SHERIFF TO FACE FRAUD AND OTHER CHARGES STEMMING FROM SELLING E-CIGARETTES IN JAIL

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, May 27, 2016

Tennessee Sheriff Indicted by Federal Grand Jury on Conspiracy, Fraud and Related Charges

Chief Administrative Deputy and Sheriff’s Uncle also Indicted

A county sheriff and two other men were indicted for their roles in the formation, marketing and operation of a private company and the concealment and misrepresentation of their involvement with the business, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting U.S. Attorney Jack Smith of the Middle District of Tennessee.

Robert F. Arnold, 40, Sheriff of Rutherford County, Tennessee; Chief Deputy Joe L. Russell II, 49, also of Rutherford County; and John Vanderveer, 58, of Marietta, Georgia, Arnold’s uncle, were charged in a 14-count indictment with honest services fraud, wire fraud, bribery concerning federal programs, extortion under color of official right, obstruction of justice and conspiracy.

The indictment alleges that Arnold, Russell and Vanderveer devised a scheme to exploit Arnold’s and Russell’s official positions to make tens of thousands of dollars selling e-cigarettes in the Rutherford County Jail.  Specifically, in October 2013, each defendant allegedly invested $3,000 to start JailCigs LLC, a private company that would allow friends and family members of inmates to purchase e-cigarettes online and have them shipped to the jail for distribution by jail personnel and use by inmates.  As part of its marketing strategy, JailCigs allegedly promised a $5 commission for every e-cigarette sold to the jail or detention facility.  In late 2013, Arnold and Russell introduced JailCigs into the Rutherford County Jail, JailCigs’s first and largest customer in Tennessee.  Over the next year and a half, JailCigs allegedly sold approximately 10,500 e-cigarettes for delivery to Rutherford County Jail inmates, totaling $156,975 in revenue.

Arnold and Russell allegedly used their official positions to make JailCigs profitable, including by allowing the company’s e-cigarettes to be admitted into the Rutherford County Jail as non-contraband; directing jail employees to perform tasks beneficial to JailCigs on county time; promoting JailCigs to other sheriff offices and counties; and waiving Rutherford County’s customary commission from the sale of JailCigs.  Arnold and Russell also failed to subject the business arrangement with JailCigs to a competitive bidding process and did not enter into a written contract with the company, despite being advised to do both things by the county attorney, according to the indictment.  Between December 2013 and April 2015, Arnold allegedly received $66,790 from JailCigs and Russell and Vanderveer each received roughly $50,000.

On the eve of the 2014 election, in which Arnold was running for reelection as Sheriff of Rutherford County, Russell allegedly emailed a JailCigs customer and reminded the customer that it was Arnold who brought the JailCigs program to the Rutherford County Jail for the enjoyment of inmates and if Arnold was not reelected, the program would come to an end.  The indictment alleges that Russell’s email implored the customer to “tell everyone you know to support Sheriff Arnold in his re-election.”

When various people raised questions and concerns about the propriety of the arrangement between JailCigs and Rutherford County, Arnold and Russell allegedly made misrepresentations that the arrangement had been approved by various officials, including the county attorney and the county auditor, and repeatedly denied that they were personally involved with JailCigs or were receiving any benefit from the sale of its product.  The indictment also alleges that in an effort to protect JailCigs’s ongoing business, Arnold subsequently made several false and misleading statements to the media about his role in and knowledge of JailCigs, including saying that he was unaware of Russell’s involvement with JailCigs and that he was “shocked” and “taken back” by the discovery.  Arnold allegedly also told the media that he had not received any income from JailCigs and had made a mistake when he listed JailCigs as a source of income on his state “Statement of Disclosure of Interests” form.  The day before making this statement, however, Arnold allegedly had deposited a $3,900 check from JailCigs.

The indictment also alleges that on April 17, 2015, after learning of the media reports and pending criminal investigation, Vanderveer met with the Tennessee sales representative for JailCigs and told her that “Joe” wanted her to destroy her commission tabulation sheets, which contained evidence of the scheme.

The charges in the indictment are merely allegations.  The defendants are presumed innocent until and unless convicted.

The Tennessee Bureau of Investigation and the FBI are investigating this case.  Trial Attorney Mark Cipolletti of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Cecil W. Vandevender of the Middle District of Tennessee are prosecuting the case.

DOJ ANNOUNCES CHARGES AGAINST FORMPER PLAYER FOR NBA

 FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, May 25, 2016

Former NBA Player Indicted on Charity Fraud Scheme

A federal grand jury sitting in Kansas City, Missouri, returned an indictment Monday, which was unsealed this morning, against a former professional basketball player and representative for the National Basketball Players Association (NBPA), charging him with corruptly interfering with the internal revenue laws, conspiracy to commit wire fraud, obstruction of justice and aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Tammy Dickinson of the Western District of Missouri.

The indictment alleges that Kermit Alan Washington, 64, used a charity he founded and operated, Project Contact Africa (PCA), to defraud donors, eBay and PayPal and the Internal Revenue Service (IRS).  In order to induce individuals, including former professional athletes, to make donations to PCA, Washington falsely represented that 100 percent of the donations would go to Africa.  However, Washington diverted charitable donations from PCA to buy gifts and pay personal expenses, including rent, vacations, jewelry and entertainment.

“Individuals who use charitable organizations to defraud donors and evade tax obligations inflict substantial harm on every U.S. taxpayer and cause untold damage to well-intentioned charitable endeavors,” said Acting Assistant Attorney General Ciraolo.  “The Department is committed to identifying those engaged in such criminal conduct and holding them accountable.”

“The federal indictment alleges this former NBA player used his celebrity status to exploit the good intentions of those who donated to a charity he founded, called Project Contact Africa,” said U.S. Attorney Dickinson. “According to the indictment, Washington profited by diverting hundreds of thousands of dollars in donations that was supposed to benefit a clinic in Africa for needy families and children, but instead bankrolled his own personal spending.”

It is alleged that Washington referred professional athletes to Ron Mix, a former professional football player and an attorney licensed in the state of California, whose practice focused on the filing of workers’ compensation claims on behalf of former professional athletes.  In exchange for the referrals, Mix made payments to PCA and claimed those amounts as charitable deductions on his personal tax returns.  Upon receipt of these payments, Washington diverted the funds for his own personal benefit.  Washington filed false individual income tax returns for 2010 through 2013, failing to report the funds he diverted from PCA and false Forms 990-EZ on behalf of PCA.  Washington also falsified PCA’s corporate minutes to obstruct the investigation and used the identity of another individual to perpetrate this scheme.

It is further alleged that Washington conspired with others to defraud eBay and PayPal, customers and donors of PCA by allowing the co-conspirators to use PCA’s name, tax-exempt status and IRS Employee Identification Number (EIN) with eBay and PayPal so the co-conspirators could avoid substantial listing and registration fees incurred in operating online, for-profit businesses.  Moreover, customers who made purchases falsely believed that 100 percent of the proceeds from the co-conspirators’ online eBay sales benefited PCA.  In exchange for allowing the co-conspirators to use PCA’s tax-exempt status, Washington received payments from the co-conspirators.

Washington was arrested yesterday in Los Angeles and had his initial appearance in U.S. District Court in the Central District of California. Washington was ordered to surrender his passport and released on bond and must wear a location monitoring device. Washington’s next court date is tentatively scheduled on June 16 before U.S. Magistrate Judge John T. Maughmer in the Western District of Missouri.

If convicted, Washington faces a statutory maximum sentence of three years in prison on the charge of corrupt interference with the internal revenue laws, 20 years in prison on the charge of conspiring to commit wire fraud, 20 years in prison on the charge of obstruction and a mandatory sentence of two years in prison for the charge of aggravated identity theft, which will be in addition to any other term of imprisonment he receives.  He also faces supervised release, a maximum fine of $250,000 on each count and restitution.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Dickinson commended special agents of IRS-Criminal Investigation, Immigration and Customs Enforcement’s Homeland Security Investigations, who investigated the case and Assistant U.S.  Attorneys Patrick Daly and Curt Bohling of the Western District of Missouri, and Trial Attorney Ryan Raybould of the Tax Division, who are prosecuting the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

DOJ ANNOUCES CONVICTION OF MAN FOR FAILING TO DISCLOSE BEING A PRISON GUARD IN BOSNIA

FROM:  U.S. JUSTICE DEPARTMENT

Thursday, May 26, 2016

Georgia Man Convicted of Immigration Fraud for Failing to Disclose Role in Bosnian Prison Camp

Mladen Mitrovic, 54, of Loganville, Georgia, was found guilty by a federal jury of obtaining his U.S. citizenship by providing false and fraudulent information on his naturalization application, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney John Horn of the Northern District of Georgia and Special Agent in Charge Nick S. Annan of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) in Atlanta.

Among other things, Mitrovic, who is originally from Bosnia and Herzegovina, failed to disclose his role as a prison guard in a detention camp, which was part of the “ethnic cleansing” that occurred during the Bosnian War from 1992 through 1995.  Mitrovic was convicted yesterday and his sentencing is scheduled for Aug. 25, 2016, before U.S. District Judge Amy Totenberg of the Northern District of Georgia.

“This case demonstrates the Justice Department’s continued commitment to denying safe haven to human rights violators,” said Assistant Attorney General Caldwell.  “No matter how long it takes, we will pursue justice, protect the integrity of our immigration system and seek accountability for crimes.”

“Mitrovic thought that he could bury his past and the horrific human rights violations he committed during the Bosnian War,” said U.S. Attorney Horn.  “A jury saw through his deceit and he will now be held accountable for failing to be truthful during the naturalization process.”

“Human rights violators who think they can conceal their past to escape accountability in the United States are sorely mistaken,” said Special Agent in Charge Annan.  “This individual tried to cheat our nation's immigration system by lying about his actions during the Bosnian Civil War.  This result shows that HSI is firmly committed to investigating and identifying criminals who seek to exploit our nation’s welcoming policy toward legitimate war refugees.”

According to evidence presented at trial, in 1996, Mitrovic was permitted to immigrate to the United States based on his statements in his refugee application that he feared persecution if he remained in Bosnia.  In 2002, he naturalized as an American citizen.  The evidence presented at trial also demonstrated that on his naturalization application, Mitrovic stated, among other things, that he had never persecuted anyone because of their race, religion or membership in a social group; he had never committed a criminal offense for which he had not been arrested; and he had never provided any false or misleading information to obtain an immigration benefit, such as refugee status.

In reality, as the trial evidence established, during the Bosnian War, Mitrovic had been a guard in one of the prison camps that the Bosnian Serb Army (VRS) opened in May 1992 to “ethnically cleanse” northwest Bosnia of non-Serb minorities.  At trial, one victim testified that Mitrovic had used a sharp military knife to carve a Christian cross into his chest, saying from that moment on, he “was going to be a Serb.”  Others testified that Mitrovic and other soldiers beat non-Serb prisoners into unconsciousness or threatened to kill them with automatic rifles.  Bosnian government documents also showed that in February 1996, Mitrovic applied for and was later awarded veterans’ benefits for his later military service in the VRS during the Bosnian War.  Trial evidence showed that Mitrovic failed to disclose any of this conduct or military service on his refugee and naturalization applications.

HSI investigated this case.  Assistant Deputy Chief Christina Giffin of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorneys William Traynor and Jessica Morris of the Northern District of Georgia are prosecuting the case.

SOMALI RESTAURANT FIRE STARTER PLEADS GUILTY TO HATE CRIME

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, May 19, 2016

Man Who Set Fire to Somali Restaurant in Grand Forks, North Dakota, Pleads Guilty to Hate Crime

Matthew Gust, 25, pleaded guilty today to a federal hate crime for setting fire to a Somali restaurant in Grand Forks, North Dakota, announced Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division, and U.S. Attorney Christopher C. Myers of the District of North Dakota.

According to his plea agreement, Gust admitted that he set the Dec. 8, 2015, fire in order to intimidate and interfere with the Somali employees and patrons of the Juba Café.  Early that morning, he drove to a gas station and purchased a small amount of gasoline, which he used to fill a 40 oz. beer bottle, turning it into a Molotov cocktail.  Gust then drove to the café, donned a face mask, punched a hole through the front window of the café, lit the Molotov cocktail, threw it through the window and fled.  The Molotov cocktail exploded on impact, creating an explosion and fire that engulfed Juba Café and caused at least $90,000 worth of damages.

Gust pleaded guilty to an arson charge as well as to the hate-crime charge.  He was by charged by information with those two counts on March 20, 2016.  He had earlier been indicted by a grand jury for using a destructive device in the commission of a crime; that charge will be dismissed as part of his plea agreement.

“We will not tolerate violence that attempts to divide us by targeting individuals based on their national origin,” said Principal Deputy Assistant Attorney General Gupta.  “The Civil Rights Division will continue to bring to justice those who attempt to intimidate and drive out members of our community.”

“This case exemplifies the strong partnership between local, state, and federal authorities working together to ensure the rights of all members of our community are protected from criminal conduct motivated by hate,” said U.S. Attorney Myers.  “In such circumstances, the response from all levels of law enforcement in North Dakota will be swift and certain.”

“Investigating these types of attacks will always remain a priority for the FBI,” said Special Agent in Charge Richard T. Thornton of the FBI’s Minneapolis Division.  “Attacks such as these have no place in our society and those who would commit them should know that they will be aggressively pursued by the FBI.”

“There is no place for hate in our communities, and these targeted acts of violence won’t be tolerated,” said Special Agent in Charge Jim Modzelewski of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) St. Paul, Minnesota, Field Division.  “ATF will continue to diligently investigate these crimes, to ensure that all of our residents feel safe and welcomed.”

Gust is scheduled to be sentenced on Aug. 29, 2016.  The hate-crime charge carries a maximum sentence of 20 years in prison, while the arson charge carries a maximum sentence of 10 years in prison.

This case was investigated by Grand Forks Police Department, the FBI and ATF.  The case is being prosecuted by Assistant U.S. Attorney Megan A. Healy of the District of North Dakota and Trial Attorney Dana Mulhauser of the Civil Rights Division’s Criminal Section.

CONTRACTOR PLEADS GUILTY TO BRIBING GSA EMPLOYEES

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, May 16, 2016

Former Government Contractor Pleads Guilty to Bribery

Bribes Paid to Former GSA Employees Totaling $15,000 in Exchange for Contract Work

A former government contractor pleaded guilty today to paying bribes to public officials related to work his company performed for the General Services Administration (GSA), announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Rod J. Rosenstein of the District of Maryland.

Moustafa Ahmed Ibrahim, 37, of Harrisonburg, Virginia, pleaded guilty today before U.S. District Judge George L. Russell III of the District of Maryland to one count of bribery.  A sentencing hearing is scheduled for Sept. 9, 2016.

In his plea agreement, Ibrahim admitted that between October 2007 and November 2009, he paid cash bribes totaling at least $15,000 to two GSA building managers in the Washington, D.C., metro area.  In exchange for the bribes, the two managers, both of whom have already pleaded guilty to bribery, awarded more than $200,000 in construction and maintenance work at the facilities they managed to Ibrahim’s general contracting company.  Each job was for less than $3,000 and so could be billed to a government credit card without an open bidding process, and Ibrahim admitted that in exchange for the work, that he would kick back approximately 10 percent of each job to the relevant GSA employee.  As part of the plea agreement, Ibrahim also agreed to forfeiture totaling $15,000.

The GSA Office of Inspector General is investigating the case.  Trial Attorney Richard B. Evans of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Kelly O. Hayes of the District of Maryland are prosecuting the case.