Baltimore, Maryland – The U.S. Attorney’s Office for the District of Maryland has seized “http://pharmacywalmart.com” and “https://stromectol-ivermectin.com” which on June 16, 2021 resolved to “https://en.pharmacywalmart.com/buy-stromectol-usa.html.” The websites contained numerous uses of the legitimate Walmart trademarked logo and appears to attempt to mimic a legitimate Walmart website.  The fraudulent websites allegedly offers for sale a number of drugs for the experimental and unapproved treatment or prevention of COVID-19.  Instead, the domains were allegedly used to collect the personal information of individuals visiting the sites in order to use the information for nefarious purposes, including fraud, phishing attacks, and/or deployment of malware.  Individuals visiting the sites will now see a message that the site has been seized by the federal government and be redirected to another site for additional information.  These are the 12th and 13th COVID fraud related domain name seized by the Maryland U.S. Attorney’s Office and HSI.

The seizure of the domains name was announced by Acting United States Attorney for the District of Maryland Jonathan F. Lenzner and Special Agent in Charge James R. Mancuso of Homeland Security Investigations - Baltimore.

According to the affidavit filed in support of the seizure, the HSI Intellectual Property Rights Center (“IPRC”) and the HSI Cyber Crimes Center (“C3”) discovered an apparent fraudulent website, named “https://stromectol-ivermectin.com” which resolved to an internal webpage of “pharmacywalmart.com.”  A domain analysis conducted by HSI indicated that pharmacywalmart.com was created on November 4, 2019, from a registrant located in Russia.

The HSI Cyber Operations Officer (COO) noted the phone number “+1-718-475-90-88” on the pharmacywalmart.com website. While the location for the area code for this number is New York City, the format provided does not match that of a typical United States based phone number. Pharmacywalmart.com purports to offer for sale a number of drugs, including Stromectol (Ivermectin), Aralen (Chloroquine) and Kaletra (Lopinavir and Ritonavir), for the experimental and unapproved treatment or prevention of COVID-19.

As detailed in the affidavit filed in support of the seizure, Stromectol is the brand name of Ivermectin which is a prescription medication used to treat certain parasitic infections; Aralen is a brand name for chloroquine, most commonly used for the treatment and prevention of malaria; and Kaletra is the brand name of a combination of Lopinavir and Ritonavir which are prescription medications that are approved to treat human immunodeficiency virus 1 (HIV-1). None of those drugs are an approved preventative or treatment for COVID-19.  On the page offering Kaletra for sale, the subject domain name contained the following: “In 2020, after laboratory researches, it was found out that Kaletra shows positive results in a blockage of a COVID-19 viral replication.” The affidavit alleges that this statement is not supported by trials or the FDA.

Neither domain name is authorized by Walmart to use their intellectual property or offer their products for sale.  By seizing the sites, the government has prevented third parties from acquiring the names and using it to commit additional crimes, as well as prevented third parties from continuing to access the sites in their present form.

On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.             

Acting United States Attorney Jonathan F. Lenzner commended HSI for its work in this investigation.  Mr. Lenzner recognized the U.S. Food and Drug Administration’s Office of Criminal Investigations, the U.S. Postal Inspection Service and the Baltimore County Police Department for their assistance and thanked Assistant U.S. Attorneys Aaron S.J. Zelinsky and Sean R. Delaney, who are handling the case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit www.justice.gov/usao/md.

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Greenbelt, Maryland – U.S. District Judge Deborah K. Chasanow today sentenced former Baltimore City employee Gary Brown, Jr., age 38, of Baltimore, to 27 months in federal prison, followed by three years of supervised release, for conspiracy to commit wire fraud, two counts of conspiracy to defraud the United States, and for filing a false tax return.  Judge Chasanow also ordered Brown to pay restitution of $14,000.

The sentence was announced by United States Attorney for the District of Maryland Robert K. Hur; Special Agent in Charge Jennifer C. Boone of the Federal Bureau of Investigation, Baltimore Field Office; and Special Agent in Charge Kelly R. Jackson of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.

“As a public servant, Gary Brown should have placed the interests of Baltimore City residents above his own,” said United States Attorney Robert K. Hur. “Instead, Brown conspired with the former Mayor and others to line their own pockets and to avoid paying their taxes.  Baltimore City faces many pressing issues, and we need dedication and integrity from our public servants—not corruption—in order to solve them.  Law enforcement will continue to be vigilant for evidence of fraud and corruption, to ensure that our citizens receive the honesty and professionalism they deserve from government officials.” 

“Gary Brown displayed a flagrant abuse of power by deceiving and defrauding the public and the government for his own personal gain,” said Special Agent in Charge Jennifer Boone, of the FBI's Baltimore division. “We have no tolerance for public corruption and will continue to root out violations of the law. The sentence today is the result of a partnership with the IRS Criminal Investigation, Department of Labor OIG and the Baltimore City Inspector General's Office.”

“Rather than setting an example for the citizens of Baltimore, Brown demonstrated a blatant disregard for the law,” said IRS-CI Special Agent in Charge Kelly R. Jackson.  “Brown not only neglected to accurately report his income to the IRS but he also falsified tax documents on behalf of others, actions which erode the confidence in public officials as well as our tax system.”

According to Brown’s plea agreement, from approximately 2011 until December 2016, Gary Brown, Jr. worked as a legislative aide to then-Maryland State Senator Catherine Pugh.  Brown actively campaigned for Pugh’s reelection to the State Senate in 2014 and served as her campaign aide during her 2016 mayoral election campaign.  Following Pugh’s election and inauguration as mayor of Baltimore City in December 2016, Brown was hired as the Deputy Director of Special Events in the mayor’s office.  In December 2016, Brown was nominated by the Maryland Democratic Central Committee to fill the vacancy in the Maryland House of Delegates created by Pugh’s mayoral victory.  However, the Governor withdrew Brown’s nomination after he was indicted for election law violations in January 2017.

Brown was the sole owner and operator of Stricker Abstracting, LLC, and GB Abstracting, LLC, both Maryland companies that purported to be title-abstracting businesses, and GBJ Consulting, LLC, a Maryland consulting business.  Brown ran all three companies from his residences in Baltimore.  Brown also freelanced as a tax return preparer.  Between March 2011 until March 2019, Brown helped Pugh promote and sell the Healthy Holly books.  Brown oversaw the transportation and storage of the books, drafted invoices, and corresponded with purchasers.  Much of Brown’s work on Healthy Holly occurred during work hours while serving as Pugh’s legislative aide and mayoral staff member.  Brown was not an employee of Healthy Holly and received no salary or compensation until approximately mid-2016 when he started to get sales commissions.  None of his companies received compensation for services purportedly provided to Healthy Holly.

Brown Wire Fraud Conspiracy

According to Gary Brown’s plea agreement, from November 2011 until March 2019, he conspired with Catherine Pugh to fraudulently sell and distribute tens of thousands of Healthy Holly books.  Brown admitted that over that period they executed the scheme in three ways: by selling the books, keeping the money and not delivering the books; by providing books to purchasers, but later converting them to their own use at campaign events and government functions; and by reselling books that had previously been purchased and donated to the Baltimore City Public Schools. 

Brown Conspiracy with Pugh to Defraud the United States

Further, as detailed in his plea agreement, Brown cashed checks Pugh wrote to him from the Healthy Holly account, then used the cash to fund money orders, debit cards, and personal checks in the names of straw donors, which were then submitted to the Committee to Elect Catherine Pugh.  Brown also admitted that he cashed some of the Healthy Holly checks and gave the cash to Pugh.  To conceal the straw-donation scheme and avoid paying taxes that might result from the scheme, Pugh and Brown provided false information to the IRS regarding the purpose of the Healthy Holly checks.   

Brown and Wedington Conspiracy to Defraud the United States/Filing False Tax Returns

Brown and former Baltimore City employee Rosyln Wedington both admitted that they conspired to avoid tax withholdings from Wedington’s payroll checks while Wedington was the Executive Director of the Maryland Center for Adult Training (MCAT) and Brown was the Chairman of the Board of Directors.  Specifically, in 2013, Wedington’s salary was garnished due to outstanding student loan debt and medical bills.  In order to avoid further garnishments, Wedington asked Brown to take her “off payroll,” which meant that MCAT would no longer submit her name to the payroll service provider for the purpose of calculating taxes to be withheld from her salary.  Brown agreed to the arrangement and had MCAT make electronic deposits into his personal bank account in an amount that exceeded the annual salary owed to Wedington, creating the pretense that he was doing work for MCAT as an independent contractor.  Brown then wrote checks to Wedington and/or gave her cash equal to or greater than her salary, which was more than $80,000 per year.  No taxes were withheld from the funds Brown paid to Wedington, nor did her salary go through Wedington’s bank account, where it could be garnished.  In addition, Brown prepared fraudulent tax returns for Wedington for tax years 2013 through 2017, which did not report Wedington’s MCAT income and made a variety of false entries, resulting in refunds to which Wedington was not entitled and avoiding over $121,000 in total taxes due and owing.  Brown also filed a false individual income tax return for tax year 2016 for himself, which falsely listed the $64,325 of Healthy Holly payments as business income.  In addition, from 2016 through 2018, Brown worked part-time as a freelance tax preparer and charged a fee to prepare dozens of tax returns that he filed on behalf of his family, friends, and associates.  Brown included false information in all of those tax returns in order to obtain larger refunds for his customers.  The fraudulently obtained refunds totaled more than $100,000.

Judge Chasanow previously sentenced Catherine Elizabeth Pugh, age 69, of Baltimore, Maryland, to three years in federal prison, followed by three years of supervised release, on charges of conspiracy to commit wire fraud, conspiracy to defraud the United States, and two counts of tax evasion.  Judge Chasanow also ordered Pugh to pay $411,948 in restitution and to forfeit $669,688 including property on Ellamont Road in Baltimore and $17,800 from the Committee to Re-elect Catherine Pugh.

Roslyn Wedington, age 50, of Rosedale, Maryland, previously pleaded guilty to conspiracy to defraud the United States and to five counts of filing false tax returns.  Wedington faces a maximum sentence of five years in federal prison for conspiracy to defraud the United States, and three years in prison for each count of filing a false tax return.  Judge Chasanow has not yet scheduled sentencing for Wedington.

United States Attorney Robert K. Hur commended the FBI and the IRS Criminal Investigation for their work in the investigation and thanked the U.S. Department of Labor - Office of Inspector General, Office of Investigations - Labor Racketeering and Fraud, the Maryland State Prosecutor’s Office, and the Baltimore City Office of Inspector General for their assistance.  Mr. Hur thanked Assistant U.S. Attorneys Martin J. Clarke and Leo J. Wise, who are prosecuting the case.

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Baltimore, Maryland – U.S. District Judge Richard D. Bennett sentenced Reginald Alphonso Hopkins, age 52, of Prince George’s County, Maryland, today to two years in federal prison, followed by one year of home confinement as part of three years of supervised release, for a wire fraud conspiracy relating to the submission of fraudulent claims for the Paycheck Protection Program (“PPP”) benefits under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.  The CARES Act was a federal law enacted in March 2020 to provide emergency financial assistance to Americans suffering from the economic effects caused by the COVID-19 pandemic. 

The sentence was announced by Erek L. Barron, United States Attorney for the District of Maryland and Acting Special Agent in Charge R. Joseph Rothrock of the Federal Bureau of Investigation, Baltimore Field Office.

Financial assistance offered through the CARES Act included forgivable loans to small businesses for job retention and certain other expenses, through the Paycheck Protection Program, administered through the Small Business Administration (SBA).  The SBA also offered an Economic Injury Disaster Loan (EIDL) and/or an EIDL advance to help businesses meet their financial obligations.  An EIDL advance did not have to be repaid, and small businesses could receive an advance, even if they were not approved for an EIDL loan. The maximum advance amount was $10,000.

According to his plea agreement, Hopkins fraudulently obtained $1,007,224 in PPP funds and $9,000 in Economic Injury Disaster Loan funds for various purported businesses he controlled—a transportation business, a car sales business, and an assisted living facility.  He also attempted to fraudulently obtain more than $3,132,224 in PPP and EIDL funds.

As detailed in the statement of facts submitted as part of the plea agreement, between June 11, 2020 and March 23, 2021, Hopkins, with the assistance of a co-conspirator submitted fraudulent PPP loan applications for Prestige Executive Transportation, Prestige 24/7 Auto Sales & Services LLC (“Prestige 24/7”), and Prestige Assisted Living Inc. (“Prestige Assisted Living”), all businesses owned by Hopkins.  Each loan application contained multiple material misrepresentations, including as to the number of employees and average monthly payroll.  Fabricated IRS tax forms and bank records were also submitted in support of the loan applications.  In fact, IRS tax records reveal that none of the companies reported paying wages to any employees. 

Based on the fraudulent submissions, the PPP loans were funded.  Approximately $291,090 was distributed to Prestige Transportation’s bank account; approximately $294,771 was distributed to Prestige 24/7’s bank account; and approximately $421,363 was distributed to Prestige Assisted Living’s bank account.  All the bank accounts were controlled by Hopkins.  Hopkins agreed to pay the co-conspirator a kickback payment for his work in submitting the false applications.  Hopkins provided the co-conspirator: a check for  $58,000, approximately 20 percent of the PPP loan amount for the Prestige Executive Transportation loan; eight checks totaling $75,000 or 25 percent of the Prestige 24/7 loan; and five checks totaling $44,000 or approximately 10.5 percent of the Prestige Assisted Living loan.

Hopkins admitted that he spent the fraudulently obtained loan proceeds in various ways unrelated to job retention or other business expenses, including the $177,000 in kickbacks paid to the co-conspirator, providing PPP funds to various friends, family members, making large cash withdrawals for himself, and paying off various personal debts.  Hopkins also used $30,000 of the PPP funds to purchase an auto body repair shop called B&G Auto Repair LLC, for which he planned to obtain a fraudulent PPP loan.

In addition to obtaining the PPP loans discussed above, Hopkins also conspired with the co-conspirator to fraudulently obtain PPP loans for various other purported businesses, including Prestige Executive Protection Services, LLC, Prestige Paradise Promotions, LLC, Prestige Executive Protection Services II, LLC, Prestige Real Estate & Development, LLC, and B&G Auto Repair LLC.  Hopkins repeatedly sought the co-conspirator’s assistance in obtaining PPP loans for these entities, but the loans never closed. 

Hopkins further admitted that he caused to be submitted numerous fraudulent EIDL applications, including for Prestige Executive Transportation and Prestige Executive Protection Services II.  Both of those loans, as well as others, were ultimately declined, but Hopkins received an EIDL advance of $5,000 and $4,000, for Prestige Executive Transportation and Prestige Executive Protection Services II, respectively.

The District of Maryland Strike Force is one of five strike forces established throughout the United States by the U.S. Department of Justice to investigate and prosecute COVID-19 fraud, including fraud relating to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.  The CARES Act was designed to provide emergency financial assistance to Americans suffering the economic effects caused by the COVID-19 pandemic.  The strike forces focus on large-scale, multi-state pandemic relief fraud perpetrated by criminal organizations and transnational actors.  The strike forces are interagency law enforcement efforts, using prosecutor-led and data analyst-driven teams designed to identify and bring to justice those who stole pandemic relief funds. 

For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.  Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

United States Attorney Erek L. Barron commended the FBI for their work in the investigation and thanked the Baltimore County Police Department and the U.S. Small Business Administration – Office of Inspector General (“SBA-OIG”).  Mr. Barron thanked Assistant U.S. Attorney Paul Riley, who prosecuted the federal case.  Mr. Barron also recognized the assistance of the Maryland COVID-19 Strike Force Paralegal Specialist Joanna Huber.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit www.justice.gov/usao-md and https://www.justice.gov/usao-md/community-outreach.

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Baltimore, Maryland – U.S. District Judge Ellen L. Hollander today sentenced Phillip J. “Jamie” Harrington III, age 50, of Dorchester, Maryland, to one year of probation, to pay a $10,000 fine, a $5,000 special assessment, and to perform 100 hours of community service for unlawful employment of undocumented workers.  Judge Hollander sentenced Capt. Phip’s Seafood Inc. to three years of probation and to pay a $240,000 fine for visa fraud related to the employment of temporary workers employed at Harrington companies.  In addition, Judge Hollander ordered Harrington and Captain Phip’s seafood to participate in a verification program for their employees and were debarred from participating in the H-2B visa program.  The fines were paid today.

The sentences were announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge James R. Mancuso of Homeland Security Investigations (HSI) Baltimore; Special Agent in Charge Andrew Wroblewski of the Washington Field Office of the U.S. Department of State’s Diplomatic Security Service (DSS); and Acting Special Agent in Charge Troy Springer of the Washington Regional Office, U.S. Department of Labor - Office of Inspector General (DOL-OIG).

Philip J. Harrington, Jr. was Capt. Phip’s owner, President, and sole Director until his death on February 13, 2018. Since March 6, 2019, Capt. Phip’s has been owned and operated by Philip Harrington’s, son, Jamie Harrington.  The primary business of Capt. Phip’s is the production and distribution of ice as well as the processing of seafood. For more than a decade, Capt. Phip’s has participated in the H-2B work visa program through which it has obtained temporary foreign workers to fill seasonal positions.

According to the company’s guilty plea, from 2013 through 2018, Captain Phip’s Seafood Inc. routinely sought prevailing wage determinations for multiple job descriptions, and then filed petitions for H-2B visas for only the jobs with the lowest prevailing wage, regardless of the actual work duties of the employees.  The H-2B Visa Program is a temporary non-agricultural worker program in which an employer may seek temporary authorization for foreign workers to legally enter and work in the U.S.  To obtain an H-2B Visa, the U.S. Department of Labor (DOL) must ensure the positions have been advertised to U.S.-based workers and assign the appropriate wage to be paid (“prevailing wage”) based on the job description.

As stated in the plea agreement, Captain Phip’s willfully submitted false and inaccurate job descriptions to obtain lower prevailing wages for its foreign workers.  Capt. Phip’s omissions about the full scope of the job duties to be performed by its temporary foreign workers resulted in the DOL approving Capt. Phip’s to pay lower prevailing wage than it would have been authorized if Capt. Phip’s had provided truthful information.

For example, in 2016, Capt. Phip’s requested and received prevailing wage determinations for three position: ice conveyor operators with a prevailing wage of $12.51; oyster production workers with a prevailing wage of $16.96; and ice machine operators (ice production workers) with a prevailing wage of $11.10. Capt. Phip’s then filed a petition for ice production workers with the U.S. Citizenship and Immigration Services (USCIS). The petition was approved and the Department of State (DOS) issued 24 H-2B visas to non-immigrant Mexican nationals authorizing them to work for Capt. Phip’s as ice production workers in the United States.  Once the Mexican ice production workers entered the United States, Capt. Phip’s used these workers for jobs beyond ice production, including for oyster processing, as maintenance workers, truck drivers and drivers’ assistants.  Capt. Phip’s admits that it intentionally and falsely claimed that the foreign workers would only be engaged in ice production in order to pay them the lower prevailing wage.  Had Capt. Phip’s truthfully filed for H-2B visas for many of these duties, these employees would have been entitled to a higher wage.

As stated in the company’s plea agreement, on August 31, 2017, a USCIS officer and government agents conducted a site visit at Capt. Phip’s location in Secretary, Maryland. At that time, Capt. Phip’s H-2B workers were authorized only to engage in oyster production work. During the site visit, three H-2B visa beneficiaries were interviewed through an interpreter and indicated that their current duties involved ice packing duties rather than oyster production work.

A USCIS officer and agents also interviewed Phillip Harrington, Jr., who signed all the H2-B visa petitions for Capt. Phip’s and his son, Jamie Harrington, who identified himself as the Vice President of Capt. Phip’s, responsible for “running the business,” to include the buying and selling of product, managing the levels of product, and hiring and/or firing. Jamie Harrington admitted that all of Capt. Phip’s H-2B workers were packing ice, and none of them were currently processing any oysters. The workers’ H-2B visas for 2017 only permitted them to work in oyster processing. Jamie Harrington admitted that Capt. Phip’s visa petitions should have been for workers for both ice and oyster processing.

During the August 31, 2017 interview, Jaime Harrington stated that he was also the President of Easton Ice Company, Inc. (“Easton Ice”).  The principal office for Easton Ice is the same physical address as Capt. Phip’s premises in Secretary, Maryland.   A subsequent interview of a recipient of multiple H-2B visas filed by Capt. Phip’s including in 2017, when the H-2B workers were only authorized for oyster processing, revealed that their duties that season were to drive a truck and deliver ice. In September 2017, an agent observed this person driving a truck bearing the name “Easton Ice.” The agent also saw another Capt. Phip’s H-2B recipient delivering ice and riding in the truck. Easton Ice did not apply for H-2B visas in 2017, and workers with H-2B visas obtained through Capt. Phips were not authorized to work for Easton Ice Company. Nevertheless, Jamie Harrington admitted that Capt. Phip’s H-2B visa recipients were routinely directed to perform work for Easton Ice and other businesses controlled by Philip and Jamie Harrington.

On August 9, 2018, government agents interviewed Jamie Harrington at Capt. Phip’s premises in Secretary, Maryland. Jamie Harrington admitted that the company was not in compliance with the requirements of the H-2B visa program and that some of Capt. Phip’s H-2B workers were driving trucks or performing other duties outside the scope of their visas, including performing work for other companies controlled by Philip and Jamie Harrington, including Easton Ice, Woodfield Ice Company, Inc. (“Woodfield Ice”), as well as two Ocean City, Maryland, motels owned by members of the Harrington family.  Agents pointed out to Jamie Harrington that if the H-2B applications had been truthful about the location and job duties for workers at Woodfield Ice the prevailing wage would have been much higher because that business is in the Washington, D.C. metro area.

Between approximately 2013 and 2018, Capt. Phip’s filed petitions for H-2B visas for approximately 142, nonimmigrant workers.  Capt. Phip’s officers involved in the H-2B process were aware that the nonimmigrant workers were intended to be employed to engage in work beyond the job descriptions authorized by the workers’ visas.  Capt. Phip’s realized unlawful benefits through the use of fraudulently low prevailing wages between April 2013 to December 2018, although the exact amount cannot be determined. Capt. Phip’s has not participated in the H-2B visa program since at least January 2019.

Jamie Harrington is also the owner and operator of multiple other businesses involved the production and distribution of ice as well as processing of seafood, rental machinery, housing development, oyster farming, and other ventures including: Easton Ice; Woodfield Ice; PJH Oyster; Two Sons R.S., LLC; Philson Properties, LLC; Two Sons C.P. LLC; P&N Farms; Atlantic Rental, LLC; DMS Hurlock, LLC; The Preserve at Wright’s Wharf Homeowners Association; and Super Transporter, LLC. (together with Capt. Phip’s, the “Harrington Companies.”

Harrington admitted in his plea agreement that, beginning in 2013 and continuing through at least August 9, 2018, he engaged in a pattern and practice of hiring and employing workers without lawful immigration status at the Harrington Companies. Most of the unauthorized workers were Mexican citizens and nationals. Some of the undocumented workers Jamie Harrington hired and employed entered the United States lawfully and overstayed their visas, others never had lawful status to be present in the United States. Analysis of payroll and other records shows that approximately 89 undocumented workers were employed by the Harrington Companies between 2013 and 2018. Harrington continued to employ several of the workers even after he knew they had been placed into removal proceedings by immigration officials because they did not have lawful status to be present or working in the United States.

United States Attorney Erek L. Barron commended HSI, DSS, and DOL-OIG for their work in the investigation and thanked the Baltimore District Office of the U.S. Department of Labor’s Wage and Hour Division for its assistance.  Mr. Barron thanked Assistant U.S. Attorney Judson T. Mihok, who prosecuted the case.

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Baltimore, Maryland – Lawrence A. Walker, age 63, of Baltimore, Maryland, pleaded guilty yesterday to conspiracy to commit wire fraud, for fraudulently obtaining more than $262,000 through the Paycheck Protection Program (“PPP”), intended to provide financial assistance to small businesses under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. 

The guilty plea was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; and Chief Robert McCullough of the Baltimore County Police Department.

According to the plea agreement, from March 2021 through December 2021, Walker and a co-conspirator engaged in a scheme to fraudulently obtain a PPP loan for Walker’s business, Nutscola Street Promotions, LLC (“Nutscola”).  Walker was the owner and resident agent, but Nutscola had no employees at the time and was not in operation.

As detailed in the plea agreement, on March 21, 2021, Walker and his co-conspirator submitted a PPP loan application that contained multiple misrepresentations, including that Nutscola had 13 employees and an average monthly payroll of $104,900.87.  Walker and his co-conspirator fabricated a tax form and a February 2020 bank statement purportedly from Nutscola’s business account which were submitted in support of the loan application.  Walker opened the Nutscola bank account on March 6, 2021, as part of the fraud scheme.

Based on the false representations and fraudulent documentation, the PPP loan was funded and approximately $262,252 in loan proceeds was distributed to the Nutscola bank account.  After receiving the loan proceeds, Walker provided his co-conspirator with a kickback for his work in obtaining the loan—two checks totaling $78,000, which was approximately 30% of the loan amount.

Walker and his co-conspirator knew that, under the PPP rules, interest and principal on a PPP loan were eligible for forgiveness, if the business spent the loan proceeds on permissible items within a designated period of time and used a certain portion of the loan toward payroll expenses.  To make it appear that the PPP loan funds were being used for legitimate purposes, on March 30, 2021, Walker signed an agreement with a payroll processor to provide payments using the PPP funds to purported employees of Nutscola, including Walker, his brother, and various other friends and associates.  Use of the payroll services also created documentation that could be used to substantiate a request for the PPP loan to be forgiven.

According to the plea agreement, a total of $159,000 in sham payroll payments were made using funds traceable to the PPP loan obtained by Walker and Nutscola.  None of the purported employees were actually employed by Nutscola and several of the purported employees provided the funds directly back to Walker.  Walker used the loan proceeds to purchase a Mercedes-Benz automobile valued at more than $76,000 and to lease and fully furnish a luxury apartment in downtown Baltimore that overlooked Camden Yards baseball stadium.  Neither use of the funds was permissible under PPP rules.

On December 31, 2021, Walker’s co-conspirator also fraudulently applied for an Economic Injury Disaster Loan (EIDL) under the CARES Act on behalf of Walker and Nutscola.  The fraudulent EIDL loan did not close.

On April 26, 2022, law enforcement executed a federal search warrant at Walker’s residence and seized multiple electronic devices, including Walker’s phone, as well as over $30,000 in cash hidden in a garbage bag inside a heater in Walker’s bedroom.  The $30,000 in cash constituted fraudulently obtained PPP funds.



Walker has made no payments in connection with the PPP loan obtained for Nutscola, and the entire PPP loan amount of $262,252 remains outstanding.  As part of his plea agreement, Walker must forfeit the cash seized during the search, the Mercedes-Benz, and pay a money judgment of $262,252.  Walker must also pay restitution of $262,252.



Walker faces a maximum sentence of 20 years in federal prison for the wire fraud conspiracy.   U.S. District Judge Richard D. Bennett has scheduled sentencing for October 31, 2023.



The District of Maryland Strike Force is one of three strike forces established throughout the United States by the U.S. Department of Justice to investigate and prosecute COVID-19 fraud, including fraud relating to the CARES Act.  The CARES Act was designed to provide emergency financial assistance to Americans suffering the economic effects caused by the COVID-19 pandemic.  The strike forces focus on large-scale, multi-state pandemic relief fraud perpetrated by criminal organizations and transnational actors.  The strike forces are interagency law enforcement efforts, using prosecutor-led and data analyst-driven teams designed to identify and bring to justice those who stole pandemic relief funds.  



For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.  Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

United States Attorney Erek L. Barron commended the FBI and the Baltimore County Police Department for their work in the investigation and thanked the Small Business Administration Office of Inspector General for its assistance.  Mr. Barron thanked Assistant U.S. Attorney Paul A. Riley, who is prosecuting the case.  He also recognized the assistance of the Maryland COVID-19 Strike Force Paralegal Specialist Joanna B.N. Huber. 

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit www.justice.gov/usao/md.

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Greenbelt, Maryland – U.S. District Judge George J. Hazel sentenced former U.S. Postal Service (USPS) letter carrier James Thomas Woodland, age 49, of Temple Hills, Maryland, to four years in prison, followed by three years of supervised release, for conspiracy to distribute and possess with intent to distribute more than five kilograms of cocaine.  The sentence was imposed on November 19, 2018.

The sentence was announced by United States Attorney for the District of Maryland Robert K. Hur; Postal Inspector in Charge Peter R. Rendina of the U.S. Postal Inspection Service (USPIS) - Washington Division; Special Agent in Charge Paul L. Bowman of the U.S. Postal Service, Office of Inspector General; and Chief J. Thomas Manger of the Montgomery County Police Department.

According to his plea agreement, from at least September 2016 through April 25, 2017, Woodland delivered drug-laden parcels coming from Nevada and California through the U.S. Mail, to his co-conspirators.  On April 21, 2017, the U.S. Postal Inspection Service identified several USPS Priority Mail parcels which were suspected to contain illegal narcotics.  On April 24, 2017, after a drug-detection canine positively alerted to the parcels, Inspectors obtained a warrant to search them.

Five of the parcels were addressed to five separate locations in Bethesda, Maryland, that were on the postal route assigned to Woodland.  None of the names listed on the parcels were associated with the addresses on the parcels.  Upon execution of the search warrant, Inspectors discovered that each of the parcels contained approximately one kilogram of cocaine. Each parcel was packaged the same, including a light-blue wax covering with a candle wick and the word “King’s” or the shape of a shamrock stamped into the vacuum-sealed cocaine brick.  The estimated street value of the cocaine was $187,600.

As detailed in Woodland’s plea agreement, postal records confirm that the drug parcels Woodland intercepted often had the same or similar characteristics as the parcels that were interdicted on April 21, 2017.  To alert Woodland that parcels were being sent, Woodland’s co-conspirators typically sent Woodland a text message containing (in whole or part) the address on Woodland’s route and/or a fictional name (i.e., a name not associated with the address on Woodland’s route).  Woodland admitted that when the parcel(s) arrived at the Bethesda Post Office for delivery, he retrieved the parcel(s), notified his co-conspirators by call or text message that he had the parcel(s), marked the parcel(s) as “delivered” using his USPS scanner, and then redirected the parcel(s) to his co-conspirators.                    

United States Attorney Robert K. Hur praised the U.S. Postal Inspection Service, the U.S. Postal Service, Office of Inspector General, and the Montgomery County Police Department for their work in the investigation.  Mr. Hur thanked Assistant U.S. Attorneys Ray D. McKenzie and Timothy F. Hagan, who prosecuted the case.

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URBANA, Ill. – Lekevie C. Johnson, 47, formerly of the 2000 block of Clayton Boulevard in Champaign, Illinois, pleaded guilty on December 1, 2022, to Federal Program Misapplication, Student Loan Misapplication, and False Statement in Bankruptcy. Sentencing for Johnson has been scheduled on April 10, 2023, at the U.S. Courthouse in Urbana, Illinois.

In court before U.S. Magistrate Judge Eric I. Long, Johnson admitted that he was formerly the pastor of Mount Calvary Missionary Baptist Church, formerly known as Jericho Missionary Baptist Church, on Bloomington Road in Champaign. Between 2012 and 2019, he operated a not-for-profit corporation, Life Line Champaign, Inc., which received federal grant funds from the United States Department of Housing and Urban Development, through the City of Champaign, to provide summer enrichment programs for low-income students in the Garden Hills neighborhood where the church was located. Johnson admitted misapplying $25,700.74 of HUD program grant funds for his own benefit, including by making numerous ATM cash withdrawals at various casinos.

Johnson also admitted that he had obtained federal student loans between 2017 and 2019 to attend Liberty University’s online Master of Arts program. Prior to receiving the loans, Johnson certified that he would use the loans only for authorized educational expenses. Nonetheless, Johnson used $31,291.62 of the loans for various non-educational expenses, including to gamble at casinos.

Finally, Johnson admitted to committing bankruptcy fraud. On January 31, 2020, Johnson and his wife filed for Chapter 7 bankruptcy in the Central District of Illinois. In his petition, Johnson claimed that he received only $42,900 from his church in 2019, even though he received tens of thousands of additional monies from the church that year. On March 5, 2020, Johnson testified under oath at a bankruptcy hearing that he had disclosed all the payments he received from the church and had no control over the church’s finances. In fact, Johnson controlled the church’s finances and had received tens of thousands of dollars in payments from the church that he had not disclosed in bankruptcy.

Johnson was released on bond pending sentencing.

For Federal Program Misapplication, Johnson faces statutory penalties of a maximum ten-year term of imprisonment, a maximum $250,000 fine, and a maximum three-year term of supervised release. For Student Loan Misapplication and False Statement in Bankruptcy, Johnson faces separate statutory penalties of a maximum five-year term of imprisonment, a maximum $250,000 fine, and a maximum three-year term of supervised release.

The case investigation was conducted by the Federal Bureau of Investigation, Springfield Field Office; Department of Housing and Urban Development—Office of Inspector General; and the Department of Education – Office of Inspector General. The U.S. Trustee for Region 10 referred the alleged bankruptcy fraud to the U.S. Attorney’s Office. The U.S. Trustee Program is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws. Region 10 is headquartered in Indianapolis, with additional offices in South Bend, Indiana, and Peoria, Illinois.

Supervisory Assistant U.S. Attorney Eugene L. Miller is representing the government in the prosecution.

Baltimore, Maryland –Keon Ball, age 45, of Baltimore, Maryland, pleaded guilty today to wire fraud conspiracy and aggravated identity theft in relation to multiple identity theft schemes and fraud schemes—including schemes conducted while on probation after a past state fraud conviction and while on pre-trial release in connection with state fraud charges.  As part of his plea agreement, Ball will be ordered to pay at least $715,504 in restitution. 

The guilty plea was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Bo Keane of the United States Secret Service - Baltimore Field Office; and Chief Melissa R. Hyatt of the Baltimore County Police Department. 

According to his guilty plea, from May 2018 to June 2020, Ball and a co-conspirator incurred charges of over $1,000,000 on fraudulently established credit lines, using the identities of at least 10 victims in connection with the schemes.  For example, on August 25, 2018, Ball submitted a false and fraudulent application for a credit line account from a financial institution using the name, birth date, and social security number of Victim 1.  After the credit application was approved, Ball and his co-conspirator incurred $105,442.59 in purchases from Company 1 (a home improvement store) under the identity of Victim 1.  Ball and his co-conspirator did likewise multiple other times afterward, incurring charges of over $150,000 in connection with lines of credit opened using various other victims’ names—none of which was repaid.  Ball and his co-conspirator also repeatedly passed fraudulent checks to Company 1 purporting to pay the balances they incurred.  

Further, as part of their scheme to defraud, Ball and his co-conspirator obtained two vehicles valued at over $60,000 and multiple pieces of heavy construction equipment valued at over $30,000 using the identity information of Victim 2.

As stated in his plea agreement, on February 5, 2019, law enforcement executed a search and seizure warrant on Ball’s luxury high rise in Baltimore where law enforcement seized multiple counterfeit identification documents including three fraudulent licenses, a card reader, re-encoder, bank white plastic card stock, hologram overlays, and a firearm which Ball was prohibited from possessing.  Investigators also discovered that Ball leased the apartment using a counterfeit identification document and the identifying information of another identity theft victim.  Law enforcement would also go on to recover multiple pieces of the fraudulently obtained heavy equipment.  Ball was subsequently arrested and charged on a state level in connection with the fraudulent credit line scheme then was released on conditions. 

As stated in the plea agreement, despite his pending state charges, Ball was not deterred and his fraudulent activity continued.  In June and July 2020, Ball submitted fraudulent CARES Act Paycheck Protection Program loan applications (PPP loans) and obtained $256,664 in government-backed PPP funds for purported businesses that did not exist in any legitimate capacity.  Included with each application was a document purporting to be a 2019 IRS Form W-3 Transmittal of Wage and Tax Statements which was in fact not legitimate and contained false information concerning purported wages paid and purported number of employees of each business.  Each application also falsely affirmed that Ball was not on probation in light of a past conviction at the time of each application.  The PPP funds were then deposited in a bank account that Ball had opened using the identity information of another victim.  

Ball also started the PPP loan application process for two additional fraudulent PPP loans from Bank 1 in the amounts of $113,258 and $231,078.000 for purported businesses he ran. These loans, however, ultimately did not close. 

In total, Ball caused a loss of $750,000 and intended losses of over $1,450,000 and used the identifying information of more than 10 victims in connection with his schemes. 

On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud.  The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts.  For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

The Pandemic Response Accountability Committee (PRAC) Fraud Task Force was established to serve the American public by promoting transparency and facilitating coordinated oversight of the federal government’s COVID-19 pandemic response.  The PRAC Fraud Task Force brings together agents from its 22 member Inspectors General to investigate fraud involving a variety of programs, including the Paycheck Protection Program.  Task force agents who are detailed to the PRAC receive expanded authority to investigate pandemic fraud as well as tools and training to support their investigations.

Ball faces a maximum sentence of twenty years in federal prison for wire fraud conspiracy and a mandatory consecutive two years in federal prison consecutive to any sentence imposed for aggravated identity theft. U.S. District Judge Deborah K. Chasanow has scheduled sentencing for July 22, 2022, at 11:30 a.m.

United States Attorney Erek L. Barron commended the USSS and the BCPD for their work in the investigation. Mr. Barron thanked Assistant U.S. Attorney Paul A. Riley, who is prosecuting the case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit https://www.justice.gov/usao-md and https://www.justice.gov/usao-md/community-outreach.  For more information on identity theft and fraud, please visit https://www.justice.gov/usao-md/report-fraud. 

 

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Baltimore, Maryland – A federal grand jury has returned a superseding indictment charging four Baltimore County residents for conspiracy and for engaging in the business of dealing firearms without a license, including privately-made firearms.  Charged in the superseding indictment are:  Tyjae Bladen, age 21, of Parkville, Maryland; Brian Brownell, a/k/a “Cole,” age 31, of Dundalk, Maryland; Maurice Dacosta, a/k/a “Jr,” age 24; and Cameron Taylor, a/k/a “Chino,” age 21, both of Parkville, Maryland.  Bladen and Taylor are also charged with illegal possession of machineguns.  The indictment was returned on March 22, 2022, and unsealed yesterday upon the arrest of Brownell.  Bladen and Taylor were charged in the original indictment and remain on pre-trial release.  Dacosta is detained on unrelated charges in Baltimore County.

Brownell and Dacosta each had an initial appearance today U.S. District Court in Baltimore.  Brownell was ordered to be detained pending a detention hearing scheduled for March 31, 2022 at 11:30 a.m.

The superseding indictment was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Toni M. Crosby of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Baltimore Field Division; Chief Melissa R. Hyatt of the Baltimore County Police Department, and Commissioner Michael Harrison of the Baltimore Police Department.

According to the 17-count superseding indictment, the defendants sold registered, as well as privately-made firearms (PMF), sometimes called ghost guns, which are firearms that lack any identifiable markings.  A PMF can be manufactured using do-it-yourself kits sold by several companies.  A machinegun conversion device, sometimes referred to as a “switch,” is used to convert a semiautomatic Glock-type pistol to fire fully automatic.  Firearms and machinegun conversion devices may also be built by using a 3D printer to create the firearm and machinegun conversion device’s component parts.  None of the defendants had a federal firearms license nor were they authorized to transport, manufacture, or deal in firearms. 

According to the superseding indictment, the defendants acquired firearms parts to be built into firearms and sold.  Dacosta, Taylor, and Bladen are also alleged to have acquired do-it-yourself kits to be built into firearms and machinegun conversion devices to sell for a profit, as well as using a 3D printer to create firearms and machinegun conversion devices. 

As detailed in the superseding indictment, between October 4, 2021 and January 4, 2022, Dacosta, Brownell, Bladen, and Taylor allegedly sold an undercover officer (UC) a total of 24 firearms, including 20 ghost guns; two confirmed and eight suspected machine gun conversion devices—several that were 3D printed; magazines; and ammunition.  The four ghost guns sold by Brownell were AR-15 firearms.

After Dacosta was arrested in Baltimore County on November 9, 2021 on unrelated charges, he allegedly instructed Bladen to continue selling firearms to the UC.  The superseding indictment alleges that Bladen met with the UC on November 22, 2021 to sell him a firearm, but the firearm did not work.  Bladen continued to communicate with the UC and allegedly arranged to sell the UC three switches and a firearm for $6,500.  The superseding indictment alleges that on December 13, 2021, Bladen drove Taylor to the meeting location, where Taylor sold the UC a 9x19mm caliber pistol with no serial number, a magazine, a machinegun conversion device, and three additional suspected machinegun conversion devices, all of which were 3D printed, for $6,800.  During the sale, Taylor allegedly told the UC that he had already sold 10 switches.

According to the superseding indictment, on January 21, 2022, investigators recovered a 3D printer, four machinegun conversion devices, and 16 suspected machinegun conversion devices from Taylor’s residence; a 3D printer and 9mm luger pistol with no serial number from Dacosta’s residence in Baltimore; and a 3D printer from Dacosta and Bladen’s residence.

If convicted, the defendants each face a maximum sentence of five years in federal prison for the conspiracy and for each count in which they are charged with engaging in the business of dealing in firearms without a license.  Taylor and Bladen also face a maximum sentence of 10 years in federal prison for each count of unlawful possession of a machinegun.  Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors. 

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

This case is part of Project Safe Neighborhoods (PSN), a program bringing together all levels of law enforcement and the communities they serve to reduce violent crime and make our neighborhoods safer for everyone.  PSN, an evidence-based program proven to be effective at reducing violent crime, is the centerpiece of the Department of Justice’s violent crime reduction efforts.  Through PSN, a broad spectrum of stakeholders work together to identify the most pressing violent crime problems in the community and develop comprehensive solutions to address them.  As part of this strategy, PSN focuses enforcement efforts on the most violent offenders and partners with locally based prevention and reentry programs for lasting reductions in crime.

United States Attorney Erek L. Barron commended the ATF, the Baltimore County Police Department, and the Baltimore Police Department for their work in the investigation.  Mr. Barron thanked Special Assistant U.S. Attorney Annie McGuire, who is prosecuting the case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit https://www.justice.gov/usao-md/project-safe-neighborhoods-psnexile and https://www.justice.gov/usao-md/community-outreach.

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Greenbelt, Maryland – U.S. District Judge Paula Xinis today sentenced Anthony Michael Mileo, age 56, of Huntingtown, Maryland, to three years in federal prison, followed by five years of supervised release, for possession of child pornography.  At the time of his indictment in January 2020, Mileo was a Corporal with the Maryland National Capital Park Police Department and was a K-9 handler.

The sentence was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge James R. Mancuso of Homeland Security Investigations (HSI) Baltimore; Colonel Woodrow W. Jones III, Superintendent of the Maryland State Police; and Calvert County State’s Attorney Robert Harvey.

According to his plea agreement, on August 7, 2019, the Maryland State Police (MSP) Computer Crimes Unit received a referral from the National Center for Missing and Exploited Children (NCMEC) regarding the possession of child sexual abuse material.  The cybertip indicated that video files documenting child sexual abuse were uploaded to a document storage application account.  The document storage application provided the contents of the account to investigators.  The content included over a dozen video files depicting child sexual abuse and provided the IP address associated with the transfer of videos depicting child sexual abuse to the account on July 1, 2019.

As detailed in the plea agreement, investigators learned that the e-mail address was associated with Mileo and the IP addresses were associated with an Internet Service Provider account located at Mileo’s address in Calvert County, Maryland.  On September 5, 2019, MSP obtained a search warrant for the contents of the e-mail account which revealed approximately 71 video files depicting child sexual abuse, including prepubescent minors and images depicting children in bondage being sexually abused.  The video files included a series of known victims of child abuse identified through NCMEC.  The e-mail account also contained non-contraband material, including employment information associated with Mileo.

On November 7, 2019, members of the MSP and HSI executed a search warrant at Mileo’s residence and recovered three cellular telephones: an Apple iPhone 7 Plus, which was seized from Mileo’s person; a black Kyocera phone seized from the rear of Mileo’s Park Police-issued vehicle; and a police-issued black iPhone in a black case with “K9” on the back.  Mileo was arrested.

A forensic analysis was undertaken on the Apple iPhone 7.  A third-party vendor was contracted to unlock the phone so that its contents could be searched.  The document storage application originally identified in the cybertip was identified on the phone, along with two additional document storage accounts.  None of the 168 files collectively contained within the second and third document storage accounts identified on the phone were able to be accessed, but many of the file names were indicative of child sex abuse material.  Investigators also identified a chat application on the phone.  One of the recovered chats contained an image depicting the sexual abuse of a toddler.  The files Mileo uploaded depicting the sexual abuse of children could be accessed from any device with an Internet connection, including the cellular telephones recovered by investigators.  For example, Mileo uploaded the document storage application onto his personal iPhone, which allowed him to access the images of child sexual abuse he had previously uploaded to the application.

Mileo previously faced related charges in Calvert County, but those charges were dismissed in favor of federal prosecution.

This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorney’s Offices and the Criminal Division's Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute individuals who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.justice.gov/psc.  For more information about Internet safety education, please visit www.justice.gov/psc and click on the "Resources" tab on the left of the page.       

United States Attorney Erek L. Barron commended HSI Baltimore and the Maryland State Police Internet Crimes Against Children Task Force for their work in the investigation and thanked the Office of the State’s Attorney for Calvert County for its assistance.  Mr. Barron thanked Assistant U.S. Attorney Timothy F. Hagan, who is prosecuting the federal case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit www.justice.gov/usao-md/project-safe-childhood and https://www.justice.gov/usao-md/community-outreach.

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Baltimore, Maryland – U.S. District Judge Lydia Kay Griggsby sentenced Robert A. DiNoto, age 48, of Huntington, New York, late yesterday to one year of incarceration to be served as six months in federal prison and six months of home detention, followed by three years of supervised release, for conspiracy to commit wire fraud, in connection with a fraudulent billing scheme involving a manufacturing company with facilities in Harford County, Maryland.  Judge Griggsby also ordered DiNoto to pay restitution and to forfeit a total of $514,352. 

The sentence was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; and Acting Special Agent in Charge Kareem A. Carter of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.

According to his guilty plea, Robert A. DiNoto, is the owner and President of American Pride Distributors (“American Pride”), located in, Woodbury, New York.  American Pride sold commercial drum containers used by manufacturers to store and transport products.  Robert DiNoto is the brother of Eugene DiNoto (E. DiNoto), a former longtime employee of Company 1, a family-owned global business headquartered in New York, but with manufacturing facilities in Belcamp and Abingdon, Maryland, both in Harford County. 

As detailed in his plea agreement, beginning no later than 2014, Robert and E. DiNoto agreed to execute a fraudulent billing scheme to defraud Company 1, through the submission of false invoices for undelivered drums.  As the facility manager for Company 1, E. DiNoto oversaw the purchasing and storing of drums for use at the Harford County manufacturing facilities and had the authority to review drum invoices and authorize payments to the drum vendors.  Robert DiNoto approached E. DiNoto about how he could start his own drum vending company.  E. DiNoto subsequently told Robert DiNoto about other drum vendors that were defrauding Company 1 using a fraudulent billing scheme.  Robert DiNoto, who was in the real estate business at the time, decided to use a company he owned, called Sandpiper Properties, Inc., trading as American Pride Distributors, to facilitate the scheme to defraud Company 1. 

Once American Pride Distributors was formed, Robert DiNoto began receiving drum purchase orders from E. DiNoto for Company 1 to establish a legitimate pattern of drum sales between American Pride and Company 1.  However, because Robert DiNoto was never in the business of manufacturing or reconditioning drums, he filled Company 1’s orders by buying the requisite number of drums from an actual drum manufacturer and arranging to ship them to Company 1’s facilities in Harford County, Maryland.  Robert DiNoto billed Company 1 for the drums using American Pride invoices, which E. DiNoto approved for payment via emails to Company 1’s accounting department in New York. 

Soon thereafter, Robert DiNoto began fraudulently invoicing Company 1 for drums that he and American Pride never delivered to the company.  To conceal the fraudulent invoices, he would intermittently send the bogus invoices before and after sending legitimate ones.  For example, in 2017, Robert DiNoto sent legitimate invoices #1555 through #1558 between February 15 and April 12 in the amounts of $19,223, $19,419, $18,038, and $20,908, respectively.  He then submitted a fraudulent invoice, #1559, and received a payment from Company 1 for $19,448 for a shipment of 358 “NEW 55 GALLON STEEL DRUMS” that were never delivered. 

Between December 2016 and August 2019, Robert DiNoto used American Pride’s invoices to bill and receive a total of approximately $257,181 from Company 1 for nonexistent drum deliveries.  Robert DiNoto used the proceeds from the fraudulent billings for personal expenses, including to pay his credit card bills. 

To avoid scrutiny throughout the conspiracy, the DiNotos kept their familial relationship with American Pride a secret from Company 1 employees.  Despite their best efforts, third-party vendors used by American Pride would sometimes inadvertently forward an email or invoice intended for Robert DiNoto to Company 1.  E. DiNoto would criticize Robert DiNoto for the mistake and ask him to remind his third-party vendors never to send correspondence to Company 1’s address.  On at least one occasion, Robert DiNoto used an alias to conceal his identity when communicating with Company 1 employees.   

Eugene Andrew DiNoto, age 51, of Bel Air, Maryland, previously pleaded guilty to conspiracy to commit wire fraud, engaging in an illegal monetary transaction, and filing a false tax return, in connection with schemes that defrauded his employer of more than $29 million.  He is awaiting sentencing. 

United States Attorney Erek L. Barron commended the FBI and IRS-CI for their work in the investigation.  Mr. Barron thanked Assistant U.S. Attorneys Martin J. Clarke and Harry M. Gruber, who are prosecuting the case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to report fraud, please visit www.justice.gov/usao-md and https://www.justice.gov/usao-md/report-fraud.

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NASHVILLE – A joint investigation by the Drug Enforcement Administration and the Williamson County Sheriff’s Office has resulted in the arrest of three individuals for possessing with intent to distribute approximately 32 kilograms of cocaine in Spring Hill, Tennessee, announced United States Attorney Henry C. Leventis.

The complaint charges Karla Lissette Hernandez, 41, Karla L. Ayala Hernandez, 18, and Ronald Giovanni Flores, 37, all from Houston, Texas, with possession with intent to distribute cocaine.

On January 17, 2024, the three were travelling in a truck which a Williamson County Sheriff’s Deputy determined was speeding and following another vehicle too closely in snowy and icy conditions. None of the occupants had a valid driver’s license. A K9 indicated the possible presence of narcotics in the vehicle. A subsequent search of the vehicle led to the recovery of 32 kilograms of cocaine wrapped in black electrical tape, 30 of which were concealed inside the door panels of the truck.

Assistant U.S. Attorney Rachel M. Stephens is prosecuting the case.

A Criminal Complaint is merely an allegation. The defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

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Baltimore, Maryland – Ahmed Sary, age 45, of Baltimore, Maryland, pleaded guilty today to conspiracy to commit wire fraud affecting financial institutions, relating to the submission of more than $17.9 million in fraudulent CARES Act loan applications.  The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was a federal law enacted in March 2020 to provide emergency financial assistance to Americans suffering from the economic effects caused by the COVID-19 pandemic. 

The guilty plea was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; Special Agent in Charge Amaleka McCall-Brathwaite of the Small Business Administration Office of Inspector General, Eastern Region; and Chief Robert McCullough of the Baltimore County Police Department.

“Sary will now pay the price for living luxurious from stolen pandemic relief funds that others needed to keep a business open or to keep a roof over their heads,” said United States Attorney Erek L. Barron.

Financial assistance offered through the CARES Act included forgivable loans to small businesses for job retention and certain other expenses, through the Paycheck Protection Program (“PPP”), administered through the Small Business Administration (“SBA”), and SBA-approved lenders.  The SBA also offered an Economic Injury Disaster Loan (“EIDL”) and/or an EIDL advance to help businesses meet their financial obligations.  An EIDL advance did not have to be repaid, and small businesses could receive an advance, even if they were not approved for an EIDL loan. The maximum advance amount was $10,000.

According to the plea agreement, from April 2020 through January 2022, Sary and his co-conspirators prepared false and fraudulent PPP loan and EIDL applications for a number of borrowers in exchange for a kickback of typically ranging from 20 percent  to 30 percent of the loan amount.  The fraudulent PPP and EIDL loan applications prepared by Sary, and his co-conspirators grossly inflated the purported businesses’ number of employees, monthly payroll costs, and revenue numbers, including for businesses that didn’t exist in any legitimate capacity

As detailed in the statement of facts, Sary and his co-conspirators filed 85 false and fraudulent PPP loan applications seeking a total of over $14,807,609.37 and 57 false and fraudulent EIDL applications seeking a total of over $3,093,670.50.  All the loans were ultimately funded.  After the loan funds were received, the recipient would typically provide Sary multiple, sometimes up to seven, checks that were signed by the loan recipient and that listed a payment amount and date but that left the payee name blank.  Sary would then write a payee name on each of those checks and deposit them.

In connection with some of the fraudulently obtained PPP loans for purported businesses, Sary also assisted the loan recipients with setting up payroll services with Payroll Processor 1 to make it appear that the fraudulently obtained PPP loan funds were being used for permissible purposes when they, in fact, were not.  The payroll services also facilitated the creation of documentation that could be used to substantiate a request for each of the PPP loans to be forgiven.

In addition to the loan kickback fees, Sary received $959,559 in PPP/EIDL funds for purported businesses he controlled, including a purported financial services business, a purported meatpacking business, a purported clothing company and a purported talent agency.  In fact, none of these businesses existed in any legitimate capacity.  Sary admitted that he used the fraudulently obtained funds to travel to Dubai and Egypt on multiple occasions, to stay at luxury hotels, including the Four Seasons, while there, to purchase property in Egypt and to, among other things, open a beachfront restaurant in Alexandria, Egypt called Sary’s Kitchen. 

Sary and the government have agreed that, if the Court accepts the plea agreement, Sary will be sentenced to between 60 months and 114 months in federal prison.  U.S. District Judge Richard D. Bennett has scheduled sentencing for February 1, 2024 at 11:00 a.m. 

The District of Maryland Strike Force is one of five strike forces established throughout the United States by the U.S. Department of Justice to investigate and prosecute COVID-19 fraud, including fraud relating to the CARES Act.  The CARES Act was designed to provide emergency financial assistance to Americans suffering the economic effects caused by the COVID-19 pandemic.  The strike forces focus on large-scale, multi-state pandemic relief fraud perpetrated by criminal organizations and transnational actors.  The strike forces are interagency law enforcement efforts, using prosecutor-led and data analyst-driven teams designed to identify and bring to justice those who stole pandemic relief funds.  

For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.  Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

United States Attorney Erek L. Barron commended the FBI, the SBA-OIG and the Baltimore County Police Department for their work in the investigation.  Mr. Barron thanked Assistant U.S. Attorney Paul A. Riley, who is prosecuting the case.  He also recognized the assistance of the Maryland COVID-19 Strike Force Paralegal Specialist Joanna B.N. Huber. 

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit www.justice.gov/usao/md.

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Baltimore, Maryland – A federal grand jury has returned an indictment charging four individuals for conspiracy to commit wire fraud, wire fraud, and aggravated identity theft. The indictment was returned on April 29, 2021 and unsealed on May 13, 2021 upon the arrest of the final defendant. The four defendants are:

Reginald McElrath, age 40, of Cockeysville, Maryland;

Chantelle Harris, age 33, of Hyattsville, Maryland;

Robert Patterson age 21, of Odenton, Maryland and;

Danisha Thomas age 37, of Bladensburg, Maryland.

The indictment was announced by Acting United States Attorney for the District of Maryland Jonathan F. Lenzner and Postal Inspector in Charge Peter R. Rendina of the U.S. Postal Inspection Service - Washington Division.

According to the indictment, from July 2019 to January 2020, McElrath, Harris, Patterson, and Thomas allegedly used the identifying information of at least 17 individuals to obtain new cell phones.  McElrath, Harris, and Patterson worked in Maryland for a vendor contracted by a multinational retail corporation to handle all contractual wireless phone transactions in their stores.   As cell service associates, McElrath, Harris, and Patterson were required to obtain the personal identifying information (PII) of customers in order to initiate a new account or upgrade an existing account.  The indictment alleges that McElrath, Harris, and Patterson used their positions to apply for new cell phone accounts with various carriers and to apply for upgraded cell phones on existing cell phone accounts in the victims’ names using the PII of the victims without their knowledge or permission.  McElrath, Harris, and Patterson allegedly charged purchases of new cell phones to fraudulent cell phone service accounts they opened in the victims’ names and none of the costs were borne by members of the conspiracy.

The indictment also alleges that co-conspirators, including Thomas, would receive the fraudulently obtained cell phones directly from McElrath, Harris, Patterson and others from inside the retail store.  One or more of the co-conspirators allegedly distributed the fraudulently obtained cell phones to other co-conspirators at the cost of the identity theft victims. 

In sum, the defendants allegedly used the stolen PII of 17 individual victims to fraudulently obtain at least $537,000 worth of cell phones.

If convicted, the defendants face a maximum sentence of 20 years in prison for wire fraud and a mandatory minimum of two years in prison, consecutive to any other sentenced imposed, for aggravated identity theft.  Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors. Thomas had an initial appearance yesterday in U.S. District Court in Baltimore.  The other three defendants previously had initial appearances on a related federal criminal complaint.

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

Acting United States Attorney Jonathan F. Lenzner commended the U.S. Postal Inspection Service for their work in the investigation.  Mr. Lenzner thanked Assistant U.S. Attorneys Mary W. Setzer and Matthew J. Maddox, who are prosecuting the case.

# # #

Baltimore, Maryland – U.S. District Judge Ellen L. Hollander sentenced Reginald McElrath, age 40, of Cockeysville, Maryland, to 18 months in federal prison, followed by three years of supervised release, for a scheme to steal cell phones worth more than $500,000.  Judge Hollander ordered that McElrath must pay restitution in the full among of the victims’ losses, which the parties agree is not more than $366,015.50.

The sentence was announced by Erek L. Barron, United States Attorney for the District of Maryland and Postal Inspector in Charge Damon E. Wood of the U.S. Postal Inspection Service - Washington Division.

According to his plea agreement and other court documents, from July 2019 to January 2020, McElrath and his co-defendants, Chantelle Harris, Robert Patterson, and Danisha Thomas used the identifying information of at least 17 individuals to obtain new cell phones.  McElrath, Harris, and Patterson worked in Maryland for a vendor contracted by a multinational retail corporation to handle all contractual wireless phone transactions in their stores.  As cell service associates, McElrath, Harris, and Patterson were required to obtain the personal identifying information (PII) of customers in order to initiate a new account or upgrade an existing account.  McElrath, Harris, and Patterson admitted that they used their positions to apply for new cell phone accounts with various carriers and to apply for upgraded cell phones on existing cell phone accounts in the victims’ names using the PII of the victims without their knowledge or permission.  McElrath, Harris, and Patterson also charged purchases of new cell phones to fraudulent cell phone service accounts they opened in the victims’ names and none of the costs were borne by members of the conspiracy. 

Co-defendant Danisha Thomas and other conspirators received the fraudulently obtained cell phones directly from McElrath, Harris, Patterson and others from inside the retail store.  McElrath received cash and payments through CashApp as compensation for his role in the scheme.

McElrath and his co-defendants used the stolen PII of approximately 51 individual victims to fraudulently obtain at least $537,000 worth of cell phones.  Fraudulent transactions personally conducted or attempted by McElrath in furtherance of the fraud conspiracy and scheme totaled approximately $366,015.50.

Co-defendants Danisha Lee Thomas, age 40, of Bladensburg, Maryland; Robert Earl Patterson, Jr., age 22, of Odenton, Maryland; and Chantelle Harris, age 34, of Hyattsville, Maryland, also pleaded guilty to their roles in the conspiracy.

United States Attorney Erek L. Barron commended the U.S. Postal Inspection Service for their work in the investigation.  Mr. Barron thanked Assistant U.S. Attorney Colleen Elizabeth McGuinn, who prosecuted the case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit www.justice.gov/usao/md.

 

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Baltimore, Maryland – U.S. Attorney Robert K. Hur of the District of Maryland today announced that Maryland has received $999,990 from the Department of Justice’s Office of Justice Programs and its component, the Office for Victims of Crime, to provide safe, stable housing and appropriate services to victims of human trafficking.

“Human trafficking is a barbaric criminal enterprise that subjects its victims to unspeakable cruelty and deprives them of the most basic of human needs, none more essential than a safe place to live,” said Attorney General William P. Barr. “Throughout this Administration, the Department of Justice has fought aggressively to bring human traffickers to justice and to deliver critical aid to trafficking survivors. These new resources, announced today, expand on our efforts to offer those who have suffered the shelter and support they need to begin a new and better life.”

“Human traffickers prey on our most vulnerable—including children—in order to profit from their victims’ misery.  Traffickers often use violence and exploit drug addictions in order to coerce their victims into such crimes as commercial sex rings,” said U.S. Attorney Robert K. Hur.  “These grants will help to provide resources to the vulnerable victims of this reprehensible crime.  The Maryland U.S. Attorney’s Office and our partners will never stop working to end human trafficking.”

The grant, awarded to the Salvation Army and the University of Maryland SAFE Center for Human Trafficking Survivors, will provide six to 24 months of transitional or short-term housing assistance for trafficking victims, including rental, utilities or related expenses, such as security deposits and relocation costs. The grant will also provide funding for support needed to help victims locate permanent housing, secure employment, as well as occupational training and counseling. The Salvation Army and the University of Maryland SAFE Center are among 73 organizations nationwide receiving more than $35 million in OVC grants to support housing services for human trafficking survivors.

“The Salvation Army of Central Maryland is committed to assisting survivors of human trafficking in reclaiming their lives and determining their futures,” said Beth Luthye, Anti-Human Trafficking Program Director for The Salvation Army of Central Maryland.  “Over the past few years, our core focus has been short-term housing and intensive care management.  This OVC grant will enable us to expand our services to also provide supportive transitional housing and independent housing assistance, as well as partnering with business and community leaders to build out initiatives focused on employment and financial independence.”  Ms. Luthye added, “The Salvation Army program, based in Baltimore City, targets adult survivors of both sex trafficking and labor trafficking throughout the state of Maryland. It is inclusive of women who often find closed doors at other residential programs, including pregnant women, mothers of young children, transgender individuals, and foreign nationals.”

"Stable housing is foundational to human trafficking survivors' ability to rebuild their lives,” said SAFE Center Founder and Director, Susan Esserman. “We feel fortunate to be partnering with the Montgomery County Department of Health and Human Services in a rapid rehousing model to address this urgent housing need. We are grateful for this OVC funding as lack of safe housing is a driver of trafficking."

“Human traffickers dangle the threat of homelessness over those they have entrapped, playing a ruthless game of psychological manipulation that victims are never in a position to win,” said OJP Principal Deputy Assistant Attorney General Katharine T. Sullivan. “These grants will empower survivors on their path to independence and a life of self-sufficiency and hope.”

Human trafficking offenses are among the most difficult crimes to identify, and the scope of human trafficking victimization may be much greater than the limited data reflect. A new report issued by the National Institute of Justice, another component of the Office of Justice Programs, found that the number of human trafficking cases captured in police reports may represent only a fraction of all such cases. Expanding housing and other services to trafficking victims remains a top Justice Department priority.

The Office for Victims of Crime, for example, hosted listening sessions and roundtable discussions with stakeholders in the field in 2018 and launched the Human Trafficking Capacity Building Center. From July 2018 through June 2019, 118 OVC human trafficking grantees reported serving 8,375 total clients, including confirmed trafficking victims and individuals showing strong indicators of trafficking victimization.

For a complete list of individual award amounts and jurisdictions that will receive funding, visit: https://www.ojp.gov/sites/g/files/xyckuh241/files/media/document/htvictimsfactheet.pdf

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The Office of Justice Programs provides federal leadership, grants, training, technical assistance and other resources to improve the nation’s capacity to prevent and reduce crime, assist victims and enhance the rule of law by strengthening the criminal and juvenile justice systems. More information about OJP and its components can be found at www.ojp.gov.

The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.

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Baltimore, Maryland – Robert A. DiNoto, age 48, of Huntington, New York, pleaded guilty today to conspiracy to commit wire fraud, in connection with a fraudulent billing scheme involving a manufacturing company with facilities in Harford County, Maryland.    

The guilty plea was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; and Special Agent in Charge Darrell J. Waldon of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.

According to his guilty plea, Robert A. DiNoto, is the owner and President of American Pride Distributors (“American Pride”), located in, Woodbury, New York.  American Pride sold commercial drum containers used by manufacturers to store and transport products.  Robert DiNoto is the brother of Eugene DiNoto (E. DiNoto), a former longtime employee of Company 1, a family-owned global business headquartered in New York, but with manufacturing facilities in Belcamp and Abingdon, Maryland, both in Harford County. 

As detailed in his plea agreement, beginning no later than 2014, Robert and E. DiNoto agreed to execute a fraudulent billing scheme to defraud Company 1, through the submission of false invoices for undelivered drums.  As the facility manager for Company 1, E. DiNoto oversaw the purchasing and storing of drums for use at the Harford County manufacturing facilities and had the authority to review drum invoices and authorize payments to the drum vendors.  Robert DiNoto approached E. DiNoto about how he could start his own drum vending company.  E. DiNoto subsequently told Robert DiNoto about other drum vendors that were defrauding Company 1 using a fraudulent billing scheme.  Robert DiNoto, who was in the real estate business at the time, decided to use a company he owned, called Sandpiper Properties, Inc., trading as American Pride Distributors, to facilitate the scheme to defraud Company 1. 

Once American Pride Distributors was formed, Robert DiNoto began receiving drum purchase orders from E. DiNoto for Company 1 to establish a legitimate pattern of drum sales between American Pride and Company 1.  However, because Robert DiNoto was never in the business of manufacturing or reconditioning drums, he filled Company 1’s orders by buying the requisite number of drums from an actual drum manufacturer and arranging to ship them to Company 1’s facilities in Harford County, Maryland.  Robert DiNoto billed Company 1 for the drums using American Pride invoices, which E. DiNoto approved for payment via emails to Company 1’s accounting department in New York.    

Soon thereafter, Robert DiNoto began fraudulently invoicing Company 1 for drums that he and American Pride never delivered to the company.  To conceal the fraudulent invoices, he would intermittently send the bogus invoices before and after sending legitimate ones.  For example, in 2017, Robert DiNoto sent legitimate invoices #1555 through #1558 between February 15 and April 12 in the amounts of $19,223, $19,419, $18,038, and $20,908, respectively.  He then submitted a fraudulent invoice, #1559, and received a payment from Company 1 for $19,448 for a shipment of 358 “NEW 55 GALLON STEEL DRUMS” that were never delivered. 

Between December 2016 and August 2019, Robert DiNoto used American Pride’s invoices to bill and receive a total of approximately $257,181 from Company 1 for nonexistent drum deliveries.  Robert DiNoto used the proceeds from the fraudulent billings for personal expenses, including to pay his credit card bills. 

To avoid scrutiny throughout the conspiracy, the DiNotos kept their familial relationship with American Pride a secret from Company 1 employees.  Despite their best efforts, third-party vendors used by American Pride would sometimes inadvertently forward an email or invoice intended for the Robert DiNoto to Company 1.  E. DiNoto would criticize Robert DiNoto for the mistake and ask him to remind his third-party vendors never to send correspondence to Company 1’s address.  On at least one occasion, Robert DiNoto used an alias to conceal his identity when communicating with Company 1 employees.   

Robert DiNoto faces a maximum sentence of 20 years in prison for conspiracy to commit wire fraud.  He will also be required to forfeit and pay restitution in the full amount of the loss, $257,181.  U.S. District Judge Lydia Kay Griggsby has scheduled sentencing for Robert DiNoto on March 21, 2023 at 2:00 p.m.

Eugene Andrew DiNoto, age 51, of Bel Air, Maryland, previously pleaded guilty to conspiracy to commit wire fraud, engaging in an illegal monetary transaction, and filing a false tax return, in connection with schemes that defrauded his employer of more than $29 million.  He is awaiting sentencing. 

United States Attorney Erek L. Barron commended the FBI and IRS-CI for their work in the investigation.  Mr. Barron thanked Assistant U.S. Attorneys Martin J. Clarke and Harry M. Gruber, who are prosecuting the case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to report fraud, please visit www.justice.gov/usao-md and https://www.justice.gov/usao-md/report-fraud.

# # #

Baltimore, Maryland – Eugene Andrew DiNoto, age 51, of Bel Air, Maryland, pleaded guilty yesterday to conspiracy to commit wire fraud, engaging in an illegal monetary transaction, and filing a false tax return, in connection with a kickback scheme that defrauded his employer of more than $29 million.    

The guilty plea was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; and Special Agent in Charge Darrell J. Waldon of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.

According to his guilty plea, Eugene DiNoto was a longtime employee of Company 1, a family-owned global business headquartered in New York, but with manufacturing facilities in Belcamp and Abingdon, Maryland, both in Harford County.  Beginning in 2012, DiNoto and another employee, Elliott Kleinman, began to use their management positions at Company 1 to execute a fraudulent billing scheme whereby they would get illegal kickbacks from various drum vendors doing business with Company 1, which used drums to store and transport its products.  As the facility managers, DiNoto and Kleinman oversaw the purchasing and storing of drums for use at the Harford County manufacturing facilities.  They also had authority to review drum invoices and authorize payments to the drum vendors. 

Anthony P. Urcioli, Sr., is the owner and President of Tunnel, Barrel & Drum Co, Inc. (TBD), located in Carlstadt, New Jersey, and of another drum supply company called Hartford Fibre Drum, Inc. (Hartford), both of which did business with Company 1.  After TBD became a drum supplier to Company 1, DiNoto and Kleinman entered into arrangement with Urcioli whereby TBD could continue selling drums to Company 1 if Urcioli agreed to fraudulently invoice Company 1 for more drums than TBD actually sold and delivered to the company.  If Urcioli agreed to falsify its invoices in this way, DiNoto and Kleinman said that they and TBD could split the extra money Company 1 paid TBD for the made-up drum deliveries 50/50.  DiNoto told Urcioli that he would split his share of the kickbacks with Elliot Kleinman 75/25.  Urcioli agreed to participate in the false billing scheme.  

From approximately January 2012 to January 31, 2020, DiNoto contacted Urcioli at least once a week to discuss the number and type of drums that he actually wanted delivered to Company 1’s Maryland facilities.  During the same conversation, DiNoto told Urcioli how many additional drums to charge, but not deliver, to Company 1 from TBD, and later from Hartford, Urcioli’s other company.  After Urcioli created the invoices that fraudulently billed Company 1 for both delivered and undelivered drums, DiNoto approved the invoices and sent them to Company 1’s headquarters to be paid.  

Urcioli also created a handwritten purchase order ticket that summarized the breakdown of actual and bogus drum orders and how the kickback amounts were calculated.  Urcioli would put a copy of the purchase order ticket in an envelope along with DiNoto’s and Kleinman’s share of the kickback amount payable via checks from TBD and Hartford, and then send the envelope to their personal residences in Harford County, Maryland. 

Sometimes, the invoices were not written as DiNoto had instructed, and he would call Urcioli and tell him to send a corrected invoice of adjust the kickback amounts.  Occasionally, DiNoto would correct an arithmetic mistake on Urcioli’s purchase order ticket, take a photograph of the changes he made to the ticket, and then email the corrected ticket back to Urcioli.

Urcioli wanted to pay the kickbacks to DiNoto and Kleinman by check so the payments would look like payments to drum wholesalers and be deductible as a cost of goods sold on TBD’s tax returns.  DiNoto told Urcioli to make his kickback checks payable to a company linked to DiNoto, called “Sandpiper Enterprises.”  Kleinman advised that he wanted his kickback checks payable to a company he formed called “EDK Management, LTD.”  Urcioli agreed, and in addition to making the kickback checks drawn on TBD and Hartford accounts payable to those companies, Urcioli wrote the word “drums” on the checks to further the pretense of legitimate purchases.

DiNoto admitted that even though Sandpiper Enterprises was not engaged in any business, he maintained a commercial bank account for Sandpiper Enterprises at a local financial institution, where he deposited all the kickback checks he received.  Before accessing the criminal proceeds, DiNoto routinely transferred all or part of the money into one of the personal bank accounts he maintained at the same bank.  DiNoto would then withdraw the funds from his personal account or write a personal check against the balance.          

Between January 2012 and January 31, 2020, Urcioli falsely invoiced Company 1 a total of $20,300,757.  TBD and Hartford kept half that amount while the remaining funds were sent to DiNoto and Kleinman.  DiNoto’s share of the kickbacks was approximately $7,071,106.  Over the same eight-year period, DiNoto used other drum vendors besides TBD and Hartford to execute his scheme to defraud Company 1.  On behalf of those other vendors, DiNoto submitted and approved invoices totaling approximately $9,197,181, resulting in a total loss to Company 1 of approximately $29,497,938.

For the period of 2017 through 2019, none of the more than $7 million in kickbacks DiNoto received for his role in the fraudulent billing scheme appeared as income on the tax returns DiNoto filed with the IRS, resulting in a loss to the U.S. government of approximately $1,374,694.

DiNoto faces a maximum sentence of 20 years in prison for conspiracy to commit wire fraud; a maximum of 10 years in federal prison for engaging in an illegal monetary transaction; and a maximum of five years in federal prison for filing a false tax return.  U.S. District Judge Lydia Kay Griggsby scheduled sentencing for DiNoto on July 13, 2022 at 2:00 p.m.

Elliott Dennis Kleinman, age 68, of Bel Air, Maryland and Anthony P. Urcioli, Sr., age 78, of Park Ridge, New Jersey, previously pleaded guilty to their roles in the scheme and are awaiting sentencing.

United States Attorney Erek L. Barron commended the FBI and IRS-CI for their work in the investigation.  Mr. Barron thanked Assistant U.S. Attorneys Martin J. Clarke and Harry M. Gruber, who are prosecuting the case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to report fraud, please visit www.justice.gov/usao-md and https://www.justice.gov/usao-md/report-fraud.

# # #

Greenbelt, Maryland – U.S. District Judge Deborah K. Chasanow sentenced Joseph Farace, age 72, of Sparks, Maryland today to 19 months in federal prison, followed by two years of supervised release, for a money laundering conspiracy.  On January 5, 2023, Judge Griggsby sentenced his son, Ryan Farace, age 38, of Reisterstown, Maryland, a previously convicted felon, to 54 months in federal prison for the same charge. 

The sentences were announced by United States Attorney for the District of Maryland Erek L. Barron; Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division; Special Agent in Charge Jarod Forget of the Drug Enforcement Administration - Washington Division; Special Agent in Charge Kareem A. Carter of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office; Chief Robert McCullough of the Baltimore County Police Department; Chief Gregory Der of the Howard County Police Department; Anne Arundel County Police Chief Amal E. Awad; Carroll County Sheriff James DeWees; Washington County Sheriff Brian K. Albert; and Chief Teresa Walter of the Havre de Grace Police Department.

According to their guilty pleas and other court documents, in November 2018, Ryan Farace was convicted in U.S. District Court in Maryland for a scheme to manufacture and distribute alprazolam tablets (sold under the brand name “Xanax”) in exchange for Bitcoin through sales on darknet marketplaces.  Cryptocurrency tracing techniques established that, in all, wallets associated with R. Farace, and/or his vendor name “XANAXMAN,” received over 9,138 Bitcoins from addresses associated with darknet marketplaces. 

Prior to his sentencing for the 2018 crimes, R. Farace met with representatives of the United States Attorney’s Office and the Drug Enforcement Administration, for the purpose of helping the government gain access to R. Farace’s drug proceeds, particularly cryptocurrency and cash, which had not yet been seized.  R. Farace repeatedly stated that he did not recall the location or means by which he could access any additional Bitcoins about which the government was not already aware.  At R. Farace’s sentencing for the 2018 crimes, he argued that he had been cooperative with the government’s efforts to obtain his assets.  Nonetheless, after R. Farace was sentenced, the government recovered additional drug proceeds in the form of Bitcoin.  Specifically, in early 2020, law enforcement recovered over 24 Bitcoin.

As detailed in his guilty plea, despite R. Farace’s claims to the government that he could not access any other Bitcoin proceeds related to his 2018 drug trafficking conviction, from October 2019 to April 2021, while incarcerated for his 2018 crimes, R. Farace conspired with his father, J. Farace, and others to launder additional proceeds of crimes through a series of financial transactions.  For example, in 2019, R. Farace sent approximately 71 Bitcoin from digital wallets he controlled to online exchanges and retailers.  Financial records from one such retailer indicated that R. Farace used some of the drug proceeds to benefit his father, including sending $3,341.65 worth of gift cards.  R. Farace used a contraband cell phone in prison to communicate with J. Farace about these purchases, using an encrypted email service. 

In August 2020, while he was incarcerated, R. Farace asked J. Farace to transfer more than 2,874 Bitcoin to a third party, so that the funds could be moved into a foreign bank account.  R. Farace provided J. Farace with the wallet address by typing it into the back cover of a prison library book and mailing it to J. Farace.

As detailed in their plea agreements, R. Farace (while incarcerated) and J. Farace used email and phone calls to discuss the transfer of bitcoin using coded language.  In September 2020, J. Farace completed the transfer of over 2,874 Bitcoin to the third party, all of which were proceeds of R. Farace’s 2018 drug crimes. On February 10, 2021, federal agents seized all of the 2,874.90419597 Bitcoin that J. Farace had transferred, the market value of which was between $65 million and $150 million at the time of seizure.  On May 11, 2021, the government seized 58.742155166 Bitcoin that was also proceeds of R. Farace’s drug trafficking.  Both R. Farace and J. Farace must forfeit all of the Bitcoin seized during the investigation.

United States Attorney Erek L. Barron and Acting Assistant Attorney General Nicole M. Argentieri commended the DEA, the IRS-CI, the Baltimore County, Howard County, and Anne Arundel County Police Departments, the Carroll County Sheriff’s Office, the Washington County Narcotics Task Force, the Havre de Grace Police Department for their work in the investigation and thanked the United States Postal Inspection Service, Maryland Department of Public Safety and Correctional Services and the Federal Bureau of Prisons for their assistance.  Mr. Barron thanked Assistant U.S. Attorney Coreen Mao and Trial Attorney Emily Cohen of the Justice Department’s Money Laundering and Asset Recovery Section, who prosecuted the case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit www.justice.gov/usao-md and https://www.justice.gov/usao-md/community-outreach.

# # #

Two former East St. Louis, Illinois, Police Department (ESLPD) officers, Vincent Anderson, 61, and Jason Boyd, 51, pleaded guilty today in U.S. District Court to civil rights offenses related to Boyd’s use of unreasonable force against two juvenile detainees.

According to court documents, on Oct. 3, 2019, two juveniles, who had been detained by the ESLPD, were sleeping in separate, locked holding cells in the East St. Louis jail. At that time, ESLPD Officer Jason Boyd banged on the glass of the juveniles’ holding cells, but the juveniles did not wake up. Boyd took pepper spray out of his holster in view of the other officers — including an ESLPD supervisor, Captain Vincent Anderson, stepped into one of the locked holding cells and pepper sprayed one of the sleeping juveniles. The other officers — including Anderson — watched Boyd spray the juvenile and did nothing to stop him despite their duty to intervene in an unreasonable use of force.

Boyd and one of the other officers agreed that the second juvenile should also be sprayed. They walked to the holding cells, where Anderson and another officer had remained. Boyd then pepper sprayed the second sleeping juvenile. Again, none of the other officers acted to stop Boyd. Further, none of the officers acted to obtain care for the juveniles, despite the officers’ duty to obtain necessary medical care for detainees.

Boyd pleaded guilty to two misdemeanor civil rights violations for his use of unreasonable force against the juveniles and Anderson pleaded guilty to two misdemeanor civil rights violations for his failure to intervene in Boyd’s use of unreasonable force.

Sentencing hearings are scheduled for July 23. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division, U.S. Attorney Rachelle Aud Crowe for the Southern District of Illinois and Special Agent in Charge David G. Nanz of the FBI Springfield Field Office made the announcement.  

The FBI Springfield Field Office is investigating the case.

Trial Attorney Erin Monju of the Civil Rights Division’s Criminal Section is prosecuting the case with support from the U.S. Attorney’s Office for the Southern District of Illinois.

Baltimore, Maryland – U.S. District Judge Catherine C. Blake today sentenced Bilal Mohammad Siddiqui, age 23, of Catonsville, Maryland, to 24 years in federal prison, followed by lifetime supervised release, for the federal charges of sexual exploitation of children and cyberstalking.

The sentence was announced by United States Attorney for the District of Maryland Robert K. Hur; Special Agent in Charge Jennifer C. Boone of the Federal Bureau of Investigation, Baltimore Field Office; and Chief Melissa R. Hyatt of the Baltimore County Police Department.

“The facts of this case are disturbing and demonstrate how a sexual predator uses the Internet to victimize innocent children,” said U.S. Attorney Robert K. Hur.  “Our community is safer now that Bilal Siddiqui will serve 24 years in federal prison, where there is no parole—ever.  I hope all parents will discuss this case with their children so that they will think twice before communicating with a stranger through the Internet.  Law enforcement will continue to work to identify and prosecute those who would harm our children.”

“Bilal Siddiqui exploited and humiliated numerous children, some even as young as eight years old,” said Jennifer C. Boone, Special Agent in Charge of the FBI Baltimore Field Office. “With nothing more than a computer and a few keystrokes, modern predators, like Siddiqui, have a limitless number of victims at their fingertips. We remain vigilant in continuing efforts to identify and hold accountable these offenders, but we also need the community to discuss the reality of online predators with children and report any suspected offenses to law enforcement.”

According to his guilty plea, between April 2017 and August 2018, Siddiqui used the Internet-based communication services LiveMe, Snapchat, Kik, and FaceTime to coerce at least six minor females, ages 8 to 14, into creating and sending him sexually explicit images and videos of themselves.  Siddiqui also attempted to sexually extort one of those victims, a sixth-grader.  When she refused to produce additional sexually explicit videos of herself, he sent images and videos that she had previously shared with him to her sixth-grade classmates and friends.

Prior to September 2017, Siddiqui created a fake account on LiveMe, a mobile application that allowed users to stream live video over the Internet and simultaneously chat with viewers, using an anonymous username and a photograph of a young boy as his profile picture, so that other users would not realize he was an adult male.  One of the users misled by Siddiqui was Jane Doe 1, an 8-year-old girl.

On September 28, 2017, Jane Doe 1 was using LiveMe to broadcast a video of herself exercising in her pajamas.  Siddiqui was among several LiveMe users watching the broadcast.  When a number of those viewers asked Jane Doe 1 to show them her underwear, she refused, and eventually terminated the broadcast.  Not long after, however, Jane Doe 1 began streaming a new LiveMe broadcast, and a number of viewers from her earlier broadcast—including Siddiqui—followed her to the new broadcast.  During the new broadcast, Jane Doe 1 told her viewers that she was 13 years old.  Again, they enticed her to undress and expose herself.  While she initially refused their requests, Jane Doe 1 eventually did give in to the requests of Siddiqui and other viewers, undressing and exposing her genitals to the camera.

Toward the end of Jane Doe 1’s broadcast, Siddiqui persuaded her to end her live stream and to contact him privately.  They communicated via FaceTime, and during these video chats, Jane Doe 1 again told Siddiqui that she was 13 years old.  He nonetheless instructed her to remove her shirt, pants, and underwear, then instructed Jane Doe 1 to use a marker to write his first name on her skin next to her genitalia.  He also instructed her to send him sexually explicit pictures of herself via text message.  She complied with his instruction and sent Siddiqui at least one picture of herself.

Viewers of Jane Doe 1’s LiveMe broadcast reported the sexually explicit requests and conduct described above to the National Center for Missing and Exploited Children.  Law enforcement identified Siddiqui as the person who persuaded Jane Doe 1 to chat privately and obtained a search warrant for his residence.  On September 5, 2018, officers executed the search warrant and located the cellphone that Siddiqui used to communicate with Jane Doe 1.

Siddiqui was present during the search, waived his Miranda rights, and voluntarily agreed to be interviewed by law enforcement.  He admitted that the phone was his, that it was passcode-protected, that he had used LiveMe on the phone, and that he created the fake LiveMe profile using a photograph of a former classmate to disguise his identity.  He admitted that he used his fake LiveMe account to communicate with Jane Doe 1, and later admitted—after initially denying—that he communicated privately with Jane Doe 1 through FaceTime, including instructing her to send him sexually explicit images of herself via text message, and that he believed Jane Doe 1 was 13 years old.

While Siddiqui was being interviewed, law enforcement conducted an on-scene forensic review of the phone and discovered evidence that he had also sexually exploited Jane Doe 2, a 9-year-old female.  Siddiqui told law enforcement that he began communicating with Jane Doe 2 in August 2018 using Snapchat, and continued to do so as recently as September 3, 2018—two days before the execution of the search warrant.  Siddiqui also admitted that he created videos of Jane Doe 2, and estimated that there were 10 videos of Jane Doe 2 engaging in sexually explicit conduct saved on his phone.  Siddiqui advised that he captured the videos by using his phone’s screen recording function, and that he believed Jane Doe 2 was 11 or 12 years old.

During the interview Siddiqui advised law enforcement that he had engaged in similar conduct with between 10 and 50 girls using mobile applications.  Siddiqui stated that he caused minor females to engage in sexually explicit conduct on video and that he derived sexual gratification from it.

Following Siddiqui’s interview, law enforcement obtained records associated with online accounts controlled and used by Siddiqui.  Those records showed that Siddiqui had coerced Jane Doe 4, an 11-year-old sixth-grader, into producing and sending him a nude image and nude videos of herself.  Siddiqui began communicating with Jane Doe 4 on September 15, 2017, and told her that he was 15 years old and lived in her town.  Within days, he had convinced Jane Doe 4 that they were in a relationship, and she revealed the name of the middle school that she was attending.

On October 4, 2017, Siddiqui began demanding that Jane Doe 4 send him sexually explicit images, and threatened to send one of the videos of Jane Doe 4 to her classmates, friends, and family if she did not produce and send further videos of herself engaging in sexually explicit conduct.  Siddiqui specifically told Jane Doe 4, “Don’t play games with me .... I’ll expose u [right now] and ruin your life.”  Jane Doe 4 begged him not to follow through on his threats and sent him additional explicit videos.  After she sent the videos, Siddiqui told Jane Doe 4 that it was “too late” because he had already sent them to her friends.

On October 7, 2017, Jane Doe 4 tried to end her relationship with Siddiqui through a conversation on Snapchat.  Siddiqui reacted by demanding that she immediately produce videos of herself engaging in sexually explicit conduct.  After she refused, Siddiqui sent one sexually explicit image and two sexually explicit videos of Jane Doe 4 to two unidentified Snapchat users.  On October 12, 2017, a classmate of Jane Doe 4 alerted her middle school guidance counselor that images of Jane Doe 4 were being circulated.  School administrators conducted a brief investigation to ensure the images had been deleted but did not contact law enforcement.

Electronic evidence further revealed that, between April 2017 and September 2018, Siddiqui used Snapchat and Kik to entice three additional minors, an 11-year-old, a 12-year-old, and a 14-year-old, to produce and send him sexually explicit images and videos.  In each instance, he lied about his real age to persuade these minors to send him such materials.

United States Attorney Robert K. Hur commended the FBI and the Baltimore County Police Department for their work in the investigation and thanked the Baltimore County State’s Attorney’s Office for its assistance.  Mr. Hur thanked Assistant U.S. Attorneys Jeffrey J. Izant and Paul E. Budlow, who prosecuted the case.

# # #

Baltimore, Maryland – Phillip J. “Jamie” Harrington III, age 50, of Dorchester, Maryland, and his company, Capt. Phip’s Seafood Inc. pleaded guilty today to unlawful employment of undocumented workers and to visa fraud, respectively, related to the employment of temporary workers employed at Harrington companies.

The guilty pleas were announced by Acting United States Attorney for the District of Maryland Jonathan F. Lenzner; Special Agent in Charge James R. Mancuso of Homeland Security Investigations (HSI) Baltimore; Special Agent in Charge Edwin Guard of the Washington Field Office of the U.S. Department of State’s Diplomatic Security Service (DSS); and Special Agent in Charge Derek Pickle, of the Washington Regional Office, U.S. Department of Labor - Office of Inspector General (DOL-OIG).

“Over a five-year period, Capt. Phips Seafood and its owners engaged in a calculated pattern of visa fraud that not only deceived the government but also resulted in lower wages to their employees,” said Acting U.S. Attorney Jonathan Lenzner. “Rather than play by the rules that other businesses follow, the defendants manipulated the H2-B visa program for the sole purpose of increasing their profits at the expense of their employees and the fair market.”

Philip J. Harrington, Jr. was Capt. Phip’s owner, President, and sole Director until his death on February 13, 2018. Since March 6, 2019, Capt. Phip’s has been owned and operated by Philip Harrington’s, son, Jamie Harrington.  The primary business of Capt. Phip’s is the production and distribution of ice as well as the processing of seafood. For more than a decade, Capt. Phip’s has participated in the H-2B work visa program through which it has obtained temporary foreign workers to fill seasonal positions.

According to the company’s guilty plea, from 2013 through 2018, Captain Phip’s Seafood Inc. routinely sought prevailing wage determinations for multiple job descriptions, and then filed petitions for H-2B visas for only the jobs with the lowest prevailing wage, regardless of the actual work duties of the employees.  The H-2B Visa Program is a temporary non-agricultural worker program in which an employer may seek temporary authorization for foreign workers to legally enter and work in the U.S.  To obtain an H-2B Visa, the U.S. Department of Labor (DOL) must ensure the positions have been advertised to U.S.-based workers and assign the appropriate wage to be paid (“prevailing wage”) based on the job description.

As stated in the plea agreement, Captain Phip’s willfully submitted false and inaccurate job descriptions to obtain lower prevailing wages for its foreign workers.  Capt. Phip’s omissions about the full scope of the job duties to be performed by its temporary foreign workers resulted in the DOL approving Capt. Phip’s to pay lower prevailing wage than it would have been authorized if Capt. Phip’s had provided truthful information.

For example, in 2016, Capt. Phip’s requested and received prevailing wage determinations for three position: ice conveyor operators with a prevailing wage of $12.51; oyster production workers with a prevailing wage of $16.96; and ice machine operators (ice production workers) with a prevailing wage of $11.10. Capt. Phip’s then filed a petition for ice production workers with the U.S. Citizenship and Immigration Services (USCIS). The petition was approved and the Department of State (DOS) issued 24 H-2B visas to non-immigrant Mexican nationals authorizing them to work for Capt. Phip’s as ice production workers in the United States.  Once the Mexican ice production workers entered the United States, Capt. Phip’s used these workers for jobs beyond ice production, including for oyster processing, as maintenance workers, truck drivers and drivers’ assistants.  Capt. Phip’s admits that it intentionally and falsely claimed that the foreign workers would only be engaged in ice production in order to pay them the lower prevailing wage.  Had Capt. Phip’s truthfully filed for H-2B visas for many of these duties, these employees would have been entitled to a higher wage.

As stated in the company’s plea agreement, on August 31, 2017, a USCIS officer and government agents conducted a site visit at Capt. Phip’s location in Secretary, Maryland. At that time, Capt. Phip’s H-2B workers were authorized only to engage in oyster production work. During the site visit, three H-2B visa beneficiaries were interviewed through an interpreter and indicated that their current duties involved ice packing duties rather than oyster production work.

A USCIS officer and agents also interviewed Phillip Harrington, Jr., who signed all the H2-B visa petitions for Capt. Phip’s and his son, Jamie Harrington, who identified himself as the Vice President of Capt. Phip’s, responsible for “running the business,” to include the buying and selling of product, managing the levels of product, and hiring and/or firing. Jamie Harrington admitted that all of Capt. Phip’s H-2B workers were packing ice, and none of them were currently processing any oysters. The workers’ H-2B visas for 2017 only permitted them to work in oyster processing. Jamie Harrington admitted that Capt. Phip’s visa petitions should have been for workers for both ice and oyster processing.

During the August 31, 2017 interview, Jaime Harrington stated that he was also the President of Easton Ice Company, Inc. (“Easton Ice”).  The principal office for Easton Ice is the same physical address as Capt. Phip’s premises in Secretary, Maryland.   A subsequent interview of a recipient of multiple H-2B visas filed by Capt. Phip’s including in 2017, when the H-2B workers were only authorized for oyster processing, revealed that their duties that season were to drive a truck and deliver ice. In September 2017, an agent observed this person driving a truck bearing the name “Easton Ice.” The agent also saw another Capt. Phip’s H-2B recipient delivering ice and riding in the truck. Easton Ice did not apply for H-2B visas in 2017, and workers with H-2B visas obtained through Capt. Phips were not authorized to work for Easton Ice Company. Nevertheless, Jamie Harrington admitted that Capt. Phip’s H-2B visa recipients were routinely directed to perform work for Easton Ice and other businesses controlled by Philip and Jamie Harrington.

On August 9, 2018, government agents interviewed Jamie Harrington at Capt. Phip’s premises in Secretary, Maryland. Jamie Harrington admitted that the company was not in compliance with the requirements of the H-2B visa program and that some of Capt. Phip’s H-2B workers were driving trucks or performing other duties outside the scope of their visas, including performing work for other companies controlled by Philip and Jamie Harrington, including Easton Ice, Woodfield Ice Company, Inc. (“Woodfield Ice”), as well as two Ocean City, Maryland, motels owned by members of the Harrington family.  Agents pointed out to Jamie Harrington that if the H-2B applications had been truthful about the location and job duties for workers at Woodfield Ice the prevailing wage would have been much higher because that business is in the Washington, D.C. metro area.

Between approximately 2013 and 2018, Capt. Phip’s filed petitions for H-2B visas for approximately 142, nonimmigrant workers.  Capt. Phip’s officers involved in the H-2B process were aware that the nonimmigrant workers were intended to be employed to engage in work beyond the job descriptions authorized by the workers’ visas.  Capt. Phip’s realized unlawful benefits through the use of fraudulently low prevailing wages between April 2013 to December 2018, although the exact amount cannot be determined. Capt. Phip’s has not participated in the H-2B visa program since at least January 2019.

Jamie Harrington is also the owner and operator of multiple other businesses involved the production and distribution of ice as well as processing of seafood, rental machinery, housing development, oyster farming, and other ventures including: Easton Ice; Woodfield Ice; PJH Oyster; Two Sons R.S., LLC; Philson Properties, LLC; Two Sons C.P. LLC; P&N Farms; Atlantic Rental, LLC; DMS Hurlock, LLC; The Preserve at Wright’s Wharf Homeowners Association; and Super Transporter, LLC. (together with Capt. Phip’s, the “Harrington Companies.”

Harrington admitted in his plea agreement that, beginning in 2013 and continuing through at least August 9, 2018, he engaged in a pattern and practice of hiring and employing workers without lawful immigration status at the Harrington Companies. Most of the unauthorized workers were Mexican citizens and nationals. Some of the undocumented workers Jamie Harrington hired and employed entered the United States lawfully and overstayed their visas, others never had lawful status to be present in the United States. Analysis of payroll and other records shows that approximately 89 undocumented workers were employed by the Harrington Companies between 2013 and 2018. Harrington continued to employ several of the workers even after he knew they had been placed into removal proceedings by immigration officials because they did not have lawful status to be present or working in the United States.

Jamie Harrington faces a maximum sentence of six months in federal prison and a $267,000 fine for the unlawful employment of undocumented workers. Captain Phip’s Seafood faces a maximum sentence of five years’ probation and a $500,000 fine for the unlawful employment of undocumented workers. U.S. District Judge Ellen L. Hollander has scheduled sentencing for both on November 23, 2021 at 10:00 a.m.

Acting United States Attorney Jonathan F. Lenzner commended HSI, DSS, and DOL-OIG for their work in the investigation and thanked the Baltimore District Office of the U.S. Department of Labor’s Wage and Hour Division for its assistance.  Mr. Lenzner thanked Assistant U.S. Attorneys Zachary A. Myers and Judson T. Mihok, who are prosecuting the case.

# # #

Greenbelt, Maryland – A federal grand jury has returned an indictment charging eight individuals, including the President, Vice-President and Chief Finance and Strategy Officer at a company that provided medical billing and coding services on government contracts and an employee at Walter Reed National Military Medical Center (WRNMMC), with conspiracy to commit health care fraud and wire fraud and related charges, in connection with a scheme to defraud WRNMMC and the Defense Health Agency (DHA).  The indictment was returned on March 17, 2022, and unsealed today upon the arrests of three defendants.  Charged in the indictment are:

            Akbar Masood, age 59, of Great Falls, Virginia;

            Michelle O. Peebles, age 48, of Riverdale, Mayland;

            Harriett Jackson, a/k/a “Harriett Soumah,” age 49, of Glenarden, Maryland;

            Judith Russ, age 58, of Washington, D.C.;

            Rhonda Paul, age 46, of Washington, D.C.;

            Wesley Williams, age 47, of Takoma Park, Maryland;

            Bagnon Jaques Titi, age 44, of Riverdale, Maryland; and

            Alfred Antonio Duncan, age 44, of White Plains, Maryland.

Masood, Peebles, and Jackson are expected have initial appearances this afternoon in U.S. District Court in Greenbelt.  The remaining defendants are expected to have initial appearances later today or on April 8, 2022.

The indictment was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Scott Moreland of the Major Procurement Fraud Field Office, U.S. Army Criminal Investigation Division (CID); Special Agent in Charge Christopher Dillard of the Department of Defense Office of Inspector General, Defense Criminal Investigative Service - Mid-Atlantic Field Office (DCIS); Special Agent in Charge Alison F. Zavada of the Naval Criminal Investigative Service (NCIS), Washington Field Office; and Acting Inspector General Rene Febles of the Washington Metropolitan Area Transit Authority Office of Inspector General (WMATA OIG).

According to the 12-count indictment, Masood was a part owner and “Chief Strategy Officer” of Company A, a Virginia-based company that served as a prime contractor for medical support services to WRNMMC and DHA.  Peebles was a site manager at Company A.  Jackson was President, Peebles was Vice-President, and Masood was “Chief Finance and Strategy Officer” of Company B, headquartered in Tysons, Virginia, which primarily provided medical billing and coding services on government contracts.

The indictment alleges that beginning in at least December 2016, Masood, Peebles, and Jackson established HMA Solutions as a Delaware Limited Liability Corporation, headquartered in Riverdale, Maryland, to take advantage of WRNMMC’s increased need for contract medical coders.  Using his authority within Company A, Masood allegedly subcontracted work to HMA on Company A’s contract with WRNMMC to supply medical coding support without disclosing his participation in HMA to Company A’s co-owners.  Masood, Peebles, and Jackson allegedly used the stolen identities of actual persons, including credentialed medical coders, to demonstrate that HMA had the ability to perform medical coding evaluation, feedback, and training services as a subcontractor to Company A.  The indictment alleges that the defendants used falsified signature of one victim, who was a credentialed medical coder, to sign consulting agreements with Company A and representing that other identity theft victims would be performing the work.  Further, the indictment alleges that Masood, Peebles, and Jackson generated false billable hours using the names of identity theft victims which they charged to Company A, which then billed those hours to WRNMMC.  Russ, an official with WRNMMC, then allegedly verified the work performed by the non-existent coders.  According to the indictment, beginning no later than January 2017, Russ was paid regularly by Peebles or Company B and had not disclosed this outside income or employment to officials at WRNMMC.

According to the indictment, Masood, Peebles, and Jackson steered a subsequent WRNMMC contract with Company A for in-person coding support from highly skilled coders (CDI Specialists), who are paid at a higher rate, to HMA as a sub-contractor.  Masood, Peebles, and Jackson then allegedly billed Company A—and thereby WRNMMC—for CDI Specialist hours, none of which were ever provided. 

As detailed in the indictment, Peebles and Jackson then recruited Paul, Williams, Titi, and Duncan to pose as medical coders and sign consulting agreements with Company A, even though none of them had any experience or credentials as medical coders.  The indictment alleges that Paul, Williams, Titi, and Duncan repeatedly submitted falsified medical coding invoices, claiming the processing of thousands of encounters each month, and causing Company A to bill WRNMMC over $1 million for their false claims alone.

According to the indictment, between 2017 and 2019, the defendants obtained approximately $3.3 million from the scheme to defraud WRNMMC and DHA.

If convicted, the defendants each face a maximum sentence of 20 years in federal prison for conspiracy to commit health care fraud and wire fraud.  All of the defendants except Russ also face a maximum of 20 years in federal prison for each of the eight counts of wire fraud.  Masood, Peebles and Jackson each face a mandatory sentence of two years in federal prison, consecutive to any other sentence imposed, for each of the two counts of aggravated identity theft, and Russ faces a maximum sentence of five years in federal prison for participating in the scheme, which was a conflict of interest to her federal employment.  Actual sentences for federal crimes are typically less than the maximum penalties.  A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors. 

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

United States Attorney Erek L. Barron commended the Army CID, DCIS, NCIS, and WMATA OIG for their work in the investigation.  Mr. Barron thanked Assistant U.S. Attorneys Adam K. Ake, and Rajeev R. Raghavan, who are prosecuting the federal case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to report fraud, please visit www.justice.gov/usao-md and https://www.justice.gov/usao-md/report-fraud.

# # #

Baltimore, Maryland – McArnold Charlemagne, age 33, of Miramar, Florida, pleaded guilty today to a federal mail fraud conspiracy charge, in connection with a scheme in which he defrauded more than 65 elderly victims of more than $1.5 million.  

The guilty plea was announced by United States Attorney for the District of Maryland Robert K. Hur and Special Agent in Charge Jennifer C. Boone of the Federal Bureau of Investigation, Baltimore Field Office.

“This defendant was part of a heartless scheme to prey on elderly victims by falsely claiming that a family member needed money to pay legal or other expenses—sometimes pretending to be the victim’s relative to convince them to send cash to the conspirators,” said U.S. Attorney Robert K. Hur.  “We will continue to work with our law enforcement partners to bring to justice those who perpetrate these despicable schemes targeting elderly victims.  I encourage anyone who believes they may be a victim of financial fraud to contact the Elder Fraud Hotline at 833-FRAUD-11 (833-372-8311).”

“McArnold Charlemagne was a member of a criminal conspiracy that took advantage of the emotions and bank accounts of dozens of senior citizens,” said Jennifer C. Boone, Special Agent in Charge of the FBI Baltimore Field Office. “Criminals who prey on, and steal from, seniors should know that their actions carry real consequences, both for their victims and for themselves. The FBI and our law enforcement partners will do everything in our power to find fraudsters and hold them accountable for their crimes.”

According to Charlemagne’s plea agreement, from about January 2018 through at least December 2019, he was part of a conspiracy to defraud elderly victims by persuading them to send thousands of dollars in cash to members of the conspiracy by falsely stating that the money would be used to help the victims’ relatives pay legal or other expenses in connection with crimes and other incidents that had not occurred or that the money would be sent to particular individuals at their addresses, rather than to members of the conspiracy falsely claiming to reside at those addresses.  Charlemagne’s co-conspirators telephoned elderly victims throughout the United States, posing as a police officer, lawyer, or other individual, falsely telling the victim that a relative, typically the victim’s grandchild, had been incarcerated in connection with a car accident or traffic stop involving a crime, and needed money—often tens of thousands of dollars—for bail, legal fees, and other expenses. 

As detailed in the plea agreement, during the telephone calls, the co-conspirators directed victims to send cash to a particular address via an overnight delivery service.  The co-conspirators allegedly even posed as the victims’ relatives to further induce them to send the cash.  Once the victims did send money, the co-conspirators called the victims asking for more cash, regularly obtaining tens of thousands of dollars from the retirement savings of victims.  To prevent the victims from sharing the information with anyone, the co-conspirators allegedly told the victims that a “gag order” had been placed on the case requiring secrecy, or that the situation was embarrassing for the grandchild and they didn’t want anyone else to know about it.

Charlemagne admitted that, in order to conceal the crime, he and other co-conspirators identified residential locations across the country where the cash should be sent, including in Maryland, Pennsylvania, Delaware, and Florida.  Charlemagne and his co-conspirators identified locations that were either vacant or for sale, so that no one would be at those locations at the time of the deliveries, then retrieved the packages of cash when they were delivered.  Charlemagne and other co-conspirators recruited and instructed additional people to assist in retrieving packages of cash from specified locations.

For example, Charlemagne flew from Miami, Florida to Washington, D.C. on May 28, 2018, for the purpose of retrieving packages containing fraud proceeds, renting a place to stay in the Baltimore area. 

On May 30, 2018, Victim #1, 75 years old from Temperance, Michigan, received a phone call from someone pretending to be her grandson’s lawyer.  Victim #1 sent two packages totaling $38,000 to addresses in Baltimore.  On June 1, 2018, Charlemagne picked up the second package sent by Victim #1, then traveled to an address on North Payson Street in Baltimore, to pick up an additional package, sent from Victim #2, 78 years old from Salem, Oregon.

Victim #2 was contacted by phone by an individual purporting to be an attorney who told Victim #2 that Victim #2’s granddaughter was a passenger in a car driven by a man that was involved in a car crash and was jailed.  The caller told Victim #2 that bail money was needed immediately to secure the release of Victim #2’s granddaughter.  The caller warned Victim #2 not to contact anyone due to a “72 hour gag order.”  Victim #2 was instructed to overnight mail $10,000 in cash to “John Miller,” who was described as an officer of the court, to an address on North Payson Street in Baltimore.  Victim #2 did as instructed.  The next day, the caller contacted Victim #2 again and stated that, because marijuana and a gun had been found in the car, an additional $10,000 was required.  Victim #2 complied.  Victim #2 was contacted again and told to send $20,000 for the victim’s medical bills, and Victim #2 complied.  While authorities were not able to recover the first two packages sent by Victim #2, the third mailing containing $20,000 was intercepted by Baltimore Police and returned to Victim #2.  Nonetheless, Charlemagne waited at North Payson Street for approximately 30 minutes on the morning of June 1, 2018, before catching a ride to a different address.

On June 6, 2018, Victim #3, an 83-year-old individual from Framingham, Massachusetts, received a phone call from a man who stated Victim #3’s son had caused a car crash by texting and driving and was being arrested. Victim #3 was told to send $8,000 to an address on Whittier Avenue in Baltimore in order to bail Victim #3’s son out.  On June 7, 2018, Victim #3 did as instructed and sent the money via FedEx.  Later that evening, Victim #3 realized the scam and called the police.  The authorities were able to contact FedEx and located the package, which had already arrived in Maryland.  The package was returned to Victim #3.

Charlemagne, who was still in the Baltimore area picking up packages containing fraud proceeds, learned that the package had been returned to the sender.  Charlemagne contacted another co-conspirator and requested the co-conspirator travel from Miami to Massachusetts in order to wait in front of Victim #3’s house, pretend to be Victim #3, and take the package.  Charlemagne texted the co-conspirator the address, a screenshot from Google Maps of where the co-conspirator should park, and a copy of the FedEx tracking number.  Charlemagne told the co-conspirator that the co-conspirator needed to fly out that night to arrive in the morning, or that it would be too late.   On June 8, 2018, the co-conspirator was caught outside the residence of Victim #3 in Framingham, Massachusetts, and arrested.

As a result of the execution of the scheme to defraud, Charlemagne and others caused at least 65 different victims to send a total of at least $1.5 million.        

Charlemagne faces a maximum sentence of 20 years in federal prison for mail fraud conspiracy.  Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.  U.S. District Judge George L. Russell, III has scheduled sentencing for March 26, 2021, at 1:00 p.m.

The Department of Justice has an interactive tool for elders who have been financially exploited to help determine to which agency they should report their incident, and also a senior scam alert website.  Victims are encouraged to file a complaint online with the FBI’s Internet Crime Complaint Center at this website or by calling 1-800-225-5324.  Elder fraud complaints may be filed with the FTC at www.ftccomplaintassistant.gov or at 877-FTC-HELP.

United States Attorney Robert K. Hur commended the FBI for its work in the investigation.  Mr. Hur thanked Assistant U.S. Attorneys Sean R. Delaney and Matthew J. Maddox, who are prosecuting the case.

# # #

Greenbelt, Maryland – Arthur Morgan, age 67, of Lorton, Virginia, pleaded guilty today to a federal wire fraud charge, in connection with federal contracts to provide helmets, body armor, and other items to military and other federal entities.  Morgan also pleaded guilty to illegal possession of a firearm by a prohibited person, a charge which was originally brought in U.S. District Court for the Eastern District of Virginia, but was transferred to Maryland.

The guilty plea was announced by United States Attorney for the District of Maryland Robert K. Hur; United States Attorney for the Eastern District of Virginia G. Zachary Terwilliger; Special Agent in Charge Eric D. Radwick of the General Services Administration (GSA) Office of Inspector General; Special Agent in Charge Ashan Benedict of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Washington Field Division; Special Agent in Charge Alison F. Zavada, Naval Criminal Investigative Service; and Assistant Inspector General for Investigations Michael Ryan of the U.S. Department of State Office of Inspector General.

According to his plea agreement, Morgan was the Chief Executive Officer of Surveillance Equipment Group Inc. (SEG) and its relevant division, SEG Armor, both of which Morgan managed from Lorton, Virginia.  The GSA enters into government-wide contracts with commercial firms to provide supplies and services that are available for use by federal agencies worldwide.  All GSA contracts are subject to the Trade Agreements Act (TAA), which requires that all products listed on GSA contracts must be manufactured or “substantially transformed” in a “designated country.”  China is not a designated country under the TAA.  Contractors were not allowed, under these GSA contracts, to supply products that did not comply with the TAA.  Any such products would have been disqualified from eligibility under the contract.  Further, a contractor’s failure to certify that its products complied with the TAA would have disqualified the contractor from eligibility for the contract.  A contractor who falsely certified that a product was TAA compliant could not lawfully seek payment from the United States for that product.

As detailed in his plea agreement, Morgan falsely certified that the ballistic vests, helmets, riot gear, and other items he offered for sale under his federal contract were from designated countries, specifically, Hong Kong and the United States.  While representing that none of SEG’s products offered to federal agencies under the relevant contract were manufactured in China, Morgan knowingly provided products that Morgan knew had been manufactured in China, in violation of the TAA and the contract.  SEG received multiple federal government orders under the contract between 2003 and 2019.  Between September 15, 2014 and August 29, 2019, approximately six federal government agencies placed at least 11 orders for ballistic and other law enforcement/security equipment from SEG—which SEG sourced from China in violation of the TAA, as part of the scheme to defraud— totaling approximately $658,866.92. 

For example, the U.S. Navy placed an order with SEG for helmets, and Morgan had a series of e-mail communications with Navy contracting personnel in Indian Head, Maryland, including concerning SEG’s inability to meet the agreed-upon delivery schedule.  In his e-mails, Morgan falsely advised the Navy contracting personnel that SEG had a factory in southern Virginia, that the helmets for the order “were in production” there, and that the delays were due to a backorder of materials needed for the helmets.  To the contrary, the helmets that Morgan provided under the U.S. Navy order originated from China before Morgan sent them to the Navy, in violation of the TAA and the contract.  Specifically, Morgan admitted that these products were manufactured by Chinese Company 1, from which Morgan knowingly ordered them.

On February 16, 2016, and March 10, 2016, the Defense Finance and Accounting Service paid SEG $127,069.60 and $191,990.28, respectively, for the U.S. Navy order.  For all of the orders, federal government agencies paid SEG at least approximately $488,976.92.

On December 17, 2019, law enforcement executed search warrants at Morgan’s residence in Lorton; at the Louisa, Virginia property that his wife owned and which Morgan had claimed housed SEG’s manufacturing operation; at one of Morgan’s storage units in Mineral, Virginia; and at a rental warehousing location in Springfield, Virginia.  Law enforcement recovered: a 12-gauge shotgun; a 9mm semi-automatic firearm with two magazines; a .380-caliber semi-automatic firearm with two magazines; a .38-caliber five-shot revolver, with two speed loaders; 315 rounds of various caliber ammunition; a 30-round 9mm extended magazine; four ballistic vests; five ballistic plates; three black ballistic helmets; one “SEG Armor” ballistic vest manufactured in China; and personal use marijuana with accompanying paraphernalia.  At the time that Morgan possessed the firearms, ammunition, and body armor, he had been convicted of at least one crime of violence, specifically, second-degree murder, assault with the intent to murder, rape or rob, and use of a handgun in a crime of violence, in the Circuit Court for Prince George’s County, Maryland on June 1, 1982. As a result of this conviction, Morgan was prohibited from possessing firearms, ammunition, or body armor.

Morgan faces a maximum sentence of 20 years in federal prison for wire fraud and a maximum of 10 years in federal prison for being a felon in possession of firearms and ammunition.  Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.  U.S. District Judge George J. Hazel has scheduled sentencing for March 15, 2021, at 10:00 a.m.

United States Attorney Robert K. Hur commended the GSA OIG, the State Department OIG, the ATF, the NCIS, and the U.S. Attorney’s Office for the Eastern District of Virginia for their work in this investigation and prosecution, and recognized the Army Major Procurement Fraud Unit, the Defense Criminal Investigative Service, Homeland Security Investigations, the FBI, the Air Force Office of Special Investigations, and the Coast Guard Investigative Service for their assistance.  Mr. Hur thanked Assistant U.S. Attorney Elizabeth Wright, who is prosecuting the case.

# # #

Baltimore, Maryland – U.S. District Judge Stephanie A. Gallagher sentenced former Customs and Border Protection (“CBP”) officer Supreme Jones, age 32, of Atlanta, Georgia and formerly of Maryland, today to five years’ probation after Jones pleaded guilty to two counts of entering an aircraft or airport security area in violation of security requirements.  As a result of his federal conviction, at least during his five year term of probation, Jones will not be able to be employed in law enforcement.

The guilty plea and sentence were announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; Special Agent in Charge James C. Harris of Homeland Security Investigations (“HSI”) Baltimore; Stephen T. Maloney, Director of Field Operations for U.S. Customs and Border Protection Baltimore Field Office; and Special Agent in Charge Craig Miles of the U.S. Department of Transportation Office of Inspector General Mid-Atlantic Region (“DOT-OIG”).

  

According to court documents, from 2018 through 2022, Jones was an armed CBP officer assigned as a uniformed officer at the Baltimore Washington International/Thurgood Marshall Airport (“BWI”).  As a result of his duties, Jones was issued credentials authorizing him to go into any area of BWI, including the areas beyond the Transportation Security Administration (“TSA”) security checkpoints, for the performance of his official duties. 

In June 2021, the FBI began an investigation into complaints that Jones was abusing his authority by using his credential to enter secure areas when not performing official duties, specifically when flying for personal travel.  According to the statement of facts, during a 14-month period Jones made more than 60 flights, either going from or returning to BWI.  Upon review of surveillance imagery corresponding to the entry point hits, the FBI discovered that Jones was often entering the sterile area of BWI via the controlled exit portals when in civilian clothing by displaying his badge to the TSA Officer or TSO on duty at the exit portal. 

Although a number of trips raised suspicions about Jones’ conduct, two itineraries in particular drew close scrutiny.  On February 21, 2022, Jones flew from BWI to Atlanta, GA.  He did not declare himself to be armed on this flight.  Nonetheless, while in civilian clothes, he used his badge to access the security area to proceed to his departure gate within.  When he arrived at the gate, he engaged in a conversation with the airline personnel, appeared to display a previously unseen limp and obtained a special needs boarding pass from the airline, thus enabling him priority boarding of the aircraft.  During this same travel period, Jones flew round-trip from Atlanta to Miami, then Miami to St. Martin.  To justify a flight change and/or late arrival on the return flight, without incurring a flight change fee, Jones falsely represented that a military unit to which he was assigned had been involved in an accident; falsely identified his military superior; and provided a fictitious phone number.

On April 5, 2022, FBI agents conducted surveillance of Jones in BWI.  They saw Jones, while still on duty and in his uniform, jump a long line of passengers in line at an airline ticket counter to check-in for a flight he was taking later that day in his personal capacity.  About 30 to 45 minutes before the departure time of his flight, FBI Special Agents saw Jones entering the terminal through the exit point, rather than through the TSA security checkpoint.  When the agents confronted Jones, he denied having a flight that day and stated that he was “…working…trailing somebody,” or words to the effect.  A short while later, Jones was seen in the departure gate area for his Atlanta-bound flight.

Jones was arrested on June 26, 2022, as he was about to board a flight from BWI to Boston, Massachusetts, with a scheduled return the following day. 

                     

United States Attorney Erek L. Barron praised the FBI, HSI, CBP and DOT-OIG for their work in the investigation.  Mr. Barron thanked Assistant U.S. Attorney P. Michael Cunningham, who prosecuted the case.

            For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit www.justice.gov/usao-md and https://www.justice.gov/usao-md/community-outreach.

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Baltimore, Maryland – U.S. District Judge Deborah K. Chasanow sentenced Keon Ball, age 45, of Baltimore, Maryland to 66 months in federal prison, followed by 3 years of supervised release, for wire fraud conspiracy and aggravated identity theft in relation to multiple identity theft schemes and fraud schemes—including schemes conducted while on probation after a past state fraud conviction and while on pre-trial release in connection with state fraud charges.  The Court has ordered Ball to pay at least $715,504 in restitution. 

The sentence was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Bo Keane of the United States Secret Service - Baltimore Field Office; and Chief Melissa R. Hyatt of the Baltimore County Police Department.

According to his plea agreement, from May 2018 to June 2020, Ball and a co-conspirator incurred charges of over $1,000,000 on fraudulently established credit lines, using the identities of at least 10 victims in connection with the schemes.  For example, on August 25, 2018, Ball submitted a false and fraudulent application for a credit line account from a financial institution using the name, birth date, and social security number of Victim 1.  After the credit application was approved, Ball and his co-conspirator incurred $105,442.59 in purchases from Company 1 (a home improvement store) under the identity of Victim 1.  Ball and his co-conspirator committed the same criminal conduct in several instances, incurring charges of over $150,000 in connection with lines of credit opened using various other victims’ names—none of which was repaid.  Ball and his co-conspirator also repeatedly passed fraudulent checks to Company 1 purporting to pay the balances they incurred.  Further, as part of their scheme to defraud, Ball and his co-conspirator obtained two vehicles valued at over $60,000 and multiple pieces of heavy construction equipment valued at over $300,000 using the identity information of Victim 2.

As stated in his plea agreement, on February 5, 2019, law enforcement executed a search and seizure warrant on Ball’s luxury high rise in Baltimore where law enforcement seized multiple counterfeit identification documents including three fraudulent licenses, a card reader, re-encoder, blank white plastic card stock, hologram overlays, and a firearm which Ball was prohibited from possessing.  Investigators also discovered that Ball leased the apartment using a counterfeit identification document and the identifying information of another identity theft victim.  Law enforcement would go on to recover multiple pieces of the fraudulently obtained heavy equipment.  Ball was subsequently arrested and charged on a state level in connection with the fraudulent credit line scheme then was released on conditions. 

Despite his pending state charges, Ball was not deterred and his fraudulent activity continued.  In June and July 2020, Ball submitted fraudulent CARES Act Paycheck Protection Program loan applications (PPP loans) and obtained $256,664 in government-backed PPP funds for purported businesses that did not exist in any legitimate capacity.  Included with each application was a document purporting to be a 2019 IRS Form W-3 Transmittal of Wage and Tax Statements which was in fact not legitimate and contained false information concerning purported wages paid and purported number of employees of each business.  Each application also falsely affirmed that Ball was not on probation in light of a past conviction at the time of each application.  The PPP funds were then deposited in a bank account that Ball had opened using the identity information of another victim.  Ball also started the PPP loan application process for two additional fraudulent PPP loans from Bank 1 in the amounts of $113,258 and $231,078.000 for purported businesses he ran. These loans, however, ultimately did not close.  In total, Ball caused a loss of $750,000, intended to cause a loss of over $1,450,000, and used the identifying information of more than 10 victims in connection with his schemes. 

On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud.  The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts.  For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

The Pandemic Response Accountability Committee (PRAC) Fraud Task Force was established to serve the American public by promoting transparency and facilitating coordinated oversight of the federal government’s COVID-19 pandemic response.  The PRAC Fraud Task Force brings together agents from its 22 member Inspectors General to investigate fraud involving a variety of programs, including the Paycheck Protection Program.  Task force agents who are detailed to the PRAC receive expanded authority to investigate pandemic fraud as well as tools and training to support their investigations.

United States Attorney Erek L. Barron commended the USSS and the BCPD for their work in the investigation. Mr. Barron thanked Assistant U.S. Attorney Paul A. Riley, who prosecuted the case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit https://www.justice.gov/usao-md and https://www.justice.gov/usao-md/community-outreach.  For more information on identity theft and fraud, please visit https://www.justice.gov/usao-md/report-fraud. 

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Used CARES Act Loan Proceeds to Purchase a Mercedes-Benz and to Lease and Fully Furnish a Luxury Apartment in Downtown Baltimore

Baltimore, Maryland – U.S. District Judge Richard D. Bennett sentenced Lawrence A. Walker, age 64, of Baltimore, Maryland, today to 24 months in federal prison, followed by 6 months of home confinement, and 3 years of supervised release, for conspiracy to commit wire fraud and fraudulently obtaining more than $262,000 through the Paycheck Protection Program (“PPP”), intended to provide financial assistance to small businesses under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.  Judge Bennett also ordered that Walker must forfeit the cash seized during the search, a Mercedes-Benz, and pay a money judgment and restitution of $232,152.

The sentence was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; and Chief Robert McCullough of the Baltimore County Police Department.

According to the plea agreement, from March 2021 through December 2021, Walker and a co-conspirator engaged in a scheme to fraudulently obtain a PPP loan for Walker’s business, Nutscola Street Promotions, LLC (“Nutscola”).  Walker was the owner and resident agent, but Nutscola had no employees at the time and was not in operation.

As detailed in the plea agreement, on March 21, 2021, Walker and his co-conspirator submitted a PPP loan application that contained multiple misrepresentations, including that Nutscola had 13 employees and an average monthly payroll of $104,900.87.  Walker and his co-conspirator fabricated a tax form and a February 2020 bank statement purportedly from Nutscola’s business account which were submitted in support of the loan application.  Walker opened the Nutscola bank account on March 6, 2021, as part of the fraud scheme.

Based on the false representations and fraudulent documentation, the PPP loan was funded and approximately $262,252 in loan proceeds was distributed to the Nutscola bank account.  After receiving the loan proceeds, Walker provided his co-conspirator with a kickback for his work in obtaining the loan—two checks totaling $78,000, which was approximately 30 percent of the loan amount.

Walker and his co-conspirator knew that, under the PPP rules, interest and principal on a PPP loan were eligible for forgiveness, if the business spent the loan proceeds on permissible items within a designated period of time and used a certain portion of the loan toward payroll expenses.  To make it appear that the PPP loan funds were being used for legitimate purposes, on March 30, 2021, Walker signed an agreement with a payroll processor to provide payments using the PPP funds to purported employees of Nutscola, including Walker, his brother, and various other friends and associates.  Use of the payroll services also created documentation that could be used to substantiate a request for the PPP loan to be forgiven. 

According to the plea agreement, a total of $159,000 in sham payroll payments were made using funds traceable to the PPP loan obtained by Walker and Nutscola.  None of the purported employees were actually employed by Nutscola and several of the purported employees provided the funds directly back to Walker.  Walker used the loan proceeds to purchase a Mercedes-Benz automobile valued at more than $76,000 and to lease and fully furnish a luxury apartment in downtown Baltimore that overlooked Camden Yards baseball stadium.  Neither use of the funds was permissible under PPP rules.

On December 31, 2021, Walker’s co-conspirator also fraudulently applied for an Economic Injury Disaster Loan (EIDL) under the CARES Act on behalf of Walker and Nutscola.  The fraudulent EIDL loan did not close.

On April 26, 2022, law enforcement executed a federal search warrant at Walker’s residence and seized multiple electronic devices, including Walker’s phone, as well as over $30,000 in cash hidden in a garbage bag inside a heater in Walker’s bedroom.  The $30,000 in cash constituted fraudulently obtained PPP funds.    Walker has made no payments in connection with the PPP loan obtained for Nutscola, and the entire PPP loan amount of $262,252 remains outstanding. 

The District of Maryland Strike Force is one of three strike forces established throughout the United States by the U.S. Department of Justice to investigate and prosecute COVID-19 fraud, including fraud relating to the CARES Act.  The CARES Act was designed to provide emergency financial assistance to Americans suffering the economic effects caused by the COVID-19 pandemic.  The strike forces focus on large-scale, multi-state pandemic relief fraud perpetrated by criminal organizations and transnational actors.  The strike forces are interagency law enforcement efforts, using prosecutor-led and data analyst-driven teams designed to identify and bring to justice those who stole pandemic relief funds.  

For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.  Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

United States Attorney Erek L. Barron commended the FBI and the Baltimore County Police Department for their work in the investigation and thanked the Small Business Administration Office of Inspector General for its assistance.  Mr. Barron thanked Assistant U.S. Attorney Paul A. Riley, who prosecuted the case.  He also recognized the assistance of the Maryland COVID-19 Strike Force Paralegal Specialist Joanna B.N. Huber. 

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit www.justice.gov/usao/md.

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A medical doctor and entrepreneur was sentenced to 119 months and 29 days in prison today for defrauding his former company’s shareholders and for failing to account for and failing to pay employment taxes, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, U.S. Attorney Dana J. Boente for the Eastern District of Virginia, Chief Don Fort of the Internal Revenue Service Criminal Investigation (IRS-CI) and Assistant Director in Charge Andrew W. Vale of the FBI’s Washington Field Office.

According to documents filed with the court, in or about September 2000, Sreedhar Potarazu, 51, of Potomac, Maryland, an ophthalmic surgeon licensed in Maryland and Virginia, founded VitalSpring Technologies Inc. (VitalSpring), a Delaware corporation. VitalSpring operated in McLean, Virginia and provided data analysis and services relating to health care expenditures. In or around the end of 2015, VitalSpring started doing business as Enziime LLC, a Delaware corporation. From its inception, Potarazu was VitalSpring’s Chief Executive Officer and President, and served on its Board of Directors.

From at least 2008, Potarazu provided materially false and misleading information to VitalSpring’s shareholders to induce more than $49 million in capital investments in the company. Potarazu represented on numerous occasions that VitalSpring was a financially successful company and that the sale of VitalSpring was imminent, which would have resulted in profits for shareholders. Potarazu also admitted that he concealed from shareholders that VitalSpring failed to account for and pay over more than $7.5 million in employment taxes to the IRS. For example, in 2014, Potarazu provided shareholders with a written summary of operating results that reflected VitalSpring’s 2013 revenues to be approximately $12.9 million when, in fact, the 2013 revenue was less than $1 million.

“Like a director employing actors and props on a stage, Sreedhar Potarazu arranged for an imposter to pose as a buyer, provided a link to a bogus website and supplied fraudulent balance sheets, phony bank statements and false tax returns to convince VitalSpring investors and potential buyers that the company was financially healthy and up-to-date on its taxes,” said Acting Deputy Assistant Attorney General Goldberg. “As a result of his actions, shareholders are out more than $49.5 million and over $7.5 million in employment taxes due to the U.S. Treasury were diverted and never paid. With Potarazu’s conviction and the sentencing hearings in this case, his fraud has been revealed, and today’s imposition of a 119 month sentence holds him fully accountable for his actions.”

“For years Potarazu enriched himself by abusing the trust of his company’s many investors and stealing millions of dollars from them through a complex scheme of fraud and deceit,” said U.S. Attorney Dana J. Boente for the Eastern District of Virginia. “This case is a prime example of this office’s ongoing commitment to bringing white-collar criminals to justice.”

“For almost a decade, Potarazu put greed ahead of his shareholders and employees by building a complex web of deceit and fraud while at the same time evading paying his employment tax liability,” said Chief Don Fort, IRS Criminal Investigation. “Today’s sentencing serves as a reminder that these types of criminal actions will be punished and IRS-CI is committed to bringing culpable individuals to justice.”

“Potarazu ran a multi-million dollar scheme that caused significant financial losses to VitalSpring shareholders for almost a decade,” said Assistant Director in Charge Andrew W. Vale of the FBI’s Washington Field Office. “The FBI is committed to bringing white-collar criminals to justice and we will continue to work closely with our law enforcement partners, to investigate, charge and prosecute those who engage in criminally deceitful business practices.”

Scheme to Defraud

From VitalSpring’s inception, but specifically from 2008 until his arrest in October 2016, Potarazu solicited investments through in-person meetings, emails, telephone conference calls, webinars, and phone calls. From in or about 2008 through in or about 2016, Potarazu raised approximately $49 million from more than 174 victim investors.

Potarazu induced investments from shareholders by making false representations, concealing material facts, and telling deceptive half-truths about VitalSpring’s financial condition, tax compliance, and alleged imminent sale. Potarazu also caused someone to pose as a representative of a prospective buyer on shareholder conference calls to add legitimacy to his claims regarding VitalSpring’s imminent sale.

VitalSpring never generated a profit. Nonetheless, Potarazu falsely represented to shareholders that VitalSpring’s financial position and profitability was improving from 2008 to 2016, and that VitalSpring had millions of dollars in cash reserves. To support his scheme, Potarazu presented fake bank statements to some shareholders that showed inflated balances.

Potarazu also concealed from shareholders that VitalSpring owed substantial employment tax to the IRS. Potarazu provided or caused to be provided false corporate income tax returns to some shareholders that overstated VitalSpring’s income and omitted the accruing employment tax liability.

In November 2014, Potarazu created a Special Review Committee (SRC) in response to a lawsuit filed in Delaware by shareholders that claimed Potarazu misled the victim investors about VitalSpring’s finances, the status of the impending sale, and Potarazu’s compensation. Potarazu provided the SRC with false financial records, fake tax returns, and fake bank statements to induce the SRC to believe that VitalSpring was financially healthy and to cause the SRC to make materially false representations to the Delaware court and victim investors. He also falsely represented that the alleged imminent sale would yield substantial returns to the shareholders, and used this to induce additional investments. Members of the SRC traveled interstate to the Eastern District of Virginia to attend meetings in which Potarazu presented false information for their review.

In truth, there was no imminent sale pending. Potarazu provided false financial records, including fake balance sheets, fabricated bank statements, and false tax returns, to several prospective buyers, financial advisors and investment banks. In December 2014, when he was questioned by Prospective Buyer 1 as to the accuracy and authenticity of bank records provided, Potarazu presented false or misleading emails purporting to be from a bank employee to bolster the legitimacy of the false bank records. Potarazu also presented Prospective Buyer 1 with a link to a fake website that was made to look like a website for a major national bank, and which referred Prospective Buyer 1 to VitalSpring’s false bank statements, and used a shadow, secondary email account assigned to a VitalSpring employee to provide false information to Prospective Buyer 1, thereby creating the appearance that Potarazu had not provided the information.

In October 2014, Prospective Buyer 2 informed Potarazu that it was no longer interested in VitalSpring. Nevertheless, Potarazu continued to represent to shareholders for months thereafter that there was a deal pending with Prospective Buyer 2. In March 2015 and February 2016, Potarazu organized, or caused to be organized, conference calls with shareholders to discuss the alleged sale. In advance of the calls, Potarazu obtained questions from the shareholders and used them to prepare the individual who posed as a representative of Prospective Buyer 2 for each call.

From 2011 to 2015, in addition to his salary paid by VitalSpring, Potarazu diverted at least $5 million from the victim investors and VitalSpring for his own personal use.

Employment Tax Fraud

Potarazu admitted that from 2007 to 2016, VitalSpring accrued employment tax liabilities of more than $7.5 million. Potarazu withheld taxes from VitalSpring employees’ wages, but failed to fully pay over the amounts withheld to the IRS. As CEO and President of VitalSpring, Potarazu was a “responsible person” obligated to collect, truthfully account for, and pay over VitalSpring’s employment taxes. Ultimate and final decision-making authority regarding VitalSpring’s business activities rested with Potarazu.

Potarazu was aware of the employment tax liability as early as 2007 and between 2007 and 2016, was frequently apprised of VitalSpring’s employment tax responsibilities by his employees. In addition, IRS special agents interviewed Potarazu in 2011 and informed him of the employment tax liability. In all but one quarter between the first quarter of 2007 and the last quarter of 2011, as well as the second and third quarters of 2015, Potarazu failed to file VitalSpring’s Employer’s Quarterly Federal Tax Return (Forms 941) with the IRS. Potarazu also failed to pay over any of the employment tax withheld from VitalSpring’s employees’ wages in all but one quarter between the second quarter of 2007 and the third quarter of 2011, as well as the third and fourth quarters of 2015.

Between 2008 and 2015, instead of paying over employment tax, Potarazu caused VitalSpring to make millions of dollars of expenditures, including thousands of dollars in transfers to himself and others, the publication of his book, “Get Off the Dime,” a sedan car service and travel.

In addition to the term of prison imposed, U.S. District Court Judge Gerald Bruce Lee ordered Potarazu to serve three years of supervised release, and to pay $49,511,169 in restitution to the shareholders and $7,691,071 to the IRS, and forfeiture of several homes, vehicles, and bank accounts. He was remanded into custody.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Boente commended special agents of IRS CI and the FBI, who conducted the investigation, and Assistant Chief Caryn Finley and Trial Attorney Jack Morgan of the Tax Division, and Assistant U.S. Attorney Jack Hanly, who prosecuted the case.

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

On Dec. 2, a federal jury in Greeneville, Tennessee, convicted Peter Bolos, 44, of Tampa, Florida, of 22 counts of mail fraud, conspiracy to commit health care fraud and introduction of a misbranded drug into interstate commerce, following a month-long trial.

According to court documents and evidence presented at trial, Bolos and his co-conspirators, Andrew Assad, Michael Palso, Maikel Bolos, Larry Smith, Scott Roix, HealthRight LLC, Mihir Taneja, Arun Kapoor, and Sterling Knight Pharmaceuticals, as well as various other companies owned by them, deceived pharmacy benefit managers (PBMs), such as Express Scripts and CVS Caremark, regarding tens of thousands of prescriptions. The PBMs processed and approved claims for prescription drugs on behalf of insurance companies. Bolos and his co-conspirators defrauded the PBMs into authorizing claims worth more than $174 million that private insurers such as Blue Cross Blue Shield of Tennessee, and public insurers such as Medicaid and TRICARE, paid to pharmacies controlled by the co-conspirators.

Court documents and evidence at trial established that Bolos, Assad and Palso owned and operated Synergy Pharmacy in Palm Harbor, Florida. Under their direction, Synergy agreed with Scott Roix, a Florida telemarketer operating under the name HealthRight, to generate prescriptions for Synergy and the other pharmacies involved in the scheme. The prescriptions were typically for drugs such as pain creams, scar creams and vitamins. To obtain the prescriptions, evidence showed Roix used HealthRight’s telemarketing platform as a telemedicine service, calling consumers and deceiving them into agreeing to accept the drugs and to provide their personal insurance information. HealthRight then paid doctors to authorize the prescriptions through its telemedicine platform, even though the doctors never communicated directly with the patients and relied solely on the telemarketers’ screening process as the basis for their authorizations. Because this faulty and fraudulent process made the prescriptions invalid, the drugs were misbranded under the Food, Drug and Cosmetic Act. Synergy and the other pharmacies nonetheless dispensed the drugs to consumers as part of the scheme, so that Bolos could submit fraudulent reimbursement claims.

Court documents and evidence at trial established that during the conspiracy, which lasted from May 2015 through April 2018, Bolos paid Roix more than $30 million to buy at least 60,000 invalid prescriptions generated by HealthRight. Evidence showed Bolos selected specific medications for the prescriptions that he could submit for highly profitable reimbursements. In addition, Bolos used illegal means to hide his activity from the PBMs so that he could remain undetected. Evidence showed that Bolos was responsible for at least $89 million out of the total $174 million in fraudulently paid billings.

“The defendants deceived consumers in order to facilitate the distribution of drugs without proper medical oversight, and overbilled insurers for illegal prescriptions,” said Deputy Assistant Attorney General Arun G. Rao of the Justice Department’s Civil Division. “The Department will continue to investigate and prosecute individuals who use telemedicine to advance fraudulent schemes that violate the Food, Drug, and Cosmetic Act.”

“The United States Attorney’s Office for the Eastern District of Tennessee applauds the unwavering efforts of the multiple agencies involved in this collaborative investigation to bring this extensive healthcare fraud and misbranding scheme to justice,” said Acting U.S. Attorney Francis M. Hamilton III for the Eastern District of Tennessee. “The scope and nature of this fraud and misbranding scheme shock the conscience. Patients were given medications that they neither requested nor wanted, and the trial proof demonstrated that the prescriptions were specifically chosen by Bolos to maximize the fraudulent scheme’s profits, rather than for the patients’ healthcare needs. The guilty verdict against Bolos and the guilty pleas obtained from his co-defendants should send a strong message that the Department of Justice will aggressively prosecute fraud against health insurance providers.”

“Healthcare fraud is an egregious crime problem that impacts every American,” said Special Agent in Charge Joseph E. Carrico of the FBI’s Knoxville Field Office. “The guilty verdict was a result of a multi-agency investigation into a complex health care fraud scheme that required substantial investigative resources. Along with its law enforcement partners, the FBI remains committed to investigate these crimes and prosecute all those that are intent in defrauding the American public." 

“Distributing misbranded prescription drugs in the U.S. marketplace places patients’ health at risk,” said Special Agent in Charge Justin C. Fielder of the FDA Office of Criminal Investigations Miami Field Office. “We will continue to pursue and bring to justice those who put profits ahead of public health.”

“Bolos and his co-conspirators used their pharmacies to fraudulently bill insurance companies hundreds of millions of dollars, and that type of health care fraud impacts everyone,” said Special Agent in Charge John Condon of Homeland Security Investigations (HSI) Tampa. “HSI will continue to work with our law enforcement partners at the federal, state and local level to investigate all fraud and bring those responsible to justice.”

“Bolos and his co-conspirators sought to increase their profits by executing a comprehensive health care fraud scheme involving innocent patients,” said Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services, Office of Inspector General. “This conviction should serve as a warning to individuals who wish to deceive the government and steal from taxpayers. Alongside our law enforcement partners, we will continue to pursue medical professionals who engage in fraudulent activity.”

“The verdict in this case sends a clear message that these types of schemes will not be tolerated,” said Special Agent in Charge Matthew Modafferi of the U.S. Postal Service Office of Inspector General in the Northeast Area Field Office. “The Special Agents of the U.S. Postal Service Office of Inspector General will continue to work closely with the U.S. Attorney’s Office and our law enforcement partners to bring to justice those who commit these kinds of offenses.”

Roix, Assad, Palso, Smith, Maikel Bolos and various associated business entities previously pleaded guilty to their roles in the conspiracy. Taneja, Kapoor, and Sterling Knight pleaded guilty to felony misbranding in a conspiracy with Bolos. U.S. District Judge J. Ronnie Greer set sentencing for Bolos for May 19, 2022, in the United States District Court for the Eastern District of Tennessee at Greeneville. Sentencings for the other defendants will be set for dates in 2022.

The trial and plea agreements resulted from a multi-year investigation conducted by the U.S. Department of Health & Human Services Office of Inspector General (Nashville); Food and Drug Administration Office of Criminal Investigations (Nashville); U.S. Postal Service, Office of Inspector General (Buffalo); Federal Bureau of Investigation (Knoxville and Johnson City, Tennessee); Office of Personnel Management Office of Inspector General (Atlanta); and the Department of Homeland Security, Homeland Security Investigations (Tampa). The U.S. Marshals Service also assisted in the investigation and the forfeiture of assets.

Assistant U.S. Attorneys TJ Harker and Mac Heavener for the Eastern District of Tennessee and Trial Attorney David Gunn of the Department of Justice Civil Division’s Consumer Protection Branch in Washington, and a former Assistant U.S. Attorney in Knoxville, prosecuted and tried the case. They were assisted by Barbra Pemberton, Bryan Brandenburg and April Denard from the U.S. Attorney’s office. 

The Justice Department, along with federal partners, announced today a $7.2 billion settlement with Deutsche Bank resolving federal civil claims that Deutsche Bank misled investors in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2006 and 2007.  This $7.2 billion agreement represents the single largest RMBS resolution for the conduct of a single entity.  The settlement requires Deutsche Bank to pay a $3.1 billion civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).  Under the settlement, Deutsche Bank will also provide $4.1 billion in relief to underwater homeowners, distressed borrowers and affected communities.

“This resolution holds Deutsche Bank accountable for its illegal conduct and irresponsible lending practices, which caused serious and lasting damage to investors and the American public,” said Attorney General Loretta E. Lynch.  “Deutsche Bank did not merely mislead investors: it contributed directly to an international financial crisis.  The cost of this misconduct is significant: Deutsche Bank will pay a $3.1 billion civil penalty, and provide an additional $4.1 billion in relief to homeowners, borrowers, and communities harmed by its practices.  Our settlement today makes clear that institutions like Deutsche Bank cannot evade responsibility for the great cost exacted by their conduct.”

“This $7.2 billion resolution – the largest of its kind – recognizes the immense breadth of Deutsche Bank’s unlawful scheme by demanding a painful penalty from the bank, along with billions of dollars of relief to the communities and homeowners that continue to struggle because of Wall Street’s greed,” said Principal Deputy Associate Attorney General Bill Baer.  “The Department will remain relentless in holding financial institutions accountable for the harm their misconduct inflicted on investors, our economy and American consumers.” 

“In the Statement of Facts accompanying this settlement, Deutsche Bank admits making false representations and omitting material information from disclosures to investors about the loans included in RMBS securities sold by the Bank.  This misconduct, combined with that of the other banks we have already settled with, hurt our economy and threatened the banking system,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “To make matters worse, the Bank’s conduct encouraged shoddy mortgage underwriting and improvident lending that caused borrowers to lose their homes because they couldn’t pay their loans.  Today’s settlement shows once again that the Department will aggressively pursue misconduct that hurts the American public.”

“Investors who bought RMBS from Deutsche Bank, and who suffered catastrophic losses as a result, included individuals and institutions that form the backbone of our community,” said U.S. Attorney Robert L. Capers for the Eastern District of New York.  “Deutsche Bank repeatedly assured investors that its RMBS were safe investments.  Instead of ensuring that its representations to investors were accurate and transparent, so that investors could make properly informed investment decisions, Deutsche Bank repeatedly misled investors and withheld critical information about the loans it securitized.  Time and again, the bank put investors at risk in pursuit of profit.  Deutsche Bank has now been held accountable.”  

“Deutsche Bank knowingly securitized billions of dollars of defective mortgages and subsequently made false representations to investors about the quality of the underlying loans,” said Special Agent In Charge Steven Perez of the Federal Housing Finance Agency, Office of the Inspector General. “Its actions resulted in enormous losses to investors to whom Deutsche Bank sold these defective Residential Mortgage-Backed Securities. Today’s announcement reaffirms our commitment to working with our law enforcement partners to hold accountable those who deceived investors in pursuit of profits, and contributed to our nation’s financial crisis.  We are proud to have worked with the U.S. Department of Justice and the U.S Attorney’s Office for the Eastern District of New York.”

As part of the settlement, Deutsche Bank agreed to a detailed Statement of Facts.  That statement describes how Deutsche Bank knowingly made false and misleading representations to investors about the characteristics of the mortgage loans it securitized in RMBS worth billions of dollars issued by the bank between 2006 and 2007.  For example:

Deutsche Bank represented to investors that loans securitized in its RMBS were originated generally in accordance with mortgage loan originators’ underwriting guidelines.  But as Deutsche Bank now acknowledges, the bank’s own reviews confirmed that “aggressive” revisions to the loan originators’ underwriting guidelines allowed for loans to be underwritten to anyone with “half a pulse.”  More generally, Deutsche Bank knew, based on the results of due diligence, that for some securitized loan pools, more than 50 percent of the loans subjected to due diligence did not meet loan originators’ guidelines.

 

Deutsche Bank also knowingly misrepresented that loans had been reviewed to ensure the ability of borrowers to repay their loans.  As Deutsche Bank acknowledges, the bank’s own employees recognized that Deutsche Bank would “tolerate misrepresentation” with “misdirected lending practices” as to borrower ability to pay, accepting even blocked-out borrower pay stubs that concealed borrowers’ actual incomes.  As a Deutsche Bank employee stated, “What goes around will eventually come around; when performance (default) begins affecting profits and/or the investors who purchase the securities, only then will Wall St. take notice.  For now, the buying continues.”

 

Deutsche Bank concealed from investors that significant numbers of borrowers had second liens on their properties. In one instance, a supervisory Deutsche Bank trader specifically instructed his team that if investors asked about second liens, “‘[t]ell them verbally . . . [b]ut don’t put in the prospectus.’”  Deutsche Bank knew that these second liens increased the likelihood that a borrower would default on his or her loan.

 

Deutsche Bank purchased and securitized loans with substantial defects to provide “flexibility” to the mortgage originators on whom Deutsche Bank’s RMBS program depended for a continued supply of loans.  Indeed, after the president of a large mortgage originator told Deutsche Bank he was “very upset with the rejection percentage,” Deutsche Bank’s diligence team was instructed, on three separate occasions, to clear loans it previously determined should be rejected.  

 

While Deutsche Bank conducted due diligence on samples of loans it securitized in RMBS, Deutsche Bank knew that the size and composition of these loan samples frequently failed to capture loans that did not meet its representations to investors.  In fact, Deutsche Bank knew “the more you sample, the more you reject.”

 

Deutsche Bank knowingly and intentionally securitized loans originated based on unsupported and fraudulent appraisals.  Deutsche Bank knew that mortgage originators were “‘giving’ appraisers the value they want[ed]” and expecting the resulting appraisals to meet the originators’ desired value, regardless of the actual value of the property.  Deutsche Bank concealed its knowledge of pervasive and consistent appraisal fraud, instead representing to investors home valuation metrics based on appraisals it knew to be fraudulent.  Deutsche Bank misrepresented to investors the value of the properties securing the loans securitized in its RMBS and concealed from investors that it knew that the value of the properties securing the loans was far below the value reflected by the originator’s appraisal. 

 

By May 2007, Deutsche Bank knew that there was an increasing trend of overvalued properties being sold to Deutsche Bank for securitization.  As one employee noted, “We are finding ourselves going back quite often and clearing large numbers of loans [with inflated appraisals] to bring down the deletion percentages.”  Deutsche Bank nonetheless purchased and securitized such loans because it received favorable prices on the fraudulent loans.  Ultimately, Deutsche Bank enriched itself by paying reduced prices for risky loans while representing to investors valuation metrics based on appraisals the Bank knew to be inflated.

 

Deutsche Bank represented to investors that disclosed borrower FICO scores were accurate as of the “cut-off date” of the RMBS issuance.  However, Deutsche Bank knowingly represented borrowers’ FICO scores as of the time of the origination of their loans despite the bank’s knowledge that these scores had often declined materially by the cut-off date.

Assistant U.S. Attorneys Edward K. Newman, Matthew R. Belz, Jeremy Turk, and Ryan M. Wilson of the U.S. Attorney’s Office for the Eastern District of New York investigated Deutsche Bank’s conduct in connection with the issuance and sale of RMBS between 2006 and 2007. The investigation was conducted with the Office of the Inspector General for the Federal Housing Finance Agency.

The $3.1 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud.  It is one of the largest FIRREA penalties ever paid.  The settlement does not release any individuals from potential criminal or civil liability.  As part of the settlement, Deutsche Bank has agreed to fully cooperate with investigations related to the conduct covered by the agreement.

Deutsche Bank will also provide $4.1 billion in the form of relief to aid consumers harmed by its unlawful conduct.  Specifically, Deutsche Bank will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country.  It will also provide financing for affordable rental and for-sale housing throughout the country. Deutsche Bank’s provision of consumer relief will be overseen by an independent monitor who will have authority to approve the selection of any third party used by Deutsche Bank to provide consumer relief.

To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html.

About the RMBS Working Group:

The RMBS Working Group, part of the Financial Fraud Enforcement Task Force, was established by the Attorney General in late January 2012.  The Working Group has been dedicated to initiating, organizing, and advancing new and existing investigations by federal and state authorities into fraud and abuse in the RMBS market that helped precipitate the 2008 Financial Crisis.  The Working Group’s efforts to date have resulted in settlements providing for tens of billions of dollars in civil penalties and consumer relief from banks and other entities that are alleged to have committed fraud in connection with the issuance of RMBS.

# # #

CLEVELAND – Federal, county, and local law enforcement officials today announced that 59 individuals were charged and arrested in connection with firearms-trafficking, narcotics, conspiracy, or other firearms offenses after a three month, violent-crime-reduction initiative in Cleveland this summer. The vast majority were charged in United States District Court, while the remaining individuals were charged in state court. These individuals were apprehended in a series of coordinated arrests made during the last two weeks.

United States Attorney Rebecca C. Lutzko made the announcement earlier today. Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) Director Steven M. Dettelbach, United States Marshal Peter J. Elliott, and Cleveland Mayor Justin M. Bibb provided additional details relating to the initiative, as well as regarding larger firearms enforcement and violence-prevention efforts.

"The Justice Department's work to disrupt and dismantle the criminal gun trafficking pipelines that flood our communities with illegal guns had never been more urgent than it is now," said Attorney General Merrick B. Garland. "That is why our prosecutors and agents are working more closely than ever before with our local law enforcement partners to get illegal guns off of our streets and hold accountable those who put illegal guns in the hands of violent criminals."

Indictments and complaints were recently unsealed in federal court. They detail a lengthy investigation, led by ATF, that focused on reducing firearms-related crime in several areas of Cleveland by studying data about areas with gun-crime violence, then identifying illegal firearms sellers to disrupt their trafficking. The investigation resulted in the seizure of over 240 firearms, 203 of which law enforcement purchased from illegal sellers and permanently removed from Cleveland’s streets. NIBIN data shows that a significant number of those firearms are connected to violent criminal activity, including homicides and felonious assaults, that took place in Cleveland and surrounding Northeast Ohio suburbs in 2022 and 2023. Of the purchased firearms, 17 are “ghost guns”—meaning, unserialized and untraceable firearms, typically assembled at home—and 28 are machinegun conversion devices or “switches”—a device that enables a firearm to fire in fully automatic mode.

In one case, law enforcement purchased more than 50 firearms from a group of 7 people working together to sell firearms on Cleveland’s streets, even though none of the involved individuals holds a federal firearms license. Those firearms included stolen firearms, firearms with obliterated serial numbers, “switches,” already-loaded firearms, assault rifles, and firearms that had been previously used to commit violent crimes. Sometimes, these individuals also sold controlled substances to law enforcement officers at the same time. In two additional cases, law enforcement purchased, respectively, 33 firearms (including “switches”) and 23 firearms (including “switches”) from two other individuals who do not hold a federal firearms license. Many of these sales took place in public parking lots of business establishments during business hours or in recreational areas while nearby uninvolved, law-abiding citizens were engaged in their day-to-day errands or engaged in recreational activities.

Also during this investigation, the ATF identified 5 individuals who were actively engaged in a conspiracy to conduct a home invasion and rob, at gunpoint, what they believed to be a “stash house” containing several kilograms of cocaine. Law enforcement intervened before these individuals could carry out their plan. Additionally, during this investigation, law enforcement purchased or seized almost 1.5 kilograms of cocaine, 215 grams of cocaine base, almost 3 kilograms of methamphetamine, 686 fentanyl pills, almost 1.5 kilograms of heroin/fentanyl mix, and 1,144 MDMA pills (otherwise known as Molly or Ecstasy).

Some defendants were charged together, but several others were charged individually. In all cases, however, the charges stemmed from the extensive, targeted, and sustained effort this past summer, led by ATF and assisted by other federal, state, and local law enforcement partners, to clamp down on the illegal firearms trafficking, use, and possession, as well as the associated distribution of drugs, in Cleveland.

The following is a breakdown of the charges in United States District Court, according to court documents:



MALACHI BERRY, 21, Cleveland, DARVELL JACKSON, 20, Cleveland, and STEVEN ARMSTRONG, 19, Cleveland, were charged together in a Conspiracy to Possess a Machinegun. JACKSON and ARMSTRONG were further charged with Illegal Possession of a Machinegun.



In the same indictment, these individuals, along with NIMAR LINDER, 21, Cleveland, were also charged with Conspiracy to Engage in the Business of Dealing  Firearms without a Federal Firearms License.



ARMSTRONG and LINDER were charged as Felons in Possession of a Firearm.

 

According to court documents, the following individuals have been indicted on Distribution of Drugs charges:



CARLOS DUPREE, 43, Cleveland, DOMINIQUE GOLDSBY, 32, Cleveland, JESSE MCDADE, 41, Cleveland, NORMAN YOUNG, 37, Cleveland, MARTIN

GOODSON, 41, Cleveland, LAJUAN ERWIN, 25, Mayfield Heights, CHEVEZ MOORER, 23, Cleveland, AARON WIMBLEY, 22, Garfield Heights, ALEXANDER

DUNCAN, 19, Cleveland, DAMIEN BODY, 39, Cleveland, DERRICK DONALD, 41, Cleveland, NAHUM HOLMES, 31, Brook Park, AKIL EDMONDS, 39, Cleveland, WILLIE C. JACKSON, 36, Cleveland, and DEANDRE SMITH, 36, Cleveland.

 

Indicted together were JOSEAN ORTIZ-STUART, 34, Cleveland, JESUS VEGA, 29, Cleveland, who were both charged with Distribution of Drugs. Also named in that indictment was GERALD MATOS, 38, Cleveland, who was charged with being a Felon in Possession of a Firearm.

 

Indicted together were ELIAS PAGAN 32, Cleveland, IVAN SANTANA, 26, Cleveland, ANGEL SANTIAGO, 46, also of Cleveland. PAGAN also faces numerous charges for Distribution of Drugs, as well being a Felon in Possession of Firearms, and both PAGAN and SANTANA were also charged with Engaging in the Business of Importing, Manufacturing, or Dealing in Firearms Without a Federal Firearms License.

SANTIAGO is also charged with Distribution of Drugs.

 

AMBRAY UNDERWOOD, 25, Euclid, was charged in an indictment for Conspiracy to Distribute Drugs, and Drug Distribution.

 

WILLIE EARL JACKSON, 26, Cleveland, and SHANE PLATS, 31, Ashtabula, were charged in the same indictment with Engaging in the Business of Dealing Firearms without a Federal Firearms License. WIILIE EARL JACKSON was also charged in that indictment with Trafficking in Firearms.

 

DESHONN BROWN age, 19, Cleveland; DEMARIUS JEFFERSON, 18, Cleveland, were both charged with Illegal Possession of Machineguns.

 

JACOB PLUMB, 40, Parma, was charged with Distribution of Drugs and Possession of a Firearm in Furtherance of a Drug Trafficking Crime.

 

ISAIAH OVERTON, 23, Cleveland, and CHARLES MORRIS, 33, East Cleveland, were charged in a single indictment with Distribution of Drugs. Additionally, OVERTON was charged with Using and Carrying a Firearm During and in Relation to a Drug Trafficking Crime.

 

CORTE’Z BUGGS, 29, Cleveland was charged in an indictment with Distribution of Drugs and Receipt of Firearm while Under Felony Indictment.

 

MICHAEL MCPHERRAN, 38, Parma, Ohio, was charged with Conspiracy to Distribute Drugs, and Distribution of Drugs.

 

HAROLD PEARL, 39, Cleveland, was charged with Distribution of Drugs and being a Felon in Possession of a Firearm.

 

Charged by complaint with Conspiracy to Possess with Intent to Distribute Drugs and Possession of a Firearm in Furtherance of a Drug Trafficking Crime were ALANTE HEARD, 33, Cleveland, ANTONIO SWEENEY, 24, Cleveland, MAURICE COMMONS, 22, North Randall, and MARKUS WILLIAMS, 33, Cleveland.

 

Charged with being a Felon in Possession of a Firearm were MARQUIS HENSON, 38, Cleveland, DEON BROWN, 19, Cleveland, and CLARENCE PAYNE, 38, Cleveland.

 

KENNETH SMITH, 23, East Cleveland, was charged with Engaging in the Business of Dealing Firearms without a Federal Firearms License, Illegal Possession of a Machinegun, and being a Felon in Possession of Firearms.

 

ANDRE LEWIS, 35, Cleveland, was charged with Distribution of Drugs and Using and Carrying a Firearm During and in Relation to a Drug Trafficking Crime.

 

DEVAUNTY LEWIS, 31, Cleveland, NICHOLAS JOHNSON, 33, Cleveland, were charged jointly in an indictment with Conspiracy to Engage in the Business of Importing, Manufacturing, or Dealing in Firearms without a Federal Firearms License, and Conspiracy to Engage in Firearms Trafficking. Both were individually charged with Engaging Business in Dealing with Firearms Without a License and Trafficking in Firearms.



LEWIS was also charged with being a Felon in Possession of a Firearm.



JOHNSON was also charged with Engaging in the Business of Importing, Manufacturing, or Dealing in Firearms without a Federal Firearms License.

 

The following were charged in an indictment with Conspiracy to Engage in the Business of Importing, Manufacturing, or Dealing in Firearms Without a Federal Firearms License: MAURICE STERETT, 39, Cleveland, ANTONIO CROSS, 22, Cleveland, MARVELL ROACH, 43, Willoughby, KENNETH TIMBERLAKE, 30, Cleveland, and TRAVIS WILLIAMS, 46, Cleveland.



STERETT, CROSS, TIMBERLAKE, and WILLIAMS were further charged, individually, with Engaging in the Business of Importing, Manufacturing, or Dealing in Firearms Without a Federal Firearms License.



STERETT, CROSS, ROACH, TIMBERLAKE, and WILLIAMS were also charged with Conspiracy to Engage in Firearms Trafficking and individual counts of Firearms Trafficking.



STERETT, TIMBERLAKE, TRAVIS WILLIAMS, and ROACH were also charged with being a Felon in Possession of Firearms.



STERETT was further charged with Distribution of Drugs.



Finally, CROSS was also charged with Illegal Transfer of a Machinegun.

 

DARION SHELTON, 20, Cleveland, was charged with Engaging in the Business of Dealing Firearms without a Federal Firearms License, and Trafficking in Firearms in connection with machinegun conversation devices or “switches.” He has also been charged with Illegal Possession of a Machinegun.



The following is a breakdown of the charges in the Cuyahoga County Court of Common Pleas, according to court documents:

 

MARCEL BATTLE, 30, Canton, Drug Trafficking.

 

AVANT WILSON, 22, Cleveland, Receiving Stolen Property (Motor Vehicle).

 

NATHAN ROBY, 44, Cleveland, Drug Trafficking.

 

RAYMOND CALLAHAN, 34, Cleveland, Drug Trafficking.

 

RAPHAEL DEEN, 30, Cleveland, Drug Trafficking.

 

TERRY LYONS, 33, Cleveland, Drug Trafficking.



 An indictment or complaint is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.



If convicted, each defendant’s sentence will be determined by the Court after review of factors unique to this case, including the defendant’s prior criminal records, if any, the defendant’s role in the offense and the characteristics of the violation. In all cases, the sentence will not exceed the statutory maximum, and, in most cases, it will be less than the maximum.

 

The investigation preceding the indictments was led by the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), with assistance from the Cleveland Division of Police (“CDP”), the United States Marshals Service (“USMS”), the Drug Enforcement Administration (“DEA”), the Federal Bureau of Investigation (“FBI”), the Department of Homeland Security Investigations (“HSI”), the Ohio Bureau of Criminal Investigation (“BCI”), the Ohio Adult Parole Authority (“APA”), the Ohio Investigative Unit (“OIU”), Customs and Border Patrol (“CBP”), Air and Marine Division, the Ohio State Highway Patrol (“OSP”), and the Cuyahoga County Sheriff’s Office. This Operation was also part of an Organized Crime Drug Enforcement Task Forces (OCDETF) initiative. The cases stemming from this investigation are being prosecuted by a team of AUSAs in the U.S. Attorney’s Office, led by AUSA Kelly Galvin, and by the Cuyahoga County Prosecutor’s Office.

Today, Mohamad Jamal Khweis, 27, of Alexandria, Virginia, was convicted by a federal jury for providing material support to the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization.

Dana J. Boente, Acting Assistant Attorney General for National Security, and U.S. Attorney for the Eastern District of Virginia; and Andrew W. Vale, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement after U.S. District Judge Liam O’Grady accepted the verdict.

“Khweis is not a naïve kid who didn’t know what he was doing,” said Dana J. Boente, Acting Assistant Attorney General for National Security, and U.S. Attorney for the Eastern District of Virginia. “He is a 27-year-old man who studied criminal justice in college. He strategically planned his travel to avoid law enforcement suspicion, encrypted his communications, and planned for possible alibis. Khweis knew exactly what he was doing, knew exactly who ISIS was, and was well aware of their thirst for extreme violence. Nonetheless, this did not deter him. Instead, Khweis voluntarily chose to join the ranks of a designated foreign terrorist organization, and that is a federal crime, even if you get scared and decide to leave. This office, along with the National Security Division and our investigative partners, are committed to tracking down anyone who provides or attempts to provide material support to a terrorist organization.”

“Mohamad Khweis purposefully traveled overseas with the intent to join ISIL in support of the terrorist group’s efforts to conduct operations and execute attacks to further their radical ideology,” said Andrew W. Vale, Assistant Director in Charge in Charge of the FBI’s Washington Field Office. “Furthermore, when ISIL leaders questioned Khweis' commitment to serving as a suicide bomber to carry out acts of terrorism, Khweis stated that he agreed and recognized that ISIL uses violence in its expansion of its caliphate. Today’s verdict underscores the dedication of the FBI and our partners within the Joint Terrorism Task Force in pursuing and disrupting anyone who poses a risk of harm to U.S. persons or interests or by providing material support to a terrorist group.”

According to court records and evidence presented at trial, Khweis left the U.S. in mid-December 2015, and ultimately crossed into Syria through the Republic of Turkey in late December 2015. Before leaving, Khweis quit his job, sold his car, closed online accounts, and did not tell his family he was leaving to join ISIS. During his travel to the Islamic State, he used numerous encrypted devices to conceal his activity, and downloaded several applications on his phone that featured secure messaging or anonymous web browsing. Khweis used these applications to communicate with ISIS facilitators to coordinate and secure his passage to the Islamic State.

After arriving in Syria, Khweis stayed at a safe house with other ISIS recruits in Raqqa and filled out ISIS intake forms, which included his name, age, skills, specialty before jihad, and status as a fighter. When Khweis joined ISIS, he agreed to be a suicide bomber. In February 2017, the U.S. military recovered his intake form, along with an ISIS camp roster that included Khweis’ name with 19 other ISIS fighters.

During the trial, Khweis admitted to spending approximately 2.5 months as an ISIS member, traveling with ISIS fighters to multiple safe houses and participating in ISIS-directed religious training. Kurdish Peshmerga military forces detained Khweis in March 2016. A Kurdish Peshmerga official testified at trial that he captured Khweis on the battlefield after Khweis left an ISIS-controlled neighborhood in Tal Afar, Iraq.

On a cross examination, Khweis admitted he consistently lied to U.S. and Kurdish officials about his involvement with ISIS, and that he omitted telling U.S. officials about another American who had trained with ISIS to conduct an attack in the U.S.

The jury convicted Khweis, a U.S. citizen, on all three charged counts, including providing and conspiring to provide material support or resources to ISIS, and a related firearms count. Khweis faces a mandatory minimum of 5 years and a maximum penalty of life in prison when sentenced on October 13. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

Trial Attorney Raj Parekh of the National Security Division’s Counterterrorism Section and Assistant U.S. Attorney Dennis Fitzpatrick for the Eastern District of Virginia are prosecuting the case. The FBI’s Joint Terrorism Task Force provided assistance in this case.

Federal, county, and local law enforcement officials today announced that 59 individuals were charged and arrested in connection with firearms-trafficking, narcotics, conspiracy, or other firearms offenses after a three month, violent-crime-reduction initiative in Cleveland this summer. The vast majority were charged in U.S. District Court, while the remaining individuals were charged in state court. These individuals were apprehended in a series of coordinated arrests made during the last two weeks. 

“The Justice Department’s work to disrupt and dismantle the criminal gun trafficking pipelines that flood our communities with illegal guns has never been more urgent than it is now,” said Attorney General Merrick B. Garland. “That is why our prosecutors and agents are working more closely than ever before with our local law enforcement partners to get illegal guns off of our streets and hold accountable those who put illegal guns in the hands of violent criminals.”

Indictments and complaints were recently unsealed in federal court. They detail a lengthy investigation, led by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), that focused on reducing firearms-related crime in several areas of Cleveland by studying data about areas with gun-crime violence, then identifying illegal firearms sellers to disrupt their trafficking. The investigation resulted in the seizure of over 240 firearms, 203 of which law enforcement purchased from illegal sellers and permanently removed from Cleveland’s streets. National Integrated Ballistic Information Network (NIBIN) data shows that a significant number of those firearms are connected to violent criminal activity, including homicides and felonious assaults, that took place in Cleveland and surrounding Northeast Ohio suburbs in 2022 and 2023. Of the purchased firearms, 17 are “ghost guns” – meaning, unserialized and untraceable firearms, typically assembled at home – and 28 are machinegun conversion devices or “switches” – a device that enables a firearm to fire in fully automatic mode.  

In one case, law enforcement purchased more than 50 firearms from a group of seven people working together to sell firearms on Cleveland’s streets, even though none of the involved individuals hold a federal firearms license. Those firearms included stolen firearms, firearms with obliterated serial numbers, “switches,” already-loaded firearms, assault rifles, and firearms that had been previously used to commit violent crimes. Sometimes, these individuals also sold controlled substances to law enforcement officers at the same time. In two additional cases, law enforcement purchased, respectively, 33 firearms (including “switches”) and 23 firearms (including “switches”) from two other individuals who do not hold a federal firearms license. Many of these sales took place in public parking lots of business establishments during business hours or in recreational areas while nearby uninvolved, law-abiding citizens were engaged in their day-to-day errands or engaged in recreational activities.

Also, during this investigation, the ATF identified five individuals who were actively engaged in a conspiracy to conduct a home invasion and rob, at gunpoint, what they believed to be a “stash house” containing several kilograms of cocaine. Law enforcement intervened before these individuals could carry out their plan. Additionally, during this investigation, law enforcement purchased or seized almost 1.5 kilograms of cocaine, 215 grams of cocaine base, almost three kilograms of methamphetamine, 686 fentanyl pills, almost 1.5 kilograms of heroin/fentanyl mix, and 1,144 MDMA pills (otherwise known as Molly or Ecstasy). 

Some defendants were charged together, but several others were charged individually. In all cases, however, the charges stemmed from the extensive, targeted, and sustained effort this past summer, led by the ATF and assisted by other federal, state, and local law enforcement partners, to clamp down on the illegal firearms trafficking, use, and possession, as well as the associated distribution of drugs, in Cleveland. 

The following is a breakdown of the charges in U.S. District Court, according to court documents:





Malachi Berry, 21; Darvell Jackson, 20; and Steven Armstrong, 19, all of Cleveland, were charged together with conspiracy to possess a machinegun. Jackson and Armstrong were further charged with illegal possession of a machinegun. In the same indictment, these individuals, along with Nimar Linder, 21, of Cleveland, were also charged with conspiracy to engage in the business of dealing firearms without a federal firearms license. Armstrong and Linder were charged as felons in possession of a firearm.





Carlos Dupree, 43, of Cleveland; Dominique Goldsby, 32, of Cleveland; Jesse Mcdade, 41, of Cleveland; Norman Young, 37, of Cleveland; Martin Goodson, 41, of Cleveland; Lajuan Erwin, 25, of Mayfield Heights; Chevez Moorer, 23, of Cleveland; Aaron Wimbley, 22, of Garfield Heights; Alexander Duncan, 19, of Cleveland; Damien Body, 39, of Cleveland; Derrick Donald, 41, of Cleveland; Nahum Holmes, 31, of Brook Park; Akil Edmonds, 39, of Cleveland; Willie C. Jackson, 36, of Cleveland; and Deandre Smith, 36, of Cleveland, were indicted on distribution of drugs charges.





Josean Ortiz-Stuart, 34, and Jesus Vega, 29, both of Cleveland, were indicted together and both charged with distribution of drugs. Also named in that indictment was Gerald Matos, 38, of Cleveland, who was charged with being a felon in possession of a firearm.





Elias Pagan, 32, Ivan Santana, 26, and Angel Santiago, 46, all of Cleveland, were indicted together. Pagan faces numerous charges for distribution of drugs, as well being a felon in possession of firearms, and both Pagan and Santana were also charged with engaging in the business of importing, manufacturing, or dealing in firearms without a federal firearms license. Santiago is also charged with distribution of drugs.





Ambray Underwood, 25, of Euclid, was charged in an indictment for conspiracy to distribute drugs, and drug distribution.





Willie Earl Jackson, 26, of Cleveland, and Shane Plats, 31, of Ashtabula, were charged in the same indictment with engaging in the business of dealing firearms without a federal firearms license. Wiilie Earl Jackson was also charged in that indictment with trafficking in firearms.





Deshonn Brown, 19, and Demarius Jefferson, 18, both of Cleveland, were both charged with illegal possession of machineguns.





Jacob Plumb, 40, of Parma, was charged with distribution of drugs and possession of a firearm in furtherance of a drug trafficking crime.





Isaiah Overton, 23, of Cleveland, and Charles Morris, 33, of East Cleveland, were charged in a single indictment with distribution of drugs. Additionally, Overton was charged with using and carrying a firearm during and in relation to a drug trafficking Crime.





Corte’z Buggs, 29, of Cleveland, was charged in an indictment with distribution of Drugs and receipt of firearm while under felony indictment.





Michael Mcpherran, 38, of Parma, was charged with conspiracy to distribute drugs and distribution of drugs.





Harold Pearl, 39, of Cleveland, was charged with distribution of drugs and being a felon in possession of a firearm.





Alante Heard, 33, of Cleveland; Antonio Sweeney, 24, of Cleveland; Maurice Commons, 22, of North Randall; and Markus Williams, 33, of Cleveland, were charged by complaint with conspiracy to possess with intent to distribute drugs and possession of a firearm in furtherance of a drug trafficking crime.





Marquis Henson, 38; Deon Brown, 19; and Clarence Payne, 38, all of Cleveland, were charged with being a felon in possession of a firearm.





Kenneth Smith, 23, of East Cleveland, was charged with engaging in the business of dealing firearms without a federal firearms license, illegal possession of a machinegun, and being a felon in possession of firearms.





Andre Lewis, 35, of Cleveland, was charged with distribution of drugs and using and carrying a firearm during and in relation to a drug trafficking crime.





Devaunty Lewis, 31, and Nicholas Johnson, 33, both of Cleveland, were charged jointly in an indictment with conspiracy to engage in the business of importing, manufacturing, or dealing in firearms without a federal firearms license, and conspiracy to engage in firearms trafficking. Both were individually charged with engaging business in dealing with firearms without a license and trafficking in firearms. Lewis was also charged with being a felon in possession of a firearm. Johnson was also charged with engaging in the business of importing, manufacturing, or dealing in firearms without a federal firearms license.





Maurice Sterett, 39, of Cleveland; Antonio Cross, 22, of Cleveland; Marvell Roach, 43, of Willoughby; Kenneth Timberlake, 30, of Cleveland; and Travis Williams, 46, of Cleveland, were charged in an indictment with conspiracy to engage in the business of importing, manufacturing, or dealing in firearms without a federal firearms license. Sterett, Cross, Timberlake, and Williams were further charged, individually, with engaging in the business of importing, manufacturing, or dealing in firearms without a federal firearms license. Sterett, Cross, Roach, Timberlake, and Williams were also charged with conspiracy to engage in firearms trafficking and individual counts of firearms trafficking. Sterett, Timberlake, Travis Williams, and Roach were also charged with being a felon in possession of firearms. Sterett was further charged with distribution of drugs. Cross was also charged with illegal transfer of a machinegun.





Darion Shelton, 20, of Cleveland, was charged with engaging in the business of dealing firearms without a federal firearms license, and trafficking in firearms in connection with machinegun conversation devices or “switches.” He has also been charged with illegal possession of a machinegun.





The following is a breakdown of the charges in the Cuyahoga County Court of Common Pleas, according to court documents:





Marcel Battle, 30, of Canton: drug trafficking;





Avant Wilson, 22, of Cleveland: receiving stolen property (motor vehicle);





Nathan Roby, 44, of Cleveland: drug trafficking;





Raymond Callahan, 34, of Cleveland: drug trafficking;





Raphael Deen, 30, of Cleveland: drug trafficking;





Terry Lyons, 33, of Cleveland: drug trafficking;





If convicted, a federal district court judge will determine any penalty after considering the U.S. Sentencing Guidelines and other statutory factors.

Attorney General Garland and U.S. Attorney Rebecca C. Lutzko for the Northern District of Ohio made the announcement. ATF Director Steven M. Dettelbach, U.S. Marshal Peter J. Elliott, and Cleveland Mayor Justin M. Bibb provided additional details relating to the initiative, as well as regarding larger firearms enforcement and violence-prevention efforts.

ATF investigated these cases, with assistance from the Cleveland Division of Police, U.S. Marshals Service, the Drug Enforcement Administration, FBI, Homeland Security Investigations, Ohio Bureau of Criminal Investigation, the Ohio Adult Parole Authority, Ohio Investigative Unit, Customs and Border Patrol, Air and Marine Division, Ohio State Highway Patrol, and the Cuyahoga County Sheriff’s Office.  

Assistant U.S. Attorney Kelly Galvin and other Assistant U.S. Attorneys for the Northern District of Ohio and the Cuyahoga County Prosecutor’s Office are prosecuting the cases.

An indictment or complaint is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

A federal jury today convicted two Bucharest, Romania, residents of 21 counts related to their scheme to infect victim computers with malware in order to steal credit card and other information to sell on dark market websites, mine cryptocurrency and engage in online auction fraud, announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney Justin E. Herdman of the Northern District of Ohio.

Bogdan Nicolescu, 36, and Radu Miclaus, 37, were convicted after a 12-day trial of conspiracy to commit wire fraud, conspiracy to traffic in counterfeit service marks, aggravated identity theft, conspiracy to commit money laundering and 12 counts each of wire fraud.  Sentencing has been set for Aug. 14, 2019 before Chief Judge Patricia A. Gaughan of the Northern District of Ohio.

According to testimony at trial and court documents, Nicolescu, Miclaus, and a co-conspirator who pleaded guilty, collectively operated a criminal conspiracy from Bucharest, Romania.  It began in 2007 with the development of proprietary malware, which they disseminated through malicious emails purporting to be legitimate from such entities as Western Union, Norton AntiVirus and the IRS. When recipients clicked on an attached file, the malware was surreptitiously installed onto their computer.

This malware harvested email addresses from the infected computer, such as from contact lists or email accounts, and then sent malicious emails to these harvested email addresses.  The defendants infected and controlled more than 400,000 individual computers, primarily in the United States.

Controlling these computers allowed the defendants to harvest personal information, such as credit card information, user names and passwords.  They disabled victims’ malware protection and blocked the victims’ access to websites associated with law enforcement.

Controlling the computers also allowed the defendants to use the processing power of the computer to solve complex algorithms for the financial benefit of the group, a process known as cryptocurrency mining.

The defendants used stolen email credentials to copy a victim’s email contacts.  They also activated files that forced infected computers to register email accounts with AOL.  The defendants registered more than 100,000 email accounts using this method.  They then sent malicious emails from these addresses to the compromised contact lists.  Through this method, they sent tens of millions of malicious emails.

When victims with infected computers visited websites such as Facebook, PayPal, eBay or others, the defendants would intercept the request and redirect the computer to a nearly identical website they had created.  The defendants would then steal account credentials.  They used the stolen credit card information to fund their criminal infrastructure, including renting server space, registering domain names using fictitious identities and paying for Virtual Private Networks (VPNs) which further concealed their identities.

The defendants were also able to inject fake pages into legitimate websites, such as eBay, to make victims believe they were receiving and following instructions from legitimate websites, when they were actually following the instructions of the defendants.

They placed more than 1,000 fraudulent listings for automobiles, motorcycles and other high-priced goods on eBay and similar auction sites.  Photos of the items were infected with malware, which redirected computers that clicked on the image to fictitious webpages designed by the defendants to resemble legitimate eBay pages.

These fictitious webpages prompted users to pay for their goods through a nonexistent “eBay Escrow Agent” who was simply a person hired by the defendants.  Users paid for the goods to the fraudulent escrow agents, who in turn wired the money to others in Eastern Europe, who in turn gave it to the defendants.  The payers/victims never received the items and never got their money back.

This resulted in a loss of millions of dollars.

The Bayrob group laundered this money by hiring “money transfer agents” and created fictitious companies with fraudulent websites designed to give the impression they were actual businesses engaged in legitimate financial transactions.  Money stolen from victims was wired to these fraudulent companies and then in turn wired to Western Union or Money Gram offices in Romania.  European “money mules” used fake identity documents to collect the money and deliver it to the defendants. 

The FBI investigated the case, with assistance from the Romanian National Police.  Senior Counsel Brian Levine of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorneys Duncan T. Brown and Brian McDonough of the Northern District of Ohio prosecuted the case.  The Office of International Affairs also provided assistance in this case.

A federal jury in Little Rock, Arkansas, found Eric Scott Kindley, 52, a private prisoner transport officer, guilty of sexually assaulting two different women in his custody during two different transports in 2014 and 2017, and for knowingly possessing a firearm in furtherance of the 2017 sexual assault.

“The defendant was a prison transport officer who abused his law enforcement authority by sexually assaulting prisoners entrusted to his custody.  That is a federal crime, and the Department of Justice will vigorously investigate and prosecute law enforcement officers who unlawfully use their position to abuse those in their custody,”   said Assistant Attorney General Eric Dreiband for the Civil Rights Division. “Today’s conviction was made possible by the brave women who testified about their abuse, and the tireless work of federal investigators and prosecutors over the last three years.”

"Kindley took advantage of his authority to exploit the very people he was entrusted with transporting across the country,” said Sean Kaul, Special Agent in Charge of the FBI Phoenix Field Office. “We commend the many victims, across the nation, who came forward to report this despicable crime. This conviction should serve as notice that anyone who uses their authority to exploit individuals in their custody, will be held accountable and the FBI will continue to aggressively pursue these types of cases. We would like to thank the FBI agents across the country whose tireless efforts helped bring Kindley to justice and the Department of Justice for their tremendous work on this case.”

Evidence at trial showed that Kindley operated a private prisoner transport company that contracted with local jails throughout the country to transport individuals who were arrested on out-of-state warrants. Kindley transported individuals alone, without any oversight, in his unmarked white minivan, often for hundreds of miles. The jury heard from six women whom he transported between 2013 and 2017, all of whom described Kindley’s pattern of conduct. Kindley transported them alone over long distances, handcuffed and shackled in the backseat of the van. Kindley forced them to listen to sexually explicit comments that escalated in intensity and depravity. Some women dealt with the comments by trying to make a joke of it; others attempted to talk back and end the comments, while others sat silently. In each instance, Kindley drove to desolate locations, putting the women in fear of being sexually assaulted, severely hurt, or worse.   

One of those women testified at trial that when Kindley transported her Alabama to Arizona in 2017, he stopped his van in a deserted area near Little Rock and sexually assaulted her while she was handcuffed, reminding her, as he did with other victims that she was “an inmate in transport” and that no one would believe her if she reported her. A second woman testified that when Kindley transported her in 2014, he stopped his van in a deserted area, also in Arkansas, and forced her to perform a sex act on him. A third woman testified that during her transport by Kindley in 2013 from Florida to Texas, he pulled his van over on the side of a dark road and sexually assaulted her. A fourth woman also testified that during her  2012 transport by from Nevada to California, Kindley stopped his van in a deserted park. He forced her to perform a sex act on him in a park bathroom. A fifth woman testified that during her 2013 transport from California to Montana, Kindley attempted to sexually assault her after he pulled over on the side of the road during a snowstorm. The jury heard testimony that none of the women who testified knew one another.

Kindley is also under indictment in the Central District of California for committing similar offenses related to his sexual assault of two other women in his custody in 2012 and 2017, and for brandishing a firearm during one of the sexual assaults. One of those women testified at this trial.

Kindley faces a maximum of life in prison. A sentencing date has not yet been set.

This case is being investigated by the Phoenix Division of the FBI with assistance from FBI field offices throughout the United States. It is being prosecuted by Special Litigation Counsel Fara Gold and Trial Attorney Maura White of the Criminal Section of the Civil Rights Division of the U.S. Department of Justice, with assistance from the United States Attorney’s Offices for the Eastern District of Arkansas and the District of Arizona.

A Beverly Hills, California, resident pleaded guilty today to filing false tax returns which did not report his offshore accounts in Germany and Israel and did not report the income earned on those accounts, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman and U.S. Attorney Nicola T. Hanna of the Central District of California.    

According to the plea agreement and related court documents, Teymour Khoubian pleaded guilty to filing false tax returns for tax years 2009 and 2010 that failed to report foreign financial accounts in Germany and Israel, and failed to report income earned on those accounts. Between 2005 and 2012, Khoubian jointly owned multiple accounts at Bank Leumi in Israel with his mother that held between $15 million and $20 million. Additionally, since at least 2005, Khoubian also owned a foreign account at Commerzbank AG in Germany. Despite his ownership interest in these accounts and a legal requirement to declare all offshore accounts containing $10,000 or more, Khoubian prepared false tax returns for tax years 2005 through 2011 that did not fully disclose his foreign accounts, nor report all the interest income earned on those accounts. For instance, Khoubian’s Bank Leumi accounts generated interest income in excess of $4 million between 2005 and 2010, none of which was reported to the Internal Revenue Service (IRS).  The total tax loss associated with the Bank Leumi accounts is approximately $ 1.2 million. 

At least since 2009, Khoubian was aware of the IRS’s Offshore Voluntary Disclosure Program (the OVDP).  The OVDP allowed U.S. taxpayers to voluntarily disclose their previously unreported foreign accounts and pay a reduced penalty to resolve their civil liability for not declaring foreign accounts to U.S. authorities. During 2011 and 2012, Bank Leumi requested that Khoubian sign a Form W-9 for U.S. tax reporting purposes. In an August 13, 2012, recorded telephone conversation with a banker at Bank Leumi, Khoubian stated that the reason he did not want to sign a Form W-9, was "because you have to pay half of it."

In 2012 and 2014, Khoubian knowingly made multiple false statements to IRS special agents investigating his foreign accounts, including falsely stating that the Bank Leumi accounts were not in his name, that he did not own a bank account in Germany from 2005 to 2010, that he closed his German bank account and moved all of that money to the United States, and that none of the money in his German bank account was moved to Israel.      

As part of the plea agreement, Khoubian agreed to the entry of a civil judgment against him for an FBAR penalty in the amount of $7,686,004.  Khoubian further agreed to pay an additional $612,310 in restitution to the IRS.     

 Khoubian faces a maximum of three years in prison for each of the tax counts to which he pleaded guilty, as well as monetary penalties and a period of supervised release.                     

This case is being prosecuted by Trial Attorneys Christopher S. Strauss and Ellen M. Quattrucci of the Justice Department’s Tax Division, with the assistance of Assistant United States Attorney Robert Conte of the U.S. Attorney’s Office for the Central District of California, and was investigated by the Internal Revenue Service-Criminal Investigation.   

JOON LLC, d/b/a AJIN USA (Ajin), an auto-parts manufacturing company, was sentenced in federal court today in Montgomery, Alabama, after pleading guilty to a charge related to the death of a machinery operator.

Regina Elsea, who was 20 years old, worked at Ajin’s Cusseta, Alabama, facility.  On June 18, 2016, she entered an enclosure — called a “cell” — containing several robots and other pieces of machinery.  While she was inside the cell, troubleshooting a sensor fault, one of the machines started up and Elsea was struck by a robotic arm.  She died of her injuries. 

The Occupational Safety and Health Act (OSH Act) requires employers to develop and utilize procedures to de-energize machinery during maintenance and servicing activities to prevent the kind of unplanned startup that killed Elsea.  These procedures are often referred to as “lockout/tagout.”  Ajin knew these procedures were required and had developed them, but Ajin also knew that — over a period of at least two years — supervisors did not effectively enforce them.

In the 15 minutes prior to Elsea’s fatal injury — in the presence of their supervisors — workers entered cells to troubleshoot machinery without following lockout/tagout no less than five times, and the supervisors did not take any action to stop or reprimand them.  In two other instances, the supervisors themselves entered a cell without following lockout/tagout.  At the time of Elsea’s fatal injury, several individuals were inside the cell, none of whom had followed lockout/tagout procedures to de-energize the machinery within the cell.

Ajin pleaded guilty to a willful violation of the OSH Act standard requiring the use of lockout/tagout procedures.  U.S. Magistrate Judge Stephen Michael Doyle sentenced Ajin to pay a $500,000 fine — the statutory maximum — $1,000,000 in restitution to Elsea’s estate, and a three-year term of probation, during which Ajin must comply with a safety compliance plan, overseen by a third-party auditor.  Among other things, the safety compliance plan requires a full review of Ajin’s lockout/tagout procedures, weekly inspections to ensure compliance, and creation of a mechanism for employees to report any safety concerns about the facility anonymously.

“Regina’s tragic death was preventable,” said Principal Deputy Assistant Attorney General Jonathan D. Brightbill of the Justice Department’s Environment and Natural Resources Division.  “OSH Act standards exist to protect American workers, but employers must actually implement them.  When safety policies exist only on paper, tragedies like this occur.  Ajin knew its supervisors and managers were turning a blind eye to the company’s safety procedures.  Now, Ajin must take responsibility for its conduct.  It will implement the safety compliance plan, and work to make its facility safer for its employees.  Employers should be aware that they must follow workplace safety laws.” 

“Every worker expects to return home safely at the end of his or her shift,” said U.S. Attorney Louis V. Franklin Sr. of the Middle District of Alabama.  “The OSH Act was passed to ensure that workers could trust that their employers create and maintain a safe work environment.  While most companies abide by the OSH Act, the unfortunate reality is that some of them do not.  Ajin failed to comply with the OSH Act and, as a direct result of their failure, Regina Elsea did not return home safely at the end of her shift.  Her death was preventable and Ajin’s failure to keep her out of harm’s way is inexcusable.  I hope this prosecution sends a message to companies that people are their most valuable resource and complying with the OSH Act is a must in protecting its employees.” 

“Employers are responsible for worker safety and health, and the failure in this situation was tragic,” said Principal Deputy Assistant Secretary of Labor for Occupational Safety and Health Loren Sweatt.  “Well-known safety procedures were repeatedly ignored that could have prevented this tragedy.  While nothing can ever replace the loss of life, the court has sent a clear message that such disregard for worker safety is unacceptable.”

The case was prosecuted by Assistant U.S. Attorney Stephanie Billingslea and former Assistant U.S. Attorney Ben M. Baxley of the Middle District of Alabama and Trial Attorney Erica H. Pencak of the Environment and Natural Resources Division’s Environmental Crimes Section.  The case was investigated by the U.S. Department of Labor Office of Investigations.

The year 2020 marks the 150th anniversary of the Department of Justice.  Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.

Three people are now in custody in relation to the fatal raid that occurred in January 2019 on Harding Street in Houston, Texas, announced Assistant Attorney General Eric Dreiband of the Department of Justice’s Civil Rights Division, U.S. Attorney Ryan K. Patrick for the Southern District of Texas and Special Agent in Charge Perrye K. Turner of the FBI.

A federal grand jury returned the nine count indictment Nov. 14 against Gerald M. Goines, 55, and Steven M. Bryant, 46, both former Houston Police Department (HPD) officers. Also charged is Patricia Ann Garcia, 53. All are residents of Houston. The indictment was unsealed this morning as authorities took all three into custody. They are expected to make their initial appearances before U.S. Magistrate Judge Dena H. Palermo at 2 p.m. central time.

The federal indictment stems from the Jan. 28 narcotics raid HPD conducted on the 7800 block of Harding Street in Houston. The enforcement action resulted in the deaths of two residents at that location. 

Goines is charged with two counts of depriving the victims’ constitutional right to be secure against unreasonable searches. The indictment alleges Goines made numerous materially false statements in the state search warrant he obtained for their residence. The execution of that warrant containing these false statements resulted in the death of the two individuals as well as injuries to four other persons, according to the indictment.

Goines and Bryant are charged with obstructing justice by falsifying records. Goines allegedly made several false statements in his tactical plan and offense report prepared in connection with that search warrant. The indictment alleges Bryant falsely claimed in a supplemental case report he had previously assisted Goines in the Harding Street investigation. Bryant allegedly identified a brown powdery substance (heroin) he retrieved from Goines’ vehicle as narcotics purchased from the Harding Street residence Jan. 27.

Goines is further charged with three separate counts of obstructing an official proceeding. The federal grand jury alleges Goines falsely stated Jan. 30 that a particular confidential informant had purchased narcotics at the Harding Street location three days prior. He also falsely stated Jan. 31 that a different confidential informant purchased narcotics at that residence that day, according to the charges. On Feb. 13, he also falsely claimed he had purchased narcotics at that residence on that day. The indictment alleges none of these statements were true.

The charges against Garcia allege she conveyed false information by making several fake 911 calls. Specifically, on Jan. 8, she allegedly made several calls claiming her daughter was inside the Harding Street location. According to the indictment, Garcia added that the residents of the home were addicts and drug dealers and that they had guns – including machine guns – inside the home. The charges allege none of Garcia’s claims were true.

If convicted of the civil rights charges, Goines faces up to life in prison. Each obstruction count carries a potential 20-year sentence, while Garcia faces a five-year term of imprisonment for conveying false information.

The FBI is conducting the investigation. Assistant U.S. Attorneys Alamdar S. Hamdani, Arthur R. Jones and Sharad S. Khandelwal, and Special Litigation Counsel Jared Fishman of the Department of Justice’s Civil Rights Division, are prosecuting the case. 

An indictment is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless convicted through due process of law.

A Massachusetts man was sentenced yesterday to 33 months in prison followed by two years of supervised release for a scheme to illegally export defense technical data to foreign nationals in Turkey in connection with the fraudulent manufacturing of parts and components used by the U.S. military, in violation of the Arms Export Control Act. The U.S. Department of Defense (DOD) later determined that some of the parts were substandard and unsuitable for use by the military.

On Aug. 10, 2022, Arif Ugur, 53, of Cambridge, pleaded guilty to two counts of wire fraud, two counts of violating the Arms Export Control Act and one count of conspiring to violate the Arms Export Control Act.

“The defendant willfully defrauded the Department of Defense and gave access to controlled defense information to individuals in a foreign country for personal gain,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “This type of brazen disregard for our export control laws threatens our military readiness and technological advantage and will not be tolerated by this department.”

According to court documents, in 2015, Ugur, founded and was the sole managing partner of the Anatolia Group Limited Partnership (Anatolia), a domestic limited partnership registered in Massachusetts. Beginning in approximately July 2015, Ugur bid on and acquired numerous contracts to supply the DOD with various parts and components intended for use by the U.S. military. Many of these contracts required that the parts be manufactured in the United States. Both in bids submitted to DOD and in subsequent email communications with DOD representatives, Ugur falsely claimed that Anatolia was manufacturing the parts in the United States. In fact, Anatolia was a front company with no manufacturing facilities whatsoever. Unbeknownst to DOD, Ugur contracted with a company in Turkey to make the parts and then passed them off to DOD as if they had been manufactured by Anatolia in the United States. Because they had not been manufactured in the United States in accordance with the contacts, Ugur failed to allow DOD to inspect the parts prior to delivery to the U.S. military. Many of the parts were substandard and some could not be used at all.

To enable the Turkish company to manufacture the parts, Ugur shared technical specifications and drawings of the parts with his co-conspirators overseas, some of whom were employees of the Turkish company. Ugur also provided his overseas co-conspirators with access to DOD’s online library of technical specifications and drawings. Because of their military applications, many of these parts were designated as Defense Articles under the International Traffic in Arms Regulations (ITAR) and the United States Munitions List (USML). Thus, an export license was required to export the parts and related technical data (blueprints, specifications, etc.) from the United States to Turkey. Ugur knew of these restrictions, but nonetheless exported technical data controlled under the ITAR and USML to employees of the Turkish manufacturer without an export license.

Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division; U.S. Attorney Rachael S. Rollins for the District of Massachusetts; Special Agent in Charge Patrick J. Hegarty of the Department of Defense, Office of Inspector General, Defense Criminal Investigative Service, Northeast Field Office; Special Agent in Charge Matthew B. Millhollin of Homeland Security Investigations in Boston; and Acting Special Agent in Charge Rashel Assouri of the U.S. Department of Commerce Office of Export Enforcement, Boston Field Office made the announcement.

Assistant U.S. Attorneys Jason A. Casey and Timothy H. Kistner for the District of Massachusetts prosecuted the case.

Four Peruvian residents have been extradited to the United States, where they stand accused of operating a large-scale extortion scheme from 2012 through 2015, the Justice Department and U.S. Postal Inspection Service today announced. 

Jesus Gerardo Gutierrez Rojas, 37, Maria de Guadalupe Alexandra Podesta Bengoa, 38, Virgilio Ignacio Polo Davila, 43, and Omar Alfredo Portocarrero Caceres, 39, face federal charges in Miami. Peruvian authorities arrested the four in late 2017, based upon a U.S. indictment. All four remained incarcerated in Peru since the time of their arrest. Peru approved their extradition to the U.S. on Jan. 18, 2019.

“The Department of Justice will pursue criminals who target and extort U.S. consumers, wherever they are,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “Those who extort U.S. consumers by phone cannot escape justice by placing their calls from abroad. I thank the Republic of Peru for extraditing these individuals to face charges in U.S. courts.”  

“Individuals who defraud American consumers will be brought to justice, no matter where they are located,” said U.S. Attorney Ariana Fajardo Orshan for the Southern District of Florida. “Protecting the elderly and vulnerable members of our community from extortion schemes, such as this one, is a top priority of this Office and the Department of Justice, and I thank the U.S. Postal Inspection Service for their unwavering commitment to rid the U.S. mail system of these schemes. This is a reminder to our community to be wary of those individuals who threaten imprisonment, a negative credit score or a change in immigration status; please report those threats immediately.”

“The U.S. Postal Inspection Service will continue to aggressively investigate and pursue those who threaten U.S. consumers and extort them of their hard earned money, regardless of what country they operate from,” said U.S. Postal Inspector in Charge Antonio J. Gomez. “The U.S. Postal Inspection Service appreciates the continued partnership with the Department of Justice’s Consumer Protection Branch in pursuing South American call center operators who victimize consumers through the U.S. mail.” 

Podesta, Polo, and Portocarrero allegedly managed and operated Peruvian call centers that placed calls to Spanish-speaking consumers across the United States while lying and threatening them into paying fraudulent settlements for nonexistent debts. Many of the consumer victims were elderly. Gutierrez was allegedly the general manager of a larger company where he worked in partnership with Podesta, Polo, and Portocarrero to facilitate their extortion scheme. The defendants’ associates in Miami collected the payments and sometimes shipped packages to victims in the U.S. 

According to the allegations in the indictment, Podesta, Polo, Portocarrero, and their employees in Peru used Internet-based telephone calls and claimed to be attorneys and government representatives to threaten victims in the United States. The callers falsely claimed that victims failed to pay for or receive a delivery of products. The callers also falsely claimed that victims would be sued and that the companies would obtain large monetary judgements against them. Some victims were also threatened with negative marks on their credit reports, imprisonment, or immigration status. The callers said these threatened consequences could be avoided if the victims immediately paid “settlement fees.” Many victims made monetary payments based on these baseless threats.  

A 34-count federal indictment was filed against the defendants in the U.S. District Court for the Southern District of Florida on Dec. 6, 2016, and was unsealed upon the defendants’ extradition to the U.S. The defendants are approved to face 12 extortion counts pending against them. An indictment merely alleges that crimes have been committed. All defendants are presumed innocent until proven guilty beyond a reasonable doubt.

The case is being prosecuted by Trial Attorney Phil Toomajian of the Department of Justice’s Consumer Protection Branch. The Postal Inspection Service investigated the case. The Criminal Division’s Office of International Affairs, the U.S. Attorney’s Office of the Southern District of Florida, the Diplomatic Security Service, and the Peruvian National Police provided critical assistance. 

A federal judge in Greeneville, Tennessee, sentenced two Florida men for their roles in a multimillion-dollar health care fraud scheme.

Peter Bolos, 44, of Tampa, was convicted by a federal jury in December 2021 of conspiracy to commit health care fraud, 22 counts of mail fraud and introduction of a misbranded drug into interstate commerce. U.S. District Judge J. Ronnie Greer sentenced Bolos to 14 years in prison and ordered him to pay more than $24.6 million in restitution and $2.5 million in forfeiture. The court also sentenced Bolos’s co-defendant, Michael Palso, 48, of Tampa, to 33 months in prison and ordered him to pay more than $24.6 million in restitution. Palso previously pleaded guilty to his role in the conspiracy, as did 14 other defendants in related cases. The remaining defendants are scheduled to be sentenced later this week.

According to court documents and evidence presented at trial, Bolos, Palso and their co-conspirators, Andrew Assad, Scott Roix, Larry Smith, Mihir Taneja, Arun Kapoor and Maikel Bolos, as well as various other companies owned or controlled by some of these individuals, deceived pharmacy benefit managers (PBMs), such as Express Scripts and CVS Caremark, regarding tens of thousands of prescriptions. The PBMs processed and approved claims for prescription drugs on behalf of insurance companies. Bolos and his co-conspirators defrauded the PBMs into authorizing millions of dollars’ worth of claims that private insurers such as Blue Cross Blue Shield of Tennessee, and public insurers such as Medicaid and TRICARE, paid to pharmacies controlled by the co-conspirators.

“The significant sentences imposed by the court are a reflection of the gravity of the crimes that the defendants in this case committed,” said Deputy Assistant Attorney General Arun G. Rao, head of the Civil Division’s Consumer Protection Branch. “The department will continue to work with law enforcement partners to prosecute those who take advantage of telemedicine to perpetrate fraud schemes.”

“The scale of the prescription-drug fraud scheme orchestrated by these defendants and their conspirators was astonishing, and the Court’s prison sentences reflect the seriousness of their crimes,” said U.S. Attorney Francis M. Hamilton III for the Eastern District of Tennessee.  “The financial harm caused by health care fraud hurts all Americans, and the United States Attorney’s Office for the Eastern District of Tennessee will continue to support the cooperation among its federal law enforcement partners that is necessary to bring criminal swindlers like these defendants to justice.”

“This sentencing is the result of a multi-agency investigation into a complex telemedicine pharmacy fraud scheme, requiring substantial investigative resources,” said Special Agent in Charge Joseph E. Carrico of the FBI’s Knoxville Field Office. “The FBI, with its law enforcement partners, will remain vigilant to assure that unscrupulous individuals who exploit our health care system are brought to justice.”

“Distributing misbranded prescription drugs in the U.S. marketplace places patients’ health at risk,” said Special Agent in Charge Justin C. Fielder of the FDA Office of Criminal Investigations (OCI) Miami Field Office. “We will continue to pursue and bring to justice those who put profits ahead of public health.”

“Bolos and his co-conspirators abandoned their responsibilities in the health care industry through an elaborate fraud scheme and manipulated the system without regard for patient need or medical necessity to line their pockets,” said Special Agent in Charge John Condon of Homeland Security Investigations (HSI) Tampa. “This significant sentence should serve as a warning to anyone who attempts to deceive the government and steal from taxpayers.”

“Providers who solicit beneficiaries’ personal information and use it to defraud federal health care programs not only undermine the integrity of those programs; they also divert valuable taxpayer dollars for self-serving purposes,” said Special Agent in Charge Tamala E. Miles of the Department of Health and Human Services, Office of Inspector General (HHS-OIG). “HHS-OIG is proud to work alongside our law enforcement partners to investigate and hold accountable perpetrators of federal health care fraud.”

“The U.S. Postal Service, Office of Inspector General, will continue to vigorously investigate those who commit frauds against federal benefit programs and the U.S. Postal Service,” said Special Agent in Charge Matthew Modafferi of the U.S. Postal Service, Office of Inspector General Northeast Area Field Office. “The sentencing in this case sends a clear message to pharmaceutical companies that tactics like these will not be tolerated. The U.S. Postal Service, Office of Inspector General would like to thank our law enforcement partners and the Department of Justice for their dedication and efforts in this investigation.”

Court documents and evidence at trial established that Bolos, Assad and Palso owned and operated Synergy Pharmacy in Palm Harbor, Florida. Under their direction, Synergy employed Scott Roix, a Florida telemarketer operating under the name HealthRight, to generate prescriptions for Synergy and the other pharmacies involved in the scheme. The prescriptions were typically for drugs such as pain creams, scar creams and vitamins. To obtain the prescriptions, Roix used HealthRight’s telemarketing platform as a telemedicine service, cold-calling consumers and deceiving them into agreeing to accept the drugs and to provide their personal insurance information. HealthRight then paid doctors to authorize the prescriptions through its telemedicine platform, even though the doctors never communicated directly with the patients and relied solely on the telemarketers’ screening process as the basis for their authorizations. Because this faulty and fraudulent process made the prescriptions invalid, the drugs were misbranded under the Food, Drug and Cosmetic Act. Synergy and the other pharmacies nonetheless dispensed the drugs to consumers as part of the scheme, so that Bolos could submit fraudulent reimbursement claims.

Court documents and evidence at trial established that during the conspiracy, which lasted from May 2015 through April 2018, Bolos and Palso, along with co-defendant Andrew Assad, paid Roix millions of dollars to buy at least 60,000 invalid prescriptions generated by HealthRight. Bolos selected specific medications for the prescriptions that he could submit for profitable reimbursements at inflated prices. In addition, Bolos, Palso, and Assad used illegal means to hide his activity from the PBMs so that they could remain undetected.

The sentencings for the remaining defendants — all of whom pleaded guilty prior to trial — are scheduled to occur later this week. Larry Smith, Alpha-Omega Pharmacy, Germaine Pharmacy, Zoetic Pharmacy, Tanith Enterprises LLC, ULD Wholesale Group and Taneja will be sentenced on May 17. Kapoor, Sterling Knight Pharmaceuticals and Maikel Bolos will be sentenced on May 18. Assad, Roix and HealthRight LLC will be sentenced on May 19. All of the sentencings will occur before Judge Greer in the U.S. District Court for the Eastern District of Tennessee at Greeneville.

The trial verdict and plea agreements resulted from a multi-year investigation conducted by the HHS-OIG (Nashville); FDA-OCI (Nashville); U.S. Postal Service, Office of Inspector General (Buffalo); FBI (Knoxville and Johnson City, Tennessee); OPM-OIG (Atlanta); and HSI (Tampa). The U.S. Marshals Service also assisted in the investigation and the forfeiture of assets.

Assistant U.S. Attorney Mac Heavener of the U.S. Attorney’s Office for the Eastern District of Tennessee and Senior Trial Attorney David Gunn of the Civil Division’s Consumer Protection Branch in Washington are prosecuting the case. They were assisted by Barbra Pemberton, Bryan Brandenburg and April Denard from the U.S. Attorney’s Office.   

Attorney General William P. Barr announced today the appointment of Timothy Shea as Interim U.S. Attorney for the District of Columbia, pursuant to 28 U.S.C. § 546, effective February 3. The Office is the largest U.S. Attorney’s Office in the country, serving as both the local and the federal prosecutor for the nation’s capital, with over 300 attorneys responsible for litigation before over 100 judges in federal and local courts.

“I am pleased to appoint Tim Shea as Interim U.S. Attorney for the District of Columbia. Tim brings to this role extensive knowledge and expertise in law enforcement matters as well as an unwavering dedication to public service, reflected in his long and distinguished career in state and federal government,” said Attorney General William P. Barr. “His reputation as a fair prosecutor, skillful litigator, and excellent manager is second-to-none, and his commitment to fighting violent crime and the drug epidemic will greatly benefit the city of Washington. I would also like to express my gratitude to Jessie Liu, who has served with distinction as U.S. Attorney for the District of Columbia since 2017, and has been nominated to a new role at the Department of the Treasury.”

Shea served as Associate Deputy Attorney General from 1990-1992 and as Counselor to the Attorney General since 2019. In both roles, he advised the Attorney General on law enforcement operations, criminal justice policy, and management issues affecting the Department. He recently spearheaded the Department’s Operation Relentless Pursuit, a crackdown targeting violent crime in seven U.S. cities.

From 1992-1997, Shea served as an Assistant U.S. Attorney in the Eastern District of Virginia where he prosecuted federal criminal cases, including violent crimes, drug trafficking, fraud cases, perjury and obstruction of justice investigations, federal tax fraud and evasion cases, civil rights matters, and public corruption cases. He headed the Task Force responsible for investigating and prosecuting crimes at the District of Columbia correctional facilities at Lorton, supervising AUSAs and D.C. government attorneys. He was also the coordinator for matters related to the Criminal Enforcement Child Support.

In state government, Shea served as the Chief of Public Protection Bureau in the Massachusetts Attorney General’s office where he managed several divisions staffed by attorneys and investigators. In that position, he was responsible for the enforcement of state law related to consumer protection, civil rights, antitrust, regulated industries, insurance rate setting, telecommunications, energy, environment, public charities, and elder protection. Shea also served in Congressional roles, including as Chief Counsel and Staff Director of the U.S. Senate Permanent Subcommittee on Investigations under the chairmanship of Senator Susan Collins and on the U.S. House Appropriations Committee professional staff under Ranking Republican Member Silvio O. Conte. During his 20 years of private practice, Shea served as Of Counsel for Bingham McCutchen and Morgan Lewis, handling complex civil litigation.

Shea earned his J.D. degree magna cum laude in 1991 from the Georgetown University Law Center where he was elected to the Order of the Coif. He was also a senior staff member of the America Criminal Law Review. He received his B.A. degree magna cum laude from Boston College in 1982 where he received the Kenealy Award for Academic Excellence.

SHERMAN, Texas – An Oklahoma City, OK woman has been convicted of various federal crimes related to an international drug trafficking conspiracy in the Eastern District of Texas, announced U.S. Attorney Brit Featherston today.

Debra Lynn Mercer-Erwin, 60, was found guilty by a jury following a two-week trial before U.S. District Judge Amos Mazzant.  Mercer-Erwin was convicted of money laundering; wire fraud; conspiracy to manufacture and distribute cocaine; and conspiracy to manufacture and distribute cocaine knowing it would be imported into the United States.

“In the aircraft world, planes registered in the United States and displaying a ‘N’ tail-number, are coveted as being properly vetted and trusted to legally operate around the world.  Mercer-Erwin found ways to exploit the registration process in order to profit from illegally obtained money being paid for her services,” said U. S. Attorney Featherston.  “Mercer-Erwin became a drug dealer when she became aware of planes she had registered were being used to transport large quantities of cocaine.   Mercer-Erwin knew that many of her clients were in the illegal drug business and she hid their identities and the sources of their money in order to reap a large profit.  She became a money launderer when she created fake sales of planes that were not actually for sale in order to hide and move drug money.  Transnational criminal organizations require assistance to operate in the U.S. and Mercer-Erwin facilitated the drug dealing by exploiting the plane registration process.”

“This investigation required cooperation between our international partners, investigating agents and our prosecutors,” added U.S. Attorney Featherston.  “They did an amazing job putting the case together, and they are to be commended for their work.”

“This guilty verdict stems from the collaborative efforts of our trusted international, federal, state and local law enforcement partners,” said Lester R. Hayes Jr., Special Agent in Charge HSI Dallas. “Disrupting the illegal activities of transnational criminal organizations is one of HSI ‘s highest priorities and is enhanced by our partnerships at all levels. After listening to testimony of high-ranking leaders of the Columbian and Nicaraguan governments, I am convinced this investigation has significantly decreased the flow of narcotics smuggled into the U.S.”

“This investigation and successful prosecution serves as an example of how federal, state, and international law enforcement agencies work together to take down those involved in large scale money laundering in support of international drug trafficking organizations,” said Special Agent in Charge Trey McClish of the Dallas Field Office of the Department of Commerce’s Office of Export Enforcement (OEE).   “OEE and our law enforcement partners will continue to identify, investigate, and dismantle transnational criminal organizations who pose a threat to our national security.” 

According to information presented in court, between 2010 and 2020, Mercer-Erwin conspired with others to enable the distribution of cocaine in the United States by purchasing and illegally registering aircraft under foreign corporations and other individuals for export to other countries.  Non-US citizens are allowed to register an aircraft with the FAA if the aircraft is placed in a trust that is managed by a U.S. trustee. Mercer-Erwin was the owner of Wright Brothers Aircraft Title (WBAT) and Aircraft Guaranty Corporation (AGC). WBAT often served as an escrow agent for transactions involving AGC and was the designated party responsible for FAA filings related to AGC aircraft. AGC, a corporation at that time operating out of Onalaska, Texas, an east Texas town in the Eastern District of Texas, without an airport.  AGC acted as trustee to over 1,000 aircrafts with foreign owners. This allowed the foreign nationals to receive an “N” tail number for their aircrafts. The “N” tail number is valuable because foreign countries are less likely to inspect a U.S.-registered aircraft for airworthiness or force down an American aircraft.   

According to prosecutors, several of the illegally registered and exported aircraft were used by transnational criminal organizations in Colombia, Venezuela, Ecuador, Belize, Honduras, Guatemala, and Mexico to smuggle large quantities of cocaine destined for the United States.  The illicit proceeds from the subsequent drug sales were then transported as bulk cash from the United States to Mexico and used to buy more aircraft and cocaine. Aircraft purchases were typically completed by foreign nationals working for transnational criminal organizations who came to the United States with drug proceeds and purchased aircraft valued in the hundreds of thousands of dollars. 

Mercer-Erwin exploited her position as trustee to circumvent U.S. laws by disguising the true identity of the foreign owners, failing to conduct due diligence as to the identity of the foreign owners, providing false aircraft locations, and falsifying and forging documents. Trial testimony revealed the investigation was initiated after aircraft filing irregularities were discovered in tandem with numerous AGC aircraft found carrying substantial amounts of cocaine. The testimony further revealed additional aircraft in AGC’s trust were not seized but found by foreign officials destroyed or abandoned near clandestine landing strips in several South American countries. Some of these wrecked or abandoned aircraft still contained muti-ton kilos of cocaine onboard, and few, if any, of the seized or destroyed aircraft were in the location they were reported to be located. When authorities confronted Mercer-Erwin as the representative of AGC, she refused to comply and each time law enforcement would seize an AGC registered aircraft laden with drugs, Mercer-Erwin attempted to distance herself from the narcotic’s trafficking by transferring ownership of the aircraft using fictitious information to conceal the nature, location, source, ownership, and control of the aircraft. 

Additionally, Mercer-Erwin and co-defendants participated in a series of bogus aircraft sales transactions in order to conceal the movement of illegally obtained funds. The co-defendants would provide buyers and investors with fabricated documents and supply false representations regarding the bogus sale of an unsellable aircraft. The aircraft was unsellable because, unbeknownst to the buyers, the true owners of the aircraft had no knowledge or intention of selling the aircraft. Other bogus sales presented to buyers consisted of aircraft that was owned by a commercial airline and previously decommissioned and inoperable. None of the aircraft presented to the buyers were for sale.

The defendants would convince the buyer to place a deposit into an escrow account with WBAT, the title company owned by Mercer-Erwin, pending the completion of the sale. Once the money was placed in WBAT’s escrow account, the buyers were responsible for the interest accrued, and an escrow fee would be charged. In a typical sale, the deposit would remain in the escrow account. However, Mercer-Erwin would transfer the money from the escrow account to bank accounts controlled by the co-conspirators.

Since the aircraft was not truly for sale, the purchase of the aircraft would inevitably fall through, and the deposit would have to be returned. The co-conspirators would repeat the process by luring another buyer for the purchase of another unsellable aircraft. Each transaction would pay for the previous one, and Mercer-Erwin would receive an escrow fee ranging from $25,000 to $150,000 for her participation in the scheme.

Mercer-Erwin was the only defendant to proceed to trial. Co-defendants Kayleigh Moffett and Carlos Rocha Villaurrutia pleaded guilty on April 10, 2023. Moffett pleaded guilty to wire fraud and conspiracy to commit export violations, and Villaurrutia pleaded guilty to conspiracy to manufacture and distribute cocaine knowing it would be unlawfully imported into the United States; conspiracy to commit money laundering; and conspiracy to commit export violations. Four other defendants have active arrest warrants but are not in custody and are presumed innocent until proven guilty.

Mercer-Erwin was indicted by a federal grand jury in February 2021.  She faces up to life in federal prison.  The maximum statutory sentence prescribed by Congress is provided here for information purposes, as the sentencing will be determined by the court based on the advisory sentencing guidelines and other statutory factors.  A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.

This is an Organized Crime Drug Enforcement Task Force (OCDETF) case and is being investigated by Homeland Security Investigations (Dallas, Brownsville, Laredo, Guatemala, Colombia, Honduras, Mexico, and Transnational Criminal Investigative Units); Department of Commerce, Bureau of Industry and Security (Dallas and Houston offices); Department of Transportation Office of Inspector General (DOT-OIG); Office of Export Enforcement; Polk County Constable Precinct 1; Southeast Texas Export Investigations Group; Internal Revenue Service; Federal Aviation Administration (FAA); Estado Mayor De La Defensa Nacional Guatemala; Fuerza Aerea Guatemalteca; and Fuerza Aerea Colombiana.  OCDETF identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.

This case was prosecuted by Assistant U.S. Attorneys Ernest Gonzalez, Heather Rattan, and Lesley Brooks. 

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