OWNER OF NEW YORK MEDICAL CLINICS PLEADS GUILTY TO ROLE IN $55 MILLION MEDICARE FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, October 26, 2015

Owner of Two New York Medical Clinics Pleads Guilty to Role in $55 Million Health Care Fraud Scheme

Defendant Laundered Millions through Sham Vendors, Generating Cash to Pay Illegal Kickbacks

The owner of two medical clinics in Brooklyn, New York, pleaded guilty today to her role in a $55 million health care fraud and money laundering conspiracy.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York, Special Agent in Charge Scott Lampert of the U.S. Department of Health and Human Services-Office of Inspector General’s (HHS-OIG’s) Office of Investigations, Special Agent in Charge Shantelle P. Kitchen of Internal Revenue Service-Criminal Investigation (IRS-CI) New York and Inspector General Dennis Rosen of New York State Medicaid made the announcement.

Valentina Kovalienko, 46, pleaded guilty before U.S. District Judge Roslynn R. Mauskopf of the Eastern District of New York to conspiracy to commit health care fraud and conspiracy to commit money laundering.  Her sentencing date has not yet been scheduled.   Pursuant to her plea agreement, Kovalienko agreed to forfeit $29,336,497.27, which amount she admitted is traceable to her criminal conduct.

According to admissions made in connection with her plea, from approximately February 2008 to February 2011, Kovalienko and others executed a scheme in which patients were paid cash kickbacks to subject themselves to medically unnecessary physical and occupational therapy, diagnostic tests and office visits that were not performed by licensed professionals, and for which the clinics billed Medicare and Medicaid.  Kovalienko also admitted that, to support the fraudulent claims, she paid occupational and physical therapists to falsify patient charts and billing records.

In connection with her guilty plea, Kovalienko admitted that she diverted funds deposited into the clinics’ bank accounts by Medicare and Medicaid to herself and her co-conspirators and to the patients to whom kickbacks were paid.  Kovalienko admitted that she did so by writing checks from the clinics’ bank accounts to an elaborate network of sham third-party vendors, purportedly in the business of providing “consulting,” “advertising” and “computer support” services, which checks she and her co-conpsirators cashed for their own benefit and to perpetuate the scheme by paying kickbacks to patients.

To date, at least 10 other individuals have pleaded guilty to participating in the scheme, including the former medical directors of both clinics, three former occupational therapists, a former physical therapist, three ambulette drivers, the owner of several of the sham vendors used to launder the money and a former patient who received illegal kickbacks.

In July and August 2014, three additional clinic managers and one ambulette driver were also charged with crimes arising from the scheme.  A trial date has not yet been set.

The case was investigated by HHS-OIG, IRS-CI and the New York State Office of the Medicaid Inspector General, and was brought as part of the Medicare Fraud Strike Force, under the supervision by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Eastern District of New York.  The case is being prosecuted by Trial Attorneys Bryan D. Fields, A. Brendan Stewart and F. Turner Buford 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 and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

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.

COLOMBIAN NATIONAL RECEIVES PRISON TERM FOR ROLE IN DRUG MONEY LAUNDERING SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, September 23, 2015

Colombian National Sentenced to 63 Months for Conspiring to Launder Drug Trafficking Proceeds

A Colombian national was sentenced today to 63 months in prison for conspiring to launder drug trafficking proceeds, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting Administrator Chuck Rosenberg of the Drug Enforcement Administration (DEA).

Tito Miller Parra-Isaza, 45, pleaded guilty on May 26, 2015.  U.S. District Judge Ed Kinkeade of the Northern District of Texas imposed the sentence.

According to a factual stipulation filed in connection with his guilty plea, Parra-Isaza coordinated the deposit of bulk cash, which he knew to be the proceeds of drug trafficking, into financial institutions in Mexico and elsewhere.  The bulk cash was later wire transferred into bank accounts in Dallas and then transported to Panama and elsewhere for distribution to individuals involved in drug trafficking.

Four other defendants previously pleaded guilty.  Of the remaining charged defendants, three are fugitives and one is deceased.

This case is being investigated by the DEA.  This case is being prosecuted by Senior Trial Attorney Mark Irish and Trial Attorney Nicole Grosnoff of the Criminal Division’s Asset Forfeiture and Money Laundering Section.  The Criminal Division’s Office of International Affairs also has provided substantial assistance.

WOMAN SENTENCED IN CASE INVOLVING DEFRAUDING THE ELDERLY IN A SWEEPSTAKES SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, August 11, 2015

CALIFORNIA WOMAN SENTENCED TO OVER 10 YEARS FOR HER ROLE IN DEFRAUDING ELDERLY THROUGH OFFSHORE SWEEPSTAKES SCHEME

A California woman was sentenced to 130 months in prison for her role in a half-million dollar Costa Rica-based “sweepstakes fraud” scheme that victimized hundreds of U.S. residents.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina made the announcement.

Patricia Diane Clark, 57, of Sacramento, California, was sentenced today by Chief U.S. District Judge Frank D. Whitney of the Western District of North Carolina for conspiracy to commit wire fraud, wire fraud and conspiracy to commit money laundering.   Clark was also ordered to pay $642,032 in restitution and to forfeit the same amount jointly and severally with her co-defendants.

In connection with her guilty plea, Clark admitted that, from approximately 2007 through February 2013, her co-conspirators called U.S. residents from Costa Rican call centers, falsely informing them that they had won a substantial cash prize in a “sweepstakes.”  The victims, many of whom were elderly, were told that in order to receive the prize, they had to send money for a purported “refundable insurance fee.”  Clark admitted that she picked up money from the victims and sent it to her co-conspirators in Costa Rica.  Clark also admitted that she managed others who picked up money from the victims in the United States and that she kept a portion of the victims’ payments.

Clark also admitted that, once the victims sent money, her co-conspirators contacted the individuals again and falsely informed them that the prize amount had increased, either because of a clerical error or because another prize winner was disqualified.  The victims then had to send additional money to pay for new purported fees to receive the now larger sweepstakes prize.  The attempts to collect additional money from the victims continued until an individual either ran out of money or discovered the fraudulent nature of the scheme.

Clark admitted that, along with her co-conspirators, she was responsible for approximately $640,000 in losses to more than a hundred U.S. citizens.

This case is being investigated by the U.S. Postal Inspection Service, Internal Revenue Service, FBI, Federal Trade Commission and Department of Homeland Security.  The case is being prosecuted by Senior Litigation Counsel Patrick M. Donley and Trial Attorney William H. Bowne of the Criminal Division’s Fraud Section.

3 INDICTED FOR ROLES IN SCHEME TO DEFRAUD EXPORT-IMPORT BANK, COMMERCIAL BANKS

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, July 21, 2015

Three Family Members Indicted for Participating in Multi-Million Dollar Scheme to Defraud Commercial Lenders and the U.S. Export-Import Bank

Three family members were indicted for their alleged participation in a scheme to defraud Miami-area lenders and the Export-Import Bank of the United States (Ex-Im Bank), announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.

Guillermo M. Sanchez, 60, Isabel C. Sanchez, 36, and Gustavo Giral 38, all of Cutler Bay, Florida, are charged in the indictment with conspiracy to commit wire fraud, wire fraud, conspiracy to commit money laundering and money laundering.

According to allegations in the indictment, from 2007 through 2012, the defendants utilized companies they controlled to create fictitious invoices for sales of merchandise that never occurred.  In a process called “factoring,” the defendants sold the accounts receivables to two Miami-area lenders for approximately 90 percent of the value of the merchandise listed on the alleged fake invoices.  The lenders were not aware that the invoices were fake, and expected to recover the full amount owed from the purported purchasers.  To perpetuate the fraud, the defendants allegedly transferred the proceeds through numerous bank accounts under their control and, in a Ponzi-style scheme, used a portion of the funds to pay off other factored invoices.

After the Miami lenders refused to extend further credit, the defendants and their co-conspirators allegedly created false invoices and shipping documents to obtain a loan guaranteed by the Ex-Im Bank.  Rather than acquiring, selling and shipping American-manufactured goods as required for Ex-Im Bank-guaranteed loans, the defendants allegedly used the loan proceeds to extend the fraudulent scheme by paying off other lenders, and split the remaining funds among themselves and other co-conspirators.  Ultimately, the defendants defaulted on both the factoring loans and the Ex-Im Bank loan.

Co-conspirators Fredy Moreno-Beltran, Ricardo Beato and Jorge Amad were separately charged, and each have pleaded guilty to participating in the scheme.  According to his plea agreement, Moreno-Beltran owned Clientric, a purported purchaser of goods from companies controlled by the defendants.  According to their plea agreements, Beato and Amad owned Approach Technologies International, a company that the defendants falsely claimed had sold nearly $2 million of American-manufactured telephone call center software to Clientric in order to obtain an Ex-Im Bank-guaranteed loan.  In connection with their guilty pleas, Beato, Amad and Moreno admitted that the invoices provided to Ex-Im Bank were false.

The alleged scheme caused approximately $8 million in losses to the private lenders and nearly $2 million in losses to the United States.

The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.

The case is being investigated by the Ex-Im Bank Office of Inspector General, with assistance provided by the FBI and U.S. Immigration and Customs Enforcement Homeland Security Investigations.  The case is being prosecuted by Senior Litigation Counsel Patrick Donley and Trial Attorney William Bowne of the Criminal Division’s Fraud Section.

U.S. CITIZEN PLEADS GUILTY TO SMUGGLING ELECTRONIC COMPONENTS TO RUSSIA

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, June 11, 2015

New Jersey, Man Admits Smuggling $65 Million in Sensitive Electronic Components to Russia’s Ministry of Defense, Federal Security Service

A Mountainside, New Jersey, man admitted his role in an international procurement network that obtained and smuggled more than $65 million worth of electronics from the United States to Russia in violation of export control laws, U.S. Attorney Paul J. Fishman of the District of New Jersey announced.

Alexander Brazhnikov Jr., 36, a naturalized U.S. citizen born in Moscow, pleaded guilty before U.S. District Court Judge William J. Martini of the District of New Jersey, to an information charging him with one count of conspiracy to commit money laundering, one count of conspiracy to smuggle electronics from the United States and one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA).

“As he admitted in court, Brazhnikov was responsible for nearly 2,000 illegal shipments of regulated, sensitive electronics components, many of which wound up in the hands of Russian military and security forces,” said U.S. Attorney Fishman.  “He also admitted going to extraordinary lengths to conceal the nature and destination of the shipments, as well to hide the tens of millions of dollars in illegal proceeds generated by the scheme.  Shutting down schemes like this keep all of us safer.”

“Alexander Brazhnikov Jr. significantly undermined the national security of the U.S. by procuring sophisticated, high-tech electronic components and smuggling them into Russia, thereby enhancing the capabilities of the Russian Intelligence Service and contributing to the modernization of both the Russian Military Service and the Russian Nuclear Weapons Program,” said Special Agent in Charge Richard M. Frankel of the FBI’s Newark Division.  “Now, Brazhnikov must face the consequences of his actions and the full power of U.S.  jurisprudence.”

Brazhnikov Jr. was arrested at his home on June 26, 2014, following a joint investigation by the FBI, the U.S. Department of Commerce (DOC) and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI).  From January 2008 through June 2014, he was the owner, chief executive officer and principal operator of four New Jersey microelectronics export companies, each of which were used in the various conspiracies uncovered by the investigation.  Following his arrest, special agents seized $4,075,237 in proceeds related to the charged offenses, as well as real property and other assets valued at more than $600,000.

“Today's plea represents a collaborative effort among law enforcement agencies,” said Special Agent in Charge Sidney Simon of the DOC, Bureau of Industry and Security, Office of Export Enforcement’s New York Field Office.  “I commend our colleagues at the FBI and Homeland Security Investigations for their efforts.  The Office of Export Enforcement will continue to pursue violators of our export control laws by leveraging our unique authorities to protect national security.”

“HSI will use all the resources at its disposal to prevent sensitive and restricted technology from being exported illegally,” said Acting Special Agent in Charge Kevin Kelly of HSI’s Newark Field Office.  “HSI will do all in its power as the principal enforcer of export controls to ensure that sensitive technology doesn’t fall into the wrong hands.”

According to documents filed in this case and statements made in court: Brazhnikov Jr. and his companies are part of a sophisticated procurement network that has surreptitiously acquired large quantities of license-controlled electronic components from American manufacturers and vendors and exported those items to Russia on behalf of Russian business entities that were authorized to supply them to the Ministry of Defense of the Russian Federation, the Federal Security Service of the Russian Federation  (FSB) and Russian entities involved in the design of nuclear warheads, weapons and tactical platforms.

The defendant conspired with his father, Alexander Brazhnikov Sr., owner of a Moscow-based procurement firm whose agents helped initiate the purchase of electronics components from United States vendors and manufacturers on behalf of the conspirators’ clients in Russia.  Brazhnikov Jr. finalized the purchase and acquisition of the requested components from the various distributors, then repackaged and shipped them to Moscow.  He routinely falsified the true identity of the end-user of the components and the true value of the components in order to avoid filling out required export control forms.  Brazhnikov Jr. purposefully concealed the true destination of the parts that were exported by directing that the shipments be sent to various “shell” addresses in Russia – some of which have been identified as vacant storefronts and apartments – which were established and controlled by the Moscow-based network.  All shipments initially directed to the shell addresses were redirected to a central warehouse controlled by the conspirators’ Moscow-based network.

The funds for the network’s illicit transactions were obtained from the various Russian purchases and initially deposited into one of the conspirators’ primary Russia-based accounts.  Disbursements for purchases were made from that primary Russian account through one or more foreign accounts held by shell corporations  in the British Virgin Islands, Latvia, Marshall Islands, Panama, Ireland, England, United Arab Emirates and Belize and ultimately into one of the defendant’s U.S.-based accounts.  The network’s creation and use of dozens of bank accounts and shell companies abroad was intended to conceal the true sources of funds in Russia, as well as the identities of the various Russian defense contracting firms receiving U.S. electronics components.

The money laundering conspiracy charge to which Brazhnikov Jr. pleaded guilty carries a maximum potential penalty of 20 years in prison and a $500,000 fine.  The smuggling and IEEPA conspiracy charges carry a maximum potential penalty, per count, of five years in prison and a $250,000 fine.  Sentencing is scheduled for Sept. 15, 2015.  Brazhnikov Jr. also agreed to the entry of a forfeiture money judgment of $65 million.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Frankel in Newark; the DOC, under the direction of Special Agent in Charge Simon, New York Field Office; special agents of ICE-HSI, under the direction of Acting Special Agent in Charge Kelly.  He also thanked officers from the Union County, New Jersey, Police Department, under the direction of Captain Chris Debbie; and officers of the Mountainside Police Department, under the direction of Police Chief Allan Attanasio, for their important contributions to the investigation.  The U.S. Justice Department’s Office of International Affairs provided assistance with this case.

The government is represented by Assistant U.S. Attorneys Dennis C. Carletta of the U.S. Attorney’s Office National Security Unit, and Peter Gaeta of the office’s Asset Forfeiture and Money Laundering Unit in Newark.

COLOMBIAN NATIONAL PLEADS GUILTY IN MONEY LAUNDERING CASE

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, May 26, 2015

Colombian National Pleads Guilty to Conspiracy to Commit Money Laundering
A Colombian national who recently was extradited from Mexico, pleaded guilty today in federal district court in Dallas, to conspiracy to launder monetary instruments, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting Administrator Chuck Rosenberg of the Drug Enforcement Administration.

Tito Miller Parra-Isaza, 45, a Colombian national, entered his guilty plea before U.S. Magistrate Judge Renee H. Toliver of the Northern District of Texas.  He will be sentenced at a later date.

According to a factual stipulation filed with the court, Parra-Isaza’s role in the conspiracy was to coordinate the deposit of bulk cash, which he knew to be the proceeds of drug smuggling, into financial institutions in Mexico and elsewhere.  In furtherance of the conspiracy, this bulk cash was later wire transferred to bank accounts in Dallas.  The funds then were  transported to Panama and elsewhere to distribute to individuals involved in drug smuggling.

Two other defendants charged in this case previously entered guilty pleas.  Of the remaining charged defendants, one is in Mexican custody, two are fugitives and one is deceased.

This case is being investigated by the DEA.  The case is being prosecuted by Trial Attorneys Mark Irish and Nicole Grosnoff of the Criminal Division’s Asset Forfeiture and Money Laundering Section.  The Criminal Division’s Office of International Affairs also has provided substantial assistance.

SEC ANNOUNCES PARTIAL SUMMARY JUDGEMENT AGAINST FORMER HEART TRONICS, INC., ATTORNEY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23205 / February 23, 2015

Securities and Exchange Commission v. Heart Tronics, Inc., et al., Civil Action No. SACV 11- 1962-JVS (ANX)

SEC Wins Summary Judgment Against Mitchell J. Stein for Heart Tronics, Inc. Fraud Scheme.

The Securities and Exchange Commission today announced that on February 18, 2015, the U.S. District Court for the Central District of California awarded partial summary judgment in the Commission's favor against Mitchell J. Stein for his role in a wide-ranging fraud scheme while he was attorney for Heart Tronics, Inc. (formerly known as Signalife, Inc.). In December 2014, Stein was sentenced to a 17-year term of imprisonment based on his conviction in a parallel criminal prosecution for 14 counts of conspiracy to commit mail fraud and wire fraud, mail fraud, wire fraud, securities fraud, money laundering and conspiracy to obstruct justice.

Based on Stein's criminal conviction, the Court awarded summary judgment in the Commission's favor on the Commission's claims that Stein violated Section 17(a) of the Securities Act of 1933, violated and aided and abetted the violation of Sections 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5, violated Sections 13(b)(5) and Rule 13b2-1 of the Exchange Act, and aided and abetted the violation of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 13a-1, 13a-11, 13a-13 and 12b-20. The Court imposed permanent injunctions, officer and director bars, a penny stock bar, a civil penalty of $5,378,581.61, and disgorgement and prejudgment interest of $6,076,415.52 against Stein.

The Commission's litigation against former Heart Tronics co-CEO for Operations, President and Chief Operating Officer, Willie Gault, continues, with trial to begin on March 3, 2015.

DIGITAL CURRENCY SERVICES IT EXEC. TO SERVE 36 MONTHS IN PRISON FOR ROLE IN MONEY LAUNDERING CASE

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, January 30, 2015

Former Liberty Reserve IT Manager Sentenced to 36 Months in Prison
The former information technology manager for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services, was sentenced today to 36 months in prison for conspiring to operate an unlicensed money transmitting business.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara of the Southern District of New York made the announcement.

Maxim Chukharev, 28, of San José, Costa Rica, pleaded guilty in September 2014 before U.S. District Judge Denise L. Cote, who also imposed today’s sentence.

According to allegations contained in the indictment and statements made in related court proceedings, Chukharev was an associate of Liberty Reserve founder Arthur Budovsky and served as Liberty Reserve’s information technology manager in Costa Rica.  In that role, Chukharev was principally responsible, along with co-defendant Mark Marmilev, formerly Liberty Reserve’s chief technology officer, for maintaining Liberty Reserve’s technological infrastructure.

According to allegations in the indictment and statements made in related court proceedings, Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.”  Liberty Reserve was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes, and it emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store and launder the proceeds of illegal activity.  Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals around the world to conduct anonymous and untraceable financial transactions.

According to court records, before being shut down by the government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds.  These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking and other crimes.

Chukharev, Marmilev and Budovsky were among seven individuals charged in the indictment, which was unsealed on May 28, 2013.  Three co-defendants—Marmilev, Vladimir Kats and Azzeddine El Amine—previously pleaded guilty.  Marmilev was sentenced to five years in prison in December 2014; Kats and El Amine await sentencing.  The indictment also charged Liberty Reserve with conspiracy to commit money laundering and operation of an unlicensed money transmitting business, and the charges remain pending.

The charges contained in the indictment are merely accusations.  The defendants are presumed innocent unless and until proven guilty.

This case is being investigated by the U.S. Secret Service, the Internal Revenue Service-Criminal Investigation and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, with assistance from the Secret Service’s New York Electronic Crimes Task Force.  The Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Financial and Economic Crime Unit of the Spanish National Police, the Cyber Crime Unit at the Swedish National Bureau of Investigation and the Swiss Federal Prosecutor’s Office also provided assistance.

This case is being prosecuted jointly by the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS) and the U.S. Attorney’s Office’s Complex Frauds Unit and Asset Forfeiture Unit in the Southern District of New York, with assistance from the Criminal Division’s Office of International Affairs and Computer Crime and Intellectual Property Section.

Trial Attorney Kevin Mosley of AFMLS and Assistant U.S. Attorneys Serrin Turner, Andrew Goldstein and Christine Magdo of the Southern District of New York are in charge of the prosecution, and Assistant U.S. Attorney Christine Magdo is in charge of the forfeiture aspects of the case.

DOJ MAKES MAJOR ANNOUNCEMENT REGARDING SINALOA CARTEL

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, January 27, 2015

Chicago Twins’ Cooperation Against Sinaloa Cartel Yields 14-Year Prison Terms; New Charges Target Cartel’s Top Echelon

Twin brothers Pedro and Margarito Flores, regarded as Chicago’s most significant drug traffickers who rose from street level dealers to the highest echelons of the Mexico-based Sinaloa Cartel and a rival cartel before they began providing unparalleled cooperation to the Drug Enforcement Administration (DEA), were each sentenced today to 14 years in federal prison.  The sentencing marked the Flores brothers’ first public court appearance since they entered protective federal custody in 2008.  Their August 2012 guilty pleas to a narcotics distribution conspiracy were unsealed in November 2014.

Also today, federal law enforcement officials announced the unsealing of an expanded eighth superseding indictment in the case in which the Flores brothers and leaders of the Sinaloa Cartel were initially indicted here in 2009.  The eighth superseding indictment and three separate new indictments announced today, add significant new defendants, including two alleged cartel money laundering associates who were arrested in the United States and extend the government’s efforts in Chicago and elsewhere to dismantle the Sinaloa Cartel under Joaquin Guzman Loera, 60, also known as “Chapo,” and Ismael Zambada Garcia, 67, aka “Mayo.”

“The persistent determination of DEA special agents and leadership in Chicago, coupled with the efforts of those in DEA offices worldwide, is having a significant impact on the global operations of the Sinaloa Cartel,” said U.S. Attorney Zachary T. Fardon of the Northern District of Illinois.  “This case put an end to the Flores brothers’ Chicago hub for transshipment of cartel narcotics nationwide.  Our investigation and prosecution of cartel members is continuing,”

“The extraordinary work in this investigation continues,” said Special Agent in Charge Dennis A. Wichern of the Chicago Field Division of the DEA.  “Agents, investigators, prosecutors and our worldwide law enforcement partners continue to expand this investigation against members of the Sinaloa Cartel ― working to bring them to justice and in doing so ― helping to make the great city of Chicago a safer place.” 

“IRS Criminal Investigation is committed to working together with the DEA and the United States Attorney’s Office to fight the war on drugs,” said Special Agent in Charge James C. Lee of the Internal Revenue Service Criminal Investigation Division (IRS CI) in Chicago.  “IRS CI brings, and will continue to bring, its financial expertise to disrupt and dismantle the Sinaloa Cartel’s drug trafficking organization.”

Flores Brothers Sentencing

In sentencing of the 33-year-old Flores brothers, U.S. District Chief Judge Ruben Castillo said that but for the Flores brothers’ cooperation, he would have imposed a life sentence and noted that because of the peril their ongoing cooperation poses to them and their families, they effectively “are going to leave here with a life sentence.”  If the city of Chicago had walls, Judge Castillo said the brothers’ operation “devastated the walls of this city,” adding that their operation “became just a highway of drugs into this city.” 

But, Judge Castillo added, “it is never too late to cooperate,” which is what earned the Flores brothers a significant discount in their sentences. 

Judge Castillo ordered the Flores brothers to forfeit more than $3.66 million that was seized from them and a sport utility vehicle.  In addition, more than $400,000 worth of assorted jewelry, several luxury automobiles and smaller amounts of cash and electronics equipment were seized and forfeited in administrative proceedings by the DEA.  The brothers left behind millions of dollars in additional assets in Mexico after they began cooperating.

The judge also placed each of the brothers on court supervision for five years when they are released from prison after serving at least 85 percent of their sentences.

Between 2005 and 2008, the Flores brothers and their crew operated a Chicago-based wholesale distribution cell for the Sinaloa Cartel and a rival drug trafficking organization controlled by Arturo Beltran Leyva, receiving on average 1,500 to 2,000 kilograms of cocaine per month.  Approximately half of this cocaine was distributed to the Flores’ customers in the Chicago area, while the other half was distributed to customers in Columbus, Cincinnati, Detroit, Milwaukee, New York, Philadelphia, Washington, D.C. and Vancouver, among other cities.  In total, the brothers admitted to facilitating the transfer of approximately $1.8 billion of drug proceeds from the United States to Mexico, primarily through bulk cash smuggling. 

At great personal risk to themselves and their families, the Flores brothers began cooperating with the government in October 2008 and recorded conversations, including two directly with Chapo Guzman.  Their cooperation resulted in indictments against leaders of the Sinaloa Cartel and the Beltran Leyva organization, as well as the complete dismantling of the brothers’ own Chicago-based criminal enterprise.  In late 2008 alone, their cooperation facilitated approximately a dozen seizures in the Chicago area totaling hundreds of kilograms of cocaine and heroin and more than $15 million in cash, as well as the seizure of more than 1,600 kilograms of cocaine in the Los Angeles area that was bound for Chicago.

Further cooperation by the Flores brothers and members of their dismantled crew resulted in the convictions of more than a dozen of their high-level customers who received on average 50 to 100 kilos of cocaine per month. 

“While not as high-profile as the cartel figures, the successful prosecution of these defendants made a very real difference in combating the scourge of drug trafficking that fuels so much violence and the destruction of communities in Chicago,” said the prosecutors in recommending a sentence at or near the low end of the agreed 10- to 16-year sentencing range.

“The Flores brothers (and their families) will live the rest of their lives in danger of being killed in retribution,” prosecutors stated in a sentencing memo.  “The barbarism of the cartels is legend, with a special place reserved for those who cooperate.” 

In 2009, the brothers’ father was kidnapped and presumed killed when he reentered Mexico despite the U.S. government warning him not to do so.

The Primary ― Eighth Superseding ― Indictment

The eighth superseding indictment unsealed today charges a total of nine defendants, including Chapo Guzman, Mayo Zambada and Guzman’s son, Jesus Alfredo Guzman Salazar, 31, aka “Alfredillo” and “Jags,” each of whom was among the initial group of co-defendants in the original indictment in 2009.  Zambada and Salazar are fugitives, while Guzman remains in Mexican custody following his arrest last February.

Co-defendant, Jesus Raul Beltran Leon, 31, aka “Trevol” and “Chuy Raul,” was arrested in Mexico this past November and remains in Mexican custody.  The remaining co-defendants, all fugitives, Heriberto Zazueta Godoy, 54, aka “Capi Beto,” Victor Manuel Felix Beltran, 27, aka “Lic Vicc,” Hector Miguel Valencia Ortega, 33, aka “Mv,” Jorge Mario Valenzuela Verdugo, 32, aka “Choclos” and Guadalupe Fernandez Valencia, 54, aka “Don Julio” and “Julia.”

This indictment alleges that all nine defendants conspired between May 2005 and December 2014, when the indictment was returned under seal, to import and distribute narcotics and to commit money laundering.  They allegedly conspired to smuggle large quantities of cocaine from Central and South America, as well as heroin, methamphetamine and marijuana from Mexico to the United States and through Chicago for distribution nationwide.  The indictment seeks forfeiture of $2 billion.      

The U.S. Treasury Department’s Office of Foreign Asset Control today announced the designation of Felix Beltran, who is Salazar’s brother-in-law, pursuant to the Foreign Narcotics Kingpin Designation Act, freezing all of his assets in the U.S. or in the control of U.S. persons and generally prohibiting any U.S. persons from engaging in transactions with him.  A second designation was announced today against Alfonso Limon Sanchez, an alleged Sinaloa Cartel associate under federal indictment with Zambada and others in San Diego.  Other alleged cartel leaders, including Chicago defendants Guzman, Zambada, Salazar and Godoy, were previously designated drug kingpins.

Charges brought in earlier versions of this primary indictment remain pending against three additional co-defendants: Felipe Cabrera Sarabia, 44, who is in custody in Mexico; German Olivares, age unknown and a fugitive; and Edgar Manuel Valencia Ortega, 27, aka “Fox,” and Hector Miguel Valencia Ortega’s brother, who was arrested last year in the United States and is in federal custody in Chicago.  His next court date is Feb. 19, 2015 for a status hearing. 

In addition to the Flores brothers, Alfredo Vasquez Hernandez, 59, pleaded guilty and was sentenced last November to 22 years in prison.  Two other co-defendants, Mayo Zambada’s son, Vicente Zambada Niebla, 39, and Tomas Arevalo Renteria, 45, have pleaded guilty and are awaiting sentencing in Chicago.  Altogether, 18 defendants have been charged in the primary case in Chicago.

Three New Indictments

Those 18 are among a total of 62 defendants, most of whom have been convicted and sentenced, who were indicted in nearly two dozen related cases in Chicago since 2009.  Two new defendants, Alvaro Anguiano Hernandez, 38, aka “Panda,” and Jorge Martin Torres, 38, were arrested separately in the U.S. in November and are facing separate indictments here alleging they were high-level money laundering associates of the Sinaloa Cartel and participated in money laundering conspiracies.  Anguiano Hernandez’s indictment seeks forfeiture of $950,000. 

Torres allegedly conspired to launder in excess of $300,000 of drug proceeds from Mexico to the United States to purchase, refurbish, and transfer from Ohio to Mexico, a 1982 Cessna Turbo 210 to promote the cartel’s alleged narcotics conspiracy.  His indictment seeks forfeiture of $1 million.

A third separate indictment announced today charges Venancio Covarrubias, 26, aka “Benny,” of Elgin, who was arrested last October, with being a high-level cartel customer in the Chicago area.  In September 2013, law enforcement, including U.S. Customs and Border Protection officers in Laredo, Texas, seized 159 kilograms of cocaine that was allegedly destined for a warehouse in Elgin leased by Covarrubias.  The cocaine, wrapped in 118 brick-shaped packages, was hidden in a tractor-trailer containing a shipment of fresh tomatoes from a fictitious Mexican business called Tadeo Produce.  The charges allege that during the prior year, Covarrubias wire transferred drug proceeds to Tadeo Produce while receiving narcotics disguised as tomato shipments.  His indictment seeks forfeiture of $2.89 million.

The money laundering conspiracy charges against Anguiano Hernandez, Torres and Covarrubias carry a maximum sentence of 20 years in prison, a $500,000 fine, or an alternate fine totaling twice the amount of the funds involved in illegal activity.  The narcotics importation and distribution conspiracy charges against Covarrubias and each defendant in the primary indictment carry a mandatory minimum sentence of 10 years to a maximum of life in prison and a $10 million fine.  If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States sentencing guidelines.  The defendants against whom charges are pending are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Total Seizures Since 2008

Overall, the Chicago-based investigation of the Sinaloa Cartel has resulted in seizures of approximately $30.8 million, approximately 11 tons of cocaine, 265 kilograms of methamphetamine and 78 kilograms of heroin.  Law Enforcement in Chicago has worked closely with federal agents and prosecutors in San Diego to target the senior leadership of the Sinaloa Cartel.  This partnership yielded the prosecutions here as well as 14 indictments announced this month in San Diego against 60 alleged Sinaloa leaders, lieutenants and associates, including Zambada, two of his four sons and another of Guzman’s sons.   

The investigation in Chicago has been led by the DEA, joined by the IRS Criminal Investigation Division and the Chicago Police Department.  Also assisting were DEA offices worldwide, including in Los Angeles, San Diego, Mexico City and its El Paso Intelligence Center, the Organized Crime Drug Enforcement Task Force the Chicago High-Intensity Drug Trafficking Area task force, the U.S. Attorney’s Offices in San Diego, Springfield, Illinois and Milwaukee and the Milwaukee Police Department, the Chicago and Peoria offices of the Federal Bureau of Investigation, the Chicago office of the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the U.S. Marshals Service, the U.S. State Department’s Diplomatic Security Service, the Cook County Sheriff’s Department, suburban police departments in Calumet City, Evergreen Park, Oak Park, Palos Heights and the Beverly Hills Police Department.  The investigation was assisted by agents and analysts of the Justice Department Criminal Division’s Special Operations Division, the attorneys from the Criminal Division’s Narcotic and Dangerous Drug Section and Office of International Affairs.

The government is being represented by Assistant U.S. Attorneys Michael J. Ferrara, Erika Csicsila, Naana Frimpong, Georgia Alexakis, Kathryn Malizia and Thomas D. Shakeshaft.  

AMERICAN, TWO CANADIANS CHARGED WITH USING OFFSHORE ACCOUNTS TO LAUNDER MONEY

FROM:  U.S. JUSTICE DEPARTMENT 
Monday, March 24, 2014
U.S. and Canadian Citizens Charged with Using Offshore Accounts and Foreign Nominee Entities to Launder $200,000

Three Caribbean-Based Defendants Charged with Laundering $200,000 of Purported Bank Fraud Proceeds in Undercover Sting

Joshua Vandyk, a U.S. citizen, and Eric St-Cyr and Patrick Poulin, Canadian citizens, were indicted for conspiracy to launder monetary instruments, the Department of Justice and Internal Revenue Service (IRS) announced today.  The indictment alleges that Vandyk, St-Cyr and Poulin conspired to conceal and disguise the nature, location, source, ownership and control of property believed to be the proceeds of bank fraud.  The Caribbean-based defendants allegedly assisted undercover law enforcement agents, posing as U.S. clients, in laundering purported criminal proceeds through an offshore structure designed to conceal the true identity of the proceeds’ owners.  Vandyk and St-Cyr invested the laundered funds on the clients’ behalf and represented the funds would not be reported to the U.S. government.

The indictment was returned in the Eastern District of Virginia on March 6, 2014, and unsealed on March 12, 2014, when all three defendants were arrested in Miami, Fla.  In addition to the conspiracy charge, Vandyk, St-Cyr and Poulin were each charged with two counts of money laundering.

“These charges result from an extensive investigation and are the latest demonstration of the Department’s resolve to find and prosecute those who aid money laundering and tax fraud globally," said Deputy Attorney General James M. Cole.

According to the indictment, Vandyk and St-Cyr lived in the Cayman Islands and worked for an investment firm based in the Cayman Islands.  St-Cyr was the founder and head of the investment firm, whose clientele included numerous U.S. citizens.  Poulin, an attorney at a law firm based in Turks and Caicos, worked and resided in Canada and in the Turks and Caicos.  His clientele also included numerous U.S. citizens.

According to the indictment, Vandyk, St-Cyr and Poulin solicited U.S. citizens to use their services to hide assets from the U.S. government.  Vandyk and St-Cyr directed the undercover agents posing as U.S. clients to create offshore foundations with the assistance of Poulin and others because they and the investment firm did not want to appear to deal with U.S. clients.  Vandyk and St-Cyr used the offshore entities to move money into the Cayman Islands and used foreign attorneys as intermediaries for such transactions.

According to the indictment, Poulin established an offshore foundation for the undercover agents posing as U.S. clients and served as a nominal board member in lieu of the clients.  Poulin transferred wire payments from the offshore foundations to the Cayman Islands, where Vandyk and St-Cyr invested those funds outside the United States in the name of the offshore foundation.  The investment firm represented that it would neither disclose the investments or any investment gains to the U.S. government, nor would it provide monthly statements or other investment statements to the clients.  Clients were able to monitor their investments online through the use of anonymous, numeric passcodes.  Upon request from the U.S. client, Vandyk and St-Cyr would liquidate investments and transfer money, through Poulin, back to the United States.  According to Vandyk and St-Cyr, the investment firm would charge clients higher fees to launder criminal proceeds than to assist them in tax evasion.

“I commend IRS Criminal Investigation and the Division’s prosecutors for the extraordinary work that they have done over many months in this investigation,” said Assistant Attorney General Kathryn Keneally for the Tax Division.  “In particular, it is important to note that the IRS’s voluntary disclosure policy excludes disclosures after the government has received information about taxpayers’ identities.  If the investigation team now has the names of account holders who have not yet come forward, time has run out for them.”

“As alleged in the indictment, these defendants were in the business of creating layers of transactions so their US clients could launder criminal proceeds,” said Chief of IRS-Criminal Investigation Richard Weber.  “IRS Criminal Investigation is committed to unraveling complex financial and money laundering schemes and holding those accountable for creating mechanisms to hide assets offshore and dodge the tax system.”

An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, each defendant faces a maximum potential sentence of 20 years in prison for each count.

The case was investigated by special agents of the IRS-Criminal Investigation.  Trial Attorneys Todd Ellinwood and Caryn Finley of the Department’s Tax Division and Assistant U.S. Attorney Kosta Stojilkovic of the U.S. Attorney’s Office for the Eastern District of Virginia are prosecuting the case.

FORMER CONGRESSMAN RENZI FOUND GUILTY OF 17 FELONY OFFENCES

FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, June 11, 2013

Former Congressman Richard G. Renzi Convicted of Extortion and Bribery in Illegal Federal Land Swap

A former U.S. Congressman and a real-estate investor were convicted today by a federal jury in Tucson, Ariz., of conspiring together to extort and bribe individuals seeking a federal land exchange, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney John Leonardo of the District of Arizona and Special Agent in Charge Douglas F. Price of the FBI’s Phoenix Division.


Richard G. Renzi, 55, of Burke, Va., was found guilty of 17 felony offenses including conspiracy, honest services wire fraud, extortion under color of official right, racketeering, money laundering and making false statements to insurance regulators.

James W. Sandlin, 62, of Sherman, Texas, was found guilty of 13 felony offenses including conspiracy, honest services wire fraud, extortion under color of official right and money laundering.

Sentencing is set before U. S. District Judge David C. Bury on Aug. 19, 2013.

"Former Congressman Renzi’s streak of criminal activity was a betrayal of the public trust and abuse of the political process," said Acting Assistant Attorney General Raman. "After years of misconduct as a businessman, political candidate and member of Congress, Mr. Renzi now faces the consequences for breaking the laws that he took an oath to support and defend."

"Our democracy is undermined whenever our elected officials misuse the power entrusted to them by the voters to serve their own private interests rather than in the service of the public interest," said U.S. Attorney Leonardo. "The jury’s verdict reinforces the fundamental principle that our society is governed by the rule of law, and that no citizen, including the most influential and powerful among us, is above the law."

"Today's conviction is a culmination of the investigative efforts of the FBI and IRS-Criminal Investigation over a period of several years," said FBI Special Agent in Charge Price. "Public corruption is one of the top criminal priorities of the FBI, and it is imperative that elected public officials be held accountable to uphold the public's trust. The FBI remains committed to this criminal priority in combating public corruption at all levels."

According to evidence at trial, Renzi, then a member of Congress from Arizona’s 1st Congressional District, promised in 2005 to use his legislative influence to profit from a federal land exchange that involved property owned by Sandlin, a real-estate investor.

At the time, Sandlin owed Renzi $700,000 in future payments from their business dealings, and Renzi threatened a proponent of the land exchange that he would not support it unless they purchased Sandlin’s property in Cochise County, Ariz. When that individual refused, Renzi promised a second proponent of a land exchange that he would support the exchange if they purchased Sandlin’s property. According to an agreement reached in May 2005, Sandlin was paid $1 million in earnest money, out of which he paid $200,000 to Renzi. Just before Sandlin received the $1.6 million balance owed on the exchange, he paid an additional $533,000 to Renzi.

Evidence at trial further showed that from 2001 to 2003, Renzi engaged in insurance fraud by diverting his clients’ insurance premiums to fund his first campaign for Congress, and he provided false statements to various state regulators who were investigating his activities.

Renzi was indicted in February 2008, and in October 2008, Renzi moved to dismiss the indictment under his rights as a member of Congress under the Speech or Debate Clause. The court denied his motion in February 2010, and Renzi pursued an interlocutory appeal. After Renzi’s appeal was unsuccessful, trial was set for May 2013.

Honest services wire fraud, extortion under color of official right, concealment money laundering and racketeering each carry maximum penalties of 20 years in prison. Conspiracy carries a maximum penalty of five years in prison, and making false statements to insurance regulators and transactional money laundering each carry maximum penalties of 10 years in prison.

This case was investigated by the FBI and the Internal Revenue Service – Criminal Investigation. The prosecution was handled by Trial Attorneys David Harbach and Sean Mulryne of the Department of Justice’s Public Integrity Section and Assistant U.S. Attorneys Gary Restaino and James Knapp of the District of Arizona.

TWO PLEAD GUILTY IN MENTAL HEALTH CARE FRAUD SCHEME

FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, November 20, 2012

Two Plead Guilty in Miami for Roles in $63 Million Mental Health Care Fraud Scheme

Two Health Care Professionals Pleaded Guilty This Week for Roles in Multi-State Scheme

WASHINGTON –A registered nurse pleaded guilty today and a former program coordinator pleaded guilty yesterday in connection with a health care fraud scheme involving defunct health provider Health Care Solutions Network Inc. (HCSN), announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Acting Special Agent-in-Charge of the FBI’s Miami Field Office; and Special Agent-in-Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office.

John Thoen, 53, of Miami, pleaded guilty today before U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida to one count of conspiracy to commit health care fraud and one count of conspiracy to commit money laundering. Alexandra Haynes, 36, of Taylor, S.C., pleaded guilty yesterday before Judge Altonaga to one count of conspiracy to commit health care fraud in the same case.

According to court documents, HCSN operated community mental health centers (CMHC) at three locations Miami-Dade County, Fla., and one location in Hendersonville, N.C. HCSN purported to provide partial hospitalization program (PHP) services to individuals suffering from mental illness. A PHP is a form of intensive treatment for severe mental illness.

According to an indictment unsealed on May 2, 2012, HCSN obtained Medicare beneficiaries to attend HCSN for purported PHP treatment that was unnecessary and, in many instances, not even provided. HCSN obtained those beneficiaries in Miami by paying kickbacks to owners and operators of assisted living facilities.

According to court documents, Thoen was a licensed registered nurse in both Florida and North Carolina. In Florida, Thoen participated in the admission to HCSN of patients who were ineligible for PHP services. Thoen participated in the routine fabrication of patient medical records that were utilized to support false and fraudulent billing to government sponsored health care benefit programs, including Medicare and Medicaid.

In North Carolina, Thoen, according to court documents, routinely submitted fraudulent PHP claims for Medicare patients who were not even present at the CMHC on days PHP services were purportedly rendered. Thoen also caused the submission of fraudulent Medicare claims on days the CMHC was closed due to snow.

Thoen also admitted to his role in a money laundering scheme, involving Psychiatric Consulting Network Inc. (PCN), a Florida corporation that was utilized by HCSN as a shell corporation to launder health care fraud proceeds. According to court documents, Thoen was president of PCN.

According to court documents, Haynes was employed in Miami as an intake specialist and routinely fabricated patient medical records. In North Carolina, Haynes was employed as a program coordinator and conducted group therapy sessions and fabricated corresponding group therapy notes even though she was not licensed to provide mental health services in the state.

According to court documents, from 2004 through 2011, HCSN billed Medicare and the Florida Medicaid program approximately $63 million for purported mental health services.

Nine defendants have been charged for their alleged roles in the HCSN health care fraud scheme. Six defendants have pleaded guilty, and three defendants are scheduled for trial on Jan. 14, 2013, before U.S. District Judge Altonaga in Miami. Defendants are presumed innocent until proven guilty at trial.

The cases are being prosecuted by Special Trial Attorney William Parente and Trial Attorney Allan J. Medina of the Criminal Division’s Fraud Section. This case was investigated by the FBI and HHS-OIG and 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 for the Southern District of Florida.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

DOJ CELEBRATES EXTRADITION OF ARELLANO-FELIX ORGANIZATION MEMBER

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, August 31, 2012
Eduardo Arellano-Felix Extradited from Mexico to the United States to Face Charges
Key Advisor to Arellano-Felix Organization’s Leadership

WASHINGTON - Eduardo Arellano-Felix, 55, one of the alleged members of the Arellano-Felix Organization (AFO), was extradited today by the government of Mexico to the United States to face racketeering, money laundering and narcotics trafficking charges in the Southern District of California.

The extradition was announced by U.S. Attorney for the Southern District of California Laura E. Duffy and Assistant Attorney General Lanny A. Breuer of the Justice Department?s Criminal Division. Arellano-Felix was arrested by Mexican authorities in Tijuana, Baja California, Mexico, on Oct. 25, 2008, following a gun battle with a Mexican Special Tactical Team. A final order of extradition to the United States was granted in 2010. After two years of unsuccessful appeals, Arellano-Felix arrived in the United States this afternoon. He is scheduled to make his initial appearance on Tuesday, Sept. 4, 2012, in U.S. District Court in San Diego before U.S. Magistrate Judge Barbara Lynn Major.

U.S. Attorney Duffy, whose office secured the indictment against Arellano-Felix, said, "This extradition is a significant step in our effort to bring another key figure in the Arellano Felix Organization to answer, in an American court of law, to very serious charges. We are grateful to the Government of Mexico for its assistance in the extradition."

?Today's extradition is a milestone in our fight against the Mexican drug cartels. I want to thank the Criminal Division's Office of International Affairs for its tireless work in helping to ensure that Eduardo Arellano-Felix and numerous of his alleged co-conspirators face justice in the United States,? said Assistant Attorney General Breuer.

?The extradition of Eduardo Arellano-Felix today marks the end of a 20-year DEA investigation into this vicious drug cartel,? said William R . Sherman, Acting Special Agent in Charge of the San Diego Drug Enforcement Administration (DEA). ?This extradition illustrates that DEA and all its law enforcement partners will relentlessly pursue these drug traffickers until they are brought to justice.?

San Diego FBI Special Agent in Charge Daphne Hearn said, "The FBI is pleased with Mexico's efforts to bring to justice a leader from one of the most violent criminal enterprises in our history. The spirit of cooperation between our two countries is a powerful force in disrupting the criminal activities of these groups that instill fear and threaten the safety of our citizens in the border regions of the United States."

Long-reputed to be one of the most notorious multi-national drug trafficking organizations, the AFO controlled the flow of cocaine, marijuana and other drugs through the Mexican border cities of Tijuana and Mexicali into the United States. Its operations also extended into southern Mexico as well as Colombia.

The seventh superseding indictment charges Arellano-Felix with conducting the affairs of an illegal enterprise through a pattern of racketeering activity (RICO), conspiracy to import and distribute cocaine and marijuana, as well as money laundering. The indictment alleges that the leadership of the AFO negotiated directly with Colombian cocaine-trafficking organizations for the purchase of multi-ton shipments of cocaine, received those shipments by sea and by air, in Mexico, and then arranged for the smuggling of the cocaine into the United States and its further distribution throughout the U.S. The indictment also alleges that the proceeds of the AFO's drug trafficking, estimated by law enforcement to be in the hundreds of millions of dollars, were then smuggled back into Mexico.

Brothers and former leaders of the AFO, Benjamin Arellano-Felix and Francisco Javier Arellano Felix, are currently serving sentences in the United States following their convictions for racketeering, drug trafficking and money laundering charges.

This case is being investigated by agents from the DEA, the FBI, and the Internal Revenue Service-Criminal Investigation and prosecuted in the Southern District of California by Assistant U.S. Attorneys Joseph Green, James Melendres and Dan Zipp. The Criminal Division=s Office of International Affairs provided significant assistance in the extradition. The investigation of Arellano-Felix was coordinated by an Organized Crime Drug Enforcement Task Force (OCDETF). The OCDETF program was created to consolidate and coordinate all law enforcement resources in this country's battle against major drug trafficking rings, drug kingpins, and money launderers.

The public is reminded that an indictment is not evidence that the defendant committed the crimes charged. The defendant is presumed innocent until the government meets its burden in court of proving guilt beyond a reasonable doubt.

KAZAKHSTANI NATIONAL PLEADS GUILTY TO MONEY LAUNDERING

FROM:  U.S. DEPARTMENT OF JUSTICE
Friday, April 20, 2012
Kazakhstani National Pleads Guilty to Money Laundering for “Hack and Dump” Scheme
WASHINGTON – Daniyar Zhaxalyk, 25, a citizen of Kazakhstan who entered the United States on a student visa, pleaded guilty today in Houston to one count of money laundering, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Kenneth Magidson for the Southern District of Texas.
Zhaxalyk pleaded guilty before U.S. District Judge Ewing Werlein Jr. in the Southern District of Texas.  Zhaxalyk and three co-conspirators were charged in an indictment filed in the Southern District of Texas and unsealed in December 2011.

Zhaxalyk admitted to laundering funds generated in a sophisticated “hack and dump” stock scheme that caused more than $400,000 in losses.  The indictment charged that Zhaxalyk’s co-conspirators illegally accessed brokerage accounts to engage in a stock fraud scheme in which the compromised accounts were used to purchase borrowed shares of stock at above-market prices from the defendants’ personal brokerage accounts.  Zhaxalyk’s co-conspirators then allegedly repurchased the borrowed shares at the considerably lower market price, returned the borrowed shares to the stock lender and claimed as profit the difference between the market price and the inflated price paid by the compromised victim accounts.  Zhaxalyk admitted that he received and made wire transfers and withdrawals of the funds generated from the fraudulent stock sales and supervised other Houston-based students recruited into the scheme to launder funds.
A co-defendant, Alexey Li, also a citizen of Kazakhstan who entered the United States on a student visa, previously pleaded guilty in Houston on March 2, 2012, and is awaiting sentencing.  Two other defendants remain at large.
At sentencing, Zhaxalyk will face a maximum penalty of 10 years in prison and a $250,000 fine.

This case was investigated by the St. Louis, San Francisco and Houston offices of the FBI.  The case is being prosecuted by Trial Attorney Ethan Arenson of the Computer Crime and Intellectual Property Section in the Justice Department’s Criminal Division and Assistant U.S. Attorney Mark McIntyre of the Southern District of Texas.

KAZAKHISTANI PLEADS GUILTY IN HOUSTON TX TO MONEY LAUNDERING FOR HACK AND DUMP SCHEME

FROM:  U.S. DEPARTMENT OF JUSTICE
Friday, April 20, 2012
Kazakhstani National Pleads Guilty to Money Laundering for “Hack and Dump” Scheme
WASHINGTON – Daniyar Zhaxalyk, 25, a citizen of Kazakhstan who entered the United States on a student visa, pleaded guilty today in Houston to one count of money laundering, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Kenneth Magidson for the Southern District of Texas.

Zhaxalyk pleaded guilty before U.S. District Judge Ewing Werlein Jr. in the Southern District of Texas.  Zhaxalyk and three co-conspirators were charged in an indictment filed in the Southern District of Texas and unsealed in December 2011.

Zhaxalyk admitted to laundering funds generated in a sophisticated “hack and dump” stock scheme that caused more than $400,000 in losses.  The indictment charged that Zhaxalyk’s co-conspirators illegally accessed brokerage accounts to engage in a stock fraud scheme in which the compromised accounts were used to purchase borrowed shares of stock at above-market prices from the defendants’ personal brokerage accounts.  Zhaxalyk’s co-conspirators then allegedly repurchased the borrowed shares at the considerably lower market price, returned the borrowed shares to the stock lender and claimed as profit the difference between the market price and the inflated price paid by the compromised victim accounts.  Zhaxalyk admitted that he received and made wire transfers and withdrawals of the funds generated from the fraudulent stock sales and supervised other Houston-based students recruited into the scheme to launder funds.

A co-defendant, Alexey Li, also a citizen of Kazakhstan who entered the United States on a student visa, previously pleaded guilty in Houston on March 2, 2012, and is awaiting sentencing.  Two other defendants remain at large.
At sentencing, Zhaxalyk will face a maximum penalty of 10 years in prison and a $250,000 fine.

This case was investigated by the St. Louis, San Francisco and Houston offices of the FBI.  The case is being prosecuted by Trial Attorney Ethan Arenson of the Computer Crime and Intellectual Property Section in the Justice Department’s Criminal Division and Assistant U.S. Attorney Mark McIntyre of the Southern District of Texas.

FORMER HAITIAN OFFICIAL CONVICTED IN BRIBE LAUNDERING SCHEME

The following excerpt is from a Department of Justice website:
Tuesday, March 13, 2012
Former Haitian Government Official Convicted in Miami for Role in Scheme to Launder Bribes Paid by Telecommunications Companies Laundered Funds Were Proceeds of Violations of the Foreign Corrupt Practices Act
WASHINGTON – Jean Rene Duperval, a former director of international relations for Telecommunications D’Haiti S.A.M. (Haiti Teleco), a Haitian state-owned telecommunications company, has been convicted by a federal jury on all counts for his role in a scheme to launder bribes paid to him by two Miami-based telecommunications companies.  The jury reached its verdict late yesterday after less than three hours of deliberations, following a week-long trial.

The conviction was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer for the Southern District of Florida; and Special Agent in Charge Jose A. Gonzalez of Internal Revenue Service, Criminal Investigation (IRS-CI), Miami Field Office.

“Mr. Duperval was convicted by a Miami jury of laundering $500,000 paid to him as part of an elaborate bribery scheme,” said Assistant Attorney General Breuer.  “As the director of international relations for Haiti’s state-owned telecommunications company, Duperval doled out business in exchange for bribes and then used South Florida shell companies to conceal his crimes.  This Justice Department is committed to stamping out corruption wherever we find it.”

“To conceal the payment and receipt of bribes, Duperval participated in a money laundering scheme to funnel about half a million dollars to two shell companies under his control,” said U.S. Attorney Ferrer.  “This verdict confirms that American taxpayers will not tolerate bribery, either at home or abroad,  to obtain unfair business advantages.”
“Today’s announcement sends a strong message to those hiding monies in bogus business entities: no matter how elaborate or complex the scheme, you will get caught,” said IRS Special Agent in Charge Gonzalez.  “IRS criminal investigators will continue to aggressively investigate bribery schemes to ensure that honest businesses have the benefit of a competitive market.”

Duperval, 45, of Miramar, Fla., was convicted of two counts of conspiracy to commit money laundering and 19 counts of money laundering.  According to the charges, the funds that were laundered were the proceeds of violations of the Foreign Corrupt Practices Act (FCPA), Haitian bribery law and the wire fraud statute.

Duperval was the director of international relations for Haiti Teleco, the sole provider of land line telephone service in Haiti.  According to the evidence presented at trial, two Miami-based telecommunications companies had a series of contracts with Haiti Teleco that allowed the companies’ customers to place telephone calls to Haiti.

Duperval was convicted for participating in a scheme to commit money laundering from 2003 to 2006, during which time the telecommunications companies collectively paid $500,000 to two shell companies to funnel the bribes to Duperval.  
 
The purpose of these bribes, according to the evidence presented at trial, was to obtain various business advantages from Duperval, including the issuance of preferred telecommunications rates, a continued telecommunications connection with Haiti and the continuation of a particularly favorable contract with Haiti Teleco.  To conceal the bribe payments, Duperval instructed the companies to forward the payments to the shell companies.  To support these payments, the companies and their executives created false documents claiming that the payments were for “consulting services” or for “international minutes from USA to Haiti.”  No actual services were performed.  The funds were then disbursed from the shell companies for the benefit of Duperval and his family.  To conceal the nature of these funds, Duperval falsely characterized these payments as “commissions” and “payroll.”

Duperval was remanded to the custody of the U.S. Marshals.  Sentencing is scheduled for May 21, 2012.  The conspiracy to commit money laundering count carries a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction.  The money laundering counts each carry a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction.  The indictment also seeks forfeiture, which will be determined by the court at a later date.

Duperval was the eighth defendant involved in the corruption scheme to be convicted, which includes the following individuals:
On April 27, 2009, Antonio Perez, a former controller at one of the Miami-based telecommunications companies, pleaded guilty to one count of conspiracy to violate the FCPA and money laundering.  On Jan. 12, 2010, he was sentenced to 24 months in prison, which he is currently serving.
On May 15, 2009, Juan Diaz, the president of J.D. Locator Services, pleaded guilty to one count of conspiracy to violate the FCPA and money laundering.   He admitted to receiving more than $1 million in bribe money from telecommunications companies.  On July 30, 2010, he was sentenced to 57 months in prison, which he is currently serving.
On Feb. 19, 2010, Jean Fourcand, the president and director of Fourcand Enterprises Inc., pleaded guilty to one count of money laundering for receiving and transmitting bribe monies in the scheme.  On May 5, 2010, he was sentenced to six months in prison.
On March 12, 2010, Robert Antoine, a former director of international affairs for Haiti Teleco, pleaded guilty to one count of conspiracy to commit money laundering.  He admitted to receiving more than $1 million in bribes from Miami-based telecommunications companies.  On June 2, 2010, he was sentenced to 48 months in prison, which he is currently serving.
On Aug. 4, 2011, Joel Esquenazi and Carlos Rodriguez, who were the former president and vice-president, respectively, of one of the telecommunications companies, were convicted by a federal jury of one count of conspiracy to violate the FCPA and wire fraud, seven counts of FCPA violations, one count of money laundering conspiracy and 12 counts of money laundering.  On Oct. 25, 2011, Esquenazi was sentenced to 15 years in prison, the longest sentence ever imposed in a case involving the FCPA.  On the same day, Rodriguez was sentenced to 84 months in prison for his role in the bribery scheme.  Both are currently serving their sentences.
In a second superseding indictment, Washington Vasconez Cruz, Amadeus Richers and Cecilia Zurita were charged in a related scheme to commit foreign bribery and money laundering from December 2001 through January 2006.  The defendants are fugitives.  An indictment is merely an accusation, and defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

The Department of Justice is grateful to the government of Haiti for continuing to provide substantial assistance in gathering evidence during this investigation.   In particular, Haiti’s financial intelligence unit, the Unité Centrale de Renseignements Financiers (UCREF), the Bureau des Affaires Financières et Economiques (BAFE), which is a specialized component of the Haitian National Police, and the Ministry of Justice and Public Security provided significant cooperation and coordination in this ongoing investigation.

RETIRED ARMY MAJOR SENTENCED FOR MONEY LAUNDERING

The following excerpt is from the Department of Justice website:

Tuesday, December 13, 2011

"WASHINGTON - A retired major in the U.S. Army was sentenced today to 24 months in prison for engaging in money laundering of criminally derived property totaling $400,000, which he received from a contractor following his deployment to Kuwait, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division.

Charles Joseph Bowie Jr., 45, of Georgetown, Texas, was sentenced by U.S. District Judge Xavier Rodriguez in the Western District of Texas, San Antonio Division.  In addition to his prison term, Bowie was sentenced to three years of supervised release and was ordered to pay $400,000 in restitution. 

Bowie pleaded guilty in May 2011 to a criminal information charging him with one count of engaging in monetary transactions in property derived from specified unlawful activity.  According to court documents, Bowie, a major in the U.S. Army at the time, served in Kuwait from April 2004 to April 2005, in support of Operation Iraqi Freedom.  While in Kuwait, Bowie conspired with John Cockerham, also a U.S. Army major at the time, who directed a government contractor to pay Bowie money in exchange for the award of a bottled water contract.  As part of his guilty plea, Bowie admitted that he entered into a sham consulting agreement with the contractor in an effort to conceal the four $100,000 payments he received from the contractor between July 2005 and February 2006.

On Jan. 31, 2008, Cockerham pleaded guilty to participating in a bribery and money laundering scheme.  He was sentenced on Dec. 2, 2009, to 210 months in prison and ordered to pay $9.6 million in restitution.

This case is being prosecuted by Criminal Division Trial Attorneys Richard B. Evans of the Public Integrity Section and  Mark W. Pletcher of the Fraud Section.  Assistant U.S. Attorney Susan Biggs for the Western District of Texas, San Antonio Division, is providing assistance in the case.

The case is being investigated by the Army Criminal Investigation Command, the Defense Criminal Investigative Service, the FBI, the Internal Revenue Service, the Special Inspector General for Iraq Reconstruction, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and the International Contract Corruption Task Force. "