10 INDICTED FOR CONSPIRACY TO COMMIT FEDERAL PROGRAMS BRIBERY, HONEST SERVICES WIRE FRAUD AND EXTORTION

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, December 3, 2015

Ten Individuals Indicted for Conspiracy to Commit Federal Programs Bribery, Honest Services Wire Fraud and Extortion

Ten Puerto Rico businessmen and government officials have been indicted for their alleged participation in several schemes to corruptly give things of value to public officials within the government of the Commonwealth of Puerto Rico in exchange for favorable treatment and awarding of government contracts to various corporations.  The 25-count indictment includes charges of conspiracy to commit federal programs bribery and honest services wire fraud, wire fraud, federal program bribery, extortion through fear of economic harm, money laundering, false declarations before a grand jury and obstruction of justice, announced U.S. Attorney Rosa Emilia Rodríguez-Vélez of the District of Puerto Rico.  The FBI is in charge of the investigation.

A federal grand jury in the District of Puerto Rico returned the indictment on Dec. 2, 2015, which includes 25 charges against the following individuals:

1.Anaudi Hernández Pérez, businessman and political fund raiser.  Although not named in official corporate records, he exercised de facto control over numerous companies doing business with agencies and public corporations of the Commonwealth of Puerto Rico.
2.Sally López Martínez, administrator of the Commonwealth of Puerto Rico’s Administración de Desarrollo Laboral (Workforce Development Administration, hereinafter ADL).
3.Sonia M. Barreto Colón, purchasing director of the Commonwealth of Puerto Rico’s Autoridad de Acueductos y Alcantarillados (Puerto Rico Aqueduct and Sewer Authority, hereinafter AAA).
4.Ivonne M. Falcón Nieves, vice president of AAA.  Prior to her position as vice president, Ivonne M. Falcón Nieves served as treasurer of AAA.
5.Javier A. Muñiz Álvarez, businessman.  Utilized the Company JM Profesional (sic) & Training Group Inc. to secure contracts from the Commonwealth of Puerto Rico.
Carlos F. Luna Cruz, businessman. Worked for JM Profesional (sic) & Training Group Inc.
Xavier González Calderón, Administrator for the House of Representatives of the Commonwealth of Puerto Rico.
Victor R. Burgos Cotto, Director of Technology for the House of Representatives.
Marielis Falcón Nieves, sister of Ivonne M. Falcón Nieves.
10. Glenn O. Rivera Pizarro, special assistant for administration at the House of Representatives of Puerto Rico.

According to the indictment, Hernández Pérez utilized his political and personal connections with high ranking members of the current government in order to have “his people” appointed in critical government positions within the new administration which took over after the November 2012 elections.  He also provided those individuals with things of value in exchange for government contracts, benefits and preferential treatment for several of his corporations.  The indictment focuses on benefits Hernández Pérez, his co-conspirators and corporate entities, obtained from the Commonwealth of Puerto Rico’s ADL, the Commonwealth of Puerto Rico’s AAA and the Puerto Rico House of Representatives.  The three schemes detailed in the indictment essentially followed the same modus operandi.

The indictment alleges that beginning in or about late 2012 and continuing in or about early 2013, Hernández Pérez and several unindicted co-conspirators formalized their plans to obtain government contracts with numerous governmental entities.  Hernández Pérez utilized his personal friendship with Person B (brother of the governor of Puerto Rico, identified as Person A in the indictment), and the good will generated by his substantial fundraising activities during the 2012 election cycle, to position himself to successfully make recommendations on behalf of individuals seeking government appointments and employment after the election.

Hernández Pérez received numerous emails and resumes from individuals seeking his assistance in obtaining positions within the newly elected government.  Hernández Pérez, in turn, forwarded many of those emails to government officials, and to the governor’s brother, Person B.  Many of these individuals ultimately received government employment.  Hernández Pérez and his co-conspirators then set out to form and make alliances with various corporations and limited liability companies that would be used to obtain government contracts, proposals and purchase orders.  These companies included: 3 Comm Global Inc., Links Group LLC, EKO Technologies LLC, JM Profesional (sic) & Training Group Inc. and Waffler Avenue LLC.  Some of these corporations were formed immediately prior to, or after, the general elections of November 2012.

Hernández Pérez and his co-conspirators were careful to ensure that his name did not appear on any official documentation regarding the formation of the corporations, or on any formal request for government contracts, proposals or purchase orders.  Hernández Pérez, however, was present in numerous meetings where the proposals were discussed, was included in internal electronic and oral communications regarding these matters, and received payment from the contracts into corporate bank accounts and other suspicious transactions.

Many of the individuals recommended by Hernández Pérez whom obtained the jobs, ultimately had the authority to approve or authorize contracts, purchase orders, and other financial obligations on behalf of their respective agencies, departments or public corporations, and in return for the recommendations for employment, and/or other things of value, authorized contracts, purchase orders, proposals and payments on behalf of the co-conspirators and their corporations.

Hernández Pérez and his co-conspirators offered and gave, and the public officials solicited and accepted from Hernández Pérez and his co-conspirators, things of value, including expensive meals, personal gifts, expensive fountain pens, purses, bags, concert tickets and the payment of certain accrued debts.  Hernández Pérez allegedly kept written electronic records regarding the purpose of his government related business meetings, and the things of value provided to each of these individuals.

Hernández Pérez and his co-conspirators utilized their government influence to receive an unfair competitive advantage over their competitors, in that they: a) received preferred opportunities on certain government “request for proposals” (RFPs); b) received guidance from agency employees on the proper format and content of proposals and bids for government contracts; c) had access to speak and meet with critical employees in decision making positions within the agencies, departments and government corporations; d) received guidance on how to structure bids and proposals in order to avoid the formal bidding process required by law; e) demanded and were provided with explanations from agency employees when their proposals or bids were not selected.

Once awarded the government contracts, Hernández Pérez and his co-conspirators would utilize, often without proper contractual authority, subcontractors who would perform the work defined in the contracts.  On many occasions, Hernández Pérez and his co-conspirators provided substandard work on their contractual obligations in that they: failed to make the required payments to suppliers, subcontractors and creditors; failed to abide by the terms of the contract regarding performance results/follow up as required under the contract; failed to competently provide the services they were contracted to perform.

Hernández Pérez is also charged, along with defendants Ivonne Falcón and Marielis Falcón, with Hobbs Act extortion under fear of economic harm.  Hernández Pérez and unindicted co-conspirators would utilize their contacts and influence within at least one government dependency (the AAA) to secure, for a fee, the release of legitimate payments due to other corporations, which lacked the current connections within the government.  In particular,  Hernández Pérez and his associates, obtained property not due to them, specifically, $100,000.00 from Contractor A, in exchange for utilizing his connections within AAA in order to secure a portion of the money owed (approximately $1 million) to Contractor A, with Contractor A’s consent, induced through the wrongful use of a fear of economic loss.  Moreover, the Falcón sisters aided and abetted each other to commit extortion.  Defendant Ivonne M. Falcón Nieves utilized her position at AAA in order to enable her sister, defendant Marielis Falcón Nieves, to obtain property not due to her, specifically, cash payments, check payments, payments to contractors, and the performance of residential tree trimming, from Contractor A, with Contractor A’s consent, induced through the wrongful use of a fear of economic loss.

The 25 counts detailed in the indictment are as follows:

Count 1: 18 U.S.C. § 371, Conspiracy to Commit Federal Programs Fraud and Honest Services Wire Fraud regarding contracts with ADL and AAA.
Count 2: 18 U.S.C. § 1349, Conspiracy to Commit Honest Services Wire Fraud for scheme with ADL.
Counts 3-5: 18 U.S.C. § 343, substantive Wire Fraud counts for emails related to the scheme with ADL.
Count 6: 18 U.S.C. § 1349, Conspiracy to Commit Honest Services Wire Fraud for the scheme with AAA.
Counts 7-9: 18 U.S.C. § 1343, substantive Wire Fraud counts for emails related to the scheme with AAA.
Count 10: 18 U.S.C. § 666(a)(2), paying a bribe to an agent of an organization receiving federal funds for the scheme with ADL (Sally López Martínez).
Count 11: 18 U.S.C. § 666(a)(1)(B), receipt of a bribe by an agent of an organization receiving federal funds for the scheme with ADL.
Count 12: 18 U.S.C. § 666(a)(2), paying a bribe to an agent of an organization receiving federal funds for the scheme with AAA (Ivonne Falcón).
Count 13: 18 U.S.C. § 666(a)(1)(B), receipt of a bribe by an agent of an organization receiving federal funds for the scheme with AAA (Ivonne Falcón).
Count 14: 18 U.S.C. § 666(a)(2), paying a bribe to an agent of an organization receiving federal funds for the scheme with AAA (Sonia Barreto).
Count 15: 18 U.S.C. § 666(a)(1)(B), receipt of a bribe by an agent of an organization receiving federal funds for the scheme with AAA (Sonia Barreto).
Count 16: 18 U.S.C.§ 1951(a), Extortion Through Fear of Economic Harm (Hernandez Perez).
Count 17: 18 U.S.C.§ 1951(a), Extortion Through Fear of Economic Harm (Ivonne & Marielis Falcón Nieves).
Count 18: 18 U.S.C. § 1956(h), Conspiracy to Commit Money Laundering (Hernandez Perez and Muñiz Alvarez).
Count 19: 18 U.S.C. § 1623(a), False Declarations Before Grand Jury (Carlos F.  Luna Cruz).
Count 20: 18 U.S.C. § 1623(a), False Declarations Before Grand Jury (Carlos F.  Luna Cruz).
Count 21: 18 U.S.C. § 1512(c)(2), Obstruction of Justice (Carlos F.  Luna Cruz).
Count 22: 18 U.S.C. § 1512(c)(2), Obstruction of Justice (Carlos F.  Luna Cruz).
Count 23: 18 U.S.C. § 1512(c)(2), Obstruction of Justice (Carlos F.  Luna Cruz and Javier A. Muñiz Álvarez (computer)).
Count 24: 18 U.S.C. § 1346, Conspiracy to Commit Wire Fraud (money and property) for scheme with PR House of Representatives.
Count 25: 18 U.S.C. § 666(a)(1)(A), Intentional misapplication of funds by an agent of an organization receiving federal funds for the scheme with House of Representatives (González Calderón, Burgos Cotto and Rivera Pizarro).
“For decades now, political cronyism, favoritism and corruption have robbed the people of Puerto Rico of the right to decent services and unbiased representation, including legally awarded government contracts,” said U.S. Attorney Rodríguez Vélez.  “The people of Puerto Rico foot the bill for the underhanded dealings detailed in the indictment.  The time for government cronyism that allows some to line their pockets with ill-gotten contracts at the expense of the many, is over.  The time for public servants who trade their duty to represent the people of Puerto Rico in exchange for political appointments and gifts, is also over.  The people of Puerto Rico deserve the honest services of, not only those in their government, but those who choose to do business with the government.  Their violations of the public trust will be prosecuted to the full extent of the law.”

“Unfortunately, this is one more case of graft, greed and corruption that over the last 20 years have contributed to the government of Puerto Rico’s fragile financial condition and on the brink of bankruptcy,” said Special Agent in Charge Carlos Cases of the FBI’s San Juan Division.  “It is the responsibility of the leaders of the government of Puerto Rico to ensure this type of reprehensible and corrupt behavior does not occur.  The FBI, along with the United States Attorney’s Office, District of Puerto Rico, will always remain vigilant and attack the corruption threat with undeniable and fervent passion. Let there be no doubt this is only the beginning and the investigation will continue.  There will be no stone left unturned.”

The case is being investigated by the FBI’s San Juan Division.  The case is being prosecuted by First Assistant U.S. Attorney Timothy Henwood and José Capó Iriarte of the District of Puerto Rico, Deputy Chief of the Financial Fraud and Corruption Unit.  If found guilty, the defendants are facing possible sentences of up to five years for the conspiracy to commit federal programs fraud and wire fraud, up to 10 years for honest services fraud, up to 20 years for money laundering, Hobbs Act, obstruction of justice and conspiracy to commit honest services fraud.

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

PROVIDER JUVENILE MENTAL HEALTH SERVICES INDICTED ON BRIBERY CHARGES

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, December 3, 2015

Owner of Arkansas Juvenile Mental Health Facilities Indicted on Bribery Charges

The owner of two Arkansas mental health companies that provide inpatient and outpatient mental health services to juveniles was indicted yesterday for engaging in a scheme to bribe a former deputy director of the Arkansas Department of Human Services (ADHS), announced Assistant Attorney General Leslie R. Caldwell of the Department of Justice’s Criminal Division.

A federal grand jury in the Eastern District of Arkansas returned the six-count indictment on Dec. 2, 2015, charging Theodore E. Suhl, 50, of Warm Springs, Arkansas, with conspiracy to commit bribery and honest services fraud, three counts of honest services fraud, one count federal funds bribery and one count of interstate travel in aid of bribery.

The indictment alleges that Suhl bribed Steven B. Jones, former deputy director of ADHS, to perform acts in his official capacity that benefitted Suhl and his mental health companies and to provide internal ADHS information to Suhl.  Beginning in approximately April 2007, Suhl, Jones and Phillip W. Carter, a former probation officer in Crittenden County, Arkansas, and a West Memphis, Tennessee, councilmember, allegedly periodically met at restaurants in Memphis, Tennessee, and rural Arkansas in order for Suhl to request assistance from Jones.  In exchange for Jones’ agreement to perform official acts, Suhl allegedly paid Jones by issuing checks made payable to the pastor of Carter’s church that Carter and the pastor then deposited and cashed in order to provide cash payments to Jones.    

Jones previously pleaded guilty to federal funds bribery and conspiracy for his involvement in the scheme.  Carter previously pleaded guilty to conspiracy to commit federal funds bribery and honest services wire fraud.  Jones and Carter currently await sentencing.

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

Trial Attorneys Lauren Bell, John D. Keller and Amanda R. Vaughn of the Criminal Division’s Public Integrity Section are prosecuting the case.  The FBI’s Little Rock Field Office investigated the case.

United States and Cuba Hold Counter-Narcotics Dialogue

United States and Cuba Hold Counter-Narcotics Dialogue

CONTRACTOR RECEIVES PRISON SENTENCE FOR PAYING ARMY OFFICERS BRIBES DURING WAR IN IRAQ

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, December 1, 2015

Former Military Contractor Sentenced to 12 Months in Prison for Paying Bribes to Army Officers during Iraq War

The former president of a defense contractor providing services to the U.S. military in Iraq was sentenced today to 12 months and one day in prison for his role in a scheme to pay more than $1.2 million in bribes to U.S. Army contracting personnel in exchange for being awarded lucrative defense contracts, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Zane David Memeger for the Eastern District of Pennsylvania.

U.S. District Judge Joel H. Slomsky in the Eastern District of Pennsylvania sentenced Justin W. Lee, 37, of Philadelphia, the former president of Lee Dynamics International (LDI), who pleaded guilty in July 2011 to one count of conspiracy to commit bribery and four substantive counts of bribery.

In connection with his guilty plea, Lee admitted that as the president of LDI and previously as an officer of American Logistics Services (ALS), a Kuwaiti company providing supplies to the U.S. military in Iraq, he paid multiple bribes in the form of cash, airline tickets, trips and hotel stays, among other things, to military contracting personnel in exchange for their agreement to take official action to award lucrative contracts to both LDI and ALS.

Lee’s father and co-defendant, George Lee, who was the CEO of both companies, was sentenced to 54 months in prison in July 2015 for one count of bribery.  This marks the end of a long-running investigation, which began in 2006, that led to the conviction of seven other defendants, including several high-ranking contracting officers.

The U.S. Army Criminal Investigation Command, the Defense Criminal Investigative Service and the U.S. Department of Homeland Security – Immigration and Customs Enforcement investigated the case, and the Office of the Special Inspector General for Iraq Reconstruction, the FBI and the Internal Revenue Service previously contributed to the investigation.  Trial Attorneys Richard B. Evans and John Keller of the Criminal Division’s Public Integrity Section and the U.S. Attorney’s Office of the Eastern District of Pennsylvania prosecuted the case.  Mark W. Pletcher and Emily W. Allen of the U.S. Attorney’s Office of the Southern District of California previously provided substantial assistance.

FIVE CHARGED IN CALIFORNIA HOSPITAL KICKBACK FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, November 24, 2015

Five Individuals, Including Two Doctors, Charged in Kickback Schemes Involving nearly $600 Million in Fraudulent Claims by Southern California Hospitals

Former Hospital Executive, Doctors and Two Others Admit Roles; Agree to Cooperate

In a series of related cases announced today, the former chief financial officer (CFO) of a Long Beach, California, hospital, two orthopedic surgeons and two others have been charged in long-running health care fraud schemes that illegally referred thousands of patients for spinal surgeries and generated nearly $600 million in fraudulent billings over an eight-year period.

Two of the defendants have pleaded guilty and three others have agreed to plead guilty in the coming weeks. All five defendants have agreed to cooperate in the government’s ongoing investigation into kickbacks for patient referrals and fraudulent bills for spinal surgeries.

The schemes involved tens of millions of dollars in illegal kickbacks to dozens of doctors, chiropractors and others.  As a result of the illegal payments, thousands of patients were referred to Pacific Hospital in Long Beach, where they underwent spinal surgeries that led to more than $580 million in bills being fraudulently submitted during the last eight years of the scheme alone.  Many of the fraudulent claims were paid by the California worker’s compensation system and the federal government.

In a second, similar scheme that also involved spinal surgeries, doctors received illegal kickbacks for referrals to a Hawaiian Gardens hospital.

Today, federal prosecutors today filed two cases related to the scheme, and yesterday three other cases were unsealed by a federal judge.  Those named in the cases are:

James L. Canedo, 63, of San Pedro, California, the former CFO of Pacific Hospital in Long Beach, who pleaded guilty on Sept. 4 to a criminal information charging him with participating in a conspiracy that engaged in mail fraud, honest services fraud, money laundering, paying or receiving kickbacks in connection with a federal health care program and violating the Travel Act, specifically, interstate travel in aid of a racketeering enterprise.  The case against Canedo was unsealed yesterday by U.S. District Judge Josephine L. Staton of the Central District of California, who is scheduled to sentence the defendant on June 17, 2016.
Philip Sobol, 61, of Studio City, California, an orthopedic surgeon who has agreed to plead guilty to conspiracy to commit mail fraud, honest services fraud and violations of the Travel Act; as well as a separate, substantive Travel Act violation.  The information against Sobol and a related plea agreement were filed today in U.S. District Court, where the defendant is expected to be arraigned next month.
Alan Ivar, 55, of Las Vegas, a chiropractor who formerly resided in San Juan Capistrano, California, and owned several businesses based in Costa Mesa, California, was charged today in a criminal information that alleges one count of conspiracy to commit mail fraud, honest services fraud, money laundering and violations of the Travel Act.  In a plea agreement also filed today, Ivar admitted that for well over a decade, he had an agreement with the owner of Pacific Hospital to refer patients in exchange for a monthly retainer.  Ivar, who also agreed to plead guilty, is expected to be arraigned next month.
Paul Richard Randall, 56, of Orange, California, a health care marketer previously affiliated with Pacific Hospital and Tri-City Regional Medical Center in Hawaiian Gardens, pleaded guilty on April 16, 2012, before Judge Staton to conspiracy to commit mail fraud.  Randall, who admitted recruiting chiropractors and doctors to refer patients to Tri-City in exchange for kickbacks, is scheduled to be sentenced on April 8, 2016.
Mitchell Cohen, 55, of Irvine, California, an orthopedic surgeon, was charged last week with filing a false tax return.  Cohen admits in a plea agreement filed on Nov. 16 admits the he failed to report income received from kickback payments and is expected to be arraigned next month.
All five defendants have agreed to cooperate with the government’s ongoing investigation, dubbed “Operation Spinal Cap,” into the kickback schemes, which involved dozens of surgeons, orthopedic specialists, chiropractors, marketers and other medical professionals.

Under the terms of their plea agreements, Sobol faces a federal prison term of up to 10 years; Canedo, Ivar and Randall face up to five years in prison; and Cohen faces up to three years in prison on the tax charge.  All of the defendants will be required to pay restitution to the victims of the scheme, which in Canedo’s case will be at least $20 million.

In April 2014, Michael D. Drobot, the former CEO and owner of Pacific Hospital of Long Beach, pleaded guilty to participating in the scheme and is also cooperating with the investigation.

As described in court documents, Drobot, who was the owner and/or CEO of Pacific Hospital of Long Beach until late 2013, ran a 15-year-long scheme in which he and others billed workers’ compensation insurers and the U.S. Department of Labor hundreds of millions of dollars for spinal surgeries and other procedures performed on patients who had been referred by dozens of doctors, chiropractors and others who were paid illegal kickbacks.

As part of the scheme, the conspirators typically paid a kickback of $15,000 for each lumbar fusion surgery and $10,000 for each cervical fusion surgery.  Some of the patients lived hundreds of miles away from Pacific Hospital and closer to other qualified medical facilities.  The patients were not informed that medical professionals had been offered kickbacks to induce them to refer the surgeries to Pacific Hospital.  From 2005 through 2013, only part of the overall scheme, Pacific Hospital billed insurers more than $580 million for spinal surgeries on more than 4,400 patients.  Insurers paid the hospital more than $226 million for the surgeries performed as a result of illegal kickbacks.

“Health care fraud and kickback schemes burden our healthcare system, drive up insurance costs for everyone, and corrupt both the doctor-patient relationship and the medical profession itself,” said U.S. Attorney Eileen M. Decker of the Central District of California.  “The members of this scheme treated injured workers and their spines as commodities, to be traded away to the highest bidder.  This investigation should send a message to the entire industry: patients are not for sale.”

The conspirators in the Pacific Hospital scheme concealed the kickback payments by entering into bogus contracts to provide a “cover story” for the doctors, chiropractors and others who received illegal payments.  For example, a number of doctors entered into agreements with a Pacific Specialty Physician Management (PSPM), a company owned by Drobot, under which the doctors received as much as $100,000 per month from PSPM in return for the right to purchase their medical practices – an option that was never exercised.  PSPM paid some doctors inflated prices for the right to operate their practices and collect on their insurance claims.  In still other cases, Pacific Hospital entered into contracts with doctors under which the doctors were to help the hospital collect on its surgery bills to insurance companies, but the hospital’s own collection staff, rather than the doctors, actually performed the collections work.  Several doctors entered into lease agreements under which PSPM or Pacific Hospital paid rent for the use of office space, but rarely used the space.  And other doctors had agreements to provide consulting services to Drobot’s companies, but did not actually provide the services.  Still others, including marketers who introduced doctors to Pacific Hospital, had additional agreements with Drobot’s companies.

Canedo, as Pacific Hospital’s CFO from 1999 through October 2013, was responsible for tracking payments made directly to doctors by the hospital, as well as the number of patients each doctor referred to the hospital and the amounts the hospital collected for those patients’ procedures.  Canedo also communicated directly with a number of the doctors regarding the payments and surgeries, and sometimes mediated disputes between different doctors who claimed credit for the same referrals.

Sobol, Ivar and Cohen each received, respectively, $5.2 million, $1.24 million and $1.64 million in kickbacks.  Together they referred more than 200 patients to Pacific Hospital.

“The defendants carried out this elaborate scheme by callously gathering patients, remaining indifferent to patient needs, and greedily lining their pockets with a cut of the cash from taxpayer-funded health care systems,” said Assistant Director in Charge David Bowdich of the FBI's Los Angeles Field Office.  “The effort by investigators and prosecutors in this case cannot be overstated and, as it continues, will play a part in restoring confidence in the medical marketplace.”

Two other Drobot companies, California Pharmacy Management (CPM) and its successor, Industrial Pharmacy Management (IPM), were also important players in the scheme.  Both companies set up and managed what were essentially mini-pharmacies within doctors’ offices.  CPM and IPM bought and dispensed medication that the doctors prescribed to their patients, and these businesses received a portion of the money reimbursed by insurance companies for the medications.  Drobot, along with others at CPM and IPM, often agreed to increase the doctors’ shares of the insurance claims in return for those doctors’ referral of patients to Pacific Hospital.  In many cases, for doctors who made such referrals, the conspirators “advanced” payments from CPM and IPM before the companies had collected any money for the medications or even prescribed them, and often simply “wrote off” payments as losses when collections fell short.

“Injured workers were treated like livestock by doctors and hospitals who paid or accepted kickbacks and bribes in exchange for referrals,” said California Insurance Commissioner Dave Jones.  “Injured workers are put at risk when their medical treatment is based on kickbacks and bribes instead of their medical needs.  Detectives from the Department of Insurance worked closely with federal law enforcement agencies to investigate and expose this illegal conspiracy, which is one of the largest workers compensation insurance fraud cases we have ever seen.”

Randall, who also facilitated the Pacific Hospital scheme by introducing doctors to Drobot and coordinating kickback arrangements, pleaded guilty to participating in a separate, similar scheme involving Tri-City Regional Medical Center.  According to his plea agreement, Randall acted as a “marketer” for Tri-City and conspired with hospital executives to pay kickbacks to doctors and chiropractors to refer workers’ compensation patients Tri-City for spinal surgeries.  As in the Pacific Hospital scheme, the surgeries at Tri-City involved use of spinal surgery hardware that Randall distributed to Tri-City at inflated prices through his company Summit Medical Group, knowing that the cost would be passed on to insurers.  Using proceeds from the sale of the hardware, Randall paid a 5 percent kickback to Tri-City and kickbacks of up to $20,000 per surgery to the doctors and chiropractors who referred the patients.  In addition, Randall paid kickbacks to doctors in return for referrals of patients for toxicology tests though a separate company, Platinum Medical.  The scheme resulted in several million dollars in losses to insurers.

“Medical referrals should be based on what’s best for the patient – not what’s best for the doctor’s bank account,” said Special Agent in Charge Erick Martinez of IRS-Criminal Investigation (CI).  “In paying the kickbacks and submitting the resulting claims for spinal surgeries and medical services, the defendants acted with the intent to defraud workers’ compensation insurance carriers and to deprive the patients of their right to honest services.”

“We are committed to preserving Postal Service resources by vigorously investigating allegations of fraud and corruption,” said Special Agent in Charge Tom Frost of the U.S. Postal Service’s Office of Inspector General (USPS OIG).  “We are grateful for the efforts of the U.S. Attorney’s Office and our State and Federal partners in this investigation.”

The ongoing investigation into abuses involving the spinal pass-through law and kickbacks paid for spinal surgery patients is being conducted by the FBI, the USPS OIG, IRS-CI and the California Department of Insurance.

GUATEMALAN CITIZEN PLEADS GUILTY FOR ROLE IN HUMAN SMUGGLING CONSPIRACY

FROM:  U.S. JUSTICE DEPARTMENT

 Friday, November 20, 2015

Foreign National Pleads Guilty to Human Smuggling Charges

A foreign national pleaded guilty today to conspiracy and a human smuggling charge for her role in a scheme to smuggle undocumented migrants from India into the United States, announced Assistant Attorney General Leslie R. Caldwell of the Criminal Division, U.S. Attorney Kenneth Magidson for the Southern District of Texas and Special Agent in Charge Shane Folden of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) in San Antonio.

On April 23, 2015, Rosa Astrid Umanzor-Lopez, 36, a citizen of Guatemala, was extradited to the United States from Guatemala to face one count of conspiracy to smuggle undocumented migrants into the United States for profit and five counts of human smuggling charges in the Southern District of Texas.

At the plea hearing and in related court documents, Umanzor-Lopez admitted that between January 2011 and her arrest in Guatemala on Feb. 4, 2014, she and other conspirators recruited individuals in India who were willing to pay large sums of money to be smuggled into the United States.  For their smuggling operations, Umanzor-Lopez and her co-conspirators used a network of facilitators to transport groups of undocumented migrants from India through South America and Central America and then into the United States by air travel, automobiles, water craft and foot.  Many of these smuggling events involved illegal entry into the United States via the U.S.-Mexico border near McAllen and Laredo, Texas.

To this date, three co-conspirators have been convicted and sentenced.  Umanzor-Lopez’s sentencing hearing is scheduled for March 4, 2016 in Houston.

The investigation was conducted by ICE-HSI agents in McAllen, with the assistance of U.S. Customs and Border Protection’s Alien Smuggling Interdiction Unit.  This case is being prosecuted jointly by Trial Attorney Ann Marie E. Ursini of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorneys Leo J. Leo III and Casey MacDonald of the Southern District of Texas.  The Criminal Division’s Office of International Affairs provided significant support with the defendant’s extradition.

The investigation was conducted under the Extraterritorial Criminal Travel Strike Force (ECT) program, a joint partnership between the Justice Department’s Criminal Division and HSI.  The ECT program focuses on human smuggling networks that may present particular national security or public safety risks, or present grave humanitarian concerns.  ECT has dedicated investigative, intelligence and prosecutorial resources.  ECT coordinates and receives assistance from other U.S. government agencies and foreign law enforcement authorities.

BUSINESSMAN PLEADS GUILTY TO FRAUD CRIME RELATED TO STEALING FROM HIS OWN BUSINESS

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, November 24, 2015

President of North Carolina Board of Funeral Service and Business Partner Plead Guilty to Conspiracy to Defraud the United States

Two North Carolina businessmen pleaded guilty in the U.S. District Court in the Middle District of North Carolina to conspiracy to defraud the United States, 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.

Kenneth Dale Stainback, 61, of Burlington, North Carolina, pleaded guilty on Nov. 24 and Stephen Ray Smith, 60, of Mebane, North Carolina pleaded guilty on November 23.  According to court documents and statements in court, Stainback and Smith conspired to defraud the United States by filing false corporate tax returns for McClure Funeral Service (McClure).  Stainback, Smith and another co-conspirator bought McClure in 2004 and began diverting gross receipts from the business and omitting that income from the corporation’s tax returns.  The co-conspirators opened a checking account at Mid-Carolina Bank for the purpose of diverting funds from McClure, including commission checks from insurance providers and checks from clients for payment of services.  The co-conspirators wrote checks to themselves from this account, with Stainback and Smith receiving the vast majority of the diverted funds.  Stainback also opened another bank account at SunTrust Bank, which he used to divert additional funds from McClure without the knowledge of his co-conspirators.  Finally, the co-conspirators also pocketed cash payments from clients of McClure.  In order to conceal discovery of their scheme, the co-conspirators deleted and altered invoices in the business’s accounting system.  Stainback and Smith also closed their bank account at Mid-Carolina bank after being contacted by the Internal Revenue Service (IRS) regarding the corporate tax returns.

During the 2009 through 2012 fiscal years, Stainback, Smith and the other co-conspirator diverted more than $419,000 from McClure.  These diverted funds were not reported on McClure’s corporate tax returns, which resulted in a corporate tax loss of $158,530.11.  Stainback and Smith also failed to report the diverted funds on their individual income tax returns.

In addition to owning McClure, Stainback also serves as the President of the North Carolina Board of Funeral Service.

Stainback and Smith each face a statutory maximum sentence of five years in prison, a $250,000 fine and restitution to the IRS.  The court set sentencing for Smith and Stainback on March 24, 2016.

FORMER ATTORNEY PLEADS GUILTY FOR ROLE IN INTERNATIONAL INVESTMENT FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, November 24, 2015

Former California Attorney Pleads Guilty in International Investment Fraud Scheme

A Las Vegas man pleaded guilty today to conspiracy for his role in an investment fraud scheme that promoted fraudulent investment opportunities and caused more than $5 million in losses to investors.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Special Agent in Charge Laura A. Bucheit of the FBI’s Las Vegas Field Office made the announcement.

Joseph Micelli, 62, pleaded guilty before U.S. District Judge Kent J. Dawson of the District of Nevada to conspiracy to commit wire fraud and securities fraud.  His sentencing is scheduled for Feb. 23, 2016.

As part of his plea, Micelli admitted that he conspired with others in the United States and Switzerland to promote investments and loan instruments that he knew to be fraudulent.  The conspirators told victims that, for an up-front payment, a Swiss company known as the Malom Group A.G. would provide access to lucrative investment opportunities and substantial cash loans.  In connection with his plea, Micelli admitted that he held himself out to investors as an attorney, when in fact he had lost his license to practice law.  In addition, as part of an effort to defraud an investor who held an equity stake in a corporation that had filed for bankruptcy, Micelli submitted a sworn affidavit to the U.S. Bankruptcy Court for the District of New Hampshire, in which he made false statements about the Malom Group’s ability to provide financing to the debtors.

Five other defendants have been charged in the case and are awaiting trial or extradition.        

The FBI’s Las Vegas Field Office investigated this case.  Assistant Chief Brian R. Young and Trial Attorneys Melissa Aoyagi and Anna G. Kaminska of the Criminal Division’s Fraud Section prosecuted this case with assistance from the Criminal Division’s Office of International Affairs and the U.S. Attorney’s Office for the District of Nevada.  The U.S. Securities and Exchange Commission’s Enforcement Division, which referred the matter to the Department of Justice and is conducting a parallel civil enforcement investigation, also provided valuable assistance.  

Today’s conviction is part of efforts underway 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 is 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.

DEARBORN DOCTOR SENTENCED FOR ROLE IN DETROIT-AREA MEDICARE FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, November 19, 2015

Physician Sentenced to 72 Months in Prison for Role in Detroit-Area Medicare Fraud Scheme

A Detroit-area physician who led and directed a multimillion-dollar Medicare fraud scheme through his medical practice was sentenced today to 72 months in prison.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge David P. Gelios of the FBI’s Detroit Field Office and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG) made the announcement.

Dr. Hicham A. Elhorr, 48, of Dearborn, Michigan, was sentenced by U.S. District Judge Nancy G. Edmunds of the Eastern District of Michigan.  In addition to imposing the prison term, Judge Edmunds ordered Elhorr to pay $2,073,108.16 in restitution.

According to admissions in his plea agreement, from approximately August 2008 through September 2012, Elhorr and his coconspirators fraudulently billed Medicare $4.2 million for purported in-home physician services.  Elhorr admitted that he employed unlicensed individuals through his visiting physician practice, House Calls Physicians PLLC, who held themselves out as licensed physicians and purported to provide physician home visits and other services to Medicare beneficiaries in Michigan.  The unlicensed individuals prepared medical documentation that Elhorr and other licensed physicians signed as if they had performed the visits when, in fact, no licensed physicians had treated the beneficiaries.

This case was investigated by the FBI and HHS-OIG and brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Eastern District of Michigan.  The case was prosecuted by former Assistant Chief Catherine K. Dick and Trial Attorneys Matthew C. Thuesen 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 approximately 2,300 defendants who have collectively billed the Medicare program for more than $7 billion.  In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

REMARKS MADE IN HAGUE ON INTERNATIONAL CRIME

FROM:  U.S. JUSTICE DEPARTMENT 

11/20/2015 06:54 AM EST

Remarks at the Fourteenth Session of the International Criminal Court Assembly of States Parties

Remarks

Jane Stromseth, Acting Director, Office of Global Criminal Justice

The Hague, Netherlands

November 19, 2015

Mister President, fellow delegates, good afternoon. My name is Jane Stromseth, and I am the acting head of the State Department’s Office of Global Criminal Justice. It is a pleasure to address the Assembly of States Parties on behalf of the observer delegation of the United States of America. And I join others in offering our deep condolences to those affected by the terrorist attacks of recent days.

As always, this group of States gathers with a challenging agenda before it: to seek effective ways to end impunity for the most serious crimes of concern to the international community as a whole. Because success in that pursuit depends in part on seizing opportunities and taking encouragement from progress, I want to begin by noting a few of the year’s positive developments on which the international community can build.

This year, for the first time, a top commander of the vicious Lord’s Resistance Army was apprehended and transferred to the ICC. This transfer occurred in a model of cooperation among the African Union, the leadership of Uganda and the Central African Republic, and the organs of the Court. The United States is proud to have played a role in this process, and we look forward to the day when Joseph Kony is also brought to justice.

This year, also for the first time, a leader of an extremist group in Mali has come before the ICC to answer for alleged war crimes, in this case, crimes against the cultural heritage of the historic town of Timbuktu. We hope this will send a signal to other such groups within the Court’s jurisdiction.

And this year, following the Cote d’Ivoire elections in 2010 that witnessed so many atrocities, Ivoirians were able to choose their president in a peaceful election, setting a more hopeful precedent for that country’s future.

In these situations, the prospect of justice is helping deliver stability where it has been absent, and truth and dignity for victims who have been denied them. And in these and several other cases, the ICC is playing a unique and positive role. Although the United States, for reasons that have been much discussed, has not accepted the Court’s jurisdiction, we continue to work with the ICC in areas of shared interest, on a case-by-case basis and consistent with U.S. laws and policy. The United States has expressed its support for each of the investigations and prosecutions currently under way before the Court.

But the ICC is only one part of a developing system of global criminal justice, one that depends first and foremost on the strengthening of national institutions and the presence of national political will. In that vein, too, this year, we have seen hopeful signs of willingness in a number of countries to address more fully the painful legacies of conflict. To name a few:

In Kosovo, the national Assembly courageously passed the legislation required to create a hybrid Special Court to hear cases emerging from reports of serious crimes committed in the wake of the 1999 conflict.

In Colombia, the government and the country’s largest rebel group have made progress toward reaching an agreement on transitional justice in the context of their peace negotiations. We welcome Colombia’s commitment to reaching a transitional justice agreement that is consistent with its national and international legal obligations. If achieved, such an outcome would represent an important step for Colombia toward a just and durable peace.

In the Central African Republic, the transitional government is working with the international community to establish a domestic Special Criminal Court, with international participation, to seek justice for atrocity crimes that have wracked that country.

And in South Sudan, the parties to that nation’s conflict have signed a peace agreement in August that includes commitments to pursue a wide range of transitional justice measures, including the creation of a hybrid court by the African Union to try those most responsible for atrocities.

These situations span many continents, and as much distinguishes them as ties them together. But we see in these new developments the reflection of a universal yearning for dignity, and for the kind of lasting peace that is built upon justice. Many of these initiatives are in the very earliest stages, and some of them come while conflict is still a daily reality. But if they are pursued credibly, if witnesses and court personnel are protected, and if legal obligations are respected, these initiatives have the potential to contribute to a more sustainable peace in these countries, particularly as many of them will benefit from international participation. The United States will support these initiatives as best we can, and we urge others to do so as well.

But while we need to work together to support and help seize opportunities such as these, we also need to face the situations in which the possibility of progress seems more remote, and to ensure that we are working together to help lay the groundwork for justice.

No situation is more overdue for an effort to find common ground than the situation in Darfur, which the Security Council referred to the ICC ten years ago and where civilians continue to face the persistent threat of aerial bombardments, widespread rape, and the looting and burning of homes and villages. The United States strongly believes that the arrest warrants in the ICC’s Darfur situation should be carried out, and that Sudan must comply with its obligations under the referral. But even while the victims of this brutal conflict are waiting for justice, we must continue to look for ways to support and give hope to them, and to insist with one voice that the ongoing atrocities stop.

This year has also presented us with horrific realities of sexual and gender-based violence, which remain rampant and continue to undermine peacebuilding and cause long-lasting pain in conflict zones and post-conflict societies around the world. That’s why the United States is committed to helping bring to justice those responsible for these crimes, including through an Accountability Initiative that includes more than eight million dollars in support for specialized justice sector initiatives in conflict-affected countries. But every day, the egregious forms of sexual slavery and violence perpetrated by ISIL in Iraq and Syria make clear just how grave a challenge we face in ending the scourge of sexual violence, and the crucial work that lies ahead to prevent these atrocities and help survivors heal and secure justice.

We condemn, too, the other atrocities being committed in Syria and Iraq – from the Asad regime’s torture in its prisons and other abuses against the Syrian people to ISIL’s brutal campaign of targeting ethnic and religious groups, abducting women, and other heinous acts of terror – and, most recently, ISIL’s vicious attacks in Paris.

The United States will continue to lead a coalition aimed at degrading and ultimately defeating ISIL and ending these atrocities. And we will continue to work with others to seek a negotiated political transition in Syria that ends that country’s civil war and Asad’s brutality. Justice and accountability undoubtedly have a role to play in dealing with atrocities of this kind. The veto last year of a proposed referral to the ICC did not take accountability off the table in Syria. Rather, it reinforced the need for all of us to lay the groundwork now for future justice efforts, by documenting such crimes and assembling the evidence that will undoubtedly be needed in the years to come.

Against this backdrop of significant challenges, we note, as others have done, that the Court – although no longer a new institution – must still do more to establish its record of success, its legitimacy, and its deterrent impact. Given the demands the Court faces and the sensitivity of the situations in which it may intervene, we continue to urge the organs of the Court to ensure that their decisions, including prosecutorial choices, are guided by rigor, fairness, legality, and prudence.

I will also raise again our concerns about the potential activation of the crime of aggression amendments in the face of widespread uncertainty about even such basic issues as whether the Court’s jurisdiction would apply with respect to Rome Statute parties that do not ratify the amendments. We think all interested States – ratifiers and non-ratifiers alike – have a strong interest in finding a way to discuss these and other basic issues constructively prior to any decision to “activate.”

On these and other issues, the United States does not purport to have all the answers. But once again, we affirm our commitment to pursuing justice for the worst crimes known to humanity. The fact that atrocities are being perpetrated in so many places around the world fills us with a sense of urgency. But we take encouragement from the successes and the steps forward that show that the current of history, when we work together, does indeed flow toward justice. Thank you, Mr. President.

BUSINESS OWNER PLEADS GUILTY FOR ROLE IN FORECLOSURE ASSISTANCE SCHEME FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, November 12, 2015

Charlotte Business Owner Involved in Foreclosure Assistance Scheme Pleads Guilty to Conspiracy to Defraud the United States

A resident of Charlotte, North Carolina, pleaded guilty on Tuesday in the U.S. District Court of the Western District of North Carolina to conspiracy to defraud the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina.

According to court documents and statements in court, Daniel Heggins and his co-conspirator Joan Clark of Charlotte conspired to defraud the United States by filing false tax returns.  Heggins recruited individuals with debts, such as home mortgages or car loans and created false Forms 1099-OID falsely characterizing the amount of the debts as income.  Heggins and Clark then prepared and filed false Forms 1040 that requested refunds from the Internal Revenue Service (IRS) based on the false Forms 1099-OID.  Heggins and Clark caused the returns to be filed at the IRS office in Charlotte.  Sixteen false tax returns claiming more than $4 million in fraudulent refunds were filed with the IRS as part of the scheme.  According to court documents, Clark and another individual, Marlowe Williams, filed three false tax returns, requesting $900,000 in fraudulent refunds from the IRS and received $601,780.

Heggins faces a statutory maximum sentence of five years in prison and a $250,000 fine. On Nov. 5, Clark, also pleaded guilty to two counts of conspiracy to defraud the United States.  She faces a statutory maximum sentence of five years in prison and a $250,000 fine for each conspiracy count.  On Nov. 9, Williams of New London, North Carolina, pleaded guilty to conspiring with Clark to defraud the United States.  He faces a statutory maximum sentence of five years in prison and a $250,000 fine.  On Sept. 24, Cheryl Jones of Chicago, Illinois, pleaded guilty to presenting a materially false document to the IRS.  Jones submitted false tax returns to the IRS at the direction of Heggins and Clark.  She faces a statutory maximum sentence of one year in prison and a $10,000 fine.

The court has not yet set sentencing dates for any of the defendants.

Acting Assistant Attorney General Ciraolo commended special agents of IRS – Criminal Investigation and the FBI, who investigated the case, and Assistant U.S. Attorney Mike Savage of the Western District of North Carolina and Trial Attorney Todd P. Kostyshak of the Justice Department’s Tax Division, who prosecuted the case.

TWO TEXAS SCHOOL BOARD MEMBERS INDICTED ON BRIBERY, EXTORTION CHARGES

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, November 13, 2015

Two Donna, Texas, School Board Members Indicted on Bribery and Attempted Extortion Charges

The U.S. District Court for the Southern District of Texas unsealed an indictment today charging two elected members of the School Board of Donna, Texas, with bribery and attempted extortion in connection with a services contract held by the Donna Independent School District (DISD).  A private citizen who served as a middleman in the scheme also was charged.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas made the announcement.

Eloy Infante, 53, Elpidio Yanez Jr., 45, and Adrian Guerrero, 50, all from Donna, were charged in a four-count indictment returned on Oct. 27, 2015, in the Southern District of Texas with one count of conspiracy, one count of attempted extortion and two counts of federal programs bribery.  Infante and Yanez are both members of the Donna School Board and Guerrero is a private citizen.

According to the indictment, from February 2015 through May 2015, the defendants allegedly attempted to extort, and solicited and accepted bribes from, an individual whose company provided services to the DISD.  Specifically, the indictment alleges that the defendants informed the individual that, in order for his company to keep its contract with the DISD, he needed to pay Infante and Yanez $10,000 each.  The indictment alleges that both Infante and Yanez accepted partial payment of the $10,000, and that Guerrero served as the middleman for one of the payments.

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

This case was investigated by the FBI.  The case is being prosecuted by Trial Attorney Monique Abrishami of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Leo J. Leo III of the Southern District of Texas.  

FORMER EXEC AT CDT MANUFACTURING COMPANY PLEADS GUILTY FOR ROLE IN PRICE FIXING CONSPIRACY

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, November 18, 2015

Former Sales Executive Pleads Guilty to Participation in Color Display Tube Conspiracy

A former executive of a large Taiwan-based color display tube (CDT) manufacturing company pleaded guilty late yesterday for his participation in a global conspiracy to fix prices of CDTs, a type of cathode ray tube (CRT) used in computer monitors and other specialized applications.

Chun-Cheng (Alex) Yeh, a resident of Taiwan, agreed to plead guilty to conspiring to fix prices, reduce output and allocate market shares of CDTs beginning as early as May 1999 until at least March 2005.  Yeh was indicted by a federal grand jury in the Northern District of California on March 30, 2010.  The plea agreement is subject to court approval.

“Our pursuit of those whose anticompetitive conduct abroad harms U.S. consumers does not stop with indictment,” said Deputy Assistant Attorney General Brent Snyder of the Antitrust Division’s Criminal Enforcement Program.  “We will use all of the tools available to us to ensure that those whose conduct results in criminal charges will be brought to justice should they choose to become fugitives.”

According to the indictment, Yeh, a former director of sales, and co-conspirators agreed to fix CDT prices and reduce output by shutting down CDT production lines for periods of time.  Yeh and co-conspirators also agreed to allocate shares for the CDT market overall and for certain customers.  The conspirators exchanged sales, production, market share and pricing information for the purposes of implementing, monitoring and enforcing their agreements.

Yeh is the first individual to plead guilty in connection with the CDT investigation.  On May 17, 2011, Samsung SDI Company Ltd. pleaded guilty and paid a $32 million criminal fine for its role in the CDT conspiracy.  Four other indicted individuals remain fugitives.  On Aug. 18, 2009, Wen Jun (Tony) Cheng was indicted for his participation in the CDT conspiracy.  On Nov. 9, 2010, Seung-Kyu (Simon) Lee, Yeong-Ug (Albert) Yang and Jae-Sik (J.S.) Kim were also indicted for their participation in the CDT conspiracy.

Yeh is charged with violating the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than the maximum fine.

The federal antitrust investigation into price fixing and other anticompetitive conduct in the CRT industry is being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Field Office.

TEXAS MAN ARRESTED FOR ROLE IN ID THEFT, INCOME TAX FRAUD SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, November 17, 2015

Houston Man Charged in Stolen Identity Tax Refund Fraud Scheme

A Houston, Texas, man was arrested Friday after a federal grand jury sitting in Houston indicted him for three counts of wire fraud, four counts of theft of public money and seven counts of aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas.

According to the allegations in the indictment, during 2015, Denzel Roberts was part of a stolen identity refund fraud (SIRF) scheme that used stolen personal identification information, including names and social security numbers, to file false federal income tax returns for tax year 2014.  Roberts and others used this stolen information to access the Internal Revenue Service’s (IRS) “Get Transcript” web application to obtain tax information of their identity theft victims and filed fraudulent tax returns in those names.  Roberts also opened several bank accounts using a fraudulent passport, directed that the fraudulent tax refunds be deposited into those accounts and withdrew the illicit proceeds.

If convicted, Roberts faces a statutory maximum sentence of 20 years in prison for each count of wire fraud, 10 years in prison for each count of theft of public money and a mandatory sentence of two years in prison for aggravated identity theft.  He also faces substantial monetary penalties and restitution.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Magidson commended special agents of IRS-Criminal Investigation and the FBI’s Houston Cyber Task Force, who investigated the case and Trial Attorneys Michael C. Boteler and Grace E. Albinson of the Tax Division, who are prosecuting this case with assistance from Assistant U.S. Attorney Jimmy Sledge of the Southern District of Texas.

An indictment merely alleges that crimes have been committed.  The defendant is presumed innocent until proven guilty beyond a reasonable doubt.

POSTAL WORKER PLEADS GUILTY FOR ROLE IN STOLEN IDENTITY TAX FRAUD RING

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, November 12, 2015

Alabama Resident and U.S. Postal Worker Pleads Guilty for Involvement in Stolen Identity Tax Refund Fraud Ring

Stole Identities of Individuals on Her Mail Route for Use in Filing False Tax Returns

An Alabama resident and U.S. Postal Service (USPS) employee pleaded guilty today in the U.S. District Court for the Middle District of Alabama to conspiring to defraud the United States with respect to false claims, aggravated identity theft and embezzling mail, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama announced.

According to court documents, between June 2012 and December 2013, Elizabeth Grant, 42, of Seale, Alabama, conspired with others to obtain fraudulent tax refunds by filing false federal income tax returns using stolen identities.  For a fee, Grant provided co-conspirators with addresses along her mail delivery route to use in filing false tax returns.  Grant then retrieved the fraudulent tax refund checks from the mail and delivered the checks to her co-conspirators.  The scheme resulted in the filing of more than 700 false returns claiming more than $1.5 million in refunds.

Several co-conspirators, including Tracy Mitchell and Keshia Lanier, have already pleaded guilty and were sentenced for their roles in this scheme.  On August 7, Mitchell was sentenced to 159 months in prison.  On September 25, Lanier was sentenced to 180 months in prison.  

Grant faces a statutory maximum sentence of 10 years in prison and a $250,000 fine for the conspiracy count and five years in prison and a $250,000 fine for the count of embezzling mail.  Grant also faces a mandatory minimum sentence of two years in prison for aggravated identity theft, which is in addition to the sentence she receives for the other counts, as well as a potential $125,000 fine.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck Jr. commended special agents of IRS-Criminal Investigation and the USPS Office of the Inspector General, who investigated the case and Trial Attorneys Michael C. Boteler, Gregory Bailey and Robert J. Boudreau of the Tax Division and Assistant U. S. Attorney Jonathan Ross of the Middle District of Alabama, who are prosecuting this case.

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.

MAN CHARGED WITH SOLICITING MURDER OF U.S. MILITARY MEMBERS

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, November 12, 2015

Ohio Man Arrested for Soliciting the Murder of Members of the U.S. Military

An Akron, Ohio, man was arrested today on federal charges that he solicited the murder of members of the U.S. military.

Terrence J. McNeil, 25, appeared in U.S. District Court in the Northern District of Ohio after being charged with one count of solicitation of a crime of violence.

The charge was announced by Assistant Attorney General John P. Carlin, U.S. Attorney Steven M. Dettelbach of the Northern District of Ohio and Special Agent in Charge Stephen D. Anthony of the FBI’s Cleveland Division.

“According to the allegations in the complaint, Terrence McNeil solicited the murder of members of our military by disseminating ISIL’s violent rhetoric, circulating detailed U.S. military personnel information, and explicitly calling for the killing of American service members in their homes and communities,” said Assistant Attorney General Carlin.  “ISIL and its followers continue to use social media in an attempt to incite violence around the world, including in the United States.  The National Security Division's highest priority is counterterrorism and we will use all of our tools to disrupt threats and acts of violence against our military members and their families.”

“As this nation honors our veterans, we must make clear that we will not tolerate threats of violence against our service members,” said U.S. Attorney Dettelbach.  “This defendant is charged with urging harm to our men and women in uniform and will now answer for those threats.”

“While we aggressively defend First Amendment rights, the individual arrested went far beyond free speech by reposting names and addresses of 100 U.S. service members, all with the intent to have them killed,” said Special Agent in Charge Anthony.  “We will remain vigilant in our efforts to stop those who wish to support these despicable acts.”

According to an affidavit filed in the case:

McNeil professed his support on social media on numerous occasions for the Islamic State of Iraq and Levant (ISIL), a designated foreign terrorist organization.

On or about Sept. 24, 2015, using a Tumblr account, McNeil reblogged a file with the banner “Islamic State Hacking Division,” followed by “Target: United States Military” and “Leak: Addresses of 100 U.S. Military Personnel.”

The file type is a .gif file, which allows multiple still images to be looped in one file, with a timed delay between each image.  The text of the first file reads “O Brothers in America, know that the jihad against the crusaders is not limited to the lands of the Khilafah, it is a world-wide jihad and their war is not just a war against the Islamic State, it is a war against Islam…Know that it is wajib (translated to “necessary”) for you to kill these kuffar! and now we have made it easy for you by giving you addresses, all you need to do is take the final step, so what are you waiting for? Kill them in their own lands, behead them in their own homes, stab them to death as they walk their streets thinking that they are safe…”

The file then loops several dozen photographs, purportedly of U.S. military personnel, along with their respective name, address and military branch.

The final image looped is a picture of a handgun and a knife with text that reads “…and kill them wherever you find them…”

A charge is not evidence of guilt.  It is the government’s burden to prove the case beyond a reasonable doubt, and a defendant is presumed innocent until that time.

The case is being investigated by the FBI’s Joint Terrorism Task Force in Cleveland.  This case is being prosecuted by U.S. Attorney’s Office of the Northern District of Ohio and the National Security Division’s Counterterrorism Section.

TWO FORMER TRADERS CONVICTED FOR ROLES IN MANIPULATING DOLLAR, YEN LIBOR INTEREST RATES

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, November 5, 2015

Two Former Rabobank Traders Convicted for Manipulating U.S. Dollar, Yen LIBOR Interest Rates

A federal jury convicted two former Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) derivative traders – including the bank’s former Global Head of Liquidity & Finance in London – today for manipulating the London InterBank Offered Rates (LIBOR) for the U.S. Dollar (USD) and the Yen, benchmark interest rates to which trillions of dollars in interest rate contracts were tied.  Five former Rabobank employees have now been convicted in the Rabobank LIBOR investigation.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division and Assistant Director in Charge Paul Abbate of the FBI’s Washington Field Office made the announcement.

“Today’s verdicts illustrate the department’s successful efforts to hold accountable bank executives responsible for this global fraud scheme,” said Assistant Attorney General Caldwell.  “This investigation—which also resulted in the recent conviction of a bank executive in the U.K.—exemplifies the department’s work with our international partners to protect our global markets from fraud.  The verdicts also demonstrate the department’s ongoing efforts to hold individuals who use their corporate positions to commit fraud personally responsible for their actions.”

“The department will continue to pursue aggressively those involved in illegal schemes that undermine the integrity of financial markets,” said Assistant Attorney General Baer.  “And we will hold individuals criminally accountable for directing illegal corporate behavior.”

“These convictions make clear that bank executives and traders will be held accountable for manipulating world interest rates for their own personal benefit,” said Assistant Director in Charge Abbate.  “Today’s verdict is a testament to the dedication of the special agents, analysts and prosecutors who worked tirelessly to uncover manipulation and fraud in the global financial system.”

After a four-week trial, a jury in the Southern District of New York found Anthony Allen, 44, of Hertsfordshire, England, and Anthony Conti, 46, of Essex, England, guilty of conspiracy to commit wire and bank fraud and substantive counts of wire fraud.

As the trial evidence showed, LIBOR is an average interest rate, calculated based upon submissions from leading banks around the world and reflecting the rates those banks believe they would be charged if borrowing from other banks.  At the time relevant to the charges, LIBOR was calculated for 10 currencies at 15 maturities, ranging from overnight to one year, and was published by the British Bankers’ Association (BBA), a London-based trade association, based on submissions from a panel of 16 banks, including Rabobank.  Allen, Conti and Paul Robson, who previously pleaded guilty to the conspiracy charge, each determined Rabobank’s LIBOR submissions on various occasions.

LIBOR serves as the primary benchmark for short-term interest rates globally and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products.  Rabobank invested in various derivatives contracts that were directly affected by the relevant LIBOR rates on a certain dates.  If the relevant LIBOR moved in the direction favorable to the defendants’ positions, Rabobank and the defendants benefitted at the expense of the counterparties.  When LIBOR moved in the opposite direction, the defendants and Rabobank stood to lose money to their counterparties.

Evidence at trial established that Allen, who was Rabobank’s global head of liquidity and finance and the manager of the company’s money market desk in London, oversaw a system in which Rabobank employees who traded in these LIBOR-linked derivative products influenced the employees who submitted Rabobank’s LIBOR contributions to the BBA.  These traders asked Allen, Conti, Robson and others to submit LIBOR contributions that would benefit the traders’ or the banks’ trading positions.

Sentencing is scheduled for March 10, 2016.

In addition to Allen and Conti, three other former Rabobank employees have been convicted in the Rabobank LIBOR investigation.  Robson, Lee Stewart and Takayuki Yagami each pleaded guilty to one count of conspiracy in connection with their roles in the scheme.  Two other former Rabobank employees, Tetsuya Motomura, 42, of Tokyo, and Paul Thompson, 48, of Dalkeith, Australia, have also been charged.  Rabobank entered into a deferred prosecution agreement with the department on Oct. 29, 2013, and agreed to pay a $325 million penalty to resolve violations arising from Rabobank’s LIBOR submissions.

The case was investigated by special agents, forensic accountants and intelligence analysts in the FBI’s Washington Field Office.  The prosecution is being handled by Senior Litigation Counsel Carol L. Sipperly and Assistant Chief Brian R. Young of the Criminal Division’s Fraud Section and Trial Attorney Michael T. Koenig of the Antitrust Division.  The Criminal Division’s Office of International Affairs and Deputy Chief Daniel Braun and Assistant Chief Brent Wible of the Criminal Division’s Fraud Section are thanked for their substantial assistance in this matter.

The Justice Department expresses its appreciation for the assistance provided by various enforcement agencies in the United States and abroad.  The Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the department and, along with the U.K. Financial Conduct Authority, played a major role in the LIBOR investigation.  The Securities and Exchange Commission also played a significant role in the LIBOR series of investigations, and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.   The department has worked closely with the Dutch Public Prosecution Service and the Dutch Central Bank in the investigation of Rabobank.  Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.

DOJ ANNOUNCES SHIPPING COMPANY, ENGINEERING OFFICERS CONVICTED OF ENVIRONMENTAL CRIMES AND OBSTRUCTION

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, November 10, 2015

Norwegian Shipping Company and Engineering Officers Convicted of Environmental Crimes and Obstruction of Justice

A federal jury in Mobile, Alabama, has convicted Det Stavangerske Dampskibsselskab AS (DSD Shipping) and three employees with obstructing justice, violating the Act to Prevent Pollution from Ships (APPS), witness tampering and conspiracy, announced Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division and U.S. Attorney Kenyen R. Brown of the Southern District of Alabama.  DSD Shipping is a Norwegian-based shipping company that operates crude oil tankers, including the M/T Stavanger Blossom.  Also convicted at trial were three senior engineering officers, Bo Gao, Xiaobing Chen and Xin Zhong, employed by DSD Shipping to work aboard the vessel.  A fourth employee, Daniel Paul Dancu, pleaded guilty in October.

The operation of marine vessels, like the M/T Stavanger Blossom, generates large quantities of waste oil and oil-contaminated waste water.  International and U.S. law requires that these vessels use pollution prevention equipment, known as an oily-water separator, to preclude the discharge of these materials.  Should any overboard discharges occur, they must be documented in an oil record book, a log that is regularly inspected by the U.S. Coast Guard.

“We will not tolerate the continued use of the world’s oceans as a dumping ground for contaminated waste,” said Assistant Attorney General Cruden.  “These defendants deliberately and egregiously violated the law and fouled the marine environment by dumping waste, then tried to cover it up with false records.  We hope this conviction sends a strong message to shippers worldwide that this activity must end, and we will vigorously prosecute those who continue this criminal behavior.”

“I am pleased with the record of this office in pursuing environmental crimes,” said U.S. Attorney Brown. “We will continue to prosecute corporations and individuals to protect our resources here along the Gulf Coast as well as around the World.  We need to ensure that all foreign vessels and corporations comply with U.S. Coast Guard Examinations to ensure these resources are protected.”

“The oceans cannot be used as dumping grounds,” said Acting Special Agent in Charge Andy Castro of the Environmental Protection Agency’s (EPA) criminal enforcement program in Alabama.  “The defendants in this case falsified entries in their vessel’s log books to hide the true nature of its open water discharges.  Today’s guilty verdict by a jury should serve as a warning to would-be violators that the American people will not allow the flagrant violation of U.S. laws.”

“This case shows the importance of interagency cooperation and how working together can keep our nation's waterways cleaner and safer for all,” said U.S. Coast Guard Admiral David R. Callahan.  “I commend the U.S. Attorney's Office, the Department of Justice, as well as Customs and Border Protection for their diligence in this case.  This case is a prime example of the Act to Prevent Pollution from Ships working as it was intended.  The Coast Guard is committed to working with our partners to enforce regulations and hold any violators accountable.”

“CGIS is dedicated to holding those individuals and Corporations accountable who violate United States and International law,” said Resident Agent in Charge John Allen with the U.S. Coast Guard Investigative Service (CGIS).  “CGIS will vigorously prosecute anyone who presents false documents to the U.S. Coast Guard or obstructs vessel examinations performed by the U.S. Coast Guard.”

The evidence presented during the two-week trial demonstrated that in January 2010, DSD Shipping knew that the oily-water separator aboard the M/T Stavanger Blossom was inoperable.  In an internal corporate memo, DSD Shipping noted that the device could not properly filter oil-contaminated waste water and stated that individuals “could get caught for polluting” if the problem was not addressed.  Rather than repair or replace the oily-water separator, however, DSD Shipping used various methods to bypass the device and force the discharge of oily-wastes into the ocean.  During the last months of the vessel’s operation prior to its arrival in the Port of Mobile, the M/T Stavanger Blossom discharged approximately 20,000 gallons of oil-contaminated waste water.

The evidence at trial also established that DSD Shipping employees intentionally discharged fuel oil sludge directly into the ocean.  Specifically, crewmembers cleaned the vessel’s fuel oil sludge tank, removed approximately 264 gallons of sludge and placed the waste oil into plastic garbage bags.  After hiding the sludge bags aboard the ship from port authorities in Mexico, defendants Chen and Zhong ordered crewmembers to move as many as 100 sludge bags to the deck of the vessel.  There, Zhong threw the sludge bags overboard directly into the ocean.

DSD Shipping, Dancu, Gao, Chen and Zhong, all attempted to hide these discharges from the U.S. Coast Guard by making false and fictitious entries in the vessel’s oil record book and garbage record book.  Further, after arriving in Mobile, Chen and Zhong lied to the U.S. Coast Guard about the discharge of sludge and ordered lower ranking crewmembers to do the same.

At the conclusion of trial, DSD Shipping was convicted of one count of conspiracy, three counts of violating APPS, three counts of obstruction of justice and one count of witness tampering.  Defendant Gao was convicted of one count of conspiracy and two counts of obstruction of justice.  Defendant Chen was convicted of one count of violating APPS, three counts of obstruction of justice and one count of witness tampering.  Finally, Zhong was convicted of two counts of violating APPS, two counts of obstruction of justice and one count of witness tampering.  DSD Shipping could be fined up to $500,000 per count, in addition to other possible penalties.  Gao, Chen and Zhong face a maximum penalty of 20 years in prison for the obstruction of justice charges

This case was investigated by the U.S. Coast Guard Sector Mobile, U.S. Coast Guard District Eight, CGIS and the EPA, Criminal Investigations Division.  Assistant U.S. Attorney Michael D. Anderson, with the U.S. Attorney’s Office for the Southern District of Alabama, and the Department of Justice’s Environmental Crimes Section Trial Attorney Shane N. Waller prosecuted the case.

FORMER DOD CONTRACTOR PLEADS GUILTY FOR ROLE IN KICKBACK CASE

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, November 4, 2015

Former Department of Defense Contractor Pleads Guilty to Soliciting and Receiving Kickback Proceeds Related to U.S. Government Contract

The former director of operations of a Department of Defense contracting company in Washington, D.C., pleaded guilty today to soliciting and receiving $193,665 in kickback proceeds in return for steering U.S. government subcontracts to a U.K. company, announced Assistant Attorney General Leslie R. Caldwell of the Criminal Division and U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

Robert W. Gannon, 54, of Bangkok, pleaded guilty to a one-count criminal information charging him with conspiracy to solicit and accept kickbacks.  Gannon will be sentenced on Jan. 28, 2016.

According to his plea agreement, Gannon’s job responsibilities included identifying, evaluating and monitoring subcontracts.  Gannon admitted that he used his position to arrange with executives of a U.K.-based company that they would make kickback payments to Gannon in return for a series of purchase orders Gannon’s company awarded in August 2009 with a total value of nearly $6 million.  Those orders called for the provision of explosive ordinance disposal equipment to U.S. and NATO forces in Afghanistan.  In return for his efforts, Gannon admitted that the U.K. company wired funds with a total value of almost $200,000 from bank accounts in the United Kingdom to Gannon’s account in Singapore.

The case is being investigated by the FBI, the Defense Criminal Investigative Service and the Special Inspector General for Afghanistan Reconstruction.  The Criminal Division’s Office of International Affairs and the City of London Police provided significant assistance.  The case is being prosecuted by Trial Attorney Wade Weems of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mark Lytle of the Eastern District of Virginia.

DOJ ANNOUNCES THREE CHARGED FOR SELLING FAKE NATIVE AMERICAN MADE JEWELRY

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, October 29, 2015

Three New Mexicans Charged with Fraudulently Selling Filipino-Made Jewelry as Native American-Made

Sixteen Search Warrants Executed in New Mexico and California as Part of Continuing Investigation into Alleged Violations of the Indian Arts and Crafts Act

Three New Mexicans have been charged with violating the Indian Arts and Crafts Act (IACA) by conspiring to import and fraudulently sell Filipino-made jewelry as Native American-made.  The indictment charging the three defendants is the result of an ongoing federal investigation led by the U.S. Fish and Wildlife Service into an international scheme to violate the IACA that included a law enforcement operation yesterday during which 16 search warrants were executed in New Mexico and California and related investigative activity took place in the Philippines.

The IACA prohibits the offer or display for sale, or the sale of any good in a manner that falsely suggests that it is Indian produced, an Indian product, or the product of a particular Indian and Indian tribe.  The law is designed to prevent products from being marketed as “Indian made,” when the products are not, in fact, made by Indians.  It covers all Indian and Indian-style traditional and contemporary arts and crafts produced after 1935 and broadly applies to the marketing of arts and crafts by any person in the United States.  IACA provides critical economic benefits for Native American cultural development by recognizing that forgery and fraudulent Indian arts and crafts diminish the livelihood of Native American artists and craftspeople by lowering both market prices and standards.

“American Indian and Alaska Native people have contributed tremendously to the cultural and artistic heritage of our nation and they have an important future that must be protected,” said Acting Associate Attorney General Stuart F. Delery.  “This case demonstrates our willingness to prosecute those who falsely market products as ‘Indian Made’ and thus undermine the livelihoods of Native American artists and craftspeople, many of whom are responsible for carrying precious spiritual and artistic knowledge from one generation to another.”

“The indictment announced today and yesterday’s enforcement operation are not only about enforcing the law but also about protecting and preserving the cultural heritage of Native Americans,” said U.S. Attorney Damon P. Martinez for the District of New Mexico.  “The cultural heritage of American Indians is a precious national resource and it is critically important that we provide the proper respect to those whose creations are seen by some as simple retail commodities to be exploited for profit.”

“As Chairman of the Indian Arts and Crafts Board, U.S. Department of the Interior, I want to convey the Board’s deep appreciation for the outstanding leadership and contributions provided by the U.S Attorney’s Office for the District of New Mexico and the U.S. Fish and Wildlife Service, along with the other agency partners who participated in bringing this landmark enforcement action under the Indian Arts and Crafts Act,” said Chairman Harvey Pratt of the Indian Arts and Crafts Board.  “By requiring truth-in-marketing of Indian art and craftwork, the Act is intended to protect Native American artists and artisans who rely heavily on the production and sale of traditional and contemporary art and craftworks to provide their economic livelihood, preserve their rich heritage and pass along their unique culture from generation to generation.  Unfair competition from counterfeit Native American art and craftwork seriously erodes the sustainability, vitality and economic well-being of Indian tribes and their members and businesses.  The Act is also intended to protect the consumers who purchase Native American art, bringing much needed financial resources to Indian communities in the Southwest and across the country.  Eliminating the flow of counterfeit Native American art and craftwork provides a level playing field for the highly talented, dedicated, and hard-working producers of genuine Native American art.  We must protect these authentic American Treasures.”

“Under our 2012 cooperative agreement with the Indian Arts and Crafts Board, the U.S. Fish and Wildlife Service has investigated numerous potential violations of the Indian Arts and Crafts Act,” said Special Agent in Charge Nicholas E. Chavez for U.S. Fish and Wildlife Service’s Office of Law Enforcement for the Southwest Region.  “Our investigations primarily have focused on identifying fraudulent schemes where jewelry is marketed and sold as authentic Native American adornments to defraud tourists and other consumers.  Through these investigations, the U.S. Fish and Wildlife Service endeavors to protect and preserve the authenticity of jewelry produced by our country’s Native American artisans.”

The four-count indictment that was unsealed earlier today charges Nael Ali, 51, and Mohammad Abed Manasra, 53, both of Albuquerque, New Mexico, and Christina Bowen, 41, of Los Lunas, New Mexico, with conspiracy to violate IACA and three substantive violations of the Act.  Ali is the owner of two jewelry stores, Gallery 8 and Galleria Azul, in Albuquerque’s Old Town that purport to specialize in the sale of Native American jewelry.  Bowen was formerly employed as a store manager by Ali.  Manasra holds himself out as a wholesaler of Native American jewelry.

Ali was arrested in Albuquerque yesterday and Bowen surrendered to the U.S. Marshals Service this morning.  Both made their initial appearances in federal court in Albuquerque this morning and were released pending trial.  Manasra was arrested yesterday in La Habra, California, and will be transferred to the District of New Mexico to face the charges against him.  If convicted of the charges against them, the defendants each face a statutory maximum penalty of five years in prison and a $250,000.00 fine.  Charges in indictments are merely accusations and defendants are presumed innocent unless found guilty in a court of law.

During yesterday’s law enforcement operation and as part of the continuing investigation, federal agents executed 15 search warrants in New Mexico and one in California.  Eight of the search warrants were executed in Albuquerque including four at retail and wholesale jewelry businesses.  In addition, search warrants were executed at three jewelry stores in Gallup, three jewelry stores in Santa Fe and a jewelry production shop in Zuni.  Federal agents also executed a search warrant at a jewelry store in Calistoga, California.  Three federal seizure warrants also were executed on bank accounts in a Charlotte, North Carolina, bank and a San Francisco, California, bank.  In addition, the Philippines National Bureau of Investigations conducted a series of investigative interviews at two factories in Cebu City, Philippines.          

The case was investigated by the Office of Law Enforcement for the Southwest Region of the U.S. Fish and Wildlife Service with assistance from the FBI, Homeland Security Investigations (HSI), U.S. Marshals Service, DEA and New Mexico Department of Game and Fish.  The U.S. Fish and Wildlife Service’s Office of Law Enforcement for Region Eight and California Department of Fish and Wildlife provided support in Calistoga, California, and HSI provided support in La Habra, California.  The U.S. Fish and Wildlife Service Attaché for Southeast Asia and the Philippine National Bureau of Investigations provided support in Cebu City, Philippines.  Assistant U.S. Attorney Kristopher N. Houghton is prosecuting the case.

INVESTMENT ADVISOR SENTENCED TO PRISON FOR ROLE IN $9 MILLION INVESTMENT FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, November 4, 2015

Florida Investment Advisor Sentenced to 18 Months in Prison for Orchestrating $9 Million Investment Fraud Scheme

A Tampa, Florida, area investment advisor was sentenced to 18 months in prison today for perpetrating a $9 million investment fraud scheme involving Facebook stock.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney A. Lee Bentley III of the Middle District of Florida, Special Agent in Charge Paul Wysopal of the FBI’s Tampa Field Office and Inspector in Charge Ronald J. Verrochio of the U.S. Postal Inspection Service (USPIS) Miami Division made the announcement.

Gignesh Movalia, 40, a registered investment advisor, was also ordered by Chief U.S. District Judge Steven D. Merryday of the Middle District of Florida to pay $5,394,419 in restitution and to three years of supervised release following his prison sentence.  Movalia pleaded guilty on Aug. 13, 2015, to one count of investment advisor fraud.

In connection with his guilty plea, Movalia admitted that he founded OM Global Investment Fund LLC in 2009 and subsequently used the fund to defraud investors.  Specifically, in 2011 and 2012, Movalia raised more than $9 million from 130 investors by falsely claiming to have access to pre-initial public offering shares of Facebook Inc.  Rather than using this money to buy Facebook shares as promised, however, Movalia invested the money in other securities and concealed that fact from investors.  By September 2013 when it went into receivership, the OM Global Fund lost approximately $9 million, with $6 million of those losses as a result of the fraud scheme.

The case was investigated by the FBI and USPIS, with assistance provided by the U.S. Securities and Exchange Commission’s Miami Regional Office.  The case was prosecuted by Trial Attorney Andrew H. Warren of the Criminal Division’s Fraud Section.