PLASTIC SURGEON SENTENCED TO PRISON FOR TAX EVASION CRIMES

FROM:  U.S.  JUSTICE DEPARTMENT 

Monday, April 4, 2016

Alaska Plastic Surgeon Sentenced to Prison for Wire Fraud and Tax Evasion

Defendant Concealed Bank Accounts in Panama and Costa Rica from the IRS

An Anchorage, Alaska, plastic surgeon was sentenced to 48 months in prison on Friday for wire fraud and tax evasion, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Karen L. Loeffler of the District of Alaska.

“Tax evasion knows no geographic bounds,” said Acting Assistant Attorney General Ciraolo.  “This case demonstrates that there is no longer any country where it is safe for a defendant like Dr. Brandner to hide money from the government.  The Department of Justice, along with its law enforcement partners, will continue to aggressively pursue individuals who conceal assets and income abroad in an effort to evade their responsibilities under our nation’s tax laws.”

Dr. Michael D. Brandner, 67, was convicted by a federal jury in November 2015 of four counts of wire fraud and three counts of tax evasion.  The charges arose from a scheme to conceal over $5 million of assets in secret bank accounts in Panama and Costa Rica from the Internal Revenue Service (IRS) and Dr. Brandner’s wife.  According to the indictment and evidence introduced at trial, shortly after his wife filed for divorce in late 2007, Dr. Brandner collected millions of dollars in marital assets and secretly drove from Tacoma, Washington, to Costa Rica in Central America.  In Costa Rica, he opened two bank accounts into which he deposited over $350,000 in cash and hid a thousand ounces of gold in a safe deposit box.  He then traveled to Panama where he opened an account under the name of a sham corporation and deposited $4.6 million into the account in 2008.

Dr. Brandner concealed both the existence of the bank accounts and the interest income he earned on those accounts from the court in the divorce proceedings and from the IRS.  Dr. Brandner owed the IRS $500,000 in additional taxes for the 2008 through the 2010 tax years.  In 2011, Dr. Brandner repatriated over $4.6 million once the divorce was final only to have the funds seized by U.S. Immigration and Customs Enforcement Homeland Security Investigations (ICE HSI) special agents.  He then lied to federal agents about his control of the funds.

In addition to the prison term, U.S. District Judge Sharon Gleason in Anchorage ordered Dr. Brandner to serve two years of supervised release, and pay $25,922.95 toward the costs of prosecution.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Loeffler thanked special agents of IRS-Criminal Investigation and HSI, who investigated the case and Trial Attorney Ignacio Perez de la Cruz of the Tax Division and Assistant U.S. Attorney Bryan Schroder of the District of Alaska, who jointly prosecuted the case.

FORMER HONDURAN SOCCER FEDERATION PRESIDENT PLEADS GUILTY TO RACKETEERING, CORRUPTION AND WIRE FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, March 28, 2016

Former President of Honduran Soccer Federation Pleads Guilty to Racketeering and Corruption Charges

Earlier today in federal court in Brooklyn, New York, Rafael Callejas, the president of the Honduran soccer federation (FENAFUTH) from 2002 to 2015, pleaded guilty to racketeering conspiracy and wire fraud conspiracy in connection with his receipt of bribes in exchange for the awarding of contracts for the media and marketing rights to FIFA World Cup qualifier matches.  Callejas, who served as the President of the Republic of Honduras from 1990 to 1994, also agreed to forfeit $650,000.  At sentencing, Callejas faces a maximum sentence of 20 years for each count.  Today’s plea proceeding took place before U.S. Magistrate Judge Robert M. Levy.

The guilty plea was announced by U.S. Attorney Robert L. Capers for the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez for FBI’s New York Field Office and Acting Special Agent in Charge Anthony J. Orlando for the Internal Revenue Service-Criminal Investigation’s (IRS-CI) Los Angeles Field Office.

According to court filings and facts presented during the plea proceeding, Callejas negotiated and accepted bribes totaling hundreds of thousands of dollars in exchange for his agreement to exercise his influence as the president of FENAFUTH to award contracts to Media World, a Florida sports marketing company, for the media and marketing rights to the Honduran national soccer team’s home World Cup qualifier matches for the 2014, 2018 and 2022 editions of the World Cup.  Over a period of years, Media World transmitted these bribes from its U.S. bank accounts, through an intermediary, to the foreign bank accounts of the defendant and a co-conspirator.

The guilty plea announced today is part of an investigation into corruption in international soccer being led by the U.S. Attorney’s Office for the Eastern District of New York, the FBI’s New York Field Office, and the IRS-CI Los Angeles Field Office.  The prosecutors in Brooklyn are receiving considerable assistance from attorneys in various parts of the Justice Department’s Criminal Division in Washington, D.C., including the Office of International Affairs, the Organized Crime and Gang Section, the Asset Forfeiture and Money Laundering Section and the Fraud Section, as well as from INTERPOL Washington.

Assistant U.S. Attorneys Evan M. Norris, Amanda Hector, Paul Tuchmann, Nadia Shihata, Keith D. Edelman and Brian D. Morris of the Eastern District of New York are in charge of today’s prosecution.

The government’s investigation is ongoing.

OPERATORS OF ONLINE BUSINESS INDICTED IN TAX AND BANK FRAUD CASE

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, March 4, 2016

North Carolina Couple Indicted for Tax Fraud and Bank Fraud Related to Their Online Business

A federal grand jury in the Middle District of North Carolina returned an indictment March 1 charging a Greensboro, North Carolina couple, who operated an online sales business with tax fraud as well as bank and wire fraud, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Ripley Rand of the Middle District of North Carolina. The defendants were arrested earlier today and had their initial court appearances this afternoon.

Daniel Balson and Renee Balson were charged with one count of conspiracy to defraud the United States and to commit bank fraud, one count of bank fraud and five counts of wire fraud.  Daniel Balson was additionally charged with three counts of filing false tax returns for 2009 through 2011 and Renee Balson was charged with one count of filing a false tax return for 2009.  

According to the indictment, Daniel Balson owned and operated Southern Sales Online (SSO), an online retail business that sold a variety of merchandise through eBay and Amazon, including scrapbooking and art materials, books, inspirational DVDs, pet supplies and tools.  It is alleged that although SSO earned more than $1 million in gross receipts during 2005 through 2011, the Balsons failed to report gross receipts for SSO on their tax returns filed with the Internal Revenue Service (IRS).  The Balsons also failed to report income from SSO on a bank application for a mortgage loan modification in 2011.  The indictment also alleges that the Balsons stole merchandise from LifeWay Christian Stores and Hobby Lobby and then knowingly sold the stolen merchandise through SSO at prices less than retail value.

If convicted, Daniel Balson and Renee Balson each face a statutory maximum sentence of five years in prison for the conspiracy count, 30 years in prison for the bank fraud count, 20 years in prison for each wire fraud count and three years in prison for each false tax return count.  The Balsons also face substantial monetary penalties and restitution.

An indictment is not a finding of guilt.  An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceeding.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Rand commended special agents of IRS-Criminal Investigation, who investigated the case, and Assistant Chief Todd A. Ellinwood and Trial Attorney Mara Strier of the Tax Division, who are prosecuting the case.  Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office of the Middle District of North Carolina for their assistance.

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

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, September 24, 2015

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

Two Associates Also Sentenced for their Roles in the Conspiracy

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

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

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

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

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

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

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

DOJ ANNOUNCES CONVICTION FOR EMBEZZLEMENT AND FRAUD OF FORMER LAPORTE COUNTY, INDIANA CHIEF DEPUTY AUDITOR

FROM:  U.S. JUSTICE DEPARTMENT  

Thursday, September 17, 2015

Former County Chief Deputy Auditor Convicted of Embezzling Government Funds, Tax Fraud and Wire Fraud

A former chief deputy auditor for LaPorte County, Indiana, was convicted today by a federal jury in the Northern District of Indiana of embezzling over $150,000 from the LaPorte County government, tax fraud and defrauding her elderly father-in-law out of at least $400,000.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney David A. Capp of the Northern District of Indiana made the announcement.

Mary Ray, 67, of La Porte, Indiana, was convicted of two counts each of theft of government monies and making false statements on a tax return, and with seven counts of wire fraud.  Ray will be sentenced by Judge Jon E. Deguilio of the Northern District of Indiana on Dec. 22, 2015.

According to evidence presented at trial, from September 2011 through December 2012, while she served as deputy chief auditor for LaPorte County, Ray embezzled over $150,000 from county coffers, and underreported her income on her U.S. Individual Tax Returns for those years by failing to report the embezzled funds.  Evidence at trial also showed that Ray defrauded her 86-year-old father-in-law, a disabled veteran, out of at least $400,000 that he entrusted her to oversee.  The trial evidence also demonstrated that Ray used the funds that she embezzled from LaPorte County and stole from her father-in-law to gamble at casinos.

This case was investigated by the FBI and IRS-Criminal Investigation, with assistance from the Indiana State Police, the LaPorte County Sheriff’s Department and the Indiana State Board of Accounts.  The case is being prosecuted by Trial Attorney Peter Halpern of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Donald J. Schmid of the Northern District of Indiana.

HACKER ADMITS TO ROLE IN $300 MILLION+ ATTACKS ON CORPORATE NETWORKS

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, September 15, 2015

Russian National Admits Role in Largest Known Data Breach Conspiracy Ever Prosecuted

Hackers Targeted Major Payment Processors, Retailers and Financial Institutions Around the World

A Russian national today admitted his role in a worldwide hacking and data breach scheme that targeted major corporate networks, compromised more than 160 million credit card numbers and resulted in hundreds of millions of dollars in losses –  the largest such scheme ever prosecuted in the United States.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Paul J. Fishman of the District of New Jersey and Director Joseph P. Clancy of the U.S. Secret Service made the announcement.

Vladimir Drinkman, 34, of Syktyvkar, Russia, and Moscow, pleaded guilty before Chief U.S. District Judge Jerome B. Simandle of the District of New Jersey to one count of conspiracy to commit unauthorized access of protected computers and one count of conspiracy to commit wire fraud.  Drinkman was arrested in the Netherlands on June 28, 2012, and was extradited to the District of New Jersey on Feb. 17, 2015.  Sentencing is scheduled for Jan. 15, 2016.

“This hacking ring’s widespread attacks on American companies caused serious harm and more than $300 million in losses to people and businesses in the United States,” said Assistant Attorney General Caldwell.  “As demonstrated by today’s conviction, our close cooperation with our international partners makes it more likely every day that we will find and bring to justice cyber criminals who attack America – wherever in the world they may be.  As law enforcement around the world responds to the cyber threat that affects us all, I am confident that this type of international cooperation that led to this result will be the new normal.”

“Defendants like Vladimir Drinkman, who have the skills to break into our computer networks and the inclination to do so, pose a cutting edge threat to our economic well-being, our privacy and our national security,” said U.S. Attorney Fishman.  “The crimes to which he admitted his guilt have a real, practical cost to our privacy and our pocketbooks.  Today’s guilty plea is a tribute to the skill and perseverance of the agents and prosecutors who brought him to justice.”

“This cyber case highlights the effectiveness of global law enforcement partnerships in the detection and dismantling of criminal enterprises targeting U.S. citizens,” said Director Clancy.  “The support of U.S. Attorney’s offices and the resulting plea enhances the Secret Service’s commitment to vigorously pursue transnational threats to the U.S. financial infrastructure.”

According to documents filed in this case and statements made in court, Drinkman and four co-defendants allegedly hacked into the networks of corporate victims engaged in financial transactions, retailers that received and transmitted financial data and other institutions with information that the conspirators could exploit for profit, including the computer networks of NASDAQ, 7-Eleven, Carrefour, JCP, Hannaford, Heartland, Wet Seal, Commidea, Dexia, JetBlue, Dow Jones, Euronet, Visa Jordan, Global Payment, Diners Singapore and Ingenicard.

According to the indictment in this case and statements made in court, the five defendants each played specific roles in the scheme.  Drinkman and Alexandr Kalinin, 28, of St. Petersburg, Russia, allegedly specialized in penetrating network security and gaining access to the corporate victims’ systems.  Drinkman and Roman Kotov, 34, of Moscow, allegedly specialized in mining the networks to steal valuable data.  The hackers hid their activities using anonymous web-hosting services allegedly provided by Mikhail Rytikov, 28, of Odessa, Ukraine.  Dmitriy Smilianets, 32, of Moscow, allegedly sold the information stolen by the other conspirators and distributed the proceeds of the scheme to the participants.

Drinkman and Kalinin were previously charged in New Jersey as “Hacker 1” and “Hacker 2” in a 2009 indictment charging Albert Gonzalez, 34, of Miami, in connection with five corporate data breaches, including the breach of Heartland Payment Systems Inc., which at the time was the largest ever reported.  Gonzalez is currently serving 20 years in federal prison for those offenses.  Kalinin is also charged in two federal indictments in the Southern District of New York: the first charges Kalinin in connection with hacking certain computer servers used by NASDAQ and the second charges him and another Russian hacker, Nikolay Nasenkov, with an international scheme to steal bank account information from U.S.-based financial institutions.  Rytikov was previously charged in the Eastern District of Virginia in an unrelated scheme.

Drinkman and Smilianets were arrested at the request of the United States while traveling in the Netherlands on June 28, 2012.  Smilianets was extradited on Sept. 7, 2012, and remains in federal custody.  Kalinin, Kotov and Rytikov remain at large.

The Attacks

According to documents filed in this case and statements made in court, the five defendants penetrated the computer networks of several of the corporate victims and stole user names and passwords, means of identification, credit and debit card numbers and other corresponding personal identification information of cardholders.  The conspirators allegedly acquired more than 160 million card numbers through hacking.

The initial entry was often gained using a “SQL injection attack.”  SQL, or Structured Query Language, is a type of programming language designed to manage data held in particular types of databases; the hackers allegedly identified vulnerabilities in SQL databases and used those vulnerabilities to infiltrate a computer network.  Once the network was infiltrated, the defendants allegedly placed malicious code (malware) in the system.  This malware created a “back door,” leaving the system vulnerable and helping the defendants maintain access to the network.  In some cases, the defendants lost access to the system due to companies’ security efforts, but were allegedly able to regain access through persistent attacks.

Instant message chats obtained by law enforcement revealed that the defendants allegedly targeted the victim companies for many months, waiting patiently as their efforts to bypass security were underway, sometimes leaving malware implanted in multiple companies’ servers for more than a year.

The defendants allegedly used their access to the networks to install “sniffers,” which were programs designed to identify, collect and steal data from the victims’ computer networks.  The defendants then allegedly used an array of computers located around the world to store the stolen data and ultimately sell it to others.

Selling the Data

According to documents filed in this case and statements made in court, after acquiring the card numbers and associated data – which they referred to as “dumps” – the conspirators sold it to resellers around the world.  The buyers then sold the dumps through online forums or directly to individuals and organizations.  Smilianets was allegedly in charge of sales, selling the data only to trusted identity theft wholesalers.  He allegedly charged approximately $10 for each stolen American credit card number and associated data, approximately $50 for each European credit card number and associated data and approximately $15 for each Canadian credit card number and associated data – offering discounted pricing to bulk and repeat customers.  Ultimately, the end users encoded each dump onto the magnetic strip of a blank plastic card and cashed out the value of the dump by withdrawing money from ATMs or making purchases with the cards.

Covering Their Tracks

According to documents filed in this case and statements made in court, the defendants allegedly used a number of methods to conceal the scheme.  Unlike traditional Internet service providers, Rytikov allegedly allowed his clients to hack with the knowledge he would never keep records of their online activities or share information with law enforcement.

Over the course of the conspiracy, the defendants allegedly communicated through private and encrypted communications channels to avoid detection.  Fearing law enforcement would intercept even those communications, some of the conspirators allegedly attempted to meet in person.

To protect against detection by the victim companies, the defendants allegedly altered the settings on victim company networks to disable security mechanisms from logging their actions.  The defendants also allegedly worked to evade existing protections by security software.

As a result of the scheme, financial institutions, credit card companies and consumers suffered hundreds of millions of dollars in losses – including more than $300 million in losses reported by just three of the corporate victims – and immeasurable losses to the identity theft victims in costs associated with stolen identities and false charges.

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

The case is being investigated by the U.S. Secret Service’s Criminal Investigations Division and Newark, New Jersey, Division.  The case is being prosecuted by Trial Attorney Richard Green of the Criminal Division’s Computer Crime and Intellectual Property Section, Chief Gurbir S. Grewal of the District of New Jersey’s Economic Crimes Unit and Assistant U.S. Attorney Andrew S. Pak of the District of New Jersey.  The Criminal Division’s Office of International Affairs, public prosecutors with the Dutch Ministry of Security and Justice and the National High Tech Crime Unit of the Dutch National Police also provided valuable assistance.

WOMAN PLEADS GUILTY IN CASE INVOLVING DISABLED PEOPLE HELD CAPTIVE IN PHILADELPHIA, PENNSYLVANIA

FROM:  U.S. JUSTICE DEPARTMENT  

Wednesday, September 9, 2015

Guilty Plea in Case of Disabled Adults Held in Subhuman Conditions

Linda Weston, 55, of Philadelphia, Pennsylvania, pleaded guilty today to all charges in a racketeering and hate crimes case that involved holding disabled adults captive in locked closets, basements and attics in Philadelphia’s Tacony section and in other states.  Weston pleaded guilty to racketeering conspiracy, kidnapping resulting in the death of the victim, forced human labor, involuntary servitude, multiple counts of murder in aid of racketeering, hate crime, violent crime in aid of racketeering, sex trafficking, kidnapping, theft of government funds, wire fraud, mail fraud, use of a firearm in furtherance of a violent crime and false statements.  U.S. District Court Judge Cynthia M. Rufe scheduled a sentencing hearing for Nov. 5, 2015.  Weston has agreed to receive a sentence of life plus 80 years in prison, restitution, fines, supervised release and special assessments.

From approximately 2001 through October 2011, Weston and her co-conspirators lured mentally handicapped individuals into locations rented by Weston, Jean McIntosh, Eddie Wright and others in Philadelphia; Killeen, Texas; Norfolk, Virginia; and West Palm Beach, Florida.  The group targeted mentally challenged individuals who were estranged from their families.  Once Weston convinced them to move in, she became their representative payee with Social Security and began to receive their disability benefits and in some instances, their state benefits.   On one occasion, Weston and one of her co-defendants took the social security and identification documents from a victim by force and then used the funds for her own and Weston Family purposes.

Weston, McIntosh, Wright and others confined their victims to locked rooms, basements, closets, attics and apartments.  While confined, the captives were often isolated, in the dark and sedated with drugs placed in their food and drink by Weston and other defendants.  When the individuals tried to escape, stole food, or otherwise protested their treatment, Weston and others punished them by slapping, punching, kicking, stabbing, burning and hitting them with closed hands, belts, sticks, bats and hammers or other objects, including the butt of a pistol.  Some victims endured the abuse for years, until Oct. 15, 2011, when Philadelphia Police officers rescued them from the sub-basement of an apartment building in the city’s Tacony section.  The enterprise victimized six disabled adults and four children.

In April 2005, Weston and a co-defendant targeted victim Donna Spadea.  They brought Spadea to a home at 2211 Glenview Ave., in Philadelphia.  Spadea was kept in the basement with the other victims, fed a substandard diet and not allowed to use the bathroom.  On June 26, 2005, Spadea was found dead in the basement.  Weston ordered other members of the household to move Spadea’s body to a different location before calling law enforcement.

In 2008, victim Maxine Lee was living with the family.  Lee was beaten when she tried to escape or when she begged for food and never received medical attention for any of her injuries.  After Weston moved the enterprise to Virginia in 2008, Weston confined Lee inside a kitchen cabinet and an attic for several months.  Lee subsequently died of bacterial meningitis and starvation in November of 2008.  Weston ordered other members of the household to move Lee’s body to a bedroom and stage the scene before calling law enforcement.  The next day the family left for Philadelphia.

Weston’s daughter, McIntosh, and co-defendant Wright have already pleaded guilty.  Co-defendants Gregory Thomas, Sr., and Nicklaus Woodard are awaiting trial.

The case was investigated by the FBI, the Social Security Administration Office of Inspector General, IRS Criminal Investigations, the Philadelphia Police Department and the Philadelphia District Attorney’s Office with assistance from the Bureau of Alcohol, Tobacco, Firearms and Explosives’ West Palm Beach Field Office.  It is being prosecuted by Assistant U.S. Attorneys Richard P. Barrett and Faith Moore Taylor.

SILK ROAD COUPON COUNTERFEITER PLEADS GUILTY

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, July 22, 2015

Leader of Coupon Counterfeiting Ring on Silk Road Websites Pleads Guilty

A leader of a coupon counterfeiting ring pleaded guilty today to participating in a conspiracy to sell counterfeit coupons using the “Silk Road” online marketplace, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kenneth A. Polite of the Eastern District of Louisiana.

Beau Wattigney, 30, New Orleans, pleaded guilty before U.S. District Judge Ivan L.R. Lemelle of the Eastern District of Louisiana to conspiracy to commit wire fraud and conspiracy to commit trademark counterfeiting.  Sentencing has been scheduled for Oct. 28, 2015.

In connection with his plea, Wattigney admitted that, between May 2012 and November 2014, he used the online monikers “PurpleLotus” and “GoldenLotus” to sell counterfeit coupons for various goods and services on Silk Road 1.0, which was a hidden website through which users around the world bought and sold illegal drugs, goods and services.  Wattigney further admitted that he engaged in the same conduct on Silk Road 2.0, a successor to Silk Road 1.0, using the monikers “PurpleLotus” and “CouponKing.”

The coupons allowed purchasers to obtain significant discounts on a variety of goods and services offered by the victim companies, including Hopster, Veri-fi, SmartSource, RedPlum and Visa.  For example, Wattigney sold a counterfeit coupon that allowed users to purchase $50.00 Visa Gift Cards for $0.01 each.

Wattigney admitted that he created and manufactured the fraudulent coupons with the assistance of several co-conspirators, and that they designed the coupons to look like original print-at-home manufacturers’ coupons by using the companies’ trademarks.  He also admitted that the scheme affected more than 50 U.S.-based businesses, and caused or attempted to cause more than one million dollars in intended losses.

The investigation is being conducted by the FBI Philadelphia Division, with assistance from the FBI New Orleans Field Office.  The case is being prosecuted by Senior Counsel Marie-Flore Johnson, Gavin Corn and Robert Wallace of the Criminal Division’s Computer Crime and Intellectual Property Section, and Assistant U.S. Attorney Jordan Ginsberg of the Eastern District of Louisiana.

TWO CONVICTED FOR ROLES IN SCHEME TO BRIBE FBI AGENT

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, March 4, 2015

Two Connecticut Men Sentenced to Federal Prison for Scheme to Bribe FBI Agent in New York

Two Connecticut-area men were sentenced to federal prison today for their roles in a bribery scheme to obtain confidential, internal law enforcement documents and information from a former FBI Special Agent in White Plains, New York.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Justice Department Inspector General Michael E. Horowitz made the announcement.  The sentences were imposed by U.S. District Judge Vincent L. Briccetti of the Southern District of New York.

Rizve Ahmed, aka “Caesar,” 36, of Danbury, Connecticut, and Johannes Thaler, 51, of New Fairfield, Connecticut, were sentenced to 42 months in prison and 30 months in prison, respectively.  In October 2014, both defendants pleaded guilty to bribery and conspiracy to commit wire fraud and honest services fraud.

In pleading guilty, Thaler and Ahmed admitted that, from September 2011 through March 2012, Thaler and FBI Special Agent Robert Lustyik solicited payments from Ahmed, in exchange for Lustyik’s agreement to provide internal, confidential documents and other confidential information to which Lustyik had access by virtue of his position as an FBI Special Agent.  Thaler was Lustyik’s friend, and Ahmed, a native of Bangladesh, was an acquaintance of Thaler.  The confidential documents and information pertained to a prominent citizen of Bangladesh who was affiliated with a political party opposing Ahmed’s views.  Ahmed requested the confidential information to help him locate and harm his political rival and others associated with the intended victim.

As part of the scheme, Lustyik and Thaler exchanged text messages about how to pressure Ahmed to pay them additional money in exchange for confidential information.  For example, in text messages, Lustyik told Thaler, “we need to push [Ahmed] for this meeting and get that 40 gs quick . . . .  I will talk us into getting the cash . . . .  I will work my magic . . . .  We r sooooooo close.”  Thaler responded, “I know.  It’s all right there in front of us.  Pretty soon we’ll be having lunch in our oceanfront restaurant . . . .”

Additionally, in late January 2012, Lustyik learned that Ahmed was considering using a different source to obtain confidential information.  In response, Lustyik sent a text message to Thaler stating, “I want to kill C [Ahmed] . . . .  I hung my ass out the window n we got nothing? . . . .  Tell [Ahmed], I’ve got [the victim’s] number and I’m pissed. . . .  I will put a wire on n get [Ahmed and his associates] to admit they want [a Bangladeshi political figure] offed n we sell it to [the victim].”  Lustyik further stated, “So bottom line.  I need ten gs asap.  We gotta squeeze C.”

Lustyik pleaded guilty on Dec. 23, 2014, to all five counts against him in the indictment: conspiracy to engage in a bribery scheme; soliciting bribes by a public official; conspiracy to defraud the citizens of the U.S. and the FBI; theft of government property; and unauthorized disclosure of a Suspicious Activity Report.  He is scheduled to be sentenced by Judge Briccetti on April 30, 2015, at 9:30 a.m.

The case was investigated by the Department of Justice Office of the Inspector General, and prosecuted by Trial Attorney Emily Rae Woods of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Benjamin Allee of the Southern District of New York.

ROMANIAN MAN RECEIVES 63 MONTH PRISON TERM RELATED TO INTERNATIONAL FRAUD SCHEME

FROM:  U.S. JUSTICE DEPARTMENT
Thursday, December 11, 2014
Romanian Man Sentenced to Prison for Role in International Fraud Scheme Involving Online Marketplace Websites

A Romanian man was sentenced today to serve 63 months in prison for his role in receiving and sending overseas approximately $690,000 in proceeds from an international fraud scheme involving online marketplace websites, as well as for the use of a fraudulent passport.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney David Rivera of the Middle District of Tennessee and U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida made the announcement.  U.S. District Judge Darrin P. Gayles of the Southern District of Florida imposed the sentence.

Razvan Caprarescu, 39, originally of Bucharest, Romania, was indicted in the Middle District of Tennessee in March 2014 for conspiracy to commit bank and wire fraud in connection with his participation in the online marketplace scheme.  In June 2014, the case was transferred to the Southern District of Florida, where Caprarescu had already been indicted in March 2013 for use and attempted use of a false, forged, and counterfeit Belgian passport.  Caprarescu pleaded guilty to both charges in August 2014.  In addition to his prison term, Caprarescu was ordered to pay $658,441 in restitution.

In connection with his guilty plea, Caprarescu admitted that his co-conspirators fraudulently listed vehicles for sale at online marketplaces such as eBay.  When victims expressed interest in purchasing the vehicles, the co-conspirators responded with emails directing the victims to wire payments to specified bank accounts.  These bank accounts were opened by Caprarescu and another co-conspirator using false identities and fraudulent documents, including counterfeit passports.  Eighteen victims sent approximately $367,036 to accounts opened by Caprarescu between October 2011 and June 2012.  Another 17 victims sent approximately $321,389 to accounts opened by Caprarescu’s co-conspirator.  Caprarescu and his co-conspirator subsequently sent the bulk of the money to co-conspirators located overseas.  Caprarescu also admitted that he used a false Belgian passport bearing an alias to rent a mailbox at a U.S. Pak-n-Ship store located in Broward County, Florida.

The cases were investigated by Immigration and Customs Enforcement’s Homeland Security Investigations, the FBI, and the Tennessee Bureau of Investigation.  The cases were prosecuted by Senior Counsel Mysti Degani of the Criminal Division’s Computer Crime and Intellectual Property Section, Assistant U.S. Attorney Byron M. Jones of the Middle District of Tennessee and Assistant U.S. Attorney Alicia Shick of the Southern District of Florida.

FORMER MEDICAL EQUIPMENT SUPPLY COMPANY OWNER INDICTED FOR ROLE IN MEDICARE FRAUD SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 
Thursday, October 24, 2013

Former Owner of Salt Lake City Medical Equipment Supply Company Indicted and Three Company Employees Plead Guilty for Roles in Medicare Fraud Scheme
A former owner of a Salt Lake City medical equipment supply company has been indicted and three former company employees have pleaded guilty for allegedly engaging in a $20 million Medicare fraud scheme.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney David B. Barlow of the District of Utah, Special Agent in Charge Mary Rook of the FBI’s Salt Lake City Field Office, Special Agent in Charge Gerry Roy of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Kansas City Regional Office, and Special Agent in Charge Janice M. Flores of the Defense Criminal Investigative Service’s (DCIS) Southwest Field Office made the announcement.

Jacob Kilgore, 34, of Fruit Heights, Utah, was indicted in the District of Utah on three counts of health care fraud, three counts of false statements relating to health care matters, and three counts of wire fraud.

According to court documents, Kilgore was the co-owner, vice president, and regional sales manager of Orbit Medical Inc. (Orbit), a durable medical equipment supplier located in Salt Lake City specializing in power wheelchairs.  From approximately September 2008 through June 2011, Kilgore allegedly directed a scheme to defraud Medicare by submitting false and fraudulent claims to Medicare for power wheelchairs.  Court documents allege that Kilgore and others falsified medical records – including power wheelchair prescriptions and chart notes obtained from physicians – to make it appear that beneficiaries qualified to receive power wheelchairs when they did not and that the claims otherwise met all Medicare requirements.  Kilgore and others then used these falsified documents to support false and fraudulent claims from Orbit to Medicare.

Additionally, former Orbit sales representatives Morgan Workman, 35, of Farmington, Utah; David Evans, 29, of South Jordan, Utah; and Hunter Hartman, 29, of Ladera Ranch, Calif., have each pleaded guilty to conspiring to commit health care fraud, based on the same alleged scheme to defraud Medicare.  They are awaiting sentencing.

The scheme allegedly resulted in more than $20 million in claims from Orbit to Medicare for power wheelchairs, of which Medicare paid more than $15 million.

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

The case was investigated by the FBI, HHS-OIG and DCIS.  This case is being prosecuted by Trial Attorney Niall M. O’Donnell of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mark Y. Hirata of the U.S. Attorney’s Office for the District of Utah.

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.

ARMY NATIONAL GUARD CAPTAIN CHARGED IN BRIBERY SCHEME

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, May 17, 2013
Army National Guard Captain Charged for Alleged Role in Bribery and Wire Fraud Scheme and Two Former Soldiers Sentenced for Their Roles in a Related Scheme

To Date, 11 Individuals Have Been Charged in Ongoing Corruption Investigation

A Texas Army National Guard captain has been charged for his alleged role in a bribery and wire fraud scheme and two former soldiers in the Texas Army National Guard were sentenced for their roles in a separate scheme to defraud the National Guard Bureau and its contractor, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.

These cases arose from an investigation concerning allegations that former and current soldiers and military and civilian contract recruiters in the San Antonio and Houston areas engaged in a wide-ranging scheme to obtain fraudulent recruiting referral bonuses. To date, 11 people have been charged in this ongoing investigation, including yesterday’s 17-count indictment of Fabian Barrera, 46, of Schertz, Texas, a Captain in the Army National Guard accused of personally obtaining more than $185,500 in fraudulent recruiting bonuses. Barrera made his initial appearance on May 16, 2013, in the U.S. District Court for the District of Maryland, before U.S. Magistrate Judge Jillyn K. Schulze. The public is reminded that an indictment is merely a charge and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

According to court documents, in approximately September 2005, the National Guard Bureau entered into a contract with Document and Packaging Broker, Inc., to administer the Guard Recruiting Assistance Program (G-RAP), which was designed to offer monetary incentives to soldiers who referred others to join the U.S. military. To participate in the G-RAP, an eligible soldier needed to establish an online recruiting assistant (RA) account. Through these recruiting programs, a participating soldier could receive up to $3,000 in bonus payments for every person he or she referred to serve in the U.S. military.

Barrera, an RA in the G-RAP between approximately December 2005 and February 2012, is alleged to have paid Army National Guard recruiters for the names and Social Security numbers of potential soldiers and used this information to claim that he was responsible for referring dozens of potential soldiers to join the military, though he allegedly did not recruit any of those people. As a result, Barrera is accused of receiving more than approximately $185,000 in fraudulent recruiting bonuses, and the indictment alleges that Barrera paid various recruiters in the form of checks and cash payments.

Former Staff Sergeant Jermaine Britt, 39, of Richmond, Texas, was sentenced today to 30 months in prison by Chief U.S. District Judge Biery for his role in obtaining $86,500 in fraudulent bonus payments. According to court documents, Britt served as a recruiter in the Houston area from approximately November 2006 until November 2012. He conspired with former Specialist Stephanie Heller, 37, of Wharton, Texas, who was an RA in the G-RAP and claimed approximately $44,500 in fraudulent bonuses through her account. Heller made approximately $19,750 in bribe payments to Britt, who served as a recruiter in the Houston area from approximately November 2006 until November 2012. Heller also made a $1,000 bribe payment to another recruiter in exchange for Britt and that recruiter providing the personal information of potential soldiers. In addition to accepting bribes from Heller, Britt worked with at least two other RAs to claim fraudulent bonus payments and accepted a total of $23,750 in bribe payments in exchange for providing the personal information of potential soldiers.

Britt also admitted that he obstructed justice by coaching Heller to make false statements to federal agents. In September of 2012, Heller recorded two conversations with Britt. In those conversations, Britt told Heller how she could provide false stories to federal agents to innocently explain incriminating conduct, such as large cash withdrawals from her bank account, her receipt of emails from Britt in which Britt provided the personal identifiers of potential soldiers, and her use of Britt’s military computer to make referrals under her RA account.

Britt pleaded guilty to conspiracy to commit bribery and wire fraud, bribery, and obstruction of justice on Nov. 9, 2012. Heller pleaded guilty to conspiracy to commit bribery and wire fraud and bribery on Oct. 4, 2012. Heller was also sentenced today to five years’ probation, and her cooperation was instrumental in the case against Britt.

These cases are being prosecuted by Trial Attorneys Edward J. Loya Jr., Brian A. Lichter, and Sean F. Mulryne of the Criminal Division’s Public Integrity Section. These cases are being investigated by agents from the San Antonio Fraud Resident Agency of the Major Procurement Fraud Unit, U.S. Army CID, and from the San Antonio Field Office of the Internal Revenue Service Criminal Investigation.

MORTGAGE AGENT SENTENCED TO PRISON FOR ROLE IN MORTGAGE FRAUD

FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, May 7, 2013
Las Vegas Mortgage Agent Sentenced to 15 Months in Prison for Role in Mortgage Fraud Scheme

A Las Vegas mortgage agent was sentenced late yesterday to serve 15 months in prison for her participation in a mortgage fraud scheme that netted more than $1.2 million in fraudulent mortgage loans, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Acting Special Agent in Charge William C. Woerner of the FBI’s Las Vegas Field Office announced today.

Heidi Haischer, 44, was sentenced by U.S. District Judge Miranda M. Du in the District of Nevada. In addition to her prison term, Haischer was sentenced to serve three years of supervised release.

In November 2012, after a four-day trial, a federal jury in Las Vegas found Haischer guilty of one count of wire fraud and one count of conspiracy to commit wire fraud for submitting fraudulent loan documents to purchase two homes.

According to court documents and evidence presented at trial, Haischer participated in a mortgage fraud scheme while employed as a mortgage broker in Nevada. From December 2006 to January 2007, Haischer and her co-conspirators fraudulently secured loans totaling over $1 million to obtain properties with the intent to flip and sell them for profit. Evidence at trial showed that Haischer and her co-conspirators subsequently enriched themselves by collecting brokerage commissions generated by the sales of the properties.

The court documents and trial evidence demonstrated that Haischer submitted multiple loan applications in which she overstated her income, submitted false verification of employment and misrepresented her intent to reside in one of the properties as her primary residence. Additionally, Haischer presented inflated bank account balances supported by forged bank statements to make it appear that she had assets she did not have, in order to help qualify for mortgage loans for which she otherwise would not have been eligible.

Co-conspirator Kelly Nunes was convicted in a related case in Las Vegas on Feb. 2, 2012, of one count of bank fraud and one count of conspiracy to commit wire and bank fraud. On July 11, 2012, Nunes was sentenced to 51 months in prison.

This case was investigated by the FBI. Trial Attorneys Thomas B.W. Hall and Brian R. Young of the Criminal Division’s Fraud Section prosecuted the case, with assistance from the U.S. Attorney’s Office for the District of Nevada.

This case was a result of efforts by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants.

FORMER TEXAS PAROLE OFFICER INDICTED FOR BRIBERY

FROM: U.S. DEPARTMENT OF JUSTICE

Thursday, October 25, 2012

Former Texas Parole Officer Indicted for Bribery Scheme Involving Assigned Parolee
WASHINGTON – A former Texas state parole officer was arrested today in Dallas on charges of engaging in a bribery scheme involving one of her assigned parolees, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

A federal grand jury in the Northern District of Texas returned a two-count indictment yesterday charging Nichelle Derricks, 37, of Cedar Hill, Texas, with one count of honest services wire fraud and one count of federal programs bribery.

According to the indictment, while serving as a Texas Department of Criminal Justice (TDCJ) parole officer, Derricks and one of her assigned parolees developed an improper relationship in which Derricks secretly used her official position with TDCJ to enrich herself and others by soliciting and receiving cash payments, gifts, furniture, household goods and items, food and beverages, and other things of value from the parolee in exchange for favorable official action benefitting the parolee. The scheme, according to the indictment, was conducted without the authorization, knowledge or approval of TDCJ and contrary to TDCJ procedures and requirements.

The indictment further alleges that Derricks repeatedly allowed the parolee to violate the terms of his parole by, among other things, permitting him to travel outside Texas without prior, written approval and by allowing the parolee to engage in prohibited financial transactions. According to the indictment, such favorable treatment allowed the parolee to facilitate a massive scheme to defraud investors through an oil and gas company founded and operated by the parolee while he was on state parole.

If convicted, Derricks faces a maximum potential penalty of 20 years in prison on the honest services wire fraud charge and 10 years in prison on the federal programs bribery charge. Each charge also carries a maximum $250,000 fine.

The case is being prosecuted by Trial Attorneys John P. Pearson, Edward P. Sullivan and Jeffrey E. Tsai of the Criminal Division’s Public Integrity Section. The case is being investigated by the FBI Dallas Field Office, with assistance from the U.S. Secret Service and the TDCJ Office of Inspector General.

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

MAN SENTENCED FOR SELLING CONTRACTS TO REDUCE PRISON SENTENCES

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

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

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

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

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

FORMER OFFICE MANAGER OF SENATOR EDWARD KENNEDY GOES TO PRISON FOR GOVERNMENT THEFT

The following excerpt is from the Department of Justice website:
Friday, March 30, 2012
Former Senate Office Manager Sentenced to 20 Months in Prison for Wire Fraud and Theft of Government Property
WASHINGTON – A former office manager in the U.S. Senate was sentenced today to 20 months in prison for wire fraud and theft of government property, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office.

Ngozi Pole, of Waldorf, Md., also was sentenced by U.S. District Judge Emmet G. Sullivan in the District of Columbia to serve three years of supervised release and 500 hours of community service following his prison term and ordered to pay $77,608.86 in restitution.  Pole was found guilty at trial on Feb. 1, 2011, of five counts of wire fraud and one count of theft of government property.

According to evidence presented at trial, beginning in at least 2003 and continuing until January 2007, Pole repeatedly submitted paperwork causing the Senate to pay him larger bonus payments than had been approved by either the chief of staff or former U.S. Senator Edward M. Kennedy.  According to the evidence presented at trial, these unauthorized bonus payments totaled more than $75,000.  Pole hid the existence of these unauthorized payments by repeatedly transmitting information to the chief of staff that falsely showed that he received only those payments that had been authorized.  

This sentencing was handled by Trial Attorney Tracee Plowell of the Criminal Division’s Public Integrity Section.  The case was investigated by the FBI’s Washington Field Office.   Former Senator Kennedy’s office cooperated fully with the investigation.

FORMER ARIZONA STATE REPRESENTATIVE PLEADS GUILTY TO FRAUD AND TAX EVASION

The following excerpt is from the Department of Justice website:
Wednesday, March 14, 2012
Former Arizona State Representative Pleads Guilty to Wire Fraud and Tax Evasion Related to the Misuse of More Than $140,000 in Charity Funds
WASHINGTON – Richard David Miranda, a former Arizona state representative, pleaded guilty today in the U.S. District Court for the District of Arizona to a two-count information charging him with defrauding a charity of more than $140,000 and evading income tax related to those unlawfully obtained funds.

The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; Special Agent in Charge James L. Turgal of the FBI’s Phoenix Field Office; and Special Agent in Charge Dawn Mertz of the Internal Revenue Service-Criminal Investigation (IRS-CI) Phoenix office.

“Mr. Miranda, a former member of the Arizona legislature and executive director of a non-profit organization, pleaded guilty today to using over $140,000 of the charity’s funds for his personal expenses, and then failing to disclose the extra income on his tax return,” said Assistant Attorney General Breuer.   “Having admitted this illegal conduct, Miranda will now face the consequences of his actions.   This Justice Department will continue to hold elected officials, just like ordinary citizens, accountable for their crimes.”

“The Federal Bureau of Investigation, the Internal Revenue Service and the Department of Justice remain steadfast in our efforts to combat public corruption at all levels of government by investigating and prosecuting those who deliberately abuse the public’s trust by using their office for personal gain stated,” said FBI Special Agent in Charge James L. Turgal Jr.   “The FBI and our law enforcement partners are committed to holding our elected officials accountable from intentionally engaging in schemes to profit from fraudulent activity and exploiting the faith placed in them by the American public.”  

“It is an embarrassment to the state and its people when a state representative deceives those he was elected to represent,” said IRS Special Agent in Charge Mertz.   “Former Representative Miranda selfishly defrauded a charity that was established to assist disadvantaged members of the community and used the profits for his own benefit.   Those in public office should be held to a higher standard and are not exempt from criminal prosecution.”

Miranda, 55, of Tolleson, Ariz., served as a member of the Arizona House of Representatives for the 13th District from 2011 until his resignation, effective Feb. 20, 2012.   Miranda previously served as a member of the Arizona State Senate from 2002 until 2011, and the Arizona House of Representatives from 1999 until 2002.   According to court documents, since July 2002, Miranda also served as executive director of Centro Adelante Campesino Inc. (Centro), a non-profit charitable organization that provided food, clothing and educational assistance to persons in need, including migrant farm workers, in and around Maricopa County, Ariz.

According to court documents, in May 2005, Miranda initiated a scheme to wind down Centro, sell Centro’s sole remaining asset (a building), and use the proceeds of the sale for personal expenses.   To do so, Miranda removed the charity’s longstanding volunteer accountant as an authorized signer on the charity’s bank and credit union accounts, and assumed sole control of the charity’s accounts and financial records.   He also told the volunteer accountant that the proceeds of the sale would be used to fund scholarships.   In March 2007, the building was sold for $250,000, and on March 7, 2007, a significant portion of the profits of that sale – $144,576 – were wired across state lines into Centro’s credit union account.

According to court documents, within one week of the wire transfer, Miranda began to withdraw the proceeds from Centro’s credit union account without the authorization or knowledge of Centro’s board of directors.   For example, Miranda obtained two checks payable to himself totaling $37,000, and paid off personal credit card debts totaling more than $60,000.   By Dec. 31, 2007, Miranda had withdrawn the remaining proceeds (approximately $46,836) using checks, withdrawals and electronic funds transfers, and used the funds to pay off additional personal debts and make numerous purchases for personal travel, services, clothing, food and household items.   Miranda also failed to report the proceeds of the sale as income on his IRS Form 1040 for calendar year 2007.

The charge of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or twice the amount gained or lost in the scheme.   The charge of attempt to evade or defeat tax carries a maximum penalty of five years in prison and a $100,000 fine.   Sentencing has been scheduled for June 5, 2012.

The case is being prosecuted by Trial Attorneys Edward T. Kang, Monique T. Abrishami and Brian A. Lichter of the Criminal Division’s Public Integrity Section, and Assistant U.S. Attorney Frederick A. Battista of the District of Arizona.   The case is being investigated by agents from the FBI Phoenix Field Office and IRS-CI Phoenix Office.

BOARD CHAIRMAN ALLEN STANFORD CONVICTED IN $7 BILLION FRAUD

The following excerpt is from the Department of Justice website:

Tuesday, March 6, 2012
"Allen Stanford Convicted in Houston for Orchestrating $7 Billion Investment Fraud Scheme
WASHINGTON – A Houston federal jury today convicted Robert Allen Stanford, the former Board of Directors Chairman of Stanford International Bank (SIB), for orchestrating a 20-year investment fraud scheme in which he misappropriated $7 billion from SIB to finance his personal businesses.

The guilty verdict was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; FBI Assistant Director Kevin Perkins of the Criminal Investigative Division; Assistant Secretary of Labor for the Employee Benefits Security Administration Phyllis C. Borzi; Chief Postal Inspector Guy J. Cottrell; Special Agent in Charge Lucy Cruz of the Internal Revenue Service-Criminal Investigations (IRS-CI).

Following a six-week trial before U.S. District Judge David Hittner, and approximately three days of deliberation, the jury found Stanford guilty on 13 of 14 counts in the indictment.

Stanford, 61, was convicted of one count of conspiracy to commit wire and mail fraud, four counts of wire fraud, five counts of mail fraud, one count of conspiracy to obstruct a U.S. Securities and Exchange Commission (SEC) investigation, one count of obstruction of an SEC investigation and one count of conspiracy to commit money laundering.  The jury found Stanford not guilty on one count of wire fraud.

At sentencing, Stanford faces a maximum prison sentence of 20 years for the count of conspiracy to commit wire and mail fraud, each count of wire and mail fraud, and the count of conspiracy to commit money laundering, and five years for the count of conspiracy to obstruct an SEC investigation and the count of obstruction of an SEC investigation.

The investigation was conducted by the FBI’s Houston Field Office, the U.S. Postal Inspection Service, the IRS-CI and the U.S. Department of Labor, Employee Benefits Security Administration.  The case was prosecuted by Deputy Chief William Stellmach of the Criminal Division’s Fraud Section, Assistant U.S. Attorney Gregg Costa of the Southern District of Texas and Trial Attorney Andrew Warren of the Criminal Division’s Fraud Section.”

MAN CONVICTED OF SELLING INTERNET SERVICE THEFT DEVICES

The following excerpt is from the Department of Justice website:

Friday, March 2, 2012
“Oregon Man Convicted for Helping Thousands Steal Internet Service
WASHINGTON – A Redmond, Ore., man was convicted yesterday of seven counts of wire fraud by a federal jury in Boston, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Carmen Ortiz of the District of Massachusetts announced today.

Ryan Harris, 26, was the owner of TCNISO, a company that distributed products enabling users to steal Internet service.  From 2003 through 2009, Harris developed and distributed hardware and software tools that allowed his customers to modify their cable modems so that they could disguise themselves as paying subscribers and obtain Internet service without paying.  The products included a “packet sniffer,” which Harris dubbed “Coax Thief.”  “Coax Thief” surreptitiously intercepted (or “sniffed”) Internet traffic so that the user obtained the media access control addresses and configuration files of surrounding modems.  TCNISO and Harris also offered ongoing customer support, primarily through forums that it hosted on the TCNISO website, to assist customers in their cable modem hacking activities.

“Mr. Harris tried to hide behind the banner of freedom of access to the Internet, but the evidence established that he built a million dollar business helping customers steal Internet service,” said Assistant Attorney General Breuer.

U.S. Attorney Carmen M. Ortiz said, “The Internet is an incredible resource that has transformed the way we conduct business.   Unfortunately, it has also become a breeding ground for criminals.   We will continue to prioritize the prosecution of those who wish to utilize our communication systems to conduct illegal activity and inflict harm on others.”

Each count carries a maximum prison term of 20 years and a fine of up to $250,000.  Sentencing has been scheduled for May 23, 2012, at 3 p.m. before Chief District Court Judge Mark Wolf, who presided over the trial.

The case was investigated by the Boston Field Office of the FBI and was prosecuted by Assistant U.S. Attorney Adam Bookbinder of the U.S. Attorney’s Office for the District of Massachusetts’s Cybercrimes Unit and Trial Attorney Mona Sedky from the Computer Crime and Intellectual Property Section in the Justice Department’s Criminal Division.”