COMPANY TO PAY $125 MILLION TO RESOLVE FALSE CLAIMS ACT ALLEGATIONS

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, October 29, 2015

Warner Chilcott Agrees to Plead Guilty to Felony Health Care Fraud Scheme and Pay $125 Million to Resolve Criminal Liability and False Claims Act Allegations

Former President and Three District Managers Also Face Criminal Charges

Warner Chilcott U.S. Sales LLC, a subsidiary of pharmaceutical manufacturer Warner Chilcott PLC, has agreed to plead guilty to a felony charge of health care fraud, the Justice Department announced today.  The plea agreement is part of a global settlement with the United States in which Warner Chilcott has agreed to pay $125 million to resolve its criminal and civil liability arising from the company’s illegal marketing of the drugs Actonel®, Asacol®, Atelvia®, Doryx®, Enablex®, Estrace® and Loestrin®.  Prior to today’s guilty plea by Warner Chilcott, several individuals also pleaded guilty or were charged in connection with the company’s illegal activities.

Warner Chilcott agreed to plead guilty in the District of Massachusetts to criminal charges that the company committed a felony violation by paying kickbacks to physicians throughout the United States to induce them to prescribe its drugs, manipulating prior authorizations to induce insurance companies to pay for prescriptions of Atelvia® that the insurers may not have otherwise paid for and making unsubstantiated marketing claims for the drug Actonel®.

Earlier today, an indictment was unsealed in the District of Massachusetts charging former Warner Chilcott President W. Carl Reichel, 57, of Chester, New Jersey, with one count of conspiring to pay kickbacks to physicians.  Reichel was arrested today in Boston and will make an initial appearance at 2:30 p.m. before U.S. District Court Magistrate Judge Jennifer C. Boal.

“The Justice Department is committed to protecting the integrity of physician prescribing decisions and ensuring that financial arrangements in the healthcare marketplace comply with the law,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department will continue to hold companies and responsible individuals accountable when they use improper incentives, like those alleged here, to promote their products.”

“Doctors’ medical judgment should be based on what is best for the patient, and not clouded by expensive meals and other pharmaceutical company kickbacks,” said U.S. Attorney Carmen M. Ortiz for the District of Massachusetts.  “Pharmaceutical company executives and employees should not be involved with treatment decisions or submissions to a patient’s insurance company.  Today’s enforcement actions demonstrate that the government will seek not only to hold companies accountable, but will identify and charge corporate officials responsible for the fraud.”

In a criminal information filed today in the District of Massachusetts, the government charged that, between 2009 and 2013, Warner Chilcott, through its employees acting at the direction of members of the company’s management team, knowingly and willfully paid remuneration to physicians in order to induce those physicians to prescribe Warner Chilcott drugs.  Under the law, it is illegal to offer or pay remuneration to physicians to induce them to refer individuals to pharmacies for the dispensing of drugs for which payments are made in whole or in part under a federal health care program.  The information alleges that Warner Chilcott employees, at the direction of company management, provided payments, meals and other remuneration associated with so-called “Medical Education Events,” which included dinners, lunches and receptions.  These events, which were often held at expensive restaurants, often contained minimal or no educational component and were instead used to pay prescribing physicians in an attempt to gain a “competitive advantage” over other companies.  Warner Chilcott also enlisted high-prescribing physicians as “speakers” for the company.  In fact, the “speakers” often did not actually speak about any clinical or scientific topics, and, instead, the payments were primarily intended to induce prescriptions.  For instance, Warner Chilcott informed “speakers” who were not prescribing at a high volume that they would not be paid for subsequent events unless their prescribing habits increased.    

In addition, the information alleges that from 2011 to 2013, Warner Chilcott employees knowingly and willfully submitted false, inaccurate, or misleading prior authorization requests and other coverage requests to federal health care programs for the osteoporosis medications Atelvia® and Actonel®.  The false, inaccurate and misleading information was provided to certain insurance companies in order to overcome formulary restrictions that favored less expensive osteoporosis drugs.  For instance, Warner Chilcott was aware that many insurers only paid for Atelvia® if a physician submitted an individualized request explaining why the patient could not be treated with less-expensive medications approved to treat the same conditions.  As detailed in the information, Warner Chilcott sales representatives filled out numerous prior authorizations for Atelvia®, using “canned” medical justifications which often were inconsistent with the patients’ medical conditions.  In some instances, according to the information, Warner Chilcott sales representatives submitted these prior authorizations directly to insurance companies, holding themselves out to be physicians.  In other cases, sales representatives coached physicians and staff about which medical justifications would result in an approved prior authorization, whether or not the justification was true for a particular patient.

Finally, the information alleges that Warner Chilcott employees were instructed by members of the company’s management team to make unsubstantiated superiority claims when marketing the drug Actonel®.  The management team instructed the sales representatives to tell physicians that Actonel® was superior to other bisphosphonates due to its supposedly unique “mechanism of action.”  According to the information, Warner Chilcott managers also encouraged sales representatives to use props to visually support this false claim, including pouring water and syrup onto two sponges while telling physicians that Actonel, like water, penetrated and exited the bone more quickly than its competitors, represented by the syrup.  Warner Chilcott management directed the sales representatives to make the superiority claim even though the claim was not supported by clinical evidence.

Under the terms of the plea agreement, Warner Chilcott will pay a criminal fine of $22.94 million.  

Warner Chilcott also entered into a civil settlement agreement under which it agreed to pay $102.06 million to the federal government and the states to resolve claims arising from its conduct, which allegedly caused false claims to be submitted to government health care programs.  The civil settlement resolved allegations that Warner Chilcott violated the federal Ant-Kickback Statute by paying illegal remuneration to prescribing physicians in connection with the so-called “Medical Education Events” and speaker programs and caused the submission of false prior authorization requests for Atelvia® and Actonel®.  The federal share of the civil settlement is approximately $91.5 million, and the state Medicaid share of the civil settlement is approximately $10.6 million.

Prior to today’s guilty plea by Warner Chilcott and civil settlement, several individuals were either criminally charged or pleaded guilty to various offenses related to the company’s alleged conduct.   Two former district managers, Jeffrey Podolsky, 49, of East Meadow, New York, and Timothy Garcia, 35, of Los Gatos, California, previously pleaded guilty to various charges, including conspiracy to commit health care fraud and violations of the Health Insurance Portability and Accountability Act (HIPAA).  A third former district manager, Landon Eckles, 30, of Huntersville, North Carolina, was criminally charged earlier this month for alleged HIPAA violations relating to the alleged prior authorization scheme.  Last week a Springfield, Massachusetts physician, Rita Luthra, M.D., 64, of Longmeadow, Massachusetts, was charged with, among other things, allegedly accepting free meals and speaker fees from Warner Chilcott in return for prescribing its osteoporosis drugs.

“Placing financial gain above the legitimate needs of patients is deplorable,” said Inspector General Daniel R. Levinson of the U.S. Department of Health and Human Services (HHS). “Paying kickbacks and even providing instructions on how to defraud Medicare are practices that will not be tolerated.”

“Pharmaceutical companies and their employees have a significant responsibility to sell and market drugs in an ethical and legal manner,” said Special Agent in Charge Harold H. Shaw of the FBI’s Boston Field Office.  “This settlement and the related indictments reflect the commitment of the FBI and our government partners to aggressively investigate companies and individuals who fail that responsibility and seek to profit from fraudulent activities.”

The civil settlement resolves a lawsuit filed under the whistleblower provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The civil lawsuit was filed in the District of Massachusetts and is captioned United States ex rel. Alexander, et al. v. Warner Chilcott plc, et al., Civil Action No. 11-CA-1121 (D. Mass.).  As part of today’s resolution, the whistleblowers will receive approximately $22.9 million from the federal share of the civil recovery.

The criminal case was prosecuted by the U.S. Attorney’s Office of the District of Massachusetts and the Civil Division’s Consumer Protection Branch.  The civil settlement was handled by the U.S. Attorney’s Office of the District of Massachusetts and the Civil Division’s Commercial Litigation Branch.  Assistance was provided by the FDA’s Office of Chief Counsel, HHS Office of Counsel to the Inspector General, and the National Association of Medicaid Fraud Control Units.  This matter was investigated by the FBI, HHS Office of the Inspector General, the Department of Defense’s Defense Criminal Investigative Service, the FDA’s Office of Criminal Investigations, the Department of Veterans Affairs and the Office of Personnel Management’s Office of Inspector General.    

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $26.2 billion through False Claims Act cases, with more than $16.4 billion of that amount recovered in cases involving fraud against federal health care programs.

Except for the conduct admitted in connection with the criminal plea, the claims resolved by the civil agreement are allegations only, and there has been no determination of civil liability.

FORMER DEA AGENT SENT TO PRISON FOR 78 MONTHS DUE TO ILLEGAL ACTIONS DURING SILK ROAD INVESTIGATION

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, October 19, 2015

Former DEA Agent Sentenced for Extortion, Money Laundering and Obstruction Related to Silk Road Investigation

A former Drug Enforcement Agency (DEA) agent was sentenced today to 78 months in prison for extortion, money laundering and obstruction of justice, which crimes he committed while working as an undercover agent investigating Silk Road, an online marketplace used to facilitate the sale and purchase of illegal drugs and other contraband.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Brian Stretch of the Northern District of California, Chief Richard Weber of the IRS-Criminal Investigation (IRS-CI), Special Agent in Charge David J. Johnson of  FBI’s San Francisco Division, Special Agent in Charge Michael P. Tompkins of the Department of Justice Office of the Inspector General’s Washington, D.C., Field Office and Special Agent in Charge James E. Ward of the Department of Homeland Security Office of the Inspector General’s Atlanta Field Office made the announcement.

Carl M. Force, 46, of Baltimore, pleaded guilty on July 1, 2015, before U.S. District Court Judge Richard Seeborg of the Northern District of California.  In addition to imposing the prison term, the court ordered Force to pay $340,000 in restitution and serve three years of supervised release following his sentence.

Force was a special agent with the DEA for 15 years.  From 2012 through 2013, he was assigned to the Baltimore Silk Road Task Force, a multi-agency group investigating illegal activity on the Silk Road.  Force served as an undercover agent and was tasked with, among other things, establishing communications with a target of the investigation, Ross Ulbricht, aka “Dread Pirate Roberts.”

In connection with his guilty plea, Force admitted that, while working in an undercover capacity using his DEA-sanctioned persona, “Nob,” in the summer of 2013, Force offered to sell Ulbricht fake drivers’ licenses and “inside” law enforcement information about the Silk Road investigation.  Force admitted that he attempted to conceal his communications with Ulbricht about the payments by directing Ulbricht to use encrypted messaging.  Force admitted that he understood the payments from Ulbricht, which were made in bitcoin, were government property, as they constituted evidence of a crime, and that he falsified official reports and stole the funds, which he deposited into his own personal account.  Force admitted that, as Nob, he received bitcoin payments from Ulbricht worth more than approximately $100,000.

In addition, Force admitted that he devised and participated in a scheme to fraudulently obtain additional funds from Ulbricht through another online persona, “French Maid,” of which his task force colleagues were not aware.  Force admitted that, as French Maid, he solicited and received bitcoin payments from Ulbricht worth approximately $100,000 in exchange for information concerning the government’s investigation into the Silk Road.

Force also admitted that he obstructed justice both by soliciting and accepting bitcoin from Ulbricht and by lying to federal prosecutors and agents who were investigating potential misconduct by Force and others.

In connection with his guilty plea, Force also admitted that, although he did not receive permission from the DEA to do so, he served as the chief compliance officer for CoinMKT, a digital currency exchange company.  In this role, in February 2014, Force was alerted by CoinMKT to what the company initially believed to be suspicious activity in a particular account.  Force admitted that, thereafter, in his capacity as a DEA agent, but without authority or a legal basis to do so, he directed CoinMKT to freeze $337,000 in cash and digital currency from the account.  Force further admitted that he subsequently transferred approximately $300,000 of the digital currency into a personal account that he controlled.

The case is being investigated by the FBI’s San Francisco Division, the IRS-CI’s San Francisco Division, the Department of Justice Office of the Inspector General and the Department of Homeland Security Office of the Inspector General in Washington, D.C.  The case is being prosecuted by Assistant U.S. Attorneys Kathryn Haun and William Frentzen of the Northern District of California and Trial Attorney Richard B. Evans of the Criminal Division’s Public Integrity Section.

RETIRED AF MASTER SERGEANT PLEADS GUILTY TO DISCLOSING CONFIDENTIAL BID INFORMATION

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, October 22, 2015

Retired Air Force Master Sergeant Pleads Guilty to Disclosing Confidential Bid Information for Government Contracts and Tax Fraud

A retired U.S. Air Force Master Sergeant pleaded guilty in U.S. District Court for the Southern District of Florida to unlawfully disclosing confidential procurement information and filing a false tax return, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Trevor Smith retired from the U.S. Air Force in December 2012, according to court documents and statements made in open court.  From February 2009 through February 2010, Smith was deployed to Afghanistan, where he served as Supply Non-Commissioned Officer-In-Charge for the Operation Enduring Freedom/Combined Security Transition Command-Afghanistan NATO Training Mission.  In that capacity, Smith met a Fort Lauderdale, Florida-based government contractor and agreed to disclose confidential bid information on government contracts to the contractor in exchange for bribe payments.  Smith and the contractor agreed that Smith would receive two percent of all revenues on contracts that the contractor received as a result of Smith’s assistance.

In January 2010, the contractor wired $42,853.29 to Smith.  The two agreed to wait until Smith returned to the United States for more payments.  After returning to the United States, Smith set up a shell corporation called T Star Air Inc. to receive 23 additional payments totaling $220,600.  Smith also created and submitted phony invoices to conceal the scheme.  For tax years 2010 through 2012, Smith filed corporate tax returns for T Star Air that falsely claimed inflated expenses and deductions.

At his Jan. 5, 2016 sentencing, Smith faces a statutory maximum penalty of five years in prison for disclosing confidential procurement information and three years in prison for filing a false tax return.  He could also be fined up to $500,000 or twice the gain from his crimes.

Acting Assistant Attorney General Ciraolo commended special agents of Internal Revenue Service-Criminal Investigation, the U.S. Air Force’s Office of Special Investigations and the U.S. Department of Defense’s Office of the Inspector General, who investigated this case and Trial Attorneys Charles M. Edgar Jr. and Jason H. Poole of the Tax Division, who are prosecuting this case.  Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office of the Southern District of Florida for their substantial assistance.

2ND TRUCKING COMPANY EXECUTIVE SENTENCED FOR ROLE IN BANK FRAUD AND CONSPIRACY TO DEFRAUD U.S. GOVERNMENT

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, October 16, 2015

Second Former Arrow Trucking Executive Sentenced in Multi-Million Dollar Fraud Scheme

A Waxahachi, Texas, resident and former chief financial officer (CFO) of Arrow Trucking Company was sentenced to serve 35 months in prison for conspiracy to commit bank fraud and to defraud the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U. S. Attorney Danny C. Williams Sr. of the Northern District of Oklahoma.

Jonathan Leland Moore, 38, pleaded guilty on Dec. 4, 2014, to an information charging him with one count of a dual-object conspiracy to defraud the United States and to commit bank fraud.  Moore conspired with James Douglas Pielsticker, 47, a resident of Dallas, and former CEO and president of Arrow Trucking Company, to defraud the United States by failing to account for and pay federal withholding taxes on behalf of Arrow Trucking Company and by making payments to Pielsticker outside the payroll system.

Moore cooperated with the criminal investigation, including testifying on behalf of the government during Pielsticker’s sentencing hearing last week.  On Oct. 9, Pielsticker was sentenced to serve seven and one-half years in prison and ordered to pay $21,026,682.03 in restitution for his role in the conspiracy and for attempting to evade his individual income taxes.

Chief U.S. District Court Judge Gregory K. Frizzell of the Northern District of Oklahoma also sentenced Moore to serve three years of supervised release following his prison term and ordered him to pay $21,026,682.03 in restitution to the Internal Revenue Service (IRS) and the Transportation Alliance Bank (TAB).

According to the plea agreement and other court records, in 2009, Moore, Pielsticker and others withheld Arrow Trucking Company employees’ federal income tax withholdings, Medicare and social security taxes, but did not report or pay over these taxes to the IRS, despite knowing that they had a duty to do so.  The conspirators paid for Pielsticker’s personal expenses with money from Arrow Trucking Company and submitted fraudulent invoices to TAB to induce the bank to pay funds to Arrow Trucking Company that were not warranted.  In total, the conspiracy caused a loss to the United States totaling more than $9.562 million.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Williams commended the special agents of the IRS-CI and FBI, who investigated this case, and Assistant U.S. Attorneys Jeffrey A. Gallant and Catherine Depew of the Northern District of Oklahoma and Special Assistant U.S. Attorney and Tax Division Trial Attorney Charles A. O’Reilly, who prosecuted the case on behalf of the United States.

MEDICAL EQUIPMENT SUPPLY CO. HUSBAND/WIFE OWNERS CONVICTED OF MEDICARE FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, October 16, 2015

Operators of Medical Equipment Supply Company Convicted in $1.5 Million Medicare Fraud Scheme

A federal jury in Los Angeles convicted the former owner and the former operator of a durable medical equipment supply company of health care fraud charges in connection with a $1.5 million Medicare fraud scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, Special Agent in Charge Chris Schrank of the U.S. Department of Health and Human Services-Office of the Inspector General’s (HHS-OIG) Los Angeles Region, Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Division and Special Agent in Charge David Jett of the California Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse made the announcement.

Amalya Cherniavsky, 41, and her husband, Vladislav Tcherniavsky, 46, of Long Beach, California, were both convicted late yesterday of one count of conspiracy to commit health care fraud and five counts of health care fraud.  Sentencing is scheduled for Dec. 14, 2015, before U.S. District Judge Terry J. Hatter Jr. of the Central District of California, who presided over the trial.

The evidence at trial demonstrated that Cherniavsky owned JC Medical Supply (JC Medical), a purported durable medical equipment (DME) supply company, and that she co-operated the company with her husband, Tcherniavsky.  According to the trial evidence, the defendants paid illegal kickbacks to patient recruiters in exchange for patient referrals.  The evidence further showed that the defendants paid kickbacks to physicians for fraudulent prescriptions – primarily for expensive, medically unnecessary power wheelchairs – which the defendants then used to support fraudulent bills to Medicare.

According to the evidence presented at trial, between 2006 and 2013, the defendants submitted $1,520,727 in fraudulent claims to Medicare and received $783,756 in reimbursement for those claims.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Central District of California.  The case was investigated by the FBI, HHS-OIG’s Los Angeles Regional Office and the California Department of Justice.  The case is being prosecuted by Trial Attorneys Blanca Quintero and Kevin R. Gingras of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 2,300 defendants who have collectively billed the Medicare program for more than $7 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

MAN PLEADS GUILTY IN CASE INVOLVING CALL CENTERS TARGETING SPANISH-SPEAKERS

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, October 14, 2015

Peruvian Man Pleads Guilty to Threatening and Defrauding Spanish-Speaking Consumers through Call Centers

A resident of Lima, Peru, who was charged with operating call centers that lied to and threatened Spanish-speaking victims in the United States, pleaded guilty today to conspiracy to commit mail fraud, the Department of Justice and U.S. Postal Inspection Service (USPIS) announced.

Cesar Luis Kou Reyna, 40, pleaded guilty in U.S. District Court for the Southern District of Florida in Miami to charges that he controlled call centers in Peru that falsely told Spanish-speaking victims across the United States that they owed debts and threatened legal consequences for failure to pay the alleged debts.

The announcement was made by Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida and Inspector in Charge Ronald J. Verrochio of the USPIS Miami Division.

“The threats made by the defendant’s call centers harassed and intimidated Spanish-speaking victims across the United States,” said Principal Deputy Assistant Attorney General Mizer.  “As this case and other recent examples show, we will track down those responsible for defrauding and threatening American consumers, no matter where the fraudster resides, what language the fraudster speaks or which population he or she targets.”

“The U.S. Postal Inspection Service’s investigations have no borders when it comes to investigating crimes committed in the United States or on American victims,” said U.S. Postal Inspector in Charge Verrochio.  “Postal Inspectors will track down criminals, anywhere in the world, and bring them to justice.”

Kou Reyna owned and controlled a corporation, Fonomundo FC, which operated call centers in Peru and payment and fulfilment operations in Miami.  Fonomundo FC and its affiliated call centers used Internet-based telephone calling services to place cold calls to Spanish-speaking residents in the United States.  The callers falsely claimed to be attorneys and said that victims had failed to pay for or receive a delivery of products, although the victims had not ordered these products.

The callers claimed that victims would be sued and that the companies would obtain large monetary judgements against them.  Some victims were also threatened with negative marks on their credit reports, imprisonment or deportation.  The callers said these threatened consequences could be avoided if the victims immediately paid “settlement fees.”  Many victims made monetary payments based on these threats.

Kou Reyna was originally charged by criminal complaint and was arrested by USPIS at a Houston airport on July 30 while he was traveling in the United States.  He has remained incarcerated since his arrest and was indicted on Aug. 27.

Principal Deputy Assistant Attorney General Mizer commended USPIS for its investigative efforts and thanked the U.S. Attorney’s Office of the Southern District of Florida for its contributions to the case.  The case is being prosecuted by Trial Attorneys Phil Toomajian and Stephen T. Descano of the Civil Division’s Consumer Protection Branch.

LOBBYIST PLEADS GUILTY TO EXTORTION RELATED TO BRIBERY-FRAUD SCHEME

FROM:  U.S. JUSTICE DEPARTMENT

Friday, October 2, 2015

Ohio Lobbyist Agrees to Plead Guilty to Extortion

An Ohio lobbyist agreed today to plead guilty to extortion in connection with a bribery and fraud scheme involving conduit contributions to the campaigns of elected officials, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Carter M. Stewart of the Southern District of Ohio and Special Agent in Charge Angela L. Byers of the FBI’s Cincinnati Division.

John P. Raphael, 60, of Columbus, Ohio, agreed to plead guilty to a one-count information charging him with a violation of the Hobbs Act.

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

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

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

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

MAN SENT TO PRISON FOR SELLING COUNTERFEIT INTEGRATED CIRCUITS FOR USE IN U.S. NUCLEAR SUBMARINES

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, October 6, 2015

Massachusetts Man Sentenced to 37 Months in Prison for Trafficking Counterfeit Military Goods

A Massachusetts man was sentenced today to 37 months in prison for importing thousands of counterfeit integrated circuits (ICs) from China and Hong Kong and reselling them to U.S. customers, including contractors supplying them to the U.S. Navy for use in nuclear submarines.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Deirdre M. Daly of the District of Connecticut, Special Agent in Charge Matthew J. Etre of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) in New England, Special Agent in Charge Craig W. Rupert of the Defense Criminal Investigative Service (DCIS) Northeast Field Office and Special Agent in Charge Leo Lamont of the Naval Criminal Investigative Service (NCIS) Northeast Field Office made the announcement.

Peter Picone, 42, of Methuen, Massachusetts, pleaded guilty on June 3, 2014, to conspiracy to traffic in counterfeit military goods.  In addition to imposing the prison term, U.S. District Judge Alvin W. Thompson of the District of Connecticut ordered Picone to pay $352,076 in restitution to the 31 companies whose ICs he counterfeited, and to forfeit $70,050 and 35,870 counterfeit ICs.

“Picone risked undermining our national security so that he could turn a profit,” said Assistant Attorney General Caldwell.  “He sold counterfeit integrated circuits knowing that the parts were intended for use in nuclear submarines by the U.S. Navy, and that malfunction or failure of the parts could have catastrophic consequences.”

“Supplying counterfeit electronic components to the U.S. Military is a serious crime,” said U.S. Attorney Daly.  “Individuals who choose profit over the health and safety of the men and women of our armed services will be prosecuted.”

“Counterfeit electrical components intended for use in U.S. military equipment put our service members in harm’s way, and our national security at great risk,” said Special Agent in Charge Etre.  “HSI will continue to aggressively target individuals and companies engaged in this type of criminal act.”

“The sentencing today demonstrates the continued efforts of the Defense Criminal Investigative Service and our fellow law enforcement partners to protect the integrity of the Department of Defense's infrastructure,” said Special Agent in Charge Rupert.  “Distributors who opt for financial gain by introducing counterfeit circuitry into the supply chain of mission critical equipment create an environment ripe for potential failures.  Such disregard puts the warfighter at an unnecessary risk, ultimately impacting the mission readiness of our military that the nation depends on.  DCIS will continue to shield America's investment in Defense by addressing all attempts to disrupt the reliability of our military's equipment and processes.”

“The U.S. Navy submarine force is a critical component of our national security,” said Special Agent in Charge Lamont.  “Protecting the Sailors who make up that force and their supply lines are top priorities for NCIS, to ensure our strategic deterrent remains effective.”

In April 2005, Picone founded Tytronix Inc., and served as its president and director until August 2010, when the company was dissolved.  In addition, from August 2009 through December 2012, Picone owned and operated Epic International Electronics (Epic) and served as its president and director.

In connection with his guilty plea, Picone admitted that, from February 2007 through April 2012, first through Titronix and later through Epic, he purchased millions of dollars’ worth of ICs bearing the counterfeit marks of approximately 35 major electronics manufacturers, including Motorola, Xilinx and National Semiconductor, from suppliers in China and Hong Kong.  Picone admitted that he resold the counterfeit ICs to customers both in the United States and abroad, including to defense contractors that Picone knew intended to supply the counterfeit ICs to the U.S. Navy for use in nuclear submarines, among other things.  Picone further admitted that he knew that malfunction or failure of the ICs likely would cause impairment of combat operations and other significant harm to national security.

On April 24, 2012, federal agents searched Picone’s business and residence, and recovered 12,960 counterfeit ICs.  In connection with his guilty plea, Picone admitted that he intended to sell the seized counterfeit ICs to defense contractors doing business with the Navy for use in military applications.

The case was investigated by the Defense Criminal Investigative Service, the NCIS and ICE-HSI.  The case is being prosecuted by Senior Counsel Kendra Ervin and Evan Williams of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS), Assistant U.S. Attorney Sarala Nagala and Special Assistant U.S. Attorney Carol Sipperly of the District of Connecticut, Trial Attorney Anna Kaminska of the Criminal Division’s Fraud Section and Trial Attorney Kristen Warden of the Criminal Division’s Asset Forfeiture and Money Laundering Section.  The CCIPS Cybercrime Lab provided significant assistance.

MAN AND COMPANY TO PAY OVER $3.8 MILLION COURT ORDERED PENALTY RELATED TO CFTC FRAUD COMPLAINT

FROM:  U.S. JUSTICE DEPARTMENT  

October 5, 2015

Federal Court Orders Alexander Glytenko and His Company, Direct Investment Products, Inc., to Pay a Monetary Penalty and Restitution Totaling More than $3.8 Million in Connection with Commodity Pool Fraud

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Cynthia Bashant of the U.S. District Court for the Southern District of California entered a default judgment Order against Alexander Glytenko of Carlsbad, California, and his company, Direct Investment Products, Inc. (DIP). The Court’s Order requires Glytenko and DIP jointly to pay $2,459,633 in restitution and a $1,392,000 civil monetary penalty for fraudulently operating a commodity pool in violation of the Commodity Exchange Act (CEA). The Order also permanently enjoins Glytenko and DIP from further violations of the CEA and CFTC Regulations, as charged, and imposes permanent trading and registration bans on them.

The Order arises from a CFTC Complaint filed on December 5, 2013, which charged Glytenko and DIP with fraudulently soliciting approximately $3.9 million from approximately 761 individuals residing in Russia and various former republics of the former Soviet Union to invest in a commodity pool known as DIP Capital Partners (the Pool) (see Complaint and CFTC Press Release and Complaint 6791-13).

In the Order, the Court found that, from approximately 2005 through approximately 2010, Glytenko and DIP, either directly or through their agents, knowingly misrepresented the Pool’s performance history to both prospective and actual pool participants by 1) presenting profitable performance figures for various of the Pool’s funds for years in which they knew the Pool did not even exist, 2) presenting hypothetical trading performance without labeling it as such, and 3) presenting at least two years of profitable performance results for one of the Pool’s funds when, in fact, that fund had experienced losses during those years. In addition, the Court found that in 2009, at a time when Glytenko and DIP had imposed a freeze on the withdrawal of participants’ funds as a result of substantial losses incurred by the Pool, Glytenko used participants’ funds to make a loan of $464,000 from DIP to himself.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC thanks the National Futures Association, the Cyprus Securities and Exchange Commission, and the Bermuda Monetary Authority for their assistance in this matter.

CFTC Division of Enforcement staff members responsible for this case are Alan I. Edelman, James H. Holl, III, Michelle Bougas, Dmitriy Vilenskiy, and Gretchen L. Lowe.

When hackers talk, this research team listens | NSF - National Science Foundation

When hackers talk, this research team listens | NSF - National Science Foundation

THREE SHIPPING EXECS INDICTED FOR ALLEGED ROLES IN PRICE-FIXING CONSPIRACY

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, October 6, 2015

Three Ocean Shipping Executives Indicted for Fixing Prices and Rigging Bids

Three former ocean freight executives have been indicted for participating in a long-running price-fixing conspiracy.  These executives – Yoshiyuki Aoki, Masahiro Kato and Shunichi Kusunose – have been charged with allocating customers and routes, rigging bids and fixing prices for the sale of international ocean shipments of roll-on, roll-off cargo to and from the United States and elsewhere, including the Port of Baltimore.  The affected cargo included cars, trucks, construction equipment and agricultural equipment.

Aoki, formerly of Kawasaki Kisen Kaisha (K-Line), and Kato and Kusunose, formerly of Nippon Yusen Kabushiki Kaisha (NYK), are among seven executives who have been charged in the investigation so far.  Four have pleaded guilty and been sentenced to prison.  NYK, K-Line and one other company have also pleaded guilty and paid more than $136 million in criminal fines.

“The companies and executives who conspired to restrict competition and raise prices for shipping these products must be held accountable,” said Assistant Attorney General Bill Baer of the Antitrust Division.  “We previously charged NYK and K-Line for their role in this long-running conspiracy.  Today we are continuing our effort to ensure that the executives at those companies who orchestrated the ocean shipping conspiracy face the consequences as well.”

“These felony charges indicate to those intent on corrupting our economy they will be identified and brought to justice,” said Special Agent in Charge Kevin Perkins of the FBI’s Baltimore Division.  “Our job is to protect victims who don’t see these crimes occurring, but who always end up paying the price.”

The indictment, which was returned by a grand jury in the District of Maryland, charges Aoki with participating in the conspiracy from at least as early as 2001 until at least September 2012; Kato with participating from at least as early as April 2002 until at least September 2012; and Kusunose with participating from at least as early as April 2004 until at least September 2012.

An indictment is a formal charging document and defendants are presumed innocent until proven guilty.

NURSING HOME PHARMACY SETTLES KICKBACK ALLEGATIONS WITH DOJ

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, October 7, 2015

Nation's Second-Largest Nursing Home Pharmacy to Pay $9.25 Million to Settle Kickback Allegations

The nation’s second-largest nursing home pharmacy, PharMerica Corp., has agreed to pay $9.25 million to resolve allegations that it solicited and received kickbacks from pharmaceutical manufacturer Abbott Laboratories in exchange for promoting the prescription drug Depakote for nursing home patients.  PharMerica is headquartered in Louisville, Kentucky.

“Elderly nursing home residents suffering from dementia have little control over the medications they receive and depend on the unbiased judgment of healthcare professionals for their daily care,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Kickbacks to entities making drug recommendations compromise their independence and undermine their role in protecting nursing home residents from the use of unnecessary drugs.”

Nursing homes rely on consultant pharmacists, such as those employed by PharMerica, to review their residents’ medical charts at least monthly and make recommendations to their physicians about what drugs should be prescribed for those residents.  The settlement announced today resolves allegations that in exchange for recommending that physicians prescribe Depakote, an anti-epileptic drug manufactured by Abbott, to nursing home residents, PharMerica solicited and received kickbacks from Abbott.  The government alleges that the kickbacks were disguised as rebates, educational grants and other financial support.

In May 2012, the United States, numerous individual states and Abbott entered into a $1.5 billion global civil and criminal resolution that, among other things, resolved Abbott’s liability under the False Claims Act for alleged kickbacks to nursing home pharmacies, including PharMerica.  The settlement announced today resolves PharMerica’s role in that alleged kickback scheme.

“The settlement announced  today should serve as a stark reminder to pharmaceutical companies and those with whom they do business that the Department of Justice and its investigative agencies will continue to monitor their activities,” said U.S. Attorney Anthony P. Giorno of the Western District of Virginia.  “When those activities involve improprieties such as the payment of kickbacks, we will not hesitate to hold them accountable.  We owe nothing less in fulfilling our duty to ensure that nursing home residents are provided with the appropriate drugs based upon their needs rather than the business interests of the companies providing the drugs.”

Approximately $7.6 million of the settlement will go to the United States, while $2.5 million has been allocated to cover Medicaid program claims by states that elect to participate in the settlement.  The Medicaid program is jointly funded by the federal and state governments.

“Nursing home pharmacies accepting kickbacks from drug makers in exchange for prescribing certain prescription drugs puts vulnerable residents at risk for receiving unnecessary medications, corrupts medical decision making, and inflates health care costs,” said Special Agent in Charge Nick DiGiulio of the U.S. Department of Health and Human Services’ Office of Inspector General (HHS-OIG).  “Our agency will continue to root out such corrosive practices from our health care system.”

The settlement partially resolves allegations in two lawsuits filed in federal court in the Western District of Virginia by Richard Spetter and Meredith McCoyd, former Abbott employees.  The lawsuits were filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The act also allows the government to intervene and take over the action, as it did in part in this case.  As part of today’s resolution, Ms. McCoyd will receive $1 million from the federal share of the settlement amount.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $25.2 billion through False Claims Act cases, with more than $16.1 billion of that amount recovered in cases involving fraud against federal health care programs.

This matter was jointly handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Western District of Virginia, HHS-OIG, the commonwealth of Virginia’s Office of Attorney General and the National Association of Medicaid Fraud Control Units.

The cases are captioned United States ex rel. Spetter v. Abbott Labs., et al., Case No. 10-cv-00006 (W.D. Va.) and United States ex rel. McCoyd v. Abbott Labs., et al., Case No. 07-cv-00081 (W.D. Va.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

FLORIDA MORTGAGE COMPANY OWNER RECEIVES 11 YEAR PRISON SENTENCE FOR ROLE IN $64 MILLION FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, September 24, 2015

Owner of Florida Mortgage Company Sentenced to Over 11 Years in Prison for Orchestrating $64 Million Fraud Scheme

Two Associates Also Sentenced for their Roles in the Conspiracy

The owner of a Florida mortgage company was sentenced today to serve 135 months in prison for orchestrating a $64 million mortgage fraud scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida and Special Agent in Charge Nadine Gurley of the U.S. Department of Housing and Urban Development Office of Inspector General (HUD-OIG) Atlanta Region made the announcement.

Hector Hernandez, 57, of Miami, Florida, the owner and operator of Great Country Mortgage Bankers (Great Country), a mortgage lender in Miami, was sentenced for conspiracy to commit wire fraud affecting a financial institution.  He was also ordered to pay $64,508,141 in restitution and to forfeit $8,000,000 in illicit profits.

In the same case, a real estate developer for Great Country, Aleida Fontao, 62, of Miami, was sentenced today to serve 41 months in prison, and ordered to pay $7,131,952 in restitution and $400,000 in forfeiture.  An underwriter for Great Country, Olga Hernandez, 59, of Lake Mary, Florida, was sentenced yesterday to serve 51 months in prison and ordered to pay $24,512,755 in restitution.  Hector and Olga Hernandez both pleaded guilty on July 13, 2015, while Fontao pleaded guilty on July 7, 2015.  Hector Hernandez was the last defendant to be sentenced in the case.  All 24 defendants charged in this case, which included loan officers, loan processors and underwriters, were convicted of participating in the scheme.

According to admissions made in connection with the guilty pleas, from at least 2006 and continuing through at least September 2008, Hector Hernandez was the owner and operator of Great Country which specialized in approving Federal Housing Administration (FHA) loans.  The loans were primarily for buyers of condominiums at complexes where Hector Hernandez was a part owner – however, the buyers were unqualified borrowers, due to insufficient income, high levels of debts, and outstanding collections.  Hector Hernandez admitted that his company employed loan officers, loan processors and underwriters, including Olga Hernandez and Fontao, whom he knew approved and submitted false and fraudulent FHA mortgage loan applications and accompanying documents to HUD on behalf of the unqualified borrowers.  These documents included false pay stubs, false verification of employment forms, and fictitious letters from the borrowers.

According to admissions made in connection with the guilty pleas, closing costs were paid on behalf of the unqualified borrowers through an interstate wire transfer of funds.  The borrowers were also paid to purchase the condominium units as an unreported inducement to purchase.  After the loans closed, the loans were sold to financial institutions.  When the unqualified borrowers failed to meet their monthly mortgage obligations, they defaulted on the loans causing losses both to the financial institutions and to HUD which insured the loans.  Hector Hernandez admitted that the loss from the fraudulent conduct was at least $64 million.

This case was investigated by HUD-OIG as participants in the Miami Mortgage Fraud Strike Force.  The case was prosecuted by Senior Litigation Counsel David A. Bybee and Trial Attorneys Mike O’Neill and William Johnston of the Criminal Division’s Fraud Section.

WOMAN RECEIVES 15 MONTH PRISON TERM FOR USING COUNTERFEIT TRAVELER'S CHECKS

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, October 1, 2015

Woman Sentenced for Using Counterfeit Traveler’s Checks

Montgomery, Alabama -Cathy Ann Francesca Badal (23) of Brooklyn, New York was sentenced to 15 months’ imprisonment on Monday, September 28, 2015 by United States District Judge Callie V.S. Granade.  Badal’s sentence was for possessing and passing counterfeit traveler’s checks, in violation of federal law.

On December 27, 2014, deputies of the Henry County, Alabama Sheriff’s Office arrested Badal.  They found, in her purse, approximately 140 counterfeit traveler’s checks, each one purportedly worth $100.  They also found a fraudulent driver’s license bearing Badal’s picture and the name and address of an Illinois resident who did not know Badal.

Further investigation revealed that, before being arrested in Henry County, Badal had traveled all over the country passing counterfeit traveler’s checks and using a fraudulent driver’s license to do so.  Stores from Maine to Florida reported being victimized by Badal.  As a result, Judge Granade ordered that Badal pay a total restitution amount of $53,800 to 47 different businesses.

“This case demonstrates that identity theft is a problem that is national in scope,” stated U.S. Attorney Beck.  “We in the Middle District of Alabama consider it a great success when we are able to bring to justice a person like Badal who had, before coming to Alabama, preyed upon businesses and individuals all over the country and all for her own personal gain,” Beck stated.

This case was jointly investigated by the Henry County Sheriff’s Office and the United States Secret Service.  Assistant United States Attorney Jonathan S. Ross prosecuted the case.

FOUR SENTENCED FOR ROLES IN MILITARY FUEL THEFT SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, September 29, 2015

One Current and Three Former U.S. Army Soldiers Sentenced for Fuel Theft Scheme

One current and three former U.S. Army soldiers were sentenced today in federal court in Raleigh, North Carolina, for their involvement in a bribery scheme in Afghanistan that resulted in the theft of fuel valued at more than $10 million.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Thomas G. Walker of the Eastern District of North Carolina, Special Agent in Charge John F. Khin of the Defense Criminal Investigative Service (DCIS) Southeast Field Office, Special Agent in Charge John A. Strong of the FBI’s Charlotte Division, Director Frank Robey of the U.S. Army Criminal Investigation Command’s (Army CID) Major Procurement Fraud Unit and Special Inspector General for Afghanistan Reconstruction (SIGAR) John F. Sopko made the announcement.

Each defendant previously pleaded guilty to one count of conspiracy and one count of bribery.  U.S. District Court Judge Terrence W. Boyle of the Eastern District of North Carolina imposed the following sentences:

Jeffery B. Edmondson, 38, of Fayetteville, North Carolina, was the senior enlisted member of the unit who supervised all of his co-conspirators, and was sentenced to eight years in prison.

Christopher Ciampa, 33, of Lillington, North Carolina, was sentenced to 10 years in prison.

Enmanual Lugo, 32, of Ocean Township, New Jersey, was sentenced to four years in prison.

Geoffrey Montague, 39, of Fayetteville, North Carolina, was a senior enlisted member of the unit who reported to Edmondson, and was sentenced to five years in prison.

In 2011, Edmondson, Ciampa, Lugo and Montague were U.S. Army soldiers serving with the 3rd Special Forces Group Service Detachment deployed to Kandahar Air Field in Afghanistan.  During the deployment, the defendants were responsible for managing Transportation Movement Requests (TMRs) for fuel and other items in support of military units in Afghanistan paid for by the U.S. government.

In connection with their guilty pleas, the defendants admitted to submitting fake TMRs for thousands of gallons of fuel that were neither necessary nor used by military units.  The defendants admitted that, in return for cash bribe payments, they awarded all of the TMRs to the same Afghan trucking company, which used the fake TMRs to download fuel from depots on Kandahar Air Field and then sold the fuel on the black market.

The defendants admitted that they sent some of the illicit proceeds to the Unites States via wire transfer or hidden in personal items, and transported cash back to the United States either on their persons or in their luggage.  In addition, Edmondson and Ciampa admitted to using the funds to purchase automobiles.

According to the plea agreements, the scheme caused losses to the United States of over $10 million.

The case was investigated by the DCIS, FBI, Army CID and SIGAR.  The case was prosecuted by Trial Attorney Wade Weems of the Criminal Division’s Fraud Section, on detail from SIGAR, and Assistant U.S. Attorney Banumathi Rangarajan of the Eastern District of North Carolina.

TWO SENTENCED FOR KILLING DURING HOME INVASION

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, September 29, 2015

Two Tennessee Men Each Sentenced to 28 Years in Prison for Killing During Home Invasion Robbery

Two Tennessee men were each sentenced to 28 years in prison for killing during a home invasion robbery, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney David Rivera of the Middle District of Tennessee.

Michael Massey, 26, of Lexington, Tennessee; and Demario Winston, 27, of Clarksville, Tennessee, pleaded guilty on May 29, 2015, before Chief U.S. District Court Judge Kevin H. Sharp of the Middle District of Tennessee to conspiracy to commit Hobbs Act Robbery and use of a firearm in a crime of violence resulting in death.  Massey also pleaded guilty to a separate count of Hobbs Act Robbery, and was ordered to pay $17,000 in restitution.

According to admissions reflected in the plea agreements, on May 7, 2011, Massey, Winston and others attempted to rob a home in Clarksville, and Massey used a sledge hammer to gain entry.  The conspirators previously had been advised that a large amount of cocaine and cash was stored inside a safe in the basement of the home.

The defendants further admitted that, while inside the home, Winston, who was armed with a 9mm pistol, engaged in a gun fight with the homeowner on the first floor as other conspirators attempted to force one of the occupants of the home, Raul Triana, to open the safe, and pistol-whipped him in the face in the process.  Evidence introduced in the plea hearing indicated that, in response to the shooting on the first floor, some of the conspirators fled the home, and Massey, who was armed with an assault rifle, fled through the basement where he encountered Triana and shot and killed him.

In addition, Massey admitted that, on Oct. 21, 2011, he and a co-defendant planned the robbery of the owner of a Clarksville-based construction company.  Massey, together with two others executed the robbery at gunpoint.

This case was investigated by the Clarksville Police Department and the DEA.  The case was prosecuted by Laura Gwinn of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorney Lynne T. Ingram of the Middle District of Tennessee.

FORMER CFO PLEADS GUILTY IN CASE INVOLVING BRIBING ARGENTINE GOVERNMENT OFFICIALS

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, September 30, 2015

Former Chief Financial Officer of Siemens Argentina Pleads Guilty to Role in Multimillion Dollar Foreign Bribery Scheme

The former chief financial officer (CFO) of Siemens S.A. – Argentina (Siemens Argentina) pleaded guilty today to conspiring to pay tens of millions of dollars in bribes to Argentine government officials to secure, implement and enforce a $1 billion contract to create national identity cards.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington, D.C.  Field Office made the announcement.

Andres Truppel, 61, of Argentina, pleaded guilty today in the Southern District of New York to conspiring to violate the anti-bribery, internal controls and books and records provisions of the Foreign Corrupt Practices Act (FCPA); and to commit wire fraud.

In 1998, the government of Argentina awarded to a subsidiary of Siemens Aktiengesellschaft (Siemens AG) a contract worth approximately $1 billion to create state-of-the-art national identity cards (the Documento Nacional de Identidad or DNI project).  The Argentine government terminated the DNI project in 2001.

In connection with his guilty plea, Truppel admitted that he engaged in a decade-long scheme to pay tens of millions of dollars in bribes to Argentine government officials in connection with the DNI project, which was worth more than $1 billion to Siemens.  Truppel admitted that he and his co-conspirators concealed the illicit payments through various means, including using shell companies associated with intermediaries to disguise and launder the funds, and by paying $7.4 million as part of a hedging contract with a foreign currency company incorporated in the Bahamas.

In addition, Truppel admitted that he and his co-conspirators paid nearly $1 million to a former official in Argentina’s Ministry of Justice that was used to bribe an Argentine government official.

Truppel also admitted that he used a $27 million contract between a Siemens entity and a company called MFast Consulting AG that purported to be for consulting services to conceal bribes to Argentine officials.

In 2008, Siemens Aktiengesellschaft (Siemens AG), a German entity, pleaded guilty to violating the books and records provisions of the FCPA; Siemens Argentina pleaded guilty to conspiracy to violate the books and records provisions of the FCPA; and Siemens Bangladesh Limited and Siemens S.A. – Venezuela each pleaded guilty to conspiracy to violate the anti-bribery and books and records provisions of the FCPA.  As part of the plea agreements, the Siemens companies paid a total of $450 million in criminal fines.  The U.S. Securities and Exchange Commission (SEC) also brought a civil case against Siemens AG alleging that it violated the anti-bribery, books and records and internal controls provisions of the FCPA.  In resolving the SEC case, Siemens AG paid $350 million in disgorgement of wrongful profits.  The Munich Public Prosecutor’s Office also resolved similar charges with Siemens AG that resulted in a fine of $800 million.  In August 2009, following these corporate resolutions with U.S. and German authorities, Siemens AG withdrew its claim to the more than $200 million arbitration award.

The case is being investigated by the FBI’s Washington Field Office.  The case is being prosecuted by Assistant Chief Tarek J. Helou of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Niketh Velamoor of the Southern District of New York.  The Criminal Division’s Office of International Affairs, the SEC and the Munich Public Prosecutor’s Office also provided significant assistance.

AG LYNCH SPEAKS AT OPIOID MISUSE AND ADDICTION SUMMIT

FROM:  U.S. JUSTICE DEPARTMENT 

Attorney General Loretta E. Lynch Delivers Keynote Address at the Opioid Misuse and Addiction Summit

Waltham, MA United States~Friday, October 2, 2015

Remarks as Prepared for Delivery

Before we begin today’s program, I want to take a moment to address the devastating events that occurred yesterday at Umpqua Community College in Oregon.  Like you, I was shocked and appalled by this monstrous and tragic attack.  Although we are still gathering information, the Department of Justice is already on the ground assisting local law enforcement and we will continue to do everything we can to support the Douglas County community going forward.  My heart goes out to all those affected by this heinous crime and I know that the entire Justice Department family – and all of us here today – will keep the victims and their loved ones in our thoughts and prayers.

Thank you, U.S. Attorney [Carmen] Ortiz, for those kind words – and for your outstanding service to the people of Massachusetts over the course of this administration.  I’d also like to recognize Attorney General [Maura] Healey and Commissioner [Monica] Bharel for the bold steps they have taken – beginning the moment they took office this year – to clamp down on opioid trafficking and abuse throughout Massachusetts.  And I’d like to thank Dr. [Dennis] Dimitri and the entire Massachusetts Medical Society for advancing public health and public safety; for bringing attention and expertise to the critical issue we’re discussing today; and for hosting this vitally important summit that recognizes the critical public health issues in what far too many, for far too long, have seen only as a law enforcement issue.  It’s a pleasure to be in Waltham this morning and a privilege to join such a distinguished group of public servants and health experts as we explore new strategies for curbing drug abuse and building stronger, safer communities.

It is particularly appropriate that this morning’s gathering is taking place at the Massachusetts Medical Society.  As the oldest continually operating state medical organization in the United States, the Massachusetts Medical Society has set the standard for its peers for well over two centuries.  You have attracted and united more than 25,000 physicians and medical students behind your essential mission of “promot[ing] … the health, benefit and welfare of the citizens of the Commonwealth.”  And you have built a striking record of success in educating and advocating for Massachusetts’s medical professionals and the patients for whom they care.  I applaud you for leading a truly comprehensive campaign to reduce prescription drug abuse in the Commonwealth – and I want you to know that the Department of Justice and the entire Obama Administration, is standing with you in this fight.  Through the tireless efforts of our Drug Enforcement Administration (DEA) – under the leadership of Acting Administrator [Chuck] Rosenberg – we are making major strides on all four of the action areas identified in the White House Prescription Drug Abuse Prevention Plan, which President Obama discussed in his weekly address just a few days ago: enforcement, disposal, monitoring and education.

On the enforcement front, we are using every civil, criminal and administrative tool we have to discover, disrupt and dismantle illegal traffic in pharmaceutical controlled substances – and we are making real and significant progress.  We have targeted the illegal supply chain, thwarted doctor-shopping attempts and disrupted so-called “pill mills” – just a few days ago, we won a conviction in a 49-count case against a former heart surgeon in Georgia who aggressively prescribed controlled narcotics to patients who were addicted to them and who, at one point, received more Oxycodone pills than any other doctor in the state.  Further highlighting the often heartbreaking costs of addiction, the doctor was himself addicted to painkillers. We have ramped up our focus on individuals and organizations who use the Internet to buy and sell controlled substances and we have seen a marked reduction in online trafficking as a result.  And we are building cooperation and seamless communication between agencies tasked with combating this challenge by integrating DEA agents and investigators with other federal, state and local law enforcement officers in 66 Tactical Diversion Squads stationed across 41 states, Puerto Rico and the District of Columbia – with three more on the way.  Just this past May, our collaborative approach enabled us to execute the largest pharmaceutical-related takedown in the DEA’s history – a takedown of pill mills as well as medical professionals who were illegally diverting prescription painkillers; diverting them away from real patients and into the hands of street sellers. This operation spanned four states, involved nearly a thousand law enforcement officers and resulted in 280 arrests – including 22 doctors and pharmacists.  

We also know, as you do, that opioid addiction often begins not with a law-breaking doctor, but with a family medicine cabinet.  That’s why we are working to ensure that unused, unwanted and expired medications are responsibly discarded and taken out of circulation.  In the last five years, the DEA has held ten National Take Back Days – most recently this past Saturday – when the public is encouraged to bring excess prescription drugs to thousands of designated sites across the country for safe and secure disposal.  In only the last nine Take Back Days, the DEA – in conjunction with state, local and tribal law enforcement partners – collected nearly 5 million pounds of medication – that is, 2,400 tons of medication that is no longer circulating through our communities.  And last year, the DEA introduced several new ways to dispose of old or unused prescription drugs – including many more authorized drop-off sites, as well as pre-paid return-mail packages – that will make this program even more efficient and even more effective.

Still, aggressive enforcement and conscientious disposal are just part of the picture.  We are also continuing to support Prescription Drug Monitoring Programs at the state level, because we recognize that rigorous monitoring is one of the best ways to detect and prevent the diversion of pharmaceuticals.  Forty-nine states and Guam currently have monitoring programs in place, while Washington, D.C., has authorized one and we look forward to working with every jurisdiction going forward – in part through the Harold Rogers Prescription Drug Monitoring grant program – to make those programs more robust and more effective.  At the same time, we have amplified our education and outreach efforts to help inform professional associations, industry organizations and law enforcement agencies at all levels about the latest developments, programs and policies affecting opioid trafficking and addiction.  In FY 2014 alone, the DEA conducted 150 such events, building on 114 the year before.  And in addition to monitoring, we are working to expand medication assisted treatment for opioid use disorders and placing additional focus on treatment for incarcerated individuals who have experienced issues with addiction to help ensure that they can return to their communities as productive members of society.

This work has taken on a special importance, because as we have learned from scientific studies, treatment providers, victims and investigations, prescription drug abuse is a common precursor to the abuse of heroin – an incredibly dangerous drug that has also experienced increased use in recent years.  That’s why, since April, a multi-agency Heroin Task Force has been meeting to design a comprehensive plan – which will be delivered to Congress by year’s end – to counter the spread of heroin nationwide.  Meanwhile, the Department of Justice/Organized Crime Drug Enforcement Task Force has allocated additional funding to help address the surge of heroin overdoses in the New England region, including here in eastern Massachusetts.  And the DEA recently led several major actions against drug cartels and heroin traffickers, while raising awareness about the growing presence of fentanyl in heroin sold on the streets, which substantially and tragically increases the risk of overdose.

Of course, we won’t be there to stop every person from abusing heroin or prescription painkillers – but those of us in law enforcement can take steps to ensure that we are prepared to respond when we do encounter heroin- or prescription-drug-related emergencies in the field.  That’s why my predecessor, Attorney General Eric Holder, urged local law enforcement authorities to carry the drug naloxone – which can help restore breathing after an overdose – as a standard tool on their beats.  He followed up by issuing a memorandum last July directing federal law enforcement agencies – including the DEA, the ATF, the FBI and the U.S. Marshals Service – to assess whether their agents should be trained and equipped to recognize and respond to opioid overdoses, in part by carrying naloxone.  And since that time, our Bureau of Justice Assistance has provided a Law Enforcement Naloxone Toolkit, which serves as an information clearinghouse to help law enforcement agencies establish their own naloxone programs.  This is an area in which Massachusetts has been a groundbreaking leader and I want to recognize all of you in this room for your work on this issue. You have saved lives.

Through all of these efforts, we at the Department of Justice are fighting diligently, creatively and collaboratively – with the partnership of individuals like all of you, each and every day – to ensure that our communities have the assistance, the resources and the guidance they need to bring wrongdoers to justice and to end this deadly crisis once and for all.  Although our ongoing work will not be easy, it is clear from what we have already accomplished that we have reason for optimism.  If we are able to harness the expertise, the passion and the conviction assembled in this room today, I have no doubt that we can preserve opportunity, strengthen families and save lives.  After all, today’s summit is not only about reversing the spread of opioids – it’s about mending the basic fabric of our communities.  It's about providing real help, with true compassion and without judgment, to those in the grips of an addiction that has coiled around their spirit and their soul. It’s about making real and lasting progress on behalf of those in desperate need.  And it’s about confronting a deep and persistent challenge in order to chart a new course for our future and for the future of our country.

That is what the women and men in this room have always done.  It is what our nation has always done.  And it is what the Department of Justice, with your invaluable partnership, will continue to do.  As we gather here today – with so many individuals and organizations committed to this cause – I am hopeful for all that the future holds.  I am thankful for your inspiring leadership.  And I am confident that, by continuing our partnership and staying true to our guiding ideals, we will succeed – together – in creating the stronger, safer, healthier communities that our children – that all Americans – deserve.

IR-2015-111: IRS Announces Key Milestone in FATCA Implementation; U.S. Begins Reciprocal Automatic Exchange of Tax Information under Intergovernmental Agreements

IR-2015-111: IRS Announces Key Milestone in FATCA Implementation; U.S. Begins Reciprocal Automatic Exchange of Tax Information under Intergovernmental Agreements

MAN CHARGED FOR ALLEGED ROLE IN MURDER, ATTEMPTED MURDER OF ICE SPECIAL AGENTS

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, October 1, 2015

Defendant Charged with Alleged Participation in the Murder of Ice Special Agent Jaime Zapata and the Attempted Murder of Ice Special Agent Victor Avila Extradited from Mexico

Four Others Have Already Pleaded Guilty to Charges in the Case

A Mexican national was extradited from Mexico to face charges for his alleged participation in the February 2011 murder of U.S. Immigration and Customs Enforcement (ICE) Special Agent Jaime Zapata and the attempted murder of ICE Special Agent Victor Avila in Mexico.

The charges and extradition were announced today by Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia, Assistant Director Joseph S. Campbell of the FBI Criminal Investigative Division and Director Sarah R. Saldaña of ICE.

Jose Emanuel Garcia Sota, aka Juan Manuel Maldonado Amezcua, Zafado or Safado, 34, of San Luis Potosi, Mexico, was charged on May 6, 2013, in a four-count indictment with one count of murder of an officer or employee of the United States; one count of attempted murder of an officer or employee of the United States; one count of attempted murder of an internationally protected person; and one count of using, carrying, brandishing and discharging a firearm during and in relation to a crime of violence causing death.  The indictment was unsealed today when Garcia Sota made his initial appearance before Chief U.S. District Judge Royce C. Lamberth of the District of Columbia.  His next appearance in court is scheduled for Oct. 9, 2015.

“It has been over four and a half years since ICE Special Agent Jaime Zapata valiantly lost his life and Special Agent Victor Avila suffered grave injuries when they were ambushed by gunfire while on assignment in Mexico,” said Assistant Attorney General Caldwell.  “As evidenced by today’s announcement, the passage of time has not lessened our resolve to keep our promise to the family of Special Agent Zapata and to Special Agent Avila and his family, and bring to justice those responsible for this senseless and brutal attack.  And we are grateful to the Government of Mexico for its continued partnership in this case.”

“Four years ago, on a Mexican roadside, two American heroes came under attack in a violent ambush by members of Los Zetas, a dangerous criminal cartel,” said Acting U.S. Attorney Cohen.  “Four people have already accepted responsibility for their actions, and now a fifth will be brought to an American courtroom for justice.  We will not stop in the pursuit of justice – no matter how far away and how long it takes.”

“Today's announcement is the direct result of unwavering resolve and unrelenting cooperation to bring to justice those accountable for the murder of Jaime Zapata and the attempted murder of Victor Avila,” said Assistant Director Campbell.  “Although this cowardly act of violence occurred more than four years ago, this investigation remains a priority for the FBI.”

“This extradition is another step closer to the justice Special Agents Zapata and Avila deserve,” said ICE Director Saldaña.  “ICE is grateful to our partners whose tireless efforts brought about today's news.  Their dogged pursuit of justice, often in face of great danger, enables us to continue in our quest to make these criminals pay for their deeds.  While nothing can ever truly heal such a loss, we hope today's news brings Agent Zapata's family and friends a measure of peace.  His ultimate sacrifice will always be honored by the men and women of ICE.”

Four defendants previously pleaded guilty to offenses based on their roles in the murder and attempted murder of the ICE agents.  Julian Zapata Espinoza, aka Piolin, 34, pleaded guilty on May 23, 2013, to the murder of Special Agent Zapata and the attempted murder of Special Agent Avila.  Ruben Dario Venegas Rivera, aka Catracho, 27, pleaded guilty on Aug. 1, 2011, to federal charges concerning the murder of Special Agent Zapata and attempted murder of Special Agent Avila.  Jose Ismael Nava Villagran, aka Cacho, 33, pleaded guilty on Jan. 4, 2012, also to federal charges concerning the murder and attempted murder of the ICE agents.  Francisco Carbajal Flores, aka Dalmata, 40, pleaded guilty on Jan. 10, 2012, to conspiracy to conduct the affairs of an enterprise through a pattern of racketeering activity and to being an accessory after the fact to the murder and attempted murder of the ICE agents.

As part of their guilty pleas, Espinoza, Rivera and Villagran admitted to being members of a Los Zetas hit squad and to participating directly in the Feb. 15, 2011, ambush of the two special agents.  The fourth defendant, Flores, acknowledged assisting Zetas members after the attack.

An indictment is a formal charging document and defendants are presumed innocent until proven guilty.

The case is being investigated by the FBI, with substantial assistance from ICE, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Drug Enforcement Administration, the Customs and Border Patrol, the U.S. Department of State’s Diplomatic Security Service and the U.S. Marshals Service.  The investigation was also coordinated with the assistance of the Government of Mexico.

The case is being prosecuted by the Criminal Division’s Organized Crime and Gang Section and Narcotic and Dangerous Drug Section and the U.S. Attorney’s Office of the District of Columbia.  The Criminal Division’s Office of International Affairs has provided substantial assistance.

Remarks at the Association of Certified Anti-Money Laundering Specialists AML & Financial Crime Conference

Remarks at the Association of Certified Anti-Money Laundering Specialists AML & Financial Crime Conference

HEALTH CARE CLINIC OWNER RECEIVES FIVE YEAR PRISON SENTENCE FOR FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, September 29, 2015

Owner of Orlando Health Care Clinic Sentenced to Five Years in Prison for Engaging in Medicare Fraud Scheme

The owner of an Orlando health care clinic was sentenced today to five years in prison for engaging in a $2.4 million health care fraud scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney A. Lee Bentley III of the Middle District of Florida and Special Agent in Charge Shimon R. Richmond of the U.S. Health and Human Services-Office of Inspector General’s (HHS-OIG) Florida region made the announcement.

Juan Carlos Delgado, 58, and Nereyda Infante, 48, both of Orlando, pleaded guilty on June 24, 2015, before U.S. District Judge Paul G. Byron of the Middle District of Florida to conspiracy to commit health care fraud.  Infante, Delgado’s wife, who was also an owner of the health care clinic, was sentenced to one year and one day in prison.  In addition to imposing the prison terms, the court ordered the defendants to pay $1,520,850 in restitution and to forfeit $1,520,850.

Delgado and Infante owned and operated several health care clinics in Orlando, Florida, under variations of the name Prestige Medical.  According to admissions made in connection with their guilty pleas, between February 2012 and September 2014, the defendants fraudulently billed Medicare on behalf of the Prestige clinics for services that were never provided and for medications that were not prescribed or administered.  In particular, Delgado and Infante admitted to billing Medicare for pentostatin, an expensive anticancer chemotherapeutic medication used to treat Leukemia, despite never administering the drug.  Delgado and Infante admitted also that, to further the scheme, they submitted false documents to Medicare regarding the ownership and operation of the Prestige Clinics.

In connection with the scheme, the defendants billed Medicare approximately $2.4 million, over $1.2 million of which was for pentostatin.  Medicare paid approximately $1.5 million on the fraudulent claims.

The case is being investigated by the HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Middle District of Florida.  The case is being prosecuted by Trial Attorney Andrew H. Warren of the Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged over 2,300 defendants who collectively have billed the Medicare program for over $7 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.