTMENT OF JUSTICE
Thursday, May 3, 2012
Baton Rouge, Louisiana, Man Pleads Guilty to Odometer Tampering Charges
Beau Michael Guidry of Baton Rouge, La., pleaded guilty today in the U.S. District Court for the Middle District of Louisiana to three counts of odometer tampering.

Guidry, owner of Affordable Imports in Denham Springs, La., purchased high-mileage motor vehicles both online, through eBay, as well as from wholesale automobile auctions in Louisiana, Mississippi and Texas.   The vehicles’ odometers were then rolled back as much as 147,000 miles.   Guidry subsequently resold the vehicles at his lot in Denham Springs or through eBay to unsuspecting purchasers.

Many vehicles were more than 10 years old when Guidry sold them.   Because of the age of the cars, Guidry was not required to sign a disclosure certifying as accurate the mileage on the vehicles that were more than 10 years old.   However, each time he altered an odometer with intent to change the mileage on the odometer, he violated federal law.

“Just because a car dealer does not have to certify the mileage on cars he sells, that does not give him a license to roll back odometers,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division.  “It is equally fraudulent to roll back a so-called ‘exempt’ vehicle as rolling back a non-exempt vehicle.   With cars remaining in service longer, people rely on vehicles older than 10 years for basic transportation.   These citizens are not fair game for crooked car dealers.”

“The odometer tampering statutes were put in place to protect consumers who pay more for used cars, and suffer other financial and potential mechanical harm when odometers on cars are rolled back,” said U.S. Attorney Donald J. Cazayoux, Jr. of the Middle District of Louisiana.  “The Department of Justice is committed to putting in prison those who steal from consumers and put them in danger by selling cars with rolled back odometers.”

The National Highway Traffic Safety Administration Office of Odometer Fraud
Investigation (NHTSA) investigated this case.   The case was prosecuted by Justice Department trial attorney David Sullivan of the Civil Division’s Consumer Protection Branch.

Ways to Help Avoid Being Victimized by Odometer Fraud
Have a mechanic you trust check out the car.   This will cost money, but it can save much more.
Look for loose screws or scratch marks around the dashboard.   This is pertinent primarily to mechanical odometers which can be manipulated with tools.

Also on mechanical odometers, check to make sure that the digits in the odometer are lined up straight--particularly the 10,000 digit.

Test drive the car and see if the speedometer sticks.
Check for service stickers inside the door or under the hood that may give the actual mileage.   Odometer tamperers try to find these as well, but sometimes miss one.
Look in the owner’s manual to see if maintenance was listed, or if pages that might have shown high mileage were removed.

Ask the dealer whether a computer warranty check has been run on the car.
Use a commercially available computer search program that checks for mileage alterations.   Some car dealers will give you one of these for free if you ask for it.   While this is an important step to take, it is not foolproof by any means because not all high mileages are recorded on paperwork that makes its way to these databases.

Ask to see the title documents and look to see if the mileage reading on the documents has been altered.
Look to see if the steering wheel was worn smooth.   Look for other signs of excessive wear on the arm-rest, the floor mats, the pedals for the brakes and gas, and the area around the ignition.   If these items were recently replaced, that could also indicate efforts to hide the car's true use and mileage.
Don’t assume that mileage is accurate just because the vehicle has an electronic odometer.

FORMER MAGISTRATE PLEADS GUILTY TO ACCEPTING BRIBES

FROM:  U.S. DEPARTMENT OOF JUSTICE
Wednesday, May 2, 2012
Former Magistrate in Portsmouth, Virginia, Pleads Guilty to Accepting Bribes
WASHINGTON – A former state magistrate in Portsmouth, Va., pleaded guilty today in the Eastern District of Virginia to accepting bribes from a bail bondsman in exchange for giving him favorable treatment in setting bonds for criminal defendants who had been arrested, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Neil H. MacBride for the Eastern District of Virginia announced today.

Deborah Clark, 52, of Portsmouth, Va., pleaded guilty before U.S. District Judge Henry C. Morgan Jr.

Clark was charged in a criminal information filed on April 16, 2012.  She faces a maximum penalty of 10 years in prison and a fine of $250,000 when she is sentenced on Oct. 3, 2012.

According to a statement of facts filed with her plea agreement, Clark was a state magistrate in Portsmouth from January 1993 to April 2012.  She was authorized to issue arrest and search warrants, and to set bail or order the detention of arrestees.  From 2009 through February 2012, she accepted cash and gifts from a bondsman in exchange for referring arrestees to the bondsman as prospective clients and seeking and accepting his advice on the amount of bond to set in particular cases.  In addition to regular cash payments, Clark admitted receiving payments for gas, meals and expense money for trips.

Clark is subject to prosecution for bribery under a federal statute because, as a magistrate, she was an agent of the Commonwealth of Virginia, which receives annual benefits in excess of $10,000 under federal programs involving grants and other forms of assistance.

This case was investigated by the FBI.  Trial Attorneys Peter Mason and Monique Abrishami of the Public Integrity Section in the Justice Department’s Criminal Division and Assistant U.S. Attorney Alan M. Salsbury and Special Assistant U.S. Attorney Amy E. Cross of the Eastern District of Virginia are prosecuting the case.

FOUNDER OF NAVY VETERANS ASSOCIATION CAPTURED BY U.S. MARSHALS

FROM:  U.S. MARSHALS SERVICE
Marshals Capture Elusive "Bobby Thompson"
Fraudulent Founder of Navy Veterans Association was one of America's Most Wanted Fugitives


Cleveland, OH – Late last night, the United States Marshals Service captured one of America's Most Wanted and elusive fugitives who is accused of stealing millions of dollars that had been donated for the sole purpose of aiding U.S. veterans. “Bobby Thompson”, which was an alias, was on the run for over the last two years where he assumed numerous fictitious names and was known to alter his appearance. He was charged with Unlawful Flight to Avoid Prosecution, Identity Theft, Fraud, and Money Laundering.
In the early 2000s, the subject, using the alias “Bobby Thompson”, founded the U.S. Navy Veterans Association (USNVA), a charitable organization whose stated mission was to provide assistance to veterans and members of the U.S. Armed Forces. The USNVA claimed to have a national headquarters in Washington D.C., but its base of operations was the Tampa, FL, area. From its inception to the summer of 2010, it is estimated the USNVA received close to $100 million dollars in nationwide donations. 


Officials in several states are investigating the USNVA and it is believed little, if any, of the money actually benefited veterans or current service members. In August 2010, “Thompson” was charged in Ohio with various offenses relating to this fraudulent activity. A co-conspirator is currently serving a five year prison sentence in Ohio for her role in this scam after pleading guilty in June 2011.


“Thompson”, the alleged mastermind of this plot, fled in June 2010, when he learned of the criminal investigation. “Thompson” was featured on America’s Most Wanted on two separate occasions, with the most recent being March 2011.
In November 2011, the United States Marshals in the Northern District of Ohio were called on to spearhead the apprehension of “Thompson” who was indicted out of Cuyahoga County. 


In November 2011, United States Marshal Pete Elliott for the Northern District of Ohio was contacted by former Ohio Attorney General Richard Cordray and asked for his assistance in locating “Thompson”. Marshal Elliott immediately formed a task force in Cleveland, Ohio that has diligently pursued “Thompson” for over the last six months. Numerous leads were followed up while Ohio investigators tracked “Thompson” through several states to include Massachusetts, Arizona, New Mexico Rhode Island, West Virginia, Indiana, Florida and Washington.


“Thompson’s” fictitious and fraudulent life on the run came to an abrupt end last night in Portland, Oregon. After conducting an intense and thorough investigation, a team of Deputy U.S. Marshals and Task Force Officers from the Northern District of Ohio traveled to Portland, Oregon and coordinated efforts with the U.S. Marshals in the District of Oregon.


At approximately 10:30 pm (PST), the team apprehended “Thompson” outside a residence on 72nd St., NE in Portland where he has been living under one of his new fictitious names. Upon arrest, “Thompson” refused to make any statements. He appeared to be in poor physical condition and was walking with a cane. He was in possession of several false identification cards from Canada along with a backpack containing an undisclosed amount of cash. All of his possessions were taken as evidence and search warrants are being obtained for his residence. The Ohio Bureau of Criminal Investigation is traveling to Portland to conduct further investigation. Investigators are still unsure of the true identity of “Thompson” and will be working on that as well as identifying his ongoing criminal activity. “Thompson” was transported to the Multnomah County Jail where he will await extradition to Northern Ohio.


U.S. Marshal Pete Elliott stated, “This was one of our most challenging fugitive investigations to date. Our investigators followed up leads all over the nation. Their diligence and dedication directly led to the arrest in Portland. I am proud of everyone that worked on this investigation and their efforts have brought this scam artist to justice.”


Ohio Attorney General Mike DeWine stated, “We are relieved Bobby Thompson is now in federal custody after a nationwide manhunt and years of work within the Attorney General’s Office to track him down. We believe he stole between $1.5 million and $2 million which came from generous people in our state who thought they were helping U.S. Navy veterans.”

ALABAMA REAL ESTAE BID-RIGGER PLEADS GUILTY

FROM:  DEPARTMENT OF JUSTICE ANTITRUST DIVISION

ALABAMA REAL ESTATE INVESTOR AGREES TO PLEAD GUILTY TO 

CONSPIRACIES TO RIG BIDS AND COMMIT MAIL FRAUD FOR THE PURCHASE

OF REAL ESTATE AT PUBLIC FORECLOSURE AUCTIONS

Agrees to Serve One Year in Prison

WASHINGTON — An Alabama real estate investor has agreed to plead guilty and to serve one year in prison for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in southern Alabama, the Department of Justice announced today. To date, as a result of the ongoing investigation, four individuals and one company have pleaded guilty.


Charges were filed yesterday in the U.S. District Court for the Southern District of Alabama in Mobile, Ala. , against Steven J. Cox of Mobile. Cox was charged with one count of bid rigging and one count of conspiracy to commit mail fraud. According to the plea agreement, which is subject to court approval, Cox has agreed to serve one year in prison, to pay a $10,000 criminal fine and to cooperate with the department’s ongoing investigation.
According to court documents, Cox conspired with others not to bid against one another at public real estate foreclosure auctions in southern Alabama. After a designated bidder bought a property at the public auctions, which typically take place at the county courthouse, the conspirators would generally hold a secret, second auction, at which each participant would bid the amount above the public auction price he or she was willing to pay. The highest bidder at the secret, second auction won the property.


Cox was also charged with conspiring to use the U.S. mail to carry out a scheme to acquire title to rigged foreclosure properties sold at public auctions at artificially suppressed prices, to make and receive payoffs to co-conspirators and to cause financial institutions, homeowners and others with a legal interest in rigged foreclosure properties to receive less than the competitive price for the properties. Cox participated in the bid-rigging and mail fraud conspiracies from as early as January 2004 until at least May 2010.


“The Antitrust Division continues to work with its law enforcement partners to ensure that real estate foreclosure auctions are fair and competitive,” said Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division Sharis A. Pozen. “The division will vigorously pursue those who engage in collusive schemes to eliminate competition in the marketplace.”
FBI Special Agent in Charge of the Mobile FBI Office Lewis M. Chapman recognized the perseverance of agents and prosecutors in this complex investigation. Chapman stated, “This investigation sends the message that real estate fraud including antitrust violations will continue to be pursued in these tough economic times, no matter how intricate the scheme.”
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the statutory maximum fine. Each count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine in an amount equal to the greatest of $250,000, twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.


The investigation into fraud and bid rigging at certain real estate foreclosure auctions in southern Alabama is being conducted by the Antitrust Division’s Atlanta Field Office and the FBI’s Mobile Office, with the assistance of the U.S. Attorney’s Office for the Southern District of Alabama. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s Atlanta Field Office at 404-331-7100 or visit www.justice.gov/atr/contact/newcase.htm.


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

FORMER SHERIFF'S SERGEANT SENTENCED TO OVER 5 YEARS IN PRISON FOR USING TASAR TO PUNISH PRISONERS

FROM:  U.S. DEPARTMENT OF JUSTICE
Thursday, April 26, 2012
Former Tuscaloosa County, Alabama, Sheriff’s Sergeant Sentenced for Criminal Civil Rights Violations
Former Tuscaloosa County Sheriff’s sergeant, Althea Mallisham, 52, has been sentenced to 61 months in prison for civil rights convictions for wrongfully using a Taser against three detainees during separate incidents over a four month period in 2008.

On Nov. 16, 2011, Mallisham pleaded guilty to three felony civil rights offenses at which time she admitted that on separate occasions while she was on duty as a Tuscaloosa Sheriff's sergeant and acting under color of state law, she used an X26 Taser to electro-shock three pre-trial detainees as a means of punishment.   In each instance, the pre-trial detainees were either restrained in handcuffs or securely locked in a jail cell.  None of the three detainees posed a physical threat to any officers or other detainees when they were electro-shocked.  In each instance, Mallisham willfully exceeded and abused her authority under state law.

“Law enforcement officers who abuse their power to maliciously subject those in their custody to extreme pain will be held accountable,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.   “The Justice Department will continue to vigorously prosecute those who cross the line to engage in acts of criminal misconduct.”

“Officer Mallisham took an oath to uphold the law.  Virtually all of our law enforcement officers respect their oaths and the power they are entrusted with to enforce the law, and they perform their duties with honor and integrity,” said Joyce White Vance, U.S. Attorney for the Northern District of Alabama.  “Mallisham, however, violated her oath and broke the law.  Today, she has been held accountable and sentenced to five years in prison.”

This case was investigated by the Tuscaloosa resident agency of the FBI’s Birmingham Field Office. The case was prosecuted by Trial Attorney D.W. Tunnage of the Justice Department’s Civil Rights Division and Assistant U.S. Attorney Tamarra Matthews-Johnson for the Northern District of Alabama.