TALLAHASSEE, FLORIDA – A federal grand jury has returned a one-count indictment charging Phillip Timothy Howard, 61, of Tallahassee, Florida, with racketeering (RICO).  The indictment was announced by Jason R. Coody, United States Attorney for the Northern District of Florida.

According to the indictment, between in or about December 2015, and in or about January 2018, Howard, a Florida attorney, along with others, was associated with and employed by an Enterprise, that is, his Tallahassee law firm (Howard & Associates, P.A.), and several Tallahassee investment companies (Cambridge Capital Group, LLC; Cambridge Capital Wealth Advisors, LLC; Cambridge Capital Advisors, LLC; Cambridge Capital Funding, Inc., Cambridge Capital Group Equity Option Opportunities, L.P.; and Cambridge Capital Partners, L.P.).  The indictment further alleges that during this time, Howard, along with others, knowingly, willfully, and unlawfully conducted and participated in the conduct of the affairs of the Enterprise, through a pattern of racketeering activity, namely, wire fraud and money laundering. Specifically, the indictment alleges that Howard engaged in such racketeering activity in three ways. 

First, it is alleged that Howard represented former NFL players in a class-action lawsuit who were eligible for settlement payouts from the NFL, and as part of that representation, Howard fraudulently enticed his clients to invest their retirement funds with his investment companies.  However, it is also alleged that Howard failed to disclose and misrepresented to these former NFL player investors the structure of the Enterprise, and the conflicts of interest and the criminal background of persons associated with or employed by the Enterprise.  It is further alleged that Howard failed to disclose and misrepresented the true nature of investment companies’ funds and the actual investments made by the former NFL player investors.  The indictment also alleges that despite reassuring investors that their money was secure, Howard never informed them that almost none of investment funds yielded a return and failed to disclose that the investment funds had been commingled with funds used to operate his law firm and to issue payroll for its staff, pay Howard’s home mortgages, and otherwise personally enrich Howard.  It is alleged that Howard and others fraudulently obtained and attempted to obtain over $4 million through such conduct.

Second, the indictment alleges that Howard sought third-party lenders that would be willing to lend money to Howard’s former NFL clients in advance of their potential NFL concussion settlements as part of the NFL class-action lawsuit, and also to Howard as litigation funding for the NFL class-action lawsuit.  To obtain such funds for himself and his clients, it is alleged that Howard provided false and fraudulent information, including numerous material misrepresentations and omissions, to the lenders. It is alleged that Howard and others fraudulently obtained and attempted to obtain over $10 million from third-party lenders through such conduct.

Third, the indictment alleges that Howard solicited a person to invest in a real estate project located in Jacksonville, Florida, and in doing so, promised the investor certain returns on the investment within a specified period of time.  It is further alleged that after the investor money transferred money to the investment company, Howard and an employee falsely told the investor that additional money was needed in order to close that real estate deal, and that the investor was guaranteed to receive a certain return on that investment within a specified period of time.  In reliance on this false promise, it is alleged that the investor transferred additional proceeds to the investment company.  The indictment alleges that several months later, the investor was falsely told by Howard that the real estate investment funds were secure and would be returned to her.  It is alleged that Howard fraudulently obtained and attempted to obtain over $520,000 from this investor through this conduct.

Trial for Howard is scheduled for January 30, 2023, at 8:15 a.m., at the United States Courthouse in Tallahassee before the Honorable United States Chief District Judge Mark E. Walker. Howard faces a maximum penalty of 20 years in prison for racketeering and a maximum term of 3 years of supervised release following any prison sentence that is imposed.

This case resulted from a joint investigation by the Federal Bureau of Investigation and the Internal Revenue Service–Criminal Investigations, with assistance from the U.S. Securities and Exchange Commission.  Assistant United States Attorneys Justin M. Keen and David Byron are prosecuting the case.

An indictment is merely an allegation by a grand jury that a defendant has committed a violation of federal criminal law and is not evidence of guilt. All defendants are presumed innocent and entitled to a fair trial, during which it will be the government’s burden to prove guilt beyond a reasonable doubt at trial.

The United States Attorney’s Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General. To access public court documents online, please visit the U.S. District Court for the Northern District of Florida website. For more information about the United States Attorney’s Office for the Northern District of Florida, visit http://www.justice.gov/usao/fln/index.html.

TALLAHASSEE, FLORIDA – After a six-day trial, Lee John Maher, 59, of Orlando, Florida, was convicted yesterday afternoon of conspiracy to commit mail fraud and with retaining and concealing federal funds, knowing that they were wrongly taken.  Co-defendant Larry Kenneth Long, 75, of Simpsonville, South Carolina, previously pled guilty to mail fraud conspiracy.  The verdict was announced by Christopher P. Canova, United States Attorney for the Northern District of Florida.

 

Maher and Long were officers of Clean Fuel Lakeland, which operated a biodiesel facility in Lakeland, Florida, in 2009 and 2010.  When federal money became available for energy initiatives under the American Recovery and Reinvestment Act of 2009, the men applied for a $2,480,000 grant from the United States Department of Energy through the Florida Governor’s Energy Office.  The Act was designed to encourage new energy investment by reimbursing grantees for monies invested in energy businesses.  The defendants fraudulently obtained funds under the grant by falsely claiming that Clean Fuel had spent $2,480,000 to buy and install a generator to run the biodiesel plant.  As proof that the generator had been purchased, the defendants submitted eight bogus bank checks to the Governor’s Energy Office, reflecting generator payments that had never actually been made.  Based upon their submissions, $2,232,000 in grant funds were disbursed to the Clean Fuel bank account in December 2010.  Immediately, the grant funds were disbursed through Maher’s other bank accounts, with Long receiving 1%, $22,320.  None of the grant funds were ever spent toward the purchase of a generator.  The defendants kept the fraud going until November 2012, through the submission of false progress reports.  The grant funds were ultimately recovered through federal asset seizure and forfeiture actions.

 

Maher’s sentencing hearing is scheduled for March 9, 2018, at 9:30 a.m. at the United States Courthouse in Tallahassee.  Maher faces a maximum of 20 years in prison on each count.  Long’s sentencing is scheduled for later this week.

 

This case resulted from an investigation by the United States Secret Service, the Florida Department of Agriculture and Consumer Services Office of Inspector General, and the United States Department of Energy Office of Inspector General.  Assistant U.S. Attorney Michael T. Simpson prosecuted this case.

 

The United States Attorney's Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General.  To access available public court documents online, please visit the U.S. District Court for the Northern District of Florida website.  For more information about the United States Attorney’s Office, Northern District of Florida, visit http://www.justice.gov/usao/fln/index.html.

PENSACOLA, FLORIDA – Son Chu Gilliam, 51, of Pensacola, Florida, pleaded guilty today to misdemeanor charges of receipt of adulterated and misbranded devices, and sale of prescription devices without a prescription -- those devices being contact lenses.  Lawrence Keefe, United States Attorney for the Northern District of Florida, announced the guilty plea.

Her sentencing hearing is currently set for September 10, 2019.

In May 2015, law enforcement seized approximately 600 counterfeit contact lenses that were being imported from China by Gilliam to her place of business, All about Ink, a tattoo shop in Pensacola, Florida.  A number of the contact lenses seized were tested by the U.S. Food and Drug Administration (FDA), and determined to contain microbial contamination.  FDA has determined that the types of bacteria found in the contact lenses can be hazardous.

Between July 2015, and October 2015, law enforcement made a number of undercover purchases of contact lenses from Gilliam and others working for Gilliam at All about Ink.  Following the undercover purchases, a federal search warrant was executed at All about Ink, and approximately 200 pairs of contact lenses were seized.  Samples of both the contact lenses purchased by undercover agents, and the contact lenses seized were tested by FDA, and a number of those also contained microbial contamination.  In addition to agents determining that a number of the contact lenses were counterfeit and FDA determining that a number of the contact lenses were contaminated and that none of the contact lenses should have been sold without a prescription.

“American consumers rely on FDA oversight to ensure the safety of their medical devices, including contact lenses.  Selling counterfeit contact lenses without a valid prescription puts patients’ health – and their vision – at risk,” said Acting Special Agent in Charge, H. Peter Kuehl, FDA Office of Criminal Investigations Miami Field Office. “The FDA is committed to working with our law enforcement partners to keep such products out of the U.S. marketplace.”

“This criminal was selling substandard, dangerous counterfeit contact lenses with no regard for the health and safety of consumers,” said HSI Tampa Deputy Special Agent in Charge Kevin D. Sibley. “Our agents are committed to collaborating with partner agencies, like U.S. Customs and Border Protection, the U.S. Food and Drug Administration and the Florida Department of Health, to conduct aggressive investigations into the distribution of fake goods that threaten the safety of our public.”

The case resulted from the investigation by the Homeland Security Investigations, the U.S. Food and Drug Administration Office of Criminal Investigations, U.S. Customs and Border Protection, and the Florida Department of Health.  It was prosecuted by Assistant United States Attorney J. Ryan Love.

The United States Attorney's Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General.  To access public court documents online, please visit the U.S. District Court for the Northern District of Florida website.  For more information about the United States Attorney’s Office, Northern District of Florida, visit http://www.justice.gov/usao/fln/index.html

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. 

###

Two biofuel company owners were sentenced to prison for conspiracy and making false statements to the U.S. Environmental Protection Agency (EPA) and conspiracy to defraud the IRS and preparing a false tax claim.  

U.S. District Judge John E. Jones III sentenced Ben Wootton, 55 of Savannah, Georgia, to 70 months and Race Miner, 51, of Marco Island, Florida, to 66 months, after a jury convicted both defendants and their company, Keystone Biofuels Inc. (Keystone), in April 2019.  The company was originally located in Shiremanstown, Pennsylvania, and later in Camp Hill, Pennsylvania.  Miner was the founder and chief executive officer of Keystone.  Wootton was president of Keystone, and a former member of the National Biodiesel Board.  The court ordered both men to pay restitution of $4,149,383.41 to the IRS and restitution of $5,076,376.07 to the Pennsylvania Department of Environmental Protection.  Wootton and Miner will also have to serve a three-year term of supervised release after their term of imprisonment.  Keystone was sentenced to five years’ probation and ordered to pay restitution of $4,149,383.41 to the IRS and restitution of $5,076,376.07 to the Pennsylvania Department of Environment Protection criminal fine.

“The EPA and IRS renewable fuels incentive programs are important components of the Congressional program to increase the use of biofuels to benefit the environment,” said Principal Deputy Assistant Attorney General Jonathan D. Brightbill of the Justice Department’s Environment and Natural Resources Division.  “Today’s sentences are a strong reminder that the federal government will not allow supposed “green” conmen to illegally take advantage of federal and state programs that are meant to offer financial incentives to enhance the environment and energy sustainability.”

“The complex fraud perpetrated by the defendants in this case struck directly at the heart of a government program that was specifically created to benefit the environment, business owners and the community at large,” said U.S. Attorney David J. Freed of the Middle District of Pennsylvania.  “Encouraging companies to develop and provide for sale clean renewable fuels is truly a win-win proposition for everyone.  Unfortunately, the defendants used this program to benefit only themselves.  Today’s sentences send a clear message that my office, our federal partners and the United States Department of Justice will not tolerate renewable fuels fraud and related offenses.”

“The defendants defrauded the IRS and sought to profit from a system intended to protect the environment,” said Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.  “The Tax Division will continue to aggressively investigate and prosecute with our partners such tax crimes.”

“Today’s sentencing demonstrates there are real penalties for those defrauding the Renewable Fuel Standard (RFS) program,” said Jessica Taylor, Director of the EPA’s criminal enforcement program. “With this action EPA and its enforcement partners are continuing to protect both the integrity of the RINs program and the American taxpayer.”  

“Wootton and Miner actively engaged in a multimillion-dollar scheme designed to rob the government and line their own pockets.  Today, they learned there is a steep price to be paid for such greed,” said Jim Lee, Chief, IRS Criminal Investigation (IRS-CI).  “It is the partnerships between IRS-CI and other federal agencies like the EPA that allow cases like this to come to fruition, holding accountable those who seek to enrich themselves through fraudulent means.”    

“The only green resource these two cared about was money, and they told lie after lie to perpetuate their fraud,” said Special Agent in Charge Michael J. Driscoll of the FBI's Philadelphia Field Office. “Fair warning to anyone else seeking to scam the U.S. government and taxpayers like this: the FBI and our partners stand ready to investigate and hold you accountable as well.”

Wootton, Miner, and Keystone falsely represented that they were able to produce a fuel meeting the requirements set by the American Society for Testing and Materials (ASTM) for biodiesel (a renewable fuel) and adopted by the EPA, and as such were entitled to create renewable fuel credits, known as RINs, based on each gallon of renewable fuel produced.  The fuel and the RINs have financial value and could be sold and purchased by participants within the federal renewable fuels commercial system. 

Wootton and Miner were also convicted of fraudulently claiming federal tax refunds based on IRS’s Biofuel Mixture Credit.  The Biodiesel Mixture Credit is a type of “blender’s credit” for persons or businesses who mix biodiesel with diesel fuel and use or sell the mixture as a fuel.  Wootton and Miner caused Keystone to fraudulently claim tax refunds based on non-qualifying fuel and, in at least some instances, non-existent or non-mixed fuel.  In an attempt to hide their fraud scheme, the men created false corporate books and records and sham financial transactions to account for the nonexistent and non-qualifying fuel, and to create the appearance of legitimacy.

The prosecution of Wootton, Miner and Keystone is the first prosecution of a case under the federal renewable fuels program based on fuel that did not meet the program renewable fuel quality standards. 

The case was prosecuted by Senior Litigation Counsel Howard P. Stewart of the Environment and Natural Resources Division’s Environmental Crimes Section, Assistant U.S. Attorney Geoffrey MacArthur, Special Assistant U.S. Attorney David Lastra, and Trial Attorneys Mark Kotila and Michael C. Vasiliadis of the Tax Division.  EPA Region III Criminal Investigation Division, IRS Criminal Investigation and the FBI Philadelphia’s Harrisburg Resident Agency investigated the matter.

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.

A Texas man was taken into custody on allegations he fraudulently obtained more than $1.1 million in Paycheck Protection Program (PPP) loans, announced Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division and U.S. Attorney Ryan K. Patrick for the Southern District of Texas.

Joshua Thomas Argires, 29, of Houston, Texas, is charged in a criminal complaint, unsealed Monday upon his arrest, with making false statements to a financial institution, wire fraud, bank fraud and engaging in unlawful monetary transactions.  He made his initial appearance Monday before U.S. Magistrate Judge Peter Bray.

Argires allegedly perpetrated a scheme to file two fraudulent loan applications seeking more than $1.1 million in forgivable loans.  The Small Business Administration (SBA) guarantees the loans for COVID-19 relief through the PPP under the Coronavirus Aid, Relief and Economic Security (CARES) Act. 

The complaint alleges Argires submitted two fraudulent PPP loan applications to federally insured banks.  One of these applications was submitted on behalf of an entity called Texas Barbecue; the other was filed on behalf of a company called Houston Landscaping.  Argires allegedly claimed these two companies had numerous employees and hundreds of thousands of dollars in payroll expenses. 

According to the complaint, neither Texas Barbecue nor Houston Landscaping has employees or pays wages consistent with the amounts claimed in the PPP loan applications.  The complaint further asserts that both of these loans were funded, but that none of the funds were used for payroll or other expenses authorized under the PPP.  Rather, the funds received on behalf of Texas Barbecue were invested in a cryptocurrency account, while the funds obtained for Houston Landscaping were held in a bank account and slowly depleted via ATM withdrawals, according to the charges.

The CARES Act is a federal law enacted March 29.  It is designed to provide emergency financial assistance to millions of Americans who are suffering the economic effects resulting from the COVID-19 pandemic.  One source of relief the CARES Act provides is the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP.  In April 2020, Congress authorized over $300 billion in additional PPP funding.

The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of one percent.  Businesses must use PPP loan proceeds for payroll costs, interest on mortgages, rent and utilities.  The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within a set time period and use at least a certain percentage of the loan towards payroll expenses.   

A federal criminal complaint is merely an accusation. A defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

The Federal Housing Finance Agency Office of the Inspector General (OIG), SBA OIG and U.S. Postal Inspection Service’s Houston Division conducted the investigation. Trial Attorney Timothy A. Duree of the Criminal Division’s Fraud Section and Assistant U.S. Attorney James McAlister for the Southern District of Texas are prosecuting the case.     

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.

 

A long-time Philadelphia-area political consultant and attorney was sentenced today for his role in two criminal schemes to violate federal campaign finance laws announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney William M. McSwain of the Eastern District of Pennsylvania.

Kenneth Smukler, 57, of Villanova, Pennsylvania, was sentenced to 18 months in prison followed by one year of supervised release by the Honorable Jan E. DuBois.  In the 2012 Democratic primary election for Pennsylvania’s First Congressional District, Jimmie Moore, a former Philadelphia Municipal Court Judge, ran against the incumbent Congressman Bob Brady.  Assisted and directed by Smukler, Moore executed a corrupt deal in which he agreed to withdraw from the race in exchange for funds from the Bob Brady for Congress campaign (the Brady campaign) to be used to pay off Moore’s campaign debts.  Those debts included money that Jimmie Moore for Congress (the Moore campaign) owed to several vendors, to Moore himself and to Moore’s campaign manager, Carolyn Cavaness. On Feb. 29, 2012, Moore withdrew from the race and Cavaness had prepared a list of debts owed by the Moore campaign, which they provided to Smukler, a campaign consultant for the Brady campaign.  Smukler arranged for the Moore campaign to receive $90,000 from the Brady campaign through false documents and a series of concealing pass-throughs, including the consulting firm of another Brady associate and co-conspirator, D.A. Jones.  Smukler ensured that the Brady campaign reported none of the concealed payments, which exceeded the federal contribution limits, to the Federal Election Commission (FEC).  Rather, he executed the scheme by ensuring that the three installments were falsely and illegally disguised from the FEC and the public as payments for poll and consulting services.

Later, during the 2014 Democratic primary election for Pennsylvania’s Thirteenth Congressional District, Smukler again committed federal campaign finance offenses, this time for the benefit of another client, Marjorie Margolies, a former Member of the U.S. House of Representatives.  Smukler, a veteran of prior Margolies political campaigns, ran the Margolies campaign in 2014. 

In April 2014, during a close primary race, the Margolies campaign was running out of money that it could legally spend in the primary.  Smukler then caused the Margolies campaign to illegally spend general election funds in his attempt to win the primary election for his client.  He further lied about his illegal spending to the campaign’s lawyer.  That lawyer, in turn, unwittingly reported Smukler’s lies to the FEC in response to a complaint filed by another candidate. Additionally, Smukler caused excessive campaign contributions and illegal conduit contributions to the Margolies campaign, all of which were hidden or disguised from the campaign’s FEC filings.

“When political operatives like Kenneth Smukler engage in hidden illegal campaign finance schemes, they undermine the integrity of the electoral process,” said Assistant Attorney General Benczkowski.  “This is a just sentence that reflects the seriousness of these crimes.”

“In order to win at all costs, Smukler knowingly and purposefully undermined our democratic process by misusing campaign funds and lying about it,” said U.S. Attorney McSwain. “My Office will continue to prosecute public corruption wherever and whenever we uncover it. Now Smukler is headed to jail, and I am grateful that the Court imposed a just sentence reinforcing the fact that this kind of corruption will never be tolerated.”

On Dec. 3, 2018, a jury found Smukler guilty of one count of conspiracy, two counts of excessive campaign contributions, two counts of false statements, two counts of conduit contributions, one count of willfully causing a false statement to the FEC and one count of obstruction of justice.     

Former Public Integrity Section Trial Attorney Jonathan I. Kravis and the FBI investigated the case.  Richard C. Pilger, Director of the Election Crimes Branch of the Public Integrity Section, Trial Attorney Rebecca Moses of the Public Integrity Section and Assistant U.S. Attorney Eric L. Gibson of the Eastern District of Pennsylvania prosecuted the case.

Massachusetts-based medical device manufacturer Alere Inc. and its subsidiary Alere San Diego (Alere) have agreed to pay the United States $33.2 million to resolve allegations that Alere caused hospitals to submit false claims to Medicare, Medicaid, and other federal healthcare programs by knowingly selling materially unreliable point-of-care diagnostic testing devices, the Justice Department announced today.

       

“The United States is fortunate that innovative healthcare companies regularly develop medical devices that improve patients’ lives, often in remarkable ways,” said Acting Assistant Attorney General Chad A. Readler for the Justice Department’s Civil Division.  “But the Department will hold medical device manufacturers accountable if they knowingly sell defective products that waste taxpayer dollars and adversely impact patient care.”   

 

The United States alleged that between January 2006 and March 2012, Alere knowingly sold materially unreliable rapid point-of-care testing devices marketed under the trade name Triage®.  The Triage® devices aided in the diagnosis of acute coronary syndromes, heart failure, drug overdose, and other serious conditions, and the devices were frequently used in emergency departments where timely decisions are critical to ensuring proper patient care.  According to the government’s allegations, Alere received customer complaints that put it on notice that certain devices it sold produced erroneous results that had the potential to create false positives and false negatives that adversely affected clinical decision-making.  Nonetheless, the company failed to take appropriate corrective actions until FDA inspections prompted a nationwide product recall in 2012.  Of the $33.2 million to be paid by Alere, $28,378,893 will be returned to the federal government and a total of $4,860,779 will be returned to individual states, which jointly funded claims for Triage devices submitted to state Medicaid programs.        

 

“Physicians who work to treat patients with suspected myocardial infarctions rely upon devices such as Alere’s Triage Cardiac products for quick and accurate readings," said Stephen M. Schenning, Acting United States Attorney for the District of Maryland.  "When manufacturers such as Alere make changes to the specifications that affect the product’s reliability without informing physicians or the FDA, patient care is put at substantial risk.”

 

“Congress passed the False Claims Act on March 2, 1863 to protect taxpayer dollars from fraud and abuse and to allow private citizens to join the effort,” said Maureen R. Dixon, Special Agent in Charge for the U.S. Department of Health and Human Services Office of Inspector General in Philadelphia.   “We will continue to work with concerned citizens, the Department of Justice and our investigative partners to ensure the federal government only pays for honest, high quality, health care products and services.”

 

The settlement with Alere resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery.  The civil lawsuit was filed by Amanda Wu, who formerly worked for Alere as a senior quality control analyst.  As part of today’s resolution, Ms. Wu will receive approximately $5.6 million.

 

The settlement with Alere was the result of a coordinated effort among the U.S. Attorney’s Office for the District of Maryland, the Commercial Litigation Branch of the Justice Department’s Civil Division, and the National Association of Medicaid Fraud Control Units, with assistance from the FDA’s Office of Chief Counsel, and HHS’ Office of Counsel to the Inspector General. The investigation was conducted by HHS-OIG, FDA’s Office of Criminal Investigations, and the Department of Defense Criminal Investigative Services.

 

The claims resolved by this settlement are allegations only, and there has been no determination of liability.  The lawsuit is captioned United States ex rel. Amanda Wu v. Alere San Diego, et al., No. GLR-11-CV-1808. 

A complaint was unsealed today, charging two U.S. citizens with federal crimes related to Iran.  Muzzamil Zaidi, 36, a U.S. citizen who resides in Qom, Iran, was charged with acting in the United States as an agent of the government of Iran without first notifying the Attorney General.  Zaidi, Asim Naqvi, 36, a U.S. citizen who lives in Houston, Texas, and Ali Chawla, 36, a Pakistani national who lives in Qom, Iran, were all charged with violations of the International Emergency Economic Powers Act.  The complaint alleges that both charges stem from the defendants’ campaign to transport U.S. currency from the United States to Iran on behalf of the Supreme Leader of Iran in 2018 and 2019. Both Zaidi and Naqvi were arrested in Houston yesterday, Aug. 18, 2020.

“Disrupting Iran’s ability to raise U.S. dollars is key to combating its ability to sponsor international terrorism and destabilize the Middle East, including through its military presence in Yemen,” said Assistant Attorney General for National Security John C. Demers.  “Zaidi, Naqvi, and Chawla allegedly raised money in the United States on behalf of Iran’s Supreme Leader, and illegally channeled these dollars to the government of Iran.  As a result of today’s charges, their unlawful scheme has been exposed and brought to an end.  The U.S. Department of Justice and its National Security Division are committed to holding accountable individuals who operate covert networks within the United States in order to provide support and funds to hostile foreign governments like Iran in violation of U.S. law.”

“This case is significant on many levels,” said Michael R. Sherwin, Acting United States Attorney for the District of Columbia.  “To begin, as alleged in the criminal complaint, the defendants have considerable operational links to the IRGC, which has conducted multiple terrorist operations throughout the world over the past several years.  The life-blood of these terrorist operations is cash – and the defendants played a key role in facilitating that critical component.”

“Today’s charges demonstrate our commitment to preventing agents of hostile foreign governments from having access and freedom to operate within the borders of the United States,” said James A. Dawson, acting Assistant Director in Charge of the FBI’s Washington Field Office.  “In addition to being charged with acting as an illegal agent of Iran, Zaidi allegedly operated with his co-conspirators at the behest of the Iranian government — a known sponsor of terrorism — to overtly solicit U.S. money to further Iranian causes, in violation of the International Emergency Economic Powers Act (IEEPA).  This is why IEEPA was established: to prevent hostile foreign governments from leveraging the U.S. financial system in furtherance of their global destabilizing endeavors.” 

“The arrests today are the direct result of the undeterred efforts of the FBI Houston Counterterrorism investigative team,” said FBI Houston Field Office Special Agent in Charge, Perrye K. Turner.  “By engaging in around the clock collaboration with multiple Field Offices and Intelligence Community partners, our agents ensure that those who send money to terrorist regimes will ultimately be held accountable and lose their freedom.”  

As alleged in the affidavit in support of a criminal complaint, Zaidi offered his services to the Supreme Leader of Iran in or around July 2015 and said that he could serve the “Islamic Republic in the socio-political or another field.”  The complaint alleges that Zaidi traveled to Syria in or around June 2018 and that, while there, flew to an active war zone in an armed Iranian military or intelligence aircraft.  The complaint alleges that Zaidi had access to bases under the command of Iran’s Islamic Revolutionary Guard Corps (IRGC) while in that war zone, including a “Sepah Qods” (IRGC Qods Force) base.  The IRGC was designated as a terrorist organization by the U.S on April 4, 2019.  Qassem Soleimani, a major general in the IRGC, was commander of the Qods Force until he was killed in a U.S. airstrike on Jan. 3, 2020.

According to the complaint, in December 2018, Zaidi and other members of an organization known as “Islamic Pulse,” including Chawla, received the permission of the Supreme Leader of Iran to collect khums, a religious tax, on the Supreme Leader’s behalf, and to send half of that money to Yemen.  The complaint alleges that permission was formalized on or about Feb. 28, 2019, in a letter confirming the permission of the Supreme Leader of Iran and another Ayatollah to spend khums money in Yemen.

Based on the complaint, in or around July 2019, Islamic Pulse released a video soliciting donations for its purported Yemen campaign that showed money moving from the United States and other Western countries to Yemen through Iran.  The complaint alleges that Chawla replied to donors’ concerns about how the campaign was able to get money into Yemen by stating that the matter could not be discussed over email.  The complaint further alleges that Chawla sought U.S. dollars specifically, stated that Islamic Pulse could not accept electronic transfers, and admitted that Islamic Pulse was not a registered charity. 

The complaint alleges that after the United States placed sanctions on the Supreme Leader of Iran in June 2019, Zaidi told Naqvi that the action was a “straight hit on khums.”  The complaint alleges that in summer and fall 2019 Zaidi and Naqvi continued to collect U.S. currency in the United States and have it transported it to Iran, sometimes via Iraq, structured in such a way as to avoid reporting requirements.  After a group of 25 travelers carried money destined for Iran on behalf of Zaidi and Naqvi in October 2019, Zaidi and Naqvi discussed the screening the travelers underwent at the airport and Naqvi’s hope that none of the travelers would confess to authorities upon their return.

The complaint alleges that, during his current stay in the United States, which began in June 2020, Zaidi has exhibited behavior that is consistent with having received training from a foreign government or foreign intelligence service, such as the government of Iran or IRGC.  According to the complaint, that behavior includes a reluctance to discuss matters over the phone, or even over encrypted applications, because Zaidi claims that doing so could be dangerous.

The charges in criminal complaints are merely allegations, and every defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt. The maximum penalty for a violation of 18 U.S.C. § 951 is 10 years, and the maximum penalty for a violation of the International Emergency Economic Powers Act is 20 years.  The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes.

The investigation into this matter was conducted by the FBI’s Washington Field Office and Houston Field Office.  The case is being prosecuted by the National Security Section of the U.S. Attorney’s Office for the District of Columbia, along with the Counterintelligence and Export Control Section and Counterterrorism Section of the National Security Division of the Department of Justice.

The co-owners of a Boston-area home healthcare company pleaded guilty in federal court yesterday for tax crimes resulting in over $1 million in losses, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Andrew E. Lelling for the District of Massachusetts.

Hannah Holland, 51, of Quincy, Massachusetts, and Sheila O’Connell, 51, of North Weymouth, Massachusetts, each pleaded guilty to one count of conspiracy to defraud the United States and three counts of aiding and assisting in the preparation of false tax returns.

According to court documents, Holland and O’Connell co-owned and operated Erin’s Own Home Healthcare Inc. (Erin’s Own), a home healthcare business. Between 2010 and 2014, Holland and O’Connell directed another individual to cash over $3.5 million of Erin’s Own business checks through nominee bank accounts. During this time, Holland also personally deposited or cashed over $77,000 of Erin’s Own business checks. None of these funds were reported to the Internal Revenue Service (IRS) or accounted for in the company’s tax filings. Instead, Holland and O’Connell provided their tax preparer with a limited set of financial records that did not cover the substantial amounts of business funds Holland and O’Connell diverted. As a result of the underreporting, Erin’s Own caused a loss of $1,126,112 to the United States.

Sentencing is scheduled for February 13, 2019. Holland and O’Connell each face a maximum sentence of five years in prison on the conspiracy count and three years in prison on each count of aiding and assisting in the preparation of false tax returns, as well as a period of supervised release, restitution, and monetary penalties. 

Principal Deputy Assistant Attorney General Zuckerman and U.S. Attorney Lelling commended special agents from IRS-Criminal Investigation, who are investigating the case, and Assistant U.S. Attorney Jordi de Llano, Deputy Chief of the United States Attorney’s Securities and Financial Fraud Unit, and Tax Division Trial Attorney Brittney Campbell, who are prosecuting the case.  Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

A Beverly Hills, California, businessman was sentenced yesterday to 21 months in prison for filing false tax returns, which failed to report his offshore accounts in Germany and Israel and the income earned on those accounts, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Tax Division and U.S. Attorney Nicola T. Hanna for the Central District of California.

“Today’s prison sentence reinforces the message that the Tax Division alongside its strong partners in U.S. Attorneys’ Offices and the IRS is committed to prosecuting U.S. taxpayers, who willfully hide offshore accounts, and that the penalty for such criminal conduct is not just a financial penalty, but prison,” said Principal Deputy Assistant Attorney General Zuckerman.

According to court documents, Teymour Khoubian filed false tax returns for tax years 2009 and 2010, which 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. 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.

Since at least 2009, Khoubian was aware of the IRS’s Offshore Voluntary Disclosure Program (OVDP).  The OVDP allowed U.S. taxpayers to voluntarily disclose 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 his sentence, Khoubian was ordered to pay $612,310 in restitution to the IRS. Additionally, as part of his guilty plea, Khoubian paid a Foreign Bank and Financial Accounts (FBAR) penalty in the amount of $7,686,004 plus interest and penalties.

This case was 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 IRS-Criminal Investigation. 

Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney James P. Kennedy, Jr. announced today that Dorian Wills, 52, of Buffalo, NY, pleaded guilty to tax evasion before U.S. District Judge Elizabeth A. Wolford. The charge carries a maximum penalty of five years in prison and a $250,000 fine. 

 

According to documents and information provided to the court, between April 2010 and October 2013, the defendant operated a debt collection business under various names, including Heritage Capital Services LLC; Performance Payment Processing LLC; Performance Payment Service LLC; Pinnacle Payment Service LLC; and Velocity Payment Solutions LLC. Wills resided in the Western District of New York but spent significant time in Cleveland, Ohio, and Atlanta, Georgia, where the debt collection companies were located. From approximately November 2010 through approximately October 2013, the defendant operated a business called Freestar World LLC, through which he did work for the debt collection companies.

 

The debt collection companies engaged in illegal debt collection practices such as making threatening and harassing phone calls, and collecting on debt that did not exist or debt to which the debt collection companies did not have title. To avoid detection by state and federal law enforcement authorities, Wills solicited two individuals to assist him with his businesses.

 

The defendant had these individuals incorporate several debt collection companies in Georgia and Ohio, open dozens of bank accounts in the names of the debt collection companies, and submit applications for merchant accounts in the names of the debt collection companies.

 

Between 2010 and 2013, none of the debt collection companies filed a tax return. In addition, Wills failed to file his 2011 and 2013 personal income tax returns, despite some of the debt collection companies earning approximately $4,000,000 in gross receipts.

 

For the tax year 2012, the defendant filed a personal income tax return but the return did not include income information from any businesses, some of which earned nearly $5,000,000 in gross receipts in 2012, except for Freestar.

 

As a result of unreported income and the unpaid 2012 taxes, the defendant owes $1,209,537.88 in federal income taxes for tax years 2011 through 2013.

 

Previously, Wills and the debt collection companies were the subject of a civil investigation by the Federal Trade Commission, with the defendant and the FTC stipulating to a final order for permanent injunction on August 8, 2014. 

           

U.S. District Judge Elizabeth A. Wolford scheduled sentencing for Aug. 23, 2018.  Wills faces a statutory maximum sentence of five years in prison.  He also faces a period of supervised release, restitution and monetary penalties.

 

Principal Deputy Assistant Attorney General Zuckerman and U.S. Attorney Kennedy thanked special agents of IRS Criminal Investigation, who conducted the investigation, AUSA Marie P. Grisanti, and Tax Division Trial Attorneys Jason M. Scheff and Thomas F. Koelbl, who are prosecuting the case.

 

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

On March 23, 2018, the United States filed a civil forfeiture complaint seeking the possession of 63 pit bull-type dogs that were allegedly involved in a dog fighting venture in violation of the federal Animal Welfare Act. Pursuant to a federal warrant, the animals were seized on March 19, 2018, in Eastman, Georgia, by United States Department of Agriculture, Office of Inspector General (USDA-OIG) special agents working with the United States Marshals Service, Georgia Bureau of Investigation, Georgia State Patrol (GSP), Oconee Drug Task Force, Dodge County Sheriff’s Office, and Georgia Department of Natural Resources.

According to the complaint filed last week in federal court, the animals were seized after GSP troopers conducted a traffic stop involving a vehicle inside of which an injured dog was found. The operator of the vehicle admitted to having been present at a dog fight in Eastman, Georgia, and provided law enforcement with the location of the fight. At the reported location, agents discovered a disassembled dog fighting “pit” and more than 60 pit bull-type dogs staked to the ground by heavy chains. The condition of a majority of the dogs, including scarring and aggression towards other dogs, was consistent with dog fighting and related training.

After obtaining a search warrant, agents found numerous indications of dog fighting at the Eastman property, including a treadmill with a rope attached to the front part of the machine, antibiotics and other injectable veterinary medications, and a jenny mill, which is used to develop a dog’s endurance and musculature by enticing the animal to run on a circular track. From four grave areas, agents unearthed the remains of seven dogs, five of which had scarring consistent with dog fighting and one of which had a broken leg. During the search, agents noted that none of the live animals had access to food, and most did not have access to water.

Following the seizure, the United States Marshals Service took custody of the animals. K2 Solutions, Inc. and the Humane Society of the United States are assisting with the care of the dogs, at least some of which are pregnant.

“The Justice Department’s Environment and Natural Resources Division is pleased to have partnered with the U.S. Attorney’s Office, the U.S. Marshals Service, and federal and state law enforcement in this joint effort to remove these animals from harm’s way, pursuant to federal law, as quickly as possible,” said Acting Assistant Attorney General Jeffrey H. Wood for the Justice Department’s Environment and Natural Resources Division. “We applaud the agents and attorneys who worked tirelessly and acted on very little notice to achieve this successful outcome.”

“Dog fighting is a barbaric spectacle that has no place in any civilized society, and it will enjoy no quarter in the Southern District of Georgia,” said United States Attorney Bobby L. Christine. “We know that animal fighting ventures often entail other forms of illegal activity involving drugs, firearms, and gambling, and this Office will continue to work with its law enforcement partners at all levels to investigate and successfully prosecute those who contribute to the proliferation of crime and seek to profit off the abuse and suffering of helpless animals.”

“The United States Department of Agriculture, Office of Inspector General-Investigations, actively investigates allegations of animal abuse,” said Special Agent in Charge Karen Citizen-Wilcox for USDA-OIG. “This agency has made animal fighting a high priority in order to demonstrate that these blatant acts of cruelty to animals will no longer be tolerated. We would like to thank United States Attorney’s Office for aggressively prosecuting perpetrators of animal fighting.”

Dog fighting is a violent contest in which two dogs that are bred and conditioned for fighting are released by their owners or handlers in a controlled environment to attack each other and fight for purposes of entertainment or gambling. Fights usually end when one dog withdraws, when a handler “picks up” his dog and forfeits the match, or when one or both dogs die. Persons engaged in dog fighting typically use “pit bull”-type dogs, which dog fighters prefer for their compact muscular build, short coat, and the aggression that some display toward other dogs.

The federal Animal Welfare Act makes it a felony punishable by up to five years in prison to fight dogs or to possess, train, sell, buy, deliver, receive, or transport them for that purpose. The statute further authorizes the seizure and forfeiture of animals involved in dog fighting. Once the dogs are forfeited or surrendered to federal authorities, they can be evaluated and placed for adoption. Although federal funds will be used to pay for the care of the dogs while they remain in law enforcement custody, the Animal Welfare Act empowers the government to recover those costs from the dogs’ owners.

Assistant United States Attorneys Theodore S. Hertzberg and Xavier A. Cunningham are pursuing the forfeiture of the dogs on behalf of the United States. USDA-OIG is leading the related federal investigation. For any questions, please contact the United States Attorney’s Office at (912) 652-4422.

Yousif Al Mashhandani (“Yousif”), 35, of Vienna, Virginia, and Adil Hasan, 38, of Burke, Virginia, who are full biological brothers, were arrested this morning. The third individual charged is Enas Ibrahim, 32, also of Burke, who is the wife of Hasan. Each are charged with attempting to obtain naturalization contrary to law. The defendants will have their initial appearance today in front of Magistrate Judge Ivan D. Davis at 2 p.m. at the federal courthouse in Alexandria, Virginia.

Acting Deputy Attorney General and U.S. Attorney for the Eastern District of Virginia Dana J. Boente, Assistant Director in Charge Andrew W. Vale of the FBI’s Washington Field and Special Agent in Charge Patrick J. Lechleitner of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Washington, D.C., made the announcement.

According to the affidavit in support of the criminal complaint, on Nov. 1, 2004, a U.S. citizen, identified as R.H., was kidnapped and held with other hostages for months in horrible conditions in an underground bunker. After a raid in 2005 freed the hostages, Majid Al Mashhadani (“Majid”), who is a full biological brother of Yousif and Hasan, was detained and admitted his complicity in the kidnapping of R.H.   

According to the affidavit in support of the criminal complaint, Yousif was admitted into the U.S. as a refugee in 2008. In May 2013, Yousif resided in Vienna and applied for naturalization as a U.S. citizen. In connection with Yousif’s applications for citizenship, his fingerprints were taken. According to an FBI fingerprint specialist, analysis conducted in November 2013 determined that Yousif’s fingerprints match those found on a document at the underground bunker where forces rescued R.H. and others in Iraq in 2005.

According to the affidavit in support of the criminal complaint, Yousif, Hasan and Ibrahim are lawful permanent residents and have applied to naturalize and become U.S. citizens.  On various applications and forms throughout their respective immigration processes, each has provided an extensive list of family members and information of their respective family trees; however, none listed any reference to Majid.

According to the affidavit in support of the criminal complaint, on March 4, 2016, FBI agents interviewed Yousif, Hasan and Ibrahim. When FBI agents asked Yousif why he failed to include reference to Majid on the family tree form, Yousif said he omitted reference to Majid because, when he was a refugee, he was told by others applying for refugee status that he would not be allowed into the U.S. if any immediate family members had a criminal background. Hasan admitted to FBI agents that Majid was his brother. Hasan and Ibrahim each admitted they discussed not including Majid’s name on their applications for refugee status because their connection to Majid might delay their ability to gain such status.

According to the affidavit in support of the criminal complaint, to justify his application for refugee status, Yousif reported that in 2006, while working as an anti-corruption investigator for the Iraqi Commission on Public Integrity in Iraq, he started receiving threats from a Shiite militia known as the "Al Mahdi Militia," in order to coerce Yousif to drop a particular corruption investigation. Yousif said that in May 2006, Hasan was kidnapped by the Al Mahdi Militia, and was released only after Yousif arranged to drop the investigation in question and helped pay a large ransom. Yousif said that after Hasan was released, he reopened the corruption investigation, only to flee to Jordon in October 2006 after his parents’ house was burned down.

According to the affidavit in support of the criminal complaint, to justify his application for refugee status, Hasan provided sworn testimony that, in 2006, he had been kidnapped and tortured by members of the Al Mahdi Army and held for nearly a month. Hasan said he was released upon the payment of a ransom of $20,000. In an interview by FBI agents in April 2016, Hasan said he was threatened in Iraq on two occasions, but made no mention of being kidnapped, held hostage and tortured for nearly a month. In a subsequent interview in October 2016, FBI agents confronted Hasan about the discrepancy in his stories and Hasan admitted to making false statements and creating his persecution story.

A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court. Each defendant faces a maximum penalty of 10 years in prison if convicted. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes. If convicted of any offense, the sentencing of the defendants will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

The FBI’s Joint Terrorism Task Force, which includes ICE/HSI and U.S. Citizenship and Immigration Services, investigated the case. Assistant U.S. Attorneys Gordon Kromberg and Collen Garcia for the Eastern District of Virginia are prosecuting the case.

2017 03 28 Mashhadani Affidavit

An MS-13 gang member was sentenced Tuesday to more than 17 years in federal prison for his role in a brutal machete attack at an apartment complex in Dallas, Texas.

Arnold Stephen Miralda-Cruz, age 23, pleaded guilty in February to RICO conspiracy, and was sentenced Tuesday to 210 months in federal prison by U.S. District Judge Jane J. Boyle. Miralda-Cruz is the last of seven defendants sentenced in the case.

“With this sentencing, seven MS-13 gang members responsible for multiple brutal attacks in the Dallas area have now been brought to justice,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division.  “The Department of Justice will not waver in its commitment to dismantle and destroy the scourge of MS-13.”

“MS-13 is one of the most vicious gangs operating in America today,” said U.S. Attorney Erin Nealy Cox of the Northern District of Texas.  “When machete-wielding gang members terrorize our streets, they will be met with certain justice.  The Northern District of Texas thanks our law enforcement partners, led by Homeland Security Investigations, who worked tirelessly to take seven brutal men out of our community.”

“This sentencing brings an end to the violence posed by these criminal gang members who have inflicted mayhem in our communities without any remorse or empathy for anyone,” said Deputy Agent in Charge Christopher M. Miller of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Dallas.  “The violent crimes this thug and his cohorts committed for the sake of street credibility and their gang’s reputation has ended with this illegal perpetrator behind bars.”

According to court documents, the defendants – mostly El Salvadorian nationals in the United States illegally – admitted they belonged to MS-13, a notoriously violent transnational street gang with the creed, “kill, rob, rape, control.”  As members, the defendants were required to commit acts of violence to protect the gang’s reputation, and were urged to attack and kill rivals whenever possible. 

To that end, on July 14, 2017, Miralda-Cruz and several other gang members, including codefendants Rolan Ivan Hernandez Fuentes and Jerson Gutierrez-Ramos, ambushed a rival gang member and his roommate inside an apartment complex in Dallas.  Armed with machetes, knives, box cutters, and a metal bar, they struck, stabbed, and cut the victims with intent to kill.  The attack left one man with his chest and neck sliced open, necessitating emergency cardiac surgery, and the other with lacerations to his face, requiring hospitalization.  Following the attack, Hernandez-Fuentes licked the victims’ blood from the machete and stated that he liked the “taste of victory.” 

The following day, on July 15, 2017, Miralda-Cruz, Hernandez-Fuentes, Gutierrez-Ramos, and another gang member attacked and extorted a third man outside his home in Irving.  Armed with a machete from the night before, Hernandez-Fuentes forced the victim to kneel, then kicked him and stuck him with the machete.  The group demanded the victim, a heroin dealer, pay their MS-13 clique an extortion fee, a “tax,” to deal drugs in their territory.

On Aug. 9, 2017, several gang members attacked another rival gang member at an apartment complex in Dallas, intending to kill the victim.  Armed with a sledgehammer, an icepick, a metal bar, a stick, and a knife, they chased the victim, caught him when he tripped, and then attacked him. The victim, who managed to escape, suffered stab wounds to his back and lacerations on several parts of his body, requiring hospitalization.  

On Aug. 19, 2017, several gang members attacked and robbed another rival gang member at an apartment complex in Irving.  Hernandez-Fuentes approached the victim near a Shell gas station and lured him to a nearby apartment complex where his fellow gang members were waiting.  After robbing the victim, they savagely beat, kicked, and hit him with a metal bat until they thought that he was dead.  The victim suffered a fractured skull and bleeding from his brain, requiring hospitalization. 

In late August, several gang members plotted twice to kill a man believed to be a member of a rival gang.  They first lured the victim to a park in Dallas, where they lay in wait with machetes and a shotgun.  The victim ultimately refused to get out of his car, and they aborted the plan to kill him.  A few days later, they renewed the plot.  At an apartment complex in Dallas, they confronted the victim with a shotgun.  Gutierrez-Ramos pointed the shotgun at the victim’s chest to shoot him, but the weapon jammed and did not fire.  The victim managed to drive away.

On Sept. 25, 2017, Hernandez-Fuentes, Gutierrez-Ramos, and other MS-13 gang members went to Running Bear Park in Irving to ambush and kill a victim whom they believed to be a rival gang member.  Armed with machetes, sticks, and a shotgun, they lured the victim to the park under the guise that they were going to buy a tattoo machine from him.  The victim, however, unexpectedly arrived at the park with three friends.  Nonetheless, the victims were lured to the back of the park where the armed gang was hiding in the woods and waiting to spring.  When the victims arrived near the wooded area, the armed gang confronted them and forced them to kneel.

A brutal attack ensued as the assailants hacked at the four victims with their machetes.  One male victim escaped unscathed.  During the attack, Hernandez-Fuentes hit one male victim with the shotgun and told him not to “mess with the mara (gang).”  At some point, Hernandez-Fuentes got distracted, and the victim ran away.  Hernandez-Fuentes fired at the victim but missed, and the victim escaped by swimming across a pond.  Another male victim also escaped after he sustained a serious cut to his arm, which required hospitalization.  The female victim, however, was not so fortunate.  She was savagely maimed, sustaining multiple deep lacerations to her arms, hands, and leg from the machete attack.  The female victim, who was left for dead badly bleeding in the park, sustained permanent and life-threatening injuries, which required extensive medical care and hospitalization.  After the attack, the attackers drove away with their weapons and property stolen from the victims.  The police arrested the attackers in the days following the savage assault.

Other sentences in the case are as follows:

Rolan Ivan Hernandez-Fuentes, aka “Tasmania,” sentenced to life in federal prison for RICO conspiracy  

 

Jerson Gutierrez-Ramos, aka “Sparky,” sentenced to 475 months in federal prison for RICO conspiracy

 

Arnold Steven Miralda-Cruz, aka “Sico,” sentenced to 210 months in federal prison for RICO conspiracy

 

Kevin Cruz, aka “Street Danger,” sentenced to 250 months in federal prison for RICO conspiracy

 

Manuel Amaya-Alvarez, aka “Chocolate,” sentenced to 240 months for two counts of attempted murder in aid of racketeering

 

Jose Armando Saravia-Romero, aka “Pinky,” sentenced to 57 months in federal prison for assault with a dangerous weapon in aid of racketeering

 

Jonathan Alexander Baires, aka “Splinter,” sentenced to 120 months for attempted murder in aid of racketeering

HSI, the Irving Police Department, and the Dallas Police Department conducted the investigation.  Trial Attorney Julie Finocchiaro of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorneys Gary Tromblay and Sid Moody prosecuted the case.

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 former caregivers in Fulton, Missouri, have been sentenced for their roles in the death of a disabled resident at Second Chance Homes, an organization that provided housing and care for developmentally disabled persons through a Missouri Department of Mental Health initiative. 

On Tuesday, September 1, 2020, U.S. District Court Judge Brian C. Wimes sentenced Sherry Paulo to 210 months of imprisonment. Today, Judge Wimes sentenced Anthony Flores to 188 months of imprisonment and Anthony R. K. Flores (“R.K. Flores”) to three years of probation.   

On Nov. 22, 2019, Sherry Paulo, 55, and Anthony Flores, 60, each pleaded guilty in federal court in the Western District of Missouri to one count of willfully failing to provide necessary medical care to victim C.D., resulting in injury to and the death of C.D.  Paulo also pleaded guilty to one count of health care fraud arising from her efforts to hide C.D.’s death. On February 12, 2020, R.K. Flores pleaded guilty to one count of knowingly falsifying a document with the intent to impede, obstruct, and influence a federal investigation related to the death of C.D.

“Our caregivers have a moral as well as legal obligation to treat those they are entrusted to care for with respect and protect them from abuse,” said Assistant Attorney General Eric Dreiband of the Civil Rights Division. “In this free country, it is the solemn duty of government to protect all persons, including those who are most vulnerable, from criminal acts that result in the horror that occurred in this case. No one should be confined and left to die in a small, dark basement and then hidden in a trash can filled with cement. The department of Justice will ensure that those who commit acts like these and violate the civil rights of others see justice under the law.”

“These defendants violated their legal and moral obligation to provide medical care to a person with developmentally disabilities, who was dependent upon them, then attempted to cover up their crime beneath layers of deceit and literal concrete,” said U.S. Attorney Tim Garrison of the Western District of Missouri. “Besides substandard care and dismal living conditions, they refused to seek medical treatment for their victim as his health deteriorated. Today the justice system is holding them accountable for their roles in his tragic death.”

“These sentencings are the culmination of the unwavering commitment to seeking justice for those most vulnerable in our society,” said Timothy R. Langan, Special Agent in Charge of the FBI in Kansas City, Missouri. “The defendants in this case not only failed to provide care for the victim, but took steps to conceal their abuse while continuing to profit from their actions. The FBI remains committed to seeking justice for victims and insuring those responsible are held accountable.”

“These former caregivers committed horrendous crimes against a patient with a developmental disability, while raiding vital Medicaid funds to prop up their alibis,” said Curt L. Muller, Special Agent in Charge of the Office of Inspector General for the U.S. Department of Health and Human Services. “We will continue to work with our law enforcement partners to ensure such criminals are brought to justice.”  

According to court documents filed in connection with the sentencings, Paulo, Flores, and R.K. Flores worked as caregivers at Second Chance Homes. Victim C.D., who was significantly developmentally disabled and entirely dependent upon his caretakers, had been a resident at Second Chance Homes (SCH) since 2008. Paulo was assigned to care for C.D. in the months leading up to C.D.’s death. 

In their guilty pleas, Flores and Paulo admitted that, beginning in 2014, they observed C.D.’s weight decline and his health deteriorate. However, Paulo stopped following C.D.’s prescribed health regimen and stopped taking C.D. to his doctors’ appointments. Paulo and Flores observed C.D. become underweight and pale, struggle to eat, and appear to have less energy.  As C.D.’s health deteriorated, Paulo occasionally took C.D. out of his designated SCH residence and put him in the basement of the home she shared with Flores. The basement was small and dark without access to sunlight or running water. Although Paulo and Flores witnessed C.D.’s health continue to decline while in her basement, they did not take C.D. to get necessary medical treatment because they did not want Paulo to be blamed for C.D.’s malnutrition and ill health.

In approximately September 2016, C.D. suffered an acute medical emergency while in the basement room of Paulo and Flores’s home. Despite observing C.D.’s physical distress and obvious medical need, Paulo and Flores chose not to seek medical care for C.D. C.D. died in their home while Paulo and Flores watched.  Before his death in or about September 2016, C.D. last saw a doctor in December 2015.   

In their plea agreements, Paulo and Flores admitted that, after C.D.’s death, Paulo placed C.D.’s body in a trashcan. Paulo and Flores put the trashcan in a wooden crate that they filled with cement. Paulo, Flores, and R.K. Flores then placed the crate in Paulo’s storage unit.

In the months that followed, Paulo took extensive measures to cover up C.D.’s death. She instructed another SCH resident to lie in C.D.’s bed to convince officials that C.D. was still present at SCH; repeatedly used C.D.’s Electronic Benefits Card; asked an SCH employee to falsely present another SCH resident as C.D. at a doctor’s appointment and get a prescription in C.D.’s name; and falsified numerous official records related to C.D.

In particular, Paulo admitted that after C.D. died, she submitted, or caused to be submitted, false Medicaid claims for services purportedly rendered to C.D. when, as Paulo knew, C.D. was deceased. The amount wrongfully paid by Medicaid, between approximately September 2016 and April 2017, was $106,795. 

It was not until April 2017 that the defendants admitted C.D. was no longer at SCH.  Paulo reported C.D. missing to the Fulton, Missouri Police Department on April 17, 2017. When interviewed by the police, Paulo, Flores, and R.K. Flores falsely stated that they had seen C.D. on April 16, 2017.  In truth, none of the defendants had seen C.D. in months; Paulo and Flores further knew that C.D. had died. Defendants Paulo, Flores, and R.K. Flores did not admit their wrongdoing until a week later, when the Fulton Police Department discovered C.D.’s body.

This case was investigated by the Jefferson City Resident Agency of the FBI Kansas City Division and the St. Louis Field Office of the Department of Health and Human Services Office of the Inspector General Kansas City Region. The case was prosecuted by Assistant U.S. Attorneys Cindi Woolery and Gregg Coonrod of the U.S. Attorney’s Office, and Special Litigation Counsel Julia Gegenheimer and Trial Attorney Janea Lamar of the Department of Justice, Civil Rights Division, Criminal Section. The Fulton, Missouri Police Department and Callaway County Prosecutor Christopher Wilson contributed significantly to the investigation and prosecution of this matter.

Three residents of Lima, Peru, pleaded guilty yesterday to extortion for overseeing a ring of call centers that threatened and extorted Spanish-speaking victims in the United States, the Department of Justice and U.S. Postal Inspection Service announced.

Jesus Gerardo Gutierrez Rojas, 37, Maria de Guadalupe Alexandra Podesta Bengoa, 38, and Virgilio Ignacio Polo Davila, 43, were extradited from Peru in April and pleaded guilty before U.S. District Court Judge Roy K. Altman in Fort Lauderdale yesterday. As part of his guilty plea, Gutierrez admitted that he oversaw a number of affiliated call centers in Peru that falsely told Spanish-speaking victims across the United States that they had incurred debts and would suffer various consequences for failure to pay off the debts that they did not, in fact, owe. As part of their guilty pleas, Podesta and Polo admitted that they managed and supervised two of these affiliated call centers that used extortion to obtain money from U.S. victims. 

“The Department of Justice is committed to identifying and prosecuting criminals who target and extort U.S. consumers,” said Assistant Attorney General Jody Hunt. “Yesterday’s guilty pleas demonstrate that those who threaten U.S. consumers by phone cannot escape justice by placing their calls from abroad. Working with our international partners, we will bring them to justice no matter where they reside. I thank the Republic of Peru for extraditing these defendants to face justice in our courts and the U.S. Postal Insecption Service for its work investigating this case.” 

As part of their guilty pleas, Podesta and Polo admitted that their Peruvian call centers contacted U.S. consumers, many of whom were elderly and vulnerable, using Internet-based calls. Claiming to be attorneys and government representatives, Podesta, Polo and their callers falsely told victims that they failed to pay for or receive a delivery of products and threatened them into paying fraudulent settlements for nonexistent debts. The callers falsely threatened victims with lawsuits, negative marks on their credit reports, imprisonment, or immigration consequences if they did not immediately pay for the purportedly delivered products and “settlement fees.” Many victims made payments based on these baseless extortionate threats.  

Gutierrez was the general manager of a larger company where he worked in partnership with Podesta, Polo, and others to facilitate their extortion scheme. The defendants’ associates in Miami collected the payments and sometimes shipped packages to victims in the U.S. 

“If an individual who claims to be an attorney or government representative calls and instructs you to pay money to: receive products you did not buy; avoid a lawsuit; avoid imprisonment; or avoid a change in immigration status, hang up and immediately report that threat to www.ftccomplaintassistant.gov,” said U.S. Attorney for the Southern District of Florida Ariana Fajardo Orshan. “I thank the Republic of Peru for extraditing the defendants in this case and the U.S. Postal Inspection Service for their unwavering commitment to investigate and pursue those who threaten U.S. consumers.”

“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.” 

With yesterday’s three guilty pleas, all five defendants who have been charged in connection with this large-scale extortion scheme have now pleaded guilty.   

Trial Attorney Phil Toomajian of the Department of Justice’s Consumer Protection Branch is prosecuting the case. 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 former National Football League (NFL) player was sentenced today to five years in prison for orchestrating a nationwide scheme to defraud a health care benefit program for retired NFL players.  

According to court documents, Robert McCune, 42, of Riverdale, Georgia, defrauded the Gene Upshaw NFL Player Health Reimbursement Account Plan (the Plan). The Plan was established pursuant to the NFL’s 2006 collective bargaining agreement. It provided former players, their spouses and their dependents, up to a maximum of $350,000 per player tax-free reimbursement of out-of-pocket medical care expenses that were not covered by insurance.

Court documents show that McCune submitted false and fraudulent claims to the Plan on his own behalf and on behalf of dozens of other former NFL players. Between June 5, 2017, and April 12, 2018, he submitted 68 claims for 51 other players. The claims typically sought reimbursement of $40,000 or more for expensive medical equipment such as hyperbaric oxygen chambers, ultrasound machines and electromagnetic therapy devices. None of the medical equipment described in the claims was ever purchased or received. In total, McCune and his co-conspirators submitted approximately $2.9 million in fraudulent claims to the Plan.  

Court documents further show that McCune obtained identifying information for other participants in the Plan, including the player’s name, insurance identification number, social security number, mailing address and/or date of birth. In exchange for submitting the false and fraudulent claims, McCune demanded kickbacks and bribes in the thousands of dollars for each claim submitted. 

McCune pleaded guilty to one count of conspiracy to commit health care fraud and wire fraud, 10 counts of wire fraud, 12 counts of health care fraud and three counts of aggravated identity theft.

Thirteen other defendants have been sentenced for their participation in the nationwide scheme:

John Eubanks, 38, of Cleveland, Mississippi, was sentenced to 18 months in prison;

Tamarick Vanover, 47, of Tallahassee, Florida, and Ceandris Brown, 39, of Iowa Colony, Texas, were each sentenced to a year and a day in prison;

Correll Buckhalter, 43, of Colleyville, Texas, was sentenced to 10 months in prison, followed by 300 days’ home detention;

Clinton Portis, 40, of Fort Mill, South Carolina, was sentenced to six months in prison, followed by 180 days’ home detention;

Etric Pruitt, 40, of Theodore, Alabama, was sentenced to three months in prison, followed by 180 days’ home detention;

James Butler, 39, of Atlanta, Georgia, was sentenced to two months in prison, followed by 180 days’ home detention;

Carlos Rogers, 40, of Alpharetta, Georgia, was sentenced to 180 days’ home detention and 400 hours of community service;

Anthony Montgomery, 37, of Cleveland, Ohio; Antwan Odom, 40, of Irvington, Alabama; Darrell Reid, 39, of Farmingdale, New Jersey; and Fredrick Bennett, 38, of Port Wentworth, Georgia, were each sentenced to 180 days’ home detention and 240 hours of community service; and

Joe Horn, 50, of Columbia, South Carolina, was sentenced to 200 hours of community service.

Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division; U.S. Attorney Carlton S. Shier IV for the Eastern District of Kentucky; Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division; and Special Agent in Charge George L. Piro of the FBI’s Miami Field Office made the announcement.

This case was investigated by the FBI and included efforts by various FBI Field Offices and Resident Agencies, including Augusta, Georgia; Birmingham and Mobile, Alabama; Cleveland, Ohio; Chicago, Illinois; Columbia, South Carolina; Dallas and Houston, Texas; Denver, Colorado; Jackson, Mississippi; Lexington, Kentucky; New Orleans, Louisiana; Miami, Jacksonville, and Tampa, Florida; Newark, New Jersey; Los Angeles, San Diego, Sacramento, and Newport Beach, California; Phoenix, Arizona; Salt Lake City, Utah; and Washington, D.C. 

Assistant Chief John (Fritz) Scanlon and Trial Attorney Alexander J. Kramer of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Andrew E. Smith of the Eastern District of Kentucky prosecuted the case.

On Wednesday, November 14, 2018, Hyundai Construction Equipment Americas Inc. (Hyundai), then a subsidiary of Hyundai Heavy Industries Co. Ltd, pleaded guilty and was sentenced in federal court in Atlanta, Georgia, to pay a $1.95 million dollar criminal fine for conspiring to defraud the United States government and to violate the Clean Air Act, the Justice Department announced today. The charges relate to construction equipment Hyundai imported for sale into the United States from the Republic of Korea that contained engines that did not comply with air emissions standards under the Clean Air Act.  

Hyundai imports construction and other equipment into the United States, which it sells to its dealer network. During a phase-in period for new air emissions standards, Hyundai opted to participate in a transition program that allowed it to import limited numbers of engines not in compliance with the new standards. As part of the program, Hyundai had to report the number of imported noncompliant engines to the U.S. Environmental Protection Agency. Hyundai’s imports of noncompliant engines substantially exceeded its allowance. A consultant retained by Hyundai to provide advice about complying with the requirements warned the company that it was out of compliance and that it risked a substantial penalty. The consultant advised Hyundai to stop importing and notify the EPA. Nonetheless, Hyundai continued to import the noncompliant engines, and its employees conspired to lie to the EPA and to impede EPA’s ability to enforce emissions standards. Ultimately, Hyundai submitted a report that intentionally understated the number of noncompliant engines it had imported from Korea.

“This case underscores the necessity for foreign companies that opt to do business in the United States to comply with our Nation’s laws developed to protect human health and the environment,” said Assistant Attorney General Jeffrey Bossert Clark for the Environment and Natural Resources Division. “A self-reporting regime, such as the one here, depends upon the honesty and integrity of the regulated parties. We hope that this case will chart a new course for Hyundai, and serve as a lesson for all companies that interact with our regulatory agencies.”

“Hyundai Construction Equipment Americas tried to increase its profits by illegally importing diesel engines that did not comply with U.S. Clean Air Act regulations,” said EPA Office of Enforcement and Compliance Assurance Assistant Administrator Susan Bodine. “This case shows that EPA and our law enforcement partners will not allow importers to gain a competitive advantage or risk the health and safety of our communities by evading U.S. environmental laws.”

Assistant Attorney General Clark thanked the U.S. Environmental Protection Agency’s Criminal Investigation Division for its work in this investigation. The case is being prosecuted by Senior Counsel Krishna Dighe of the Environmental Crimes Section of the Justice Department’s Environment and Natural Resources Division and Assistant U.S. Attorney Christopher J. Huber, Deputy Chief of the Complex Fraud Section, of the United States Attorney’s Office for the Northern District of Georgia.

Christopher A. Parris, 41, formerly of Rochester, New York, and currently of Lawrenceville, Georgia, pleaded guilty today to conspiracy to commit mail fraud related to a Ponzi scheme, as well as to wire fraud involving the fraudulent sale of purported N95 masks during the pandemic.

“The fraud schemes at issue here, including the purported sales of personal protective equipment that the defendant could not actually provide, are particularly egregious,” said Acting Assistant Attorney General Brian M. Boynton of the Justice Department’s Civil Division. “The Department of Justice is committed to prosecuting anyone who would try to profit through this kind of conduct.”

“Defendant Parris, together with his co-defendant Perry Santillo, bilked millions of dollars from unsuspecting investors in their Ponzi scheme,” said U.S. Attorney James P. Kennedy Jr. for the Western District of New York. “Their web of deceit spread far and wide as they purchased established investment advisor or broker businesses from across the country in order to gain access to new victims. This office remains committed to working with all of our partners to identify and bring to justice those who seek to enrich themselves by defrauding others.”

“Preying on companies and the Department of Veterans Affairs as they sought to protect their employees and patients from this pandemic is beyond the pale,” said Acting U.S. Attorney Channing D. Phillips for the District of Columbia. “The department and our law enforcement partners will catch and stop those who take advantage of public health emergencies to perpetrate such frauds.”

“The U.S. Postal Inspection Service aggressively conducts investigations of those who fraudulently use the U.S. Mail to facilitate complex fraud schemes,” said Acting Inspector in Charge Joshua W. McCallister of the U.S. Postal Inspection Service, Boston Division. “Today’s plea demonstrates our ongoing work with law enforcement partners to stop those who are engaged in these types of fraudulent activities.”

“Financial frauds are grounded in greed, so it's no surprise that when multiple people are behind a single scheme the greed runs deeper and the damage hits harder,” said Special Agent-in-Charge Stephen Belongia of the Buffalo Office of the FBI. “The only guarantee in a Ponzi scheme is that it will fall short, and the founders who contrived them will too.”  

“The urgent need to protect veterans and VA health care workers during this fast-moving pandemic required the Department of Veterans Affairs to rapidly purchase personal protective equipment” said Inspector General Michael J. Missal of the Department of Veterans Affairs (VA). “Working with our law enforcement partners, the VA Office of Inspector General (OIG) stopped a criminal who was attempting to profit from this horrible crisis and prevented the government and taxpayers from being defrauded of hundreds of millions of dollars. The VA OIG will continue to work zealously to ensure schemes like this are uncovered, investigated and prosecuted to the fullest extent of the law.”

“Since the onset of the pandemic, HSI quickly adapted to investigate the increasing and evolving threat posed by COVID-19-related fraud and criminal activity,” said Acting Special Agent in Charge Jack P. Staton of Homeland Security Investigations (HSI), New Orleans Field Office. “This guilty plea is a testament to the commitment we have, along with our law enforcement partners, to protecting the American public in times of crisis.”

The Ponzi Scheme

Between January 2011 and June 2018, Parris conspired with co-defendant Perry Santillo and others to obtain money through an investment fraud, commonly known as a Ponzi scheme. Specifically, in 2007, Parris and Santillo, as equal partners, formed a business known as Lucian Development in Rochester. Prior to approximately July 2007, Lucian Development raised millions of dollars from investors in Rochester, and elsewhere, by soliciting investments for City Capital Corporation, a business operated by Ephren Taylor. In July 2007, Parris and Santillo were advised by Ephren Taylor that their investors’ money had been lost. In response, in August 2007, Parris and Santillo agreed to acquire the assets and debts of City Capital Corporation. The acquisition proved financially ruinous, with the amount of the acquired debt far exceeding the value of the acquired assets. Taylor was later prosecuted and convicted of operating a Ponzi scheme.

Subsequently, Parris and Santillo chose not to disclose the truth to investors that their money, entrusted to Lucian Development for investment in City Capital Corporation, was gone. Instead, Parris and Santillo continued to solicit ever-increasing amounts of money from new investors in an unsuccessful attempt to recoup the losses. In order to find potential investors to solicit and defraud, Parris and Santillo purchased businesses from established investment advisors or brokers who were looking to exit their businesses. Between approximately 2008 and September 2017, Parris and Santillo, using money obtained from prior investors, purchased the businesses of at least 15 investment advisors or brokers, located in Tennessee, Ohio, Minnesota, Nevada, California (five businesses), Florida, South Carolina (two businesses), Texas, Pennsylvania, Maryland and Indiana.

The investment offerings pitched by Parris and Santillo consisted principally of unsecured promissory notes and preferred stock issued by various entities controlled by Parris and Santillo. Potential investors were offered an apparent array of investment options to create the illusion of a diversified investment portfolio. Those investment options included products issued by purported issuers such as First Nationle Solutions (FNS), Percipience Global Corporation, United RL Capital Services, Boyles America, Middlebury Development Corporation and NexMedical Solutions, among others. None of these issuers had substantial bona fide business operations or used investor money in the manner and for the purposes represented to investors. To the extent that an issuer may have had some minor legitimate business activities, it was not profitable, and insufficient revenues were generated to pay investors any returns (let alone return the principal amounts of their investments).

Over the years, to keep the Ponzi scheme from being detected, a substantial portion of incoming new investor monies were depleted by making promised interest and other payments to earlier investors. Most of the rest of incoming investor money was used by Parris, Santillo and other co-conspirators to finance lavish lifestyles of the conspirators, their families and associates; to expand the scheme by purchasing investment advisor/brokerage businesses to obtain access to fresh investors; and to pay operating expenses – salaries for a sales force and administrative staff, office rents and related expenses, housing for employees, and interest on loans – all of which were used to keep the scheme going and maintain a façade of legitimate business operations.

Very little investor money was deployed in productive investments, and when so deployed, the investments yielded meager income and were not profitable, or failed altogether. The Ponzi scheme was headquartered and based out of locations in Rochester, with a number of satellite offices around the country. Administrative and banking functions were largely performed out of Rochester. The conspiracy employed a variety of salespeople, including Parris and Santillo, who traveled around the country to meet with and solicit new investors.

Between January 2012 and June 19, 2018, Parris and Santillo obtained at least $115.5 million from approximately 1,000 investors. By the time the scheme collapsed in late-2017/early 2018, Parris and Santillo, doing business through an array of corporate entities, had returned approximately $44.8 million to investors as part of their scheme, but continued to owe investors approximately $70.7 million in principal.

Among the Rochester area victims of the Ponzi scheme were the following:

A resident of Webster, New York, who held a total asset value of $94,341.89 with a fictitious company known as First Nationle Solutions (FNS), which, as of Dec. 31, 2017, was in fact worthless or close to worthless; and

A resident of Victor, New York, and his wife, who invested approximately $221,758.67 with FNS and Middlebury Development. The couple received three payments of $2,500 but lost approximately $214,258.67.

Parris and Santillo controlled hundreds of different business bank accounts opened under numerous different business names at various financial institutions, including but not limited to Bank of America, Citizens Bank, Genesee Regional Bank and ESL Federal Credit Union. Santillo and Parris directed and authorized the transactions that occurred in the accounts, including deposits, withdrawals, check writing and funds transfers. The various bank accounts were used to transfer money from one account to another. Incoming investor money was routinely transferred through several accounts before the funds were finally spent on whatever purpose Parris and/or Santillo authorized. By moving investors’ funds through various accounts in various entity names, Parris and Santillo were able to conceal and obscure the fact that new investor money was being used to repay earlier investors, finance the operations of the Ponzi scheme, and fund their lifestyles.

Santillo was previously convicted and is awaiting sentencing.

The COVID-19 Fraud Scheme

Parris also pleaded guilty in a case originally charged in the U.S. District Court for the District of Columbia to defrauding the U.S. Department of Veterans’ Affairs (VA), as well as at least eight other victim companies, in a scheme involving personal protection equipment (PPE). Between February and April 10, 2020, the defendant, as the owner and operator of Encore Health Group, a company based in Atlanta, that purported to broker medical equipment, offered to sell scarce PPE, including 3M-brand N95 respirator masks, to various medical supply companies and governmental entities. In these proposals, Parris knowingly misrepresented his access to, and ability to obtain and deliver on time, vast quantities of 3M N95 masks and other PPE. The defendant falsely represented that he was able to obtain 3M N95 masks directly from authorized sources in the United States, when in fact, he had no ready access to 3M factories or 3M N95 masks or other PPE, no proven source of supply, and no track record of procuring and delivering such items.

For example, in March 2021, Parris offered to sell the VA 125 million 3M N95 masks at a cost of $6.45 per mask. In this process, the defendant attempted to obtain an upfront payment of $3.075 million from the VA, even though he knew at the time that he had no access to the promised masks or present ability to deliver the promised masks.

As part of his guilty plea, Parris admitted that, in addition to attempting to defraud the VA, he actually obtained upfront payments totaling approximately $7.4 million from at least eight clients for 3M N95 masks that he knew he had no access to or present ability to obtain or deliver on time. Parris also admitted that the proceeds of the scheme totaled approximately $6,218,525. In total, Parris sought orders in excess of $65 million for the non-existent PPE equipment.

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Parris is scheduled to be sentenced on Dec. 8 before U.S. District Judge Frank P. Geraci Jr. He faces a maximum penalty of 20 years in prison for conspiracy regarding the Ponzi scheme, 30 years in prison for wire fraud in connection to a presidentially-declared emergency, and 10 years in prison for committing the offense originally charged in the District of Columbia while on release from the Western District of New York.

The plea is the result of an investigation by the U.S. Postal Inspection Service, under the direction of Acting Inspector-in-Charge Joshua W. McCallister of the Boston Division; the FBI, Buffalo Division, under the direction of Special Agent-in-Charge Stephen Belongia, the IRS, Criminal Investigation Division, under the direction of Thomas Fattorusso, Acting Special Agent-in-Charge; the U.S. Department of Labor, Office of Inspector General, Office of Investigations – Labor Racketeering and Fraud, under the direction of Nikitas Splagounias, Acting Special Agent-in-Charge, New York Region, the New York State Department of Financial Services, under the direction of Superintendent Linda A. Lacewell; the Securities and Exchange Commission; the VA OIG, under the direction of Michael J. Missal, Inspector General, and HSI, under the direction of Acting Special Agent in Charge Jack P. Staton of the New Orleans Field Office.

Assistant U.S. Attorney John J. Field is handling the prosecution in the Western District of New York, and Trial Attorney Patrick Runkle of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Peter Lallas are handling the prosecution in the District of Columbia.

On May 17, 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 fraud related to COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

The Justice Department announced that three former White River Juvenile Detention Center officers: Will Ray, 26, Thomas Farris, 47, and Jason Benton, 42, have been indicted by a federal grand jury for their roles in a conspiracy to assault juvenile inmates. 

The seven-count indictment charges that Ray, Farris, and Benton conspired to assault juvenile detainees, assaulted the detainees, and then tried to cover up their misconduct.  The indictment charges that, in some instances, the defendants used pepper spray on juveniles and then, rather than decontaminating them, shut them in their cells to “let them cook.”

In addition to the conspiracy, Ray is charged in Count Two with participating in the Nov. 6, 2013, assault of a fourteen-year-old boy who had been lying asleep on his bunk.  According to the indictment, Ray grabbed the boy from his bunk and held him so that another officer could spray the boy in the face with pepper spray.

Farris, in addition to the conspiracy, is charged in Count Three with assaulting a seventeen-year-old juvenile on Nov. 21, 2013, by pepper spraying him in the face.

Counts Four through Seven of the Indictment charged Benton with two assaults and with falsifying incident reports related to those assaults.  According to the Indictment, on June 6, 2012, Benton assaulted a sixteen-year-old juvenile by grabbing, shoving, and choking him.  The indictment also charges that, on May 19, 2013, Benton deployed pepper spray in the face of a fifteen-year-old juvenile.  According to the indictment, none of the juveniles posed a physical threat to anyone nor physically resisted in any way at the time they were assaulted by the officers.   

The charges contained in this indictment are simply accusations, and not evidence of guilt.

This case is being investigated by the FBI’s Little Rock Division and is being prosecuted by Assistant U.S. Attorney Julie Peters of the Eastern District of Arkansas and Trial Attorney Samantha Trepel of the Civil Rights Division.

The Justice Department today announced a coordinated health care fraud enforcement action across seven federal districts in the Northeastern United States, involving more than $800 million in loss and the distribution of over 3.25 million pills of opioids in “pill mill” clinics.  The takedown includes new charges against 48 defendants for their roles in submitting over $160 million in fraudulent claims, including charges against 15 doctors or medical professionals, and 24 who were charged for their roles in diverting opioids.   

In addition to the new charges, today’s enforcement action also includes the guilty pleas of three corporate executives, including the Vice President of Marketing of numerous telemedicine companies and two owners of approximately 25 durable medical equipment companies, for their roles in causing the submission of over $600 million in fraudulent claims to Medicare.  This is one of the largest health care fraud schemes ever investigated by the FBI and the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG) and prosecuted by the Department of Justice, which previously resulted in charges against 21 other defendants.  The enforcement action also includes three additional recent guilty pleas by other defendants.  In addition, the Centers for Medicare & Medicaid Services, Center for Program Integrity (CMS/CPI) announced today that all appropriate administrative actions would be taken based on these charges.  As part of the announcement in April, CMS/CPI announced that it took administrative action against 130 DME companies that submitted over $1.7 billion in claims to the Medicare program. 

Today’s enforcement actions were led and coordinated by the Health Care Fraud Unit of the Criminal Division’s Fraud Section in conjunction with its Medicare Fraud Strike Force (MFSF), as well as the U.S. Attorney’s Offices for the District of New Jersey, Eastern District of Pennsylvania, Western District of Pennsylvania, Eastern District of New York, Western District of New York, District of Connecticut and District of Columbia.  The MFSF is a partnership among the Criminal Division, U.S. Attorney’s Offices, the FBI and HHS-OIG.  In addition, IRS-Criminal Investigations (IRS-CI), Department of Defense-Defense Criminal Investigative (DoD-DCIS), Food and Drug Administration-Office of Inspector General (FDA-OIG), U.S. Postal Service-Office of Inspector General (USPS-OIG), the Medicaid Fraud Control Unit and other federal and state law enforcement agencies participated in the operation.

The charges and guilty pleas announced today continue to target corporate health care fraud involving fraudulent telemedicine companies and the solicitation of illegal kickbacks and bribes from health care suppliers in exchange for the referral of Medicare beneficiaries for medically unnecessary durable medical equipment and other testing.  The charges also involve individuals contributing to the opioid epidemic, including medical professionals involved in the unlawful distribution of opioids and other prescription narcotics, a particular focus for the Department.   According to the Centers for Disease Control, approximately 115 Americans die every day of an opioid-related overdose.

Today’s arrests and guilty pleas come one-year after the Department of Justice announced the formation of the Newark/Philadelphia Regional Medicare Fraud Strike Force, a joint law enforcement effort that brings together the resources and expertise of the Health Care Fraud Unit in the Criminal Division’s Fraud Section, the U.S. Attorney’s Offices for the District of New Jersey and the Eastern District of Pennsylvania, as well as law enforcement partners.  The Strike Force focuses its efforts on aggressively investigating and prosecuting complex cases involving patient harm, large financial loss to the public fisc, and the illegal prescribing and distribution of opioids and other dangerous narcotics.

“Physicians and other medical professionals who fraudulently bill our federal health care programs are stealing from taxpayers and robbing vulnerable patients of necessary medical care.  The medical professionals and others engaging in criminal behavior by peddling opioids for profit continue to fuel our nation’s drug crisis,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “The Department of Justice will continue to use every tool at our disposal, including data analytics and traditional law enforcement techniques, to investigate, prosecute, and punish this reprehensible behavior and protect federal programs from abuse.”

“As today’s takedown demonstrates, this Strike Force has produced precisely what we hoped it would – and by that I mean tangible results,” said U.S. Attorney William M. McSwain of the Eastern District of Pennsylvania.  “We have brought together a wealth of resources, knowledge, and subject-matter expertise – that of health care fraud prosecutors, civil enforcement assistant U.S. attorneys, data analysts, and law enforcement agencies – all working to stop fraud, waste, and abuse within our federal health care programs and to stem the tide of illegal opioid distribution.  These are top priorities of the Department of Justice and my Office, and our focus in this area continues to pay off.”

“Under the law, healthcare professionals are obligated to exercise appropriate care and judgment in the manner in which opiates are prescribed and distributed in order to ensure that such substances are, in fact, ‘controlled,’” said U.S. Attorney James P. Kennedy Jr. of the Western District of New York. “When such professionals abandon that obligation and instead engage in acts of fraud and deceit, they will be prosecuted.”

“As alleged, defendants charged in the Eastern District of New York used fraud and deceit to steal Medicaid and Medicare funds meant to protect our elderly and most vulnerable residents,” stated U.S. Attorney Donoghue of the Eastern District of New York.  “As this initiative demonstrates, we will continue to bring to justice those that defraud our nation’s health care programs.” 

“We continue to work closely with our law enforcement partners to identify, investigate and eliminate fraud, waste and abuse in the nation’s federal healthcare programs,” said Deputy Administrator and CPI Center Director Alec Alexander.  “In this case, CMS will take swift administrative action against providers responsible for fraudulent billings to federal healthcare programs.  CMS is committed to protecting vulnerable beneficiaries from exploitation and safeguarding taxpayer dollars.”

“The FBI does not care about your status in life, your professional standing, your level of income, or your personal connections when you break the law," said Assistant Special Agent in Charge Wayne Jacobs of the FBI’s Newark Field Office.  “If you try to scam the system, if you exploit your professional license just to pad your pockets, if you mortgage your morals just to inflate your bank account, you will only find yourself in deeper debt.  We are committed to protecting the public; we are intent on rooting out fraud and corruption; we are duty-bound to track down and arrest anyone who is breaking our federal laws.  Don’t be next.”

“Healthcare fraud is not a victimless crime—with unscrupulous providers preying on Medicare beneficiaries and taxpayers alike.  Especially insidious is the fraud committed by healthcare professionals who are trusted to provide needed, quality services to patients,” said Special Agent in Charge Scott J. Lampert of HHS-OIG.  “With our law enforcement partners, our agency will continue to thoroughly investigate medical providers and others involved in healthcare fraud.”

“The physicians who chose to violate their oaths to “Do no harm” are nothing more than drug dealers wearing a white lab coat,” said Special Agent in Charge Susan A. Gibson of the Drug Enforcement Administration’s New Jersey Field Division.  “They have turned their backs on those most vulnerable.  We will continue to vigorously pursue these doctors who violate the faith and trust of those who need help.”

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Among those charged in the District of New Jersey are the following:

Elliot Loewenstern, 56, of Boca Raton, Florida, the vice president of marketing of purported call centers and telemedicine companies, pleaded guilty on Sept. 24, 2019, for his role in one of the largest health care fraud schemes ever investigated by the FBI and HHS-OIG and prosecuted by the Department of Justice, which resulted in charges in April 2019 against 24 defendants.   Loewenstern pled guilty to one count of conspiracy to defraud the United States and pay and receive health care kickbacks, and one count of solicitation of health care kickbacks.  Loewenstern was the Vice President of Marketing of PCS CC LLC and a marketer for Video Doctor USA (Video Doctor) and Telemed Health Group LLC (AffordADoc) (collectively, the Video Doctor Network).  In connection with his plea agreement, Loewenstern admitted causing the submission of over $424 million in fraudulent claims that resulted from the solicitation of illegal kickbacks and bribes in exchange for the referral of brace orders to brace providers.  In connection with his guilty plea, Loewenstern admitted that he and others agreed to solicit and receive illegal kickbacks and bribes from patient recruiters, brace suppliers and others in exchange for the arranging for doctors to order medically unnecessary orthotic braces for beneficiaries of Medicare and other insurance carriers.  The beneficiaries were contacted through an international telemarketing network that lured hundreds of thousands of elderly and/or disabled patients into a criminal scheme that crossed borders, involving call centers in the Philippines and throughout Latin America, Loewenstern stated.  Loewenstern admitted that many of these orders were written after only a short telephone call between the health care provider and the beneficiary, with whom the health care provider had no prior doctor-patient relationship.  In addition, Loewenstern admitted that he was aware that the owners and other executives of the Video Doctor Network schemed to defraud investors and others by making false and fraudulent representations that the Video Doctor Network was a legitimate telemedicine enterprise that made revenue of “$10 million per year” and “20 percent profit” from payments by beneficiaries who enrolled in a membership program and paid for the telemedicine consultations.  These statements were false because revenue was obtained by the Video Doctor Network through the receipt of illegal kickbacks and bribes, Loewenstern admitted.  In connection with his plea agreement, Loewenstern agreed to pay $200 million in restitution to the United States, as well as forfeit assets and property traceable to proceeds of the conspiracy to defraud the United States.  Loewenstern’s sentencing is set for Jan. 9, 2020, before U.S. District Judge Madeline Cox Arleo of the District of New Jersey, who accepted his plea.  Loewenstern was charged along with Creaghan Harry, 51, of Highland Beach, Florida, and Lester Stockett, 52, of Medellin, Colombia, in an indictment charging one count of conspiracy to defraud the United States and pay and receive health care kickbacks and four counts of health care kickbacks.  Stockett and Harry were separately charged with one count of conspiracy to commit money laundering.  Stockett, the Chief Executive Officer, previously entered a plea of guilty to one count of conspiracy to defraud the United States and one count of money laundering.  The case against Harry is pending.  Trial has not been set.  The case was investigated by FBI, HHS-OIG, and IRS-CI.  The case is being prosecuted by Acting Assistant Chief Jacob Foster and Trial Attorney Darren Halverson of the Criminal Division’s Fraud Section.

Joseph DeCoroso, M.D., 62, of Toms River, New Jersey, pleaded guilty for his role in a $13 million conspiracy to commit health care fraud and separate charges of health care fraud for writing medically unnecessary orders for durable medical equipment (DME), in many instances without ever speaking to the patients, while working for two telemedicine companies.  Sentencing is set for Jan. 8, 2020.  The case was investigated by FBI Newark and HHS-OIG.  The case is being prosecuted by Acting Assistant Chief Jacob Foster and Trial Attorney Darren Halverson.

Nelly Petrosyan, 56, of New York, New York, the owner and operator of orthotic brace suppliers in New York, New York, was indicted  on one count of conspiracy to defraud the United States and to pay and receive health care kickbacks and three counts of payment of health care kickbacks.  The charges result from a $5.6 million conspiracy in which Petrosyan offered and paid kickbacks and bribes to several purported telemedicine companies in exchange for completed doctors’ orders of medically unnecessary orthotic braces for Medicare beneficiaries.  Petrosyan and her coconspirators concealed the fraud by entering into sham contracts and producing false invoices characterizing the kickbacks and bribes as payments for “marketing.”  The investigation was conducted by FBI Newark and HHS-OIG.  The case is being prosecuted by Trial Attorney Darren Halverson.

Alice Chu, M.D., 62, of Fort Lee, New Jersey, was indicted on one count of conspiracy to commit health care fraud and four counts of health care fraud.  The charges stem from Chu’s alleged submission of false and fraudulent claims to Medicare and private insurance companies for services that were medically unnecessary, never provided, not provided as represented or not eligible for reimbursement.  Chu was allegedly induced by a financial incentive to order expensive and medically unnecessary lab tests that were paid for by Medicare.  The investigation was conducted by FBI Newark, HHS-OIG, DOD-DCIS and FDA-OIC.  The case is being prosecuted by Trial Attorney Rebecca Yuan of the Fraud Section.

Aaron Williamsky 59, of Marlboro, New Jersey, and Nadia Levit, 40, of Englishtown, New Jersey, owners of approximately 25 durable medical equipment companies, pleaded guilty on Sept. 18 and Sept. 25, respectively, for their participation in a health care fraud scheme related to their payment of kickbacks in exchange for doctors’ orders for medically unnecessary orthotic braces.  Levit’s conduct admittedly caused losses in excess of $120 million and Williamsky’s conduct admittedly caused losses in excess of $170 million.  Williamsky also pleaded guilty to a money laundering conspiracy related to his attempt to conceal at least $1.65 million of the proceeds of the fraud.  The case was investigated by FBI, HHS-OIG, and IRS-CI.  The case is being prosecuted by Assistant U.S. Attorneys Sean Sherman and Stephen Ferketic of the District of New Jersey.

Bernard Ogon, M.D., 46, of Burlington, New Jersey, pleaded guilty on Sept. 25 to one count of health care fraud conspiracy for his participation in a vast compounded medication telemedicine conspiracy.  As part of the conspiracy, Ogon admittedly signed prescriptions for compounded medications (that is, medications with ingredients of a drug tailored to the needs of a particular patient) without having established a doctor-patient relationship, spoken to the patient or conducting any medical evaluation.  Ogon often signed preprinted prescription forms—with patient information and medication already filled out—where all that was required was his signature.  Then, instead of providing the prescription to the patient, Ogon would return the prescriptions to specific compounding pharmacies involved in the conspiracy.  Ogon was paid $20 to $30 for each prescription he signed, and his participation in the conspiracy caused losses to health care benefit programs of over $24 million, including losses to government health care programs of over $7 million.  The case was investigated by FBI Newark and HHS-OIG.  The case is being prosecuted by Assistant U.S. Attorney Jason Gould of the District of New Jersey.

Joseph Santiamo, 64, of Staten Island, New York, a physician specializing in internal medicine and geriatrics was charged for allegedly conspiring to distribute and dispense controlled substances, including oxycodone, in exchange for sexual favors, and outside the usual course of professional practice and not for a legitimate medical purpose.  The case is being prosecuted by Assistant U.S. Attorney Brian Urbano of the District of New Jersey.

Yana Shtindler, 44, of Glen Head, New York; Samuel “Sam” Khaimov, 47, of Glen Head, New York; Alex Fleyshmakher, 33, of Morganville, New Jersey; and Ruben Sevumyants 36, of Marlboro, New Jersey were indicted in connection with a scheme at Prime Aid Pharmacies (located in Union City, New Jersey and Bronx, New York) that included: (a) paying illegal bribes and kickbacks to doctors and doctors’ employees in exchange for prescription referrals to Prime Aid; (b) billing health insurance providers for medications that were never actually provided to patients; and (c) opening new pharmacies and concealing the true ownership of those pharmacies to obtain lucrative contracts they otherwise would not have obtained.  The scheme of billing for medications that were never dispensed to patients was so egregious that Prime Aid received reimbursement payments of over $65 million for prescription medications that it never even ordered from distributors or had in stock.  In total, Prime Aid’s multiple schemes defrauded Medicare, Medicaid, and private insurers out of at least $99 million.  The case is being prosecuted by Assistant U.S. Attorney Joshua Haber of the District of New Jersey.

Eduard “Eddy” Shtindler, 36, the owner and operator of Empire Pharmacy in West New York, New Jersey, was charged by criminal complaint for paying bribes to a psychiatrist in Hudson County, New Jersey, to induce the doctor to send prescriptions to Empire.  On occasion, Shtindler secreted cash bribes in pill bottles that were delivered to the doctor.  In exchange for these bribes, the doctor steered patients to Empire pharmacy. In addition, starting in 2015, Empire – at Shtindler’s direction – perpetrated a fraudulent scheme to induce doctors to send expensive specialty medication prescriptions to Empire. Specialty medications often required “prior authorization” before being approved for reimbursement by Medicare, Medicaid, and some private insurance providers.  To receive prior authorization approval more quickly and successfully than any other pharmacies, Empire employees, including two pharmacists, repeatedly falsified prior authorization forms for medications for various conditions, including psoriasis and Hepatitis C. In total, Empire defrauded Medicare and Medicaid out of at least $2 million.  The case is being prosecuted by Assistant U.S. Attorney Joshua Haber of the District of New Jersey.

Matthew S. Ellis, 53, of Gainesville, Florida; Edward B. Kostishion, 59, Lakeland, Florida; Kyle D. Mclean, 36, of Arlington Heights, Illinois; Kacey C. Plaisance, 38, of Altamonte Springs, Florida; Jeremy Richey, 39, of Mars, Pennsylvania, and Jeffrey Tamulski, 46, of Tampa, Florida were indicted in connection with a genetic testing health care fraud scheme.  Kostishion, Plaisance, and Richey operated Ark Laboratory Network LLC (Ark), a company that purported to operate a network of laboratories that facilitated genetic testing.  Ark partnered with Privy Health Inc., a company that McLean operated, and another company to acquire DNA samples and Medicare information from hundreds of patients through various methods, including offering $75 gift cards to patients, all without the involvement of a treating health care professional.  Ellis, a physician based in Gainesville, served as the ordering physician who authorized genetic testing for hundreds of patients across the country that he never saw, examined, or treated.  These included patients from New Jersey and various other states where Ellis was not licensed to practice medicine. Through this process, Ellis, Kostishion, Plaisance, and McLean submitted and caused to be submitted fraudulent orders for genetic tests to numerous clinical laboratories.  These orders falsely certified that Ellis was the patients’ treating physician and, in many cases, contained false information indicating that a patient had a personal or family history of cancer, when, in fact, the patient had no cancer history whatsoever.  In 2018 alone, Medicare paid clinical laboratories at least approximately $4.6 million for genetic tests that Ellis ordered in this manner.  In addition, Kostishion, Plaisance, Richey and Tamulski entered into kickback agreements with certain clinical laboratories under which the laboratories would pay Ark a bribe in exchange for delivering DNA samples and orders for genetic tests.  The bribe payments were based on the percentage of Medicare revenue that the laboratories received in connection with the tests.  Among other things, Kostishion, Plaisance, Richey, and Tamulski concealed these kickback arrangements through issuing sham invoices to laboratories that purportedly reflected services provided at an hourly rate even though the parties had already agreed upon the bribe amount, which was based on the revenue the laboratories received.  In 2018, the clinical laboratories paid Ark at least approximately $1.8 in bribes.  The case is being prosecuted by Assistant U.S. Attorney Bernard Cooney of the District of New Jersey.

Among those charged in the Eastern District of Pennsylvania are the following:

Timothy F. Shawl, 60, of Garnet Valley, Pennsylvania, a medical doctor, was charged with five counts of unlawful distribution of controlled substances.  He allegedly wrote prescriptions for controlled substances that were outside the usual course of professional practice and not for a legitimate medical purpose.  Shawl allegedly wrote prescriptions for controlled substances for patients without seeing, treating or examining them.  Shawl allegedly prescribed hundreds of prescriptions for oxycodone to approximately 16 patients amounting to over 29,000 oxycodone tablets.  The FBI conducted the investigation.  The case is being prosecuted by Trial Attorney Debra Jaroslawicz of the Fraud Section.

Neil K. Anand, M.D., 42, of Bensalem, Pennsylavia, and Asif Kundi, 31, Atif Mahmood Malik, 34, and Viktoriya Makarova, 33, all of Philadelphia, Pennsylvania,  Anand, a medical doctor, Kundi and Malik, unlicensed foreign medical school graduates, and Makarova, a nurse practitioner, were indicted on one count of health care fraud and one count of conspiracy to distribute controlled substances.  The charges stem from the defendants’ alleged submission of false and fraudulent claims to Medicare, health plans provided by the U.S. Office of Personnel Management (OPM) and Independence Blue Cross (IBC).  The claims allegedly were  for “Goody Bags,” bags of medically unnecessary prescription medications that were dispensed by non-pharmacy dispensing sites owned by Anand.  In total, Medicare, OPM and IBC allegedly paid over $4 million for the Goody Bags.  Patients were allegedly required to take the Goody Bags in order to receive prescriptions for controlled substances. Malik and Kundi allegedly wrote prescriptions for controlled substances using blank prescriptions that were pre-signed by Anand or Makarova.  Anand and Makarova allegedly prescribed over 10,000 prescriptions for Schedule II controlled substances, of which over 7,000 were for oxycodone totaling over 634,000 oxycodone tablets.  The investigation was conducted by the FBI, HHS-OIG, USPS-OIG and OPM.  The case is being prosecuted by Trial Attorney Debra Jaroslawicz.

Twelve indictments were unsealed involving charges against 12 people for allegedly possessing oxycodone with intent to distribute.  The indictments charge that, from September 2016 through June 2019, the 12 defendants all presented forged prescriptions for oxycodone to various pharmacies outside of Philadelphia, in order to obtain oxycodone to distribute to others.  The defendants, all from Philadelphia, drove many miles to pharmacies in Mt. Laurel, New Jersey, Marcus Hook, Pennsylvania, Drexel Hill, Pennsylvania, and Kennett Square, Pennsylvania.  The defendants are charged with at least two, and up to 32, counts of possession with intent to distribute oxycodone.  The defendants are charged with having received anywhere from 6,300 milligrams to 135,000 milligrams of oxycodone.  According to the indictments, the defendants would often travel together to the pharmacies to fill their forged prescriptions.   Charged were:  Lamar Dillard, 37; Jermaine Grant, 29; Katrina Tucker, 32; Maurice Bertrand, 31; Courtney Brockenborough, 34; Alan Alexander Harrison, 29; Abdullah Howard, 23; Jonathan Metellus, 32; Clinton Monte Bullock; Crystal Coleman, 31; Marques Russell, 35, and Joseph Michael Simmons, 31.  One defendant, Metellus, is also charged with one count of health care fraud, for allegedly using his Medicaid card to purchase prescription drugs with a forged prescription.  The case was jointly investigated by the DEA’s Tactical Diversion Squad, HHS-OIG, the Pennsylvania Department of State’s Bureau of Enforcement and Investigations, the Chester County District Attorney’s Office and the Easttown Township Police Department.   The cases are being prosecuted by Assistant U.S. Attorneys David E. Troyer, Elizabeth Abrams, Joan Burnes and Mary Kay Costello of the Eastern District of Pennsylvania.

Search and seizure warrants are being executed today at approximately six different locations.  The search and seizures are being executed by law-enforcement officers from six federal agencies, including HHS-OIG, the FBI, USPS-OIG, DOL-OIG, DOD and OPM.

Among those charged in the Eastern District of New York are the following:

Anna Steiner, M.D., also known as “Hanna Wasielewska,” 63, of Valatie, New York, a licensed anesthesiologist, was charged in a superseding indictment for an alleged $17.4 million health care fraud scheme related to the payment of kickbacks in return for the ordering of DME, prescription drugs and diagnostic tests that were not medically necessary and not the result of an actual doctor-patient relationship.  Steiner was originally indicted on July 9, 2019.  The case was investigated by FBI and HHS-OIG.  The case is being prosecuted by Fraud Section Trial Attorney Andrew Estes.

Dr. Denny Martin, 46, of New York, New York, a licensed Neurologist, was charged in a complaint for an alleged healthcare fraud scheme related to the billing of doctor home visits where none actually occurred.  The case is being prosecuted by Assistant U. S. Attorney William P. Campos.

Andrew Barrett, 60, of New City, New York, and his former wife, pharmacy owner Phyllis Pincus, 58, of New City, New York, were charged by indictment with healthcare fraud and false claims in a scheme where they billed insurers for medications not actually dispensed to patients.  In 2016, Barrett was sentenced to 43 months’ incarceration upon his guilty plea to tax fraud and healthcare fraud in which he billed insurers for medications not actually dispensed to patients.  He was excluded from participation in the Medicare and Medicaid programs for over 20 years.  The case is being prosecuted by Assistant U.S. Attorney William P. Campos. 

Kevin McMahon, 31, of Seaford, New York, a registered professional nurse, was charged in a misdemeanor information with possession of fentanyl, which he obtained through the course of his employment at Nassau University Medical Center.  McMahon will plead guilty to the information pursuant to a plea agreement and has agreed to surrender his nursing license at the time of his plea.  The case is being prosecuted by Assistant U.S. Attorney Erin E. Argo.

Among those charged in the Western District of New York are the following:

Jillian Marks, 37, of Orchard Park, New York, a licensed nurse practitioner, was charged with obtaining controlled substances through fraud, wrongful use of government seal, and identity theft.   With access to the Neighborhood Health Center in the City of Buffalo’s internal computer databases, the defendant allegedly abused her position and illegally accessed the Allscripts prescription prescribing portal.  Marks allegedly prescribed approximately 2,000 dosage units of controlled substances such as Adderall and Oxycodone, in the names of health center patients, which she then had filled and picked up at local pharmacies.  At one point, Marks allegedly forged a letter from the DEA in order to appear “good” to her employer and allegedly used the DEA seal illegally.  The DEA conducted the investigation.  The case is being prosecuted by Assistant U.S. Attorneys Michael J. Adler and Misha A. Coulson of the Western District of New York.

Karen Melton, 45, of Cuba, New York, was charged with obtaining controlled substances through fraud.  Melton, a medical secretary working for a physician in Olean, New York, was not licensed to prescribe controlled substances.  However, Melton allegedly used her access within the office to issue fraudulent prescriptions in her own name in both paper and electronic form.  The prescriptions were allegedly issued without a legitimate medical purpose.  Between September 2016 and May 2019, Melton allegedly issued 59 fraudulent prescriptions for controlled substances, including hydrocodone.  The DEA conducted the investigation.  The case is being prosecuted by Assistant U.S. Attorneys Michael J. Adler and Misha A. Coulson.

Among those charged in the District of Connecticut are the following:

Philippe R. Chain, M.D., has entered into a civil settlement agreement with the U.S. Attorney’s Office for the District of Connecticut, in which he will pay $300,000 to resolve allegations that he violated the False Claims Acts.  Chain, who currently practices medicine in Florida, previously practiced medicine in Connecticut and performed telehealth services from Connecticut for a telemedicine company located in Las Vegas, Nevada.  The telehealth services Chain provided involved prescribing compounded medications to TRICARE beneficiaries. TRICARE is the federal health care program for active duty military personnel, retirees, and their families.  The government alleges that Chain caused pharmacies to submit false claims for compounded medications to TRICARE by issuing or approving prescriptions which were invalid, because Chain did not speak with or examine the patients in question and did not have an established physician-patient relationship with them, in exchange for compensation paid to Chain.  This matter was investigated by the U.S. Department of Defense, Office of Inspector General,  Defense Criminal Investigative Service.  The case is being prosecuted by Assistant U.S. Attorney Richard M. Molot of the District of Connecticut.

Among those charged in the Western District of Pennsylvania are the following:

Emilio Ramon Navarro, M.D., 58, of Coal Center, Pennsylvania, was charged with unlawfully dispensing controlled substances and health care fraud.  Counts 1 – 28 of the Indictment allege that from April 2018 until April 2019, Navarro unlawfully distributed Oxymorphone and Oxycodone, Schedule II substances, to a person in return for sexual favors, either physically or by electronic communications, outside the usual course of professional practice and not for a legitimate medical purpose.  Navarro is also charged in Count 29 with health care fraud for causing fraudulent claims to be submitted to Medicaid for payments to cover the costs of the unlawfully prescribed controlled substances.  This case was investigated by the Western Pennsylvania Opioid Fraud and Abuse Detection Unit which includes: FBI, HHS-OIG, DEA, IRS-CI, Pennsylvania Office of Attorney General - Medicaid Fraud Control Unit, Pennsylvania Office of Attorney General – Bureau of Narcotic Investigations, USPS, Veterans Affairs-OIG, FDA-CI, OPM-OIG, and the Pennsylvania Bureau of Licensing.  Assistant U.S. Attorneys Robert S. Cessar and Mark V. Gurzo are prosecuting the case.  

Among those charged in the District of Columbia are the following:

Hope Falowo, a personal care aide, was charged by information with one count of healthcare fraud for her role in a $400,000 fraud scheme where she would bill Medicaid in the District of Columbia for services she never provided.  The case is being prosecuted by Counsel to the Chief of the Health Care Fruad Unit Amy Markopoulos.

Nkiru Uduji, a personal care aide, pleaded guilty to one count of health care fraud conspiracy charged in an August 2019 Information.   The charges stem from Uduji’s role in a $600,000 fraud scheme in which she billed for more than 24 hours in a day, for services that were not rendered, and for services that were procured by kickbacks.  The case is being prosecuted by Counsel to the Chief of the Health Care Fruad Unit Amy Markopoulos.

A complaint, information or indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The Fraud Section leads the Medicare Fraud Strike Force.  Since its inception in March 2007, the Medicare Fraud Strike Force, which maintains 15 strike forces operating in 24 districts, has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Four individuals were charged with engaging in a massive fraud scheme in which their company processed payments from victims of numerous international mass-mail fraud campaigns, the Department of Justice announced.

Rosanne Day, 51; Robert Paul Davis, 63; Genevieve Renee Frappier, 49; and Miles Kelly, 55; each were charged in the District of Nevada with one count of conspiracy to commit mail and wire fraud, one count of conspiracy to commit money laundering, and multiple counts of mail fraud and wire fraud. Day and Davis were part-owners and the top managers of PacNet Services Ltd. (PacNet), a payment processing company based in Vancouver, British Columbia, Canada. Frappier was in charge of PacNet’s Marketing and Client Services departments, and Kelly oversaw PacNet’s Compliance Department.

The indictment alleges that PacNet, under the defendants’ direction, was the payment processor of choice for companies that mailed large volumes of fraudulent notifications designed to mislead victims into falsely believing they would receive a large amount of money, a valuable prize, or specialized psychic services upon payment of a fee. Many alleged victims were elderly or otherwise vulnerable. PacNet served as the middleman between banks and the fraudulent mailers – aggregating the checks, cash, and credit card payments collected by its clients, depositing the payments into PacNet-controlled bank accounts, and then distributing the funds as directed by the clients, according to the indictment.

“The defendants are charged with enriching themselves by helping fraudsters who took money from elderly and otherwise vulnerable victims,” said Assistant Attorney General Jody Hunt for the Department of Justice's Civil Division. “The United States Department of Justice will seek to hold accountable those who knowingly advance elder fraud schemes – including individuals outside our borders who enable fraudsters to move their ill-gotten gains into the banking system and benefit from their crimes.” 

“As alleged in the indictment, numerous victims in Nevada were defrauded of money in connection with the defendants’ scheme, and at least one of PacNet’s fraudulent mass mail clients was located in Nevada,” said U.S. Attorney Nicholas A. Trutanich for the District of Nevada. “Working with our Postal Inspectors and other law enforcement partners, we will identify, investigate, and prosecute criminals – both foreign and domestic – who prey on our seniors and other vulnerable Nevada residents. These fraud schemes can happen to anyone. If you’re a victim, I urge you to immediately file a complaint with the FTC at 877-FTC-HELP.”

 “The U.S. Postal Inspection Service has been at the forefront of protecting consumers from fraud schemes for many years,” said Inspector in Charge Delany DeLeon-Colon of the U.S. Postal Inspection Service’s Criminal Investigations Group. “We do this through traditional investigative methods to identify and stop the scammers, and consumer education, which is the best defense against criminals looking for easy money. Investigations like this one let the American public – especially our vulnerable population – know that Postal Inspectors are working hard to protect them and ensure their confidence in the U.S. Mail.”

From 1994 until Sept. 22, 2016, PacNet processed payments for a variety of clients, including mass-mail clients who sent fraudulent notifications to consumers in the United States and around the world, according to the indictment. Several individuals involved in operating mass-mail companies that processed payments through PacNet have been convicted of federal fraud charges during the last two years.

The indictment alleges that the defendants knew that multiple PacNet mass-mail clients obtained payments from victims through fraudulent notifications and nonetheless approved depositing those payments into U.S. bank accounts, allowing the clients to benefit from the fraud. Day, who was in charge of PacNet’s Vancouver headquarters, and Davis, who oversaw PacNet’s office in Shannon, Ireland, each earned approximately $15 million in Canadian dollars from 2013 through 2015, the last three full years that PacNet was in operation, according to the indictment.

PacNet’s policies required mass-mail clients to submit sample notifications to PacNet for review. The indictment alleges that the defendants approved processing for fraudulent notifications that had been submitted, in some situations approved processing for fraudulent notifications that had not been submitted, and at other times condoned the continued processing for mass-mail clients who were sending different, even more fraudulent notifications than what PacNet had approved.

Davis, who identified himself as PacNet’s general counsel, opened post office boxes in the United Kingdom to which certain PacNet mass-mail clients directed victim payments be sent, according to the indictment. The indictment alleges that Davis, who was a pilot, at times flew to the United Kingdom to pick up the mail and transport it to Ireland, where the mail was opened and the checks, cash, and other payments were processed. The indictment further alleges that on several occasions Davis flew to the Netherlands to pick up cash from facilities that were receiving mail for certain PacNet mass-mail clients. Davis then flew the cash to Ireland, according to the indictment.

Each charge carries a maximum penalty of 20 years in prison. The indictment contains only accusations against the defendants and is not evidence of guilt. The defendants should be presumed innocent unless and until proven guilty.

The criminal charges are the result of an investigation conducted by the United States Postal Inspection Service, which through official requests received assistance from the Vancouver Police Department, Canada’s Competition Bureau, Ireland’s Criminal Assets Bureau, the United Kingdom’s National Crime Agency, and the Netherlands’ Fiscal Information and Investigation Service.

Senior Litigation Counsel Patrick Jasperse of the Department’s Consumer Protection Branch is prosecuting the case with assistance from Assistant United States Attorney Nicholas Dickinson of the U.S. Attorney’s Office for the District of Nevada. The Criminal Division’s Office of International Affairs has provided critical support.

Amin Mahdavi, 53, an Iranian national living in the United Arab Emirates (UAE), and Parthia Cargo LLC, a freight forwarding company located in the UAE, were charged in the U.S. District Court for the District of Columbia with participating in a criminal conspiracy to violate U.S. export laws and sanctions against Iran.

“Iran evades the U.S. embargo resulting from their malicious activities with the collaboration of those who pose as innocent buyers, but who are ready to send the products on to their forbidden destination,” said Assistant Attorney General for National Security John C. Demers.  “These charges against Parthia Cargo LLC and its managing director should put on notice all freight forwarders and others who facilitate illicit transshipments to Iran that their conduct will not be tolerated.”

“We will not abide individuals or business organizations that seek to harm our national security by providing coveted U.S. goods to Iran, and we will pursue these wrongdoers no matter where they are located in the world,” said Acting U.S. Attorney Michael R. Sherwin for the District of Columbia.

“Amin Mahdavi defiantly conspired and violated U.S. sanctions to benefit his company and Iran,” said James A. Dawson, Acting Assistant Director in Charge of the FBI Washington Field Office.  “Today’s charges are another example of the dedicated and unrelenting efforts of the FBI and the U.S. Attorney's Office to pursue those who violate our nation's sanctions and put our national security at risk.  The FBI is charged with protecting our nation's security and intellectual property from being used to benefit our foreign adversaries.”

“The actions today are a result of the ongoing coordination and collaborative counter proliferation efforts by the Office of Export Enforcement and the FBI,” said P. Lee Smith, of BIS.  “The Boston Field Office of the Office of Export Enforcement will continue to vigorously pursue violators with all law enforcement partners to interdict illicit trade that threatens U.S. national security and undermines U.S. foreign policy.”

Mahdavi and Parthia Cargo LLC were charged in a criminal complaint with conspiring to defraud the United States and to violate the International Emergency Economic Powers Act (IEEPA) and the Iranian Transactions and Sanctions Regulations (ITSRs).

The affidavit in support of the criminal complaint alleges that Mahdavi was the Managing Director of Parthia Cargo LLC, a business organization that facilitated the illegal shipment to Iran of goods manufactured in the United States.  Mahdavi acknowledged to U.S. government officials in 2017 that he understood a U.S. government license was necessary to lawfully ship U.S. commercial aircraft parts to Iran.  But Mahdavi nonetheless agreed to help ship a U.S.-origin commercial aircraft part to an Iranian air transport company, utilizing the freight forwarding services of Parthia Cargo LLC and without obtaining a license.  Mahdavi and Parthia Cargo LLC conspired with individuals and business organizations located outside the United States as part of the criminal scheme, which included falsely stating to a U.S.-based aircraft parts supplier that the goods would not be shipped to Iran unless authorized by the U.S. government.

A concurrent action was filed by the Department of the Treasury, sanctioning Mahdavi and Parthia Cargo LLC, as well as a related UAE business organization, Delta Parts Supply FZC.

If convicted, Mahdavi would face up to five years of imprisonment and a fine of up to $250,000, and Parthia Cargo LLC would face a fine of up to $500,000.  The criminal charge in the complaint is an allegation, and Mahdavi and Parthia Cargo LLC are presumed innocent until proven guilty beyond a reasonable doubt.

The investigation was conducted by the FBI’s Washington Field Office and the BIS’s Boston Field Office.  Assistant U.S. Attorney Michael J. Friedman and National Security Division Trial Attorney Jennifer Kennedy Gellie are representing the United States.

Health Management Associates, LLC (HMA), formerly a U.S. hospital chain headquartered in Naples, Florida, will pay over $260 million to resolve criminal charges and civil claims relating to a scheme to defraud the United States.  The government alleged that HMA knowingly billed government health care programs for inpatient services that should have been billed as outpatient or observation services, paid remuneration to physicians in return for patient referrals, and submitted inflated claims for emergency department facility fees. 

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, Assistant Attorney General Joseph H. Hunt of the Justice Department’s Civil Division, U.S. Attorney Maria Chapa Lopez for the Middle District of Florida, U.S. Attorney Ariana Fajardo Orshan for the Southern District of Florida, U.S. Attorney Charles E. Peeler for the Middle District of Georgia, U.S. Attorney John R. Lausch Jr. for the Northern District of Illinois, U.S. Attorney R. Andrew Murray for the Western District of North Carolina, U.S. Attorney William M. McSwain for the Eastern District of Pennsylvania, U.S. Attorney Sherri Lydon for the District of South Carolina, Assistant Director Robert Johnson of FBI’s Criminal Investigative Division, and Acting Assistant Inspector General for Investigations Derrick L. Jackson for the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) made the announcement.

HMA was acquired by Community Health Systems Inc. (CHS), a major U.S. hospital chain, in January 2014, after the alleged conduct at HMA occurred.  Since July 2014, HMA has been operating under a Corporate Integrity Agreement (CIA) between CHS and the HHS-OIG.

As part of the criminal resolution, HMA entered into a three-year Non-Prosecution Agreement (NPA) with the Criminal Division’s Fraud Section in connection with a corporate-driven scheme to defraud Federal health care programs by unlawfully pressuring and inducing physicians serving HMA hospitals to increase the number of emergency department patient admissions without regard to whether the admissions were medically necessary.  The scheme involved HMA hospitals billing and obtaining reimbursement for higher-paying inpatient hospital care, as opposed to observation or outpatient care, from Federal health care programs, increasing HMA’s revenue.  Under the terms of the NPA, HMA will pay a $35 million monetary penalty.  Under the terms of the NPA, HMA and CHS, the current parent company, agreed to cooperate with the investigation, report allegations or evidence of violations of Federal health care offenses, and ensure that their compliance and ethics program satisfies the requirements of an amended and extended CIA between CHS and HHS-OIG.

In addition, an HMA subsidiary, Carlisle HMA, LLC, formerly doing business as Carlisle Regional Medical Center, has agreed to plead guilty to one count of conspiracy to commit health care fraud.  The plea agreement remains subject to acceptance by the court.  Up until 2017, Carlisle HMA, LLC owned and operated Carlisle Regional Medical Center, an acute care hospital located in Carlisle, Pennsylvania.  Carlisle HMA, LLC was charged in a criminal information filed today in the District of Columbia with conspiracy to commit health care fraud.

According to admissions made in the resolution documents, HMA instituted a formal and aggressive plan to improperly increase overall emergency department inpatient admissions at all HMA hospitals, including at Carlisle Regional Medical Center.  As part of the plan, HMA set mandatory company-wide admission rate benchmarks for patients presenting to HMA hospital emergency departments – a range of 15 to 20 percent for all patients presenting to the emergency department, depending on the HMA hospital, and 50 percent for patients 65 and older (i.e. Medicare beneficiaries) - solely to increase HMA revenue.  HMA executives and HMA hospital administrators executed the scheme by pressuring, coercing and inducing physicians and medical directors to meet the mandatory admission rate benchmarks and admit patients who did not need impatient admission through a variety of means, including by threatening to fire physicians and medical directors if they did not increase the number of patients admitted.

“HMA pressured emergency room physicians, including through threats of termination, to increase the number of inpatient admissions from emergency departments—even when those admissions were medically unnecessary,”  said Assistant Attorney General Benczkowski.  “Hospital operators that improperly influence a physician’s medical decision-making in pursuit of profits do so at their own peril.  Where we find such conduct, the Criminal Division’s Health Care Fraud Unit, together with our Civil Division and law enforcement colleagues, will aggressively prosecute those responsible to the fullest extent of the law.”

HMA also agreed to pay $216 million as part of a related civil settlement. The civil settlement resolves HMA’s liability for submitting false claims between 2008 and 2012 as part of its corporate-wide scheme to increase inpatient admissions of Medicare, Medicaid and the Department of Defense’s (DOD) TRICARE program beneficiaries over the age of 65.  The government alleged that the inpatient admission of these beneficiaries was not medically necessary, and that the care needed by, and provided to, these beneficiaries should have been provided in a less costly outpatient or observation setting.  HMA agreed to pay $62.5 million to resolve these allegations with $61,839,718 being paid to the United States and $706,084 being paid to participating States.

The civil settlement also resolves allegations that during the period from 2003 through 2011, two HMA hospitals in Florida, Charlotte Regional Medical Center and Peace River Medical Center, billed federal health care programs for services referred by physicians to whom HMA provided remuneration in return for patient referrals.  To induce patient referrals, Charlotte Regional provided a local physician group with free office space and staff, as well as direct payments, which purportedly covered overhead and administrative costs incurred by the group for its management of a Charlotte Regional physician.  HMA also provided another local physician with free rent and upgrades to his office space.  HMA agreed to pay $93.5 million to resolve these civil allegations, with the United States receiving $87.96 million, and the State of Florida receiving $5.54 million.

Additional allegations that are resolved by the civil settlement are that between 2009 and 2012, two former HMA hospitals, Lancaster Regional Medical Center and Heart of Lancaster Medical Center in Pennsylvania, billed federal health care programs for services referred by physicians with whom the facilities had improper financial relationships.  These relationships stemmed from HMA’s excessive payments to (1) a large physician group in return for two businesses owned by the group and for services allegedly performed by the group, and (2) a local surgeon that exceeded the value of the services provided.  The government alleged that these arrangements were structured in this manner to disguise payments intended to induce the referral of patients.  HMA agreed to pay $55 million to the United States to resolve these civil allegations.

Finally, the civil settlement will also resolve claims that Crossgates Hospital, an HMA facility in Brandon, Mississippi, leased space to a local physician from Jan. 15, 2005 through Jan. 14, 2007, but required the physician to pay rent for only half of the space he was actually occupying, in return for patient referrals to Crossgates Hospital.  HMA agreed to pay $425,000 to the United States to resolve these civil allegations.

Federal law, including the Anti-Kickback Statute and the Stark Law, prohibits hospitals from providing financial inducements to physicians for referrals.  These provisions are designed to ensure that physician decision-making is not compromised by improper financial incentives.

“Billing for unnecessary hospital stays wastes federal dollars,” said Assistant Attorney General Hunt.  “In addition, offering financial incentives to physicians in return for patient referrals undermines the integrity of our health care system.  Patients deserve the unfettered, independent judgment of their health care professionals.”

“The payment of kickbacks in exchange for medical referrals undermines the integrity of our healthcare system,” said U.S. Attorney Chapa Lopez. “Today’s resolution should remind healthcare providers of their duty to comply with the law, and the heavy price to be paid for corrupt practices committed by their executives. Our Civil Division will continue to invest itself in the pursuit of health care providers who violate the law for personal gain.” 

“Our office will continue to enforce prohibitions on improper financial relationships between health care providers and their referral sources, as these relationships can serve to corrupt physician judgment about a patient’s true health needs,” said U.S. Attorney Fajardo Orshan.  “We will devote all necessary resources to ensure that those rendering medical care do so for the sole benefit of the patient and in compliance with the law.”

“By manipulating patient status, HMA increased Medicare costs and pocketed taxpayer funds to which it was not entitled,” said U.S. Attorney Peeler.  “Our Medicare patients and our taxpayers deserve better, and I am proud that justice has been done. Nonetheless, we will continue to pursue those hospitals in our district that would seek to take advantage of the Medicare Program.”

“Government healthcare programs are vital to the welfare of our communities,” said U.S. Attorney Murray for the Western District of North Carolina, where two HMA hospitals were located.  “We will aggressively pursue providers that fraudulently inflate charges to government programs and divert scarce resources from those in need into their own pockets.”

“Our resolution of this matter and the significant recovery we have obtained show once again that no matter how complex the scheme is, we will find it, stop it, and punish it,” said U.S. Attorney McSwain.  “HMA covered up kickbacks for patient referrals with sham joint venture agreements, lease payments, and management agreements. These sorts of improper physician inducements are a form of ‘pay to play’ business practices that will not be tolerated.  Healthcare institutions cannot pad their bottom line at the expense of the American taxpayers.  And most importantly, this conduct must be rooted out because it gets in the way of providing top-notch patient care to American citizens.”

“It is critically important to all of us that the patients’ interest drive the physicians’ decisions on care,” said U.S. Attorney Lydon.  “Unnecessary hospital admissions not only drive up costs but can cause damage to patients and cannot be tolerated.” 

The government further alleged that from September 2009 through December 2011, certain HMA hospitals submitted claims to Medicare and Medicaid seeking reimbursement for falsely inflated emergency department facility charges.  HMA agreed to pay $12 million to resolve these civil allegations, with $11.028 million being paid to the United States and $972,000 being paid to participating States.

“Compliance with government healthcare rules requires that patients only receive treatment they actually need,” said HHS-OIG Acting Assistant Inspector General for Investigations Jackson.  “Then government programs must be billed just for those services.  No more, no less.  Let there be no doubt, we will continue to protect federal healthcare programs and beneficiaries by holding provider organizations fully accountable.”    

“This settlement is a result of the FBI’s hard work and dedication to hold companies accountable for their role in healthcare fraud and abuse,” said FBI Assistant Director Johnson.  “The FBI will not stand by when there are allegations that a company operates a corporate wide scheme to increase their financial gain at the expense of the U.S. government. We appreciate those who come forward with allegations of criminal misconduct and recognize the importance of the public’s assistance in our work.”

The allegations resolved by the settlement were originally brought in eight lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims and to receive a share of any recovery.  The eight qui tam cases, which were filed in various districts and transferred to the U.S. District Court for the District of Columbia as part of a multi-district litigation presided over by the Honorable Reggie B. Walton, are captioned: United States ex rel. Brummer v. HMA, Inc., 3-09-cv-135 (CDL) (M.D. Ga.); United States ex rel. Williams v. HMA, Inc., 3:09-cv-130 (M.D. Ga.); United States ex rel. Plantz v. HMA, Inc., 13-CV-1212 (N.D. Ill.); United States ex rel. Miller v. HMA, Inc., 10-3007 (E.D. Pa.); United States ex rel. Mason & Folstad v. HMA, Inc., 3:10-CV-472-GCM (W.D.N.C.); United States ex rel. Nurkin v. HMA, Inc., 2:11-cv-14-FtM-29DNF (M.D. Fla.); United States ex rel. Jacqueline Meyer & Cowling v. HMA, Inc., 0:11-cv-01713-JFA (D.S.C.); and United States ex rel. Paul Meyer v. HMA, Inc., 11-62445 cv-Williams (S.D. Fla.).

The whistleblower in United States ex rel. Nurkin will receive approximately $15 million as a share of the recovery, and the whistleblowers in United States ex rel. Miller will receive approximately $12.4 million as their share of the recovery.  The whistleblower shares to be awarded in the remaining cases have not yet been determined.

These matters were investigated by the Civil Division’s Commercial Litigation Branch; the Health Care Fraud Unit of the Criminal Division’s Fraud Section; the U.S. Attorneys’ Offices for the Middle District of Florida, Southern District of Florida, Middle District of Georgia, Northern District of Illinois, Western District of North Carolina, Eastern District of Pennsylvania and the District of South Carolina, the FBI Healthcare Fraud Unit Major Provider Response Team, HHS-OIG and Defense Health Agency Program Integrity.  On behalf of the States, an investigative/settlement team with members from North Carolina, Massachusetts, Virginia, Washington, and Florida assisted with the investigation and resolution of these matters. 

The government’s resolution of this matter illustrates the government’s emphasis on combating healthcare fraud and marks another achievement for the Health Care Fraud and Enforcement Action Team (HEAT) initiative, a partnership between the Department of Justice and the Department of Health and Human Services to focus efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

Except for those facts admitted to in the guilty plea and in the Non-Prosecution Agreement, the claims resolved by the settlement are allegations only, and there has been no determination of liability.

If you believe you are a victim of this offense, please visit this website or call (888) 549-3945.

A Dallas, Texas, grand jury returned two indictments today against five Chinese citizens and four companies alleging fraud and other charges, the Justice Department announced. The charges relate to alleged sales of stimulants intended for inclusion in dietary supplements.

 

The indictments charge the defendants with participation in a scheme to produce and sell dietary supplements containing hidden synthetic stimulants, such as 2-amino-6-methylheptane (“DMHA”). The charges also involve alleged shipments of 1,3-dimethylamylamine (“DMAA”) and DMHA. DMAA, which is chemically similar to DMHA, has been linked to severe adverse events such as heart attacks and strokes.

 

The indictments allege that the defendants knew major American dietary supplement retailers would not carry supplements containing these stimulant ingredients. The indictments also allege the defendants agreed with a confidential government informant to either mislabel ingredients or otherwise help to hide the true nature of a proposed dietary supplement from retailers. None of the ingredients allegedly shipped during the undercover investigation were sold to consumers. 

 

“It is unlawful for companies both outside and inside the United States to conceal questionable, dangerous, or illegal ingredients in dietary supplements sold to American consumers,” said Chad A. Readler, Acting Assistant Attorney General of the Department of Justice’s Civil Division. “These cases demonstrate the Department of Justice’s commitment to ensuring that dietary supplements are safe and accurately labeled.”

 

“U.S. consumers trust that their dietary supplements are safe and contain appropriate labeling. When unscrupulous producers add undeclared or misidentified ingredients to dietary supplements, there is no assurance that the product is safe for consumption,” said Catherine A. Hermsen, Acting Director, FDA Office of Criminal Investigations. “The FDA will continue to pursue and bring to justice those who participate in fraudulently marketing dietary supplements to the detriment of public health.”

 

 

The first indictment charges Genabolix USA Inc., a Nevada corporation; Shanghai Yongyi Bioltechnology Ltd., a Chinese corporation; Hu Chang Chun (a.k.a. James Hu), 44, of Shanghai, China, the principal of Genabolix; Gao Mei Fang (a.k.a. Amy Gao), 41, of Shanghai, China, the supply chain manager for Genabolix; and Zhang Xiao Dong (a.k.a. Mark Zhang), 31, of Shanghai, China, the sales manager for Genabolix, with mail fraud. The indictment also charges Genabolix, Shanghai Yongyi, Hu, and Gao with introducing misbranded food into interstate commerce. In addition, the indictment charges Genabolix, Yongyi, and Gao with obstruction of an agency proceeding and smuggling. 

 

A second indictment charges Shanghai Waseta International Trade Co. Ltd., a Chinese corporation; Max Pharmatech Inc., a California corporation; Xu Jia Bao (a.k.a. Fred Xu), 48, of Shanghai, China, the principal of Shanghai Waseta; and Li Ting Ting (a.k.a. Sunny Lee), 37, of Shanghai, China, the overseas sales manager for Shanghai Waseta, with wire fraud and with introducing misbranded food into interstate commerce. The indictment also charges Shanghai Waseta with smuggling.

 

Gao Mei Fang, Zhang Xiao Dong, and Xu Jia Bao were arrested in late September at a dietary supplement trade show in Las Vegas and remain in custody. A date for trial before the federal district court in Dallas has not yet been set. The remaining individual defendants are not believed to be in the United States.

 

“Few things are more important than ensuring the safety of what we put into our bodies,” said U.S. Attorney John Parker for the Northern District of Texas.  “Those who deliberately mislead us on this critical issue will be prosecuted to the fullest extent of our laws.”

 

An indictment is an accusation by a federal grand jury and is not evidence of guilt. The defendants should be presumed innocent unless and until proven guilty.

 

Upon conviction, the maximum statutory penalties for the individual defendants are 20 years’ imprisonment and a $250,000 fine for mail fraud or wire fraud; one year imprisonment and a $100,000 fine for the introduction of misbranded food into interstate commerce; three years’ imprisonment and a $250,000 fine for the introduction of misbranded food into interstate commerce with the intent to defraud or mislead; five years’ imprisonment and a $250,000 fine for obstruction of an agency proceeding; and 20 years’ imprisonment and a $250,000 fine for smuggling.

 

The FDA Office of Criminal Investigations-Dallas Division investigated the case. The case is being prosecuted by Assistant U.S. Attorneys Kathryn Rumsey and Errin Martin of the Northern District of Texas and Trial Attorneys David Sullivan and Patrick Runkle of the Justice Department’s Consumer Protection Branch.

 

Additional information about the Consumer Protection Branch and its enforcement efforts may be found at http://www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Northern District of Texas, visit its website at https://www.justice.gov/usao-ndtx.

A criminal complaint was unsealed today in federal court in Brooklyn charging Kaveh Lotfolah Afrasiabi, also known as Lotfolah Kaveh Afrasiabi, with acting and conspiring to act as an unregistered agent of the Government of the Islamic Republic of Iran, in violation of the Foreign Agents Registration Act (FARA).  Afrasiabi was arrested yesterday at his home in Watertown, Massachusetts, and will make his initial appearance this morning in federal court in Boston, Massachusetts, before U.S. Magistrate Judge Jennifer C. Boal.

John C. Demers, Assistant Attorney General for National Security; Seth D. DuCharme, Acting U.S. Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Joseph Bonavolonta, Special Agent in Charge, FBI, Boston Field Office, announced the arrest and charges.

“For over a decade, Kaveh Afrasiabi pitched himself to Congress, journalists, and the American public as a neutral and objective expert on Iran,” said John C. Demers, Assistant Attorney General for National Security.  “However, all the while, Afrasiabi was actually a secret employee of the Government of Iran and the Permanent Mission of the Islamic Republic of Iran to the United Nations (IMUN) who was being paid to spread their propaganda.  In doing so, he intentionally avoided registering with the Department of Justice as the Foreign Agents Registration Act required.  He likewise evaded his obligation to disclose who was sponsoring his views.  We now begin to hold him responsible for those deeds.”

“Afrasiabi allegedly sought to influence the American public and American policymakers for the benefit of his employer, the Iranian government, by disguising propaganda as objective policy analysis and expertise,” said Acting U.S. Attorney DuCharme.  “This Office is committed to the robust enforcement of the Foreign Agents Registration Act, which provides the American people the tools they need to evaluate opinions and arguments in the marketplace of ideas by requiring foreign agents to declare their paymasters.  Those, like the defendant, who conceal the full extent of their work for a foreign government when the law requires disclosure will face consequences for their actions.”

“Anyone working to advance the agenda of a foreign government within the United States is required by law to register as an agent of that country,” said FBI Assistant Director in Charge Sweeney.  “Mr. Afrasiabi never disclosed to a congressman, journalists or others who hold roles of influence in our country that he was being paid by the Iranian government to paint an untruthfully positive picture of the nation.  Our laws are designed to create transparency in foreign relations, and they are not arbitrary or malleable.  As today's action demonstrates, we will fully enforce them to protect our national security.”

“Our arrest of Kaveh Afrasiabi makes it clear that the United States is not going to allow undeclared agents of Iran to operate in our country unchecked.  For more than a decade, Mr. Afrasiabi was allegedly paid, directed, and controlled by the Government of Iran to lobby U.S. government officials, including a congressman; and to create and disseminate information favorable to the Iranian government,” said FBI Special Agent in Charge Bonavolonta.  “The FBI will continue to do everything it can to uncover these hidden efforts and hold accountable those who work for our adversaries to the detriment of our national security.”  

According to the complaint, Afrasiabi is a citizen of the Islamic Republic of Iran and a lawful permanent resident of the United States.  Afrasiabi holds a PhD, and frequently publishes books and articles, and appears on English-language television programs discussing foreign relations matters, particularly Iran’s relations with the United States.  Afrasiabi has identified or portrayed himself as a political scientist, a former political science professor or as an expert on foreign affairs.

Since at least 2007 to the present, Afrasiabi has also been secretly employed by the Iranian government and paid by Iranian diplomats assigned to the Permanent Mission of the IMUN.  Afrasiabi has been paid approximately $265,000 in checks drawn on the IMUN’s official bank accounts since 2007, and has received health insurance through the IMUN’s employee health benefit plans since at least 2011. 

In the course of his employment by the Iranian government, Afrasiabi has lobbied a U.S. congressman and the U.S. Department of State to advocate for policies favorable to Iran, counseled Iranian diplomats concerning U.S. foreign policy, made television appearances to advocate for the Iranian government’s views on world events, and authored articles and opinion pieces espousing the Iranian government’s position on various matters of foreign policy.  Afrasiabi has long known that FARA requires agents of foreign principals to register with the U.S. Department of Justice and has discussed information obtained from FARA disclosures with others.  Nevertheless, Afrasiabi did not register as an agent of the Government of Iran.

For example, in January 2020, Afrasiabi emailed Iran’s Foreign Minister and Permanent Representative to the United Nations with advice for “retaliation” for the U.S. military airstrike that killed Major General Qasem Soleimani, the head of the Quds Force, the external operations arm of the Iranian government’s Islamic Revolutionary Guard Corps, proposing that the Iranian government “end all inspections and end all information on Iran’s nuclear activities pending a [United Nations Security Council] condemnation of [the United States’] illegal crime.”  Afrasiabi claimed that such a move would, among other things, “strike fear in the heart of [the] enemy.”

Afrasiabi has admitted in his own communications that his extensive body of published works and television appearances, in which he has consistently advocated perspectives and policy positions favored by the Iranian government, has been attributable to the funding he receives from the Iranian government.  For example, in a July 28, 2020, email to Iran’s Foreign Minister, Afrasiabi included “links for many of [his] works, including books, hundreds of articles in international newspapers and academic journals,” telling Iran’s Foreign Minister, “Without support none of this would have been possible! This has been a very productive relationship spanning decades that ought not to be interrupted.”

The charges in the complaint are allegations, and the defendant is presumed innocent unless and until proven guilty.  If convicted of both charged offenses, Afrasiabi faces a maximum sentence of 10 years in prison.

The government’s case is being handled by the Office’s National Security and Cybercrime Section.  Assistant U.S. Attorneys Ian C. Richardson and Michael T. Keilty are in charge of the prosecution, with assistance from Trial Attorney David C. Recker of the National Security Division’s Counterintelligence and Export Control Section.

The Roman Catholic Archdiocese of New Orleans (Archdiocese of New Orleans) has agreed to pay more than $1 million to resolve allegations that it violated the False Claims Act by knowingly submitting false claims for payment to the Federal Emergency Management Agency (FEMA) for the repair or replacement of certain facilities damaged by Hurricane Katrina. The settlement, which is based on the Archdiocese of New Orleans’ financial condition, required final approval of the U.S. Bankruptcy Court for the Eastern District of Louisiana, which approved the settlement on Oct. 26. 

“FEMA offers critical financial support when natural disasters strike,” said Acting Assistant Attorney General Brian M. Boynton of the Justice Department’s Civil Division. “The Department of Justice is committed to ensuring that these taxpayer funds are properly spent to help disaster victims rebuild their communities.”  

The settlement resolves allegations that, from 2007 through 2013, the Archdiocese of New Orleans knowingly signed certifications for FEMA funding that contained false or fraudulent damage descriptions and repair estimates that were prepared by AECOM, an architecture and engineering firm based in Los Angeles. Among other things, the alleged false descriptions included purported damage to a nonexistent central air conditioning unit and misstated a facility’s square footage. 

“Federal disaster funds are an instrumental component in the effort to assist disaster victims with their recovery,” said the U.S. Attorney’s Office for the Eastern District of Louisiana. “The favorable resolution of this False Claims Act matter illustrates the collaborative efforts and firm commitment by our federal partners to use all available remedies to address signs of fraud, waste and abuse.”

“Funds fraudulently obtained from FEMA deprive deserving recipients and communities truly in need,” said Inspector General Dr. Joseph V. Cuffari for Department of Homeland Security Office of Inspector General (DHS OIG). “We appreciate the support of our law enforcement partners, and this outcome is another example of the continuing successful partnership between the Department of Homeland Security Office of Inspector General, the Department of Justice’s Civil Litigation Branch in Washington, DC and the Eastern District of Louisiana’s U.S. Attorney’s Office.”

The settlement resolved allegations originally filed in a lawsuit brought under the qui tam or whistleblower provisions of the False Claims Act by Robert Romero, an AECOM Project Specialist. The False Claims Act permits private parties to file suit on behalf of the United States for false claims and to share in any recovery. The False Claims Act also permits the United States to intervene in such an action, as it did in this case, in part, against AECOM, the Archdiocese of New Orleans, and other disaster relief applicants in June 2020. One of those applicants, Xavier University of Louisiana, previously agreed to pay the United States $12 million to resolve its alleged role in the submission of false and misleading repair estimates prepared on its behalf by AECOM. The lawsuit against AECOM and another disaster relief applicant remains ongoing. As part of its settlement, the Archdiocese of New Orleans agreed to cooperate in the litigation.       

The whistleblower lawsuit is captioned United States ex rel. Robert Romero v. AECOM, Inc., et al., No. 16-cv-15092 (E.D. La.). As part of the settlement with the Archdiocese of New Orleans, Mr. Romero received approximately $199,500. 

The False Claims Act lawsuit is being handled by the Civil Division’s Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the Eastern District of Louisiana, with assistance from FEMA’s Office of Chief Counsel. Investigative support is being provided by DHS OIG, through its Major Fraud and Corruption Unit and New Orleans Resident Office. 

The claims alleged in the lawsuit, including those resolved by the Archdiocese of New Orleans, are allegations only, and there has been no determination of liability.

An Indiana man who distributed unregistered pesticides to the tenants and managers of an apartment building he owned has pleaded guilty to three counts of violating the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA).

Cai Feng Yang, aka Kevin Yang, 41, of La Porte, Indiana, pleaded guilty today before U.S. Magistrate Judge John E. Martin in the Northern District of Indiana.  Sentencing has been scheduled for Oct. 27, 2020.

According to court records, during trips to China in September 2015 and January 2016, Yang purchased multiple boxes of unregistered pesticides labeled “cockroach killer bait” and “cockroach gum bait,” as well as several small unlabeled bottles of liquid pesticide containing the active ingredient dichlorvos.  Yang transported these pesticides to the United States in his checked luggage with the intent to use them in his La Porte apartment buildings to exterminate cockroaches and bed bugs.  None of these pesticides were registered with the EPA as required by FIFRA.  For that reason, Yang was obligated to submit a Notice of Arrival (NoA) prior to importing these products into the United States, which he failed to do.  He also failed to declare this merchandise to Customs upon his return to the United States. 

After returning from China, Yang distributed the vials of granular cockroach killer bait and the syringes of gelatinous cockroach gum bait to tenants renting apartments at 701 Maple St. and 606 Tipton Street.  Yang also provided his part-time assistant building managers at 701 Maple Street an unlabeled bottle of pesticide containing dichlorvos to be applied in apartments to kill bed bugs.  On several occasions, Yang applied the liquid pesticide in tenants’ apartments himself.

This case was investigated by the EPA-Criminal Investigation Division with assistance from the Office of Indiana State Chemist.

Trial Counsel R.J. Powers of the Environment and Natural Resources Division’s Environmental Crimes Section, Assistant U.S. Attorney Toi Denise Houston, Northern District of Indiana and Regional Criminal Enforcement Counsel David Mucha are prosecuting the case.

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.

A complex transnational organized cybercrime network that used GozNym malware in an attempt to steal an estimated $100 million from unsuspecting victims in the United States and around the world has been dismantled as part of an international law enforcement operation.  GozNym infected tens of thousands of victim computers worldwide, primarily in the United States and Europe.  The operation was highlighted by the unprecedented initiation of criminal prosecutions against members of the network in four different countries as a result of cooperation between the United States, Georgia, Ukraine, Moldova, Germany, Bulgaria, Europol and Eurojust. 

United States Attorney Scott W. Brady of the Western District of Pennsylvania made the announcement at Europol, located in The Hague, Netherlands, along with his international partners. 

The operation was conducted by the United States Attorney’s Office for the Western District of Pennsylvania and the FBI’s Pittsburgh Field Office, along with the Office of the Prosecutor General of Georgia, Prosecutor General’s Office of Ukraine, Office of the Prosecutor General of the Republic of Moldova, Public Prosecutor’s Office Verden (Germany), the Supreme Prosecutor’s Office of Cassation of the Republic of Bulgaria, Ministry of Internal Affairs of Georgia, National Police of Ukraine, General Police Inspectorate of the Republic of Moldova, the Luneburg Police of Germany and the Republic of Bulgaria’s General Directorate for Combatting Organized Crime with the significant assistance of Europol and Eurojust.

“International law enforcement has recognized that the only way to truly disrupt and defeat transnational, anonymized networks is to do so in partnership,” said U.S. Attorney Brady.  “The collaborative and simultaneous prosecution of the members of the GozNym criminal conspiracy in four countries represents a paradigm shift in how we investigate and prosecute cybercrime.  Cybercrime victimizes people all over the world.  This prosecution represents an international cooperative effort to bring cybercriminals to justice.”  

Earlier today, the U.S. Attorney’s Office for the Western District of Pennsylvania unsealed an Indictment returned by a federal grand jury in Pittsburgh charging 10 members of the GozNym criminal network with conspiracy to commit computer fraud, conspiracy to commit wire fraud and bank fraud, and conspiracy to commit money laundering.  An eleventh member of the conspiracy was previously charged in a related Indictment.  The victims of these crimes were primarily U.S. businesses and their financial institutions, including a number of victims located in the Western District of Pennsylvania. 





“This takedown highlights the importance of collaborating with our international law enforcement partners against this evolution of organized cybercrime,” said FBI Pittsburgh Special Agent in Charge Robert Jones.  “Successful investigation and prosecution is only possible by sharing intelligence, credit and responsibility.  Our adversaries know that we are weakest along the seams and this case is a fantastic example of what we can accomplish collectively."





According to the Indictment, the defendants conspired to:

infect victims’ computers with GozNym malware designed to capture victims’ online banking login credentials;

use the captured login credentials to fraudulently gain unauthorized access to victims’ online bank accounts; and,

steal money from victims’ bank accounts and launder those funds using U.S. and foreign beneficiary bank accounts controlled by the defendants.    

The defendants reside in Russia, Georgia, Ukraine, Moldova and Bulgaria.  The operation was an unprecedented international effort to share evidence and initiate criminal prosecutions against members of the same criminal network in multiple countries.    

At the request of the United States, Krasimir Nikolov, aka “pablopicasso,” “salvadordali,” and “karlo,” of Varna, Bulgaria, was searched and arrested by Bulgarian authorities and extradited to the United States in December 2016 to face prosecution in the Western District of Pennsylvania.  Nikolov’s primary role in the conspiracy was that of a “casher” or “account takeover specialist” who used victims’ stolen online banking credentials captured by GozNym malware to access victims’ online bank accounts and attempt to steal victims’ money through electronic funds transfers into bank accounts controlled by fellow conspirators.  Nikolov is named as a GozNym conspirator in the newly unsealed indictment, although he is charged in a related Indictment filed in the Western District of Pennsylvania.  Nikolov entered a guilty plea in federal court in Pittsburgh on charges relating to his participation in the GozNym conspiracy on April 10, 2019.  He is scheduled to be sentenced on Aug. 30, 2019. 

Five of the named defendants reside in Russia and remain fugitives from justice.  However, to overcome the inability to extradite the remaining defendants to the United States for prosecution, an unprecedented effort was undertaken to share evidence and build prosecutions against defendants in the remaining countries where they reside, including Georgia, Ukraine and Moldova.  The prosecutions are based on shared evidence acquired through coordinated searches for evidence in Georgia, Ukraine, Moldova and Bulgaria, as well as from evidence shared by the United States and Germany from their respective investigations.   

The GozNym network exemplified the concept of “cybercrime as a service.”  According to the Indictment, the defendants advertised their specialized technical skills and services on underground, Russian-language, online criminal forums.  The GozNym network was formed when these individuals were recruited from the online forums and came together to use their specialized technical skills and services in furtherance of the conspiracy.

According to the Indictment, Alexander Konovolov, aka “NoNe,” and “none_1,” age 35, of Tbilisi, Georgia, was the primary organizer and leader of the GozNym network who controlled more than 41,000 victim computers infected with GozNym malware.  Konovolov assembled the team of cybercriminals charged in the Indictment, in part by recruiting them through the underground online criminal forums.  Marat Kazandjian, aka “phant0m,” age 31, of Kazakhstan and Tbilisi, Georgia, was allegedly Konovolov’s primary assistant and technical administrator.  Konovolov and Kazandjian are being prosecuted in Georgia for their respective roles in the GozNym criminal network. 

Gennady Kapkanov, aka “Hennadiy Kapkanov,” “flux,” “ffhost,” “firestarter,” and “User 41,” age 36, of Poltava, Ukraine, was an administrator of a bulletproof hosting service known by law enforcement and computer security researchers as the “Avalanche” network.  This network provided services to more than 200 cybercriminals, including Konovolov and Kazandjian, and it hosted more than 20 different malware campaigns, including GozNym.  Kapkanov’s apartment in Poltava, Ukraine was searched in November 2016 during a German-led operation to dismantle the network’s servers and other infrastructure.  Kapkanov was arrested for shooting an assault rifle through the door of his apartment at Ukrainian law enforcement officers conducting the search.  Through the coordinated efforts being announced today, Kapkanov is now facing prosecution in Ukraine for his role in providing bulletproof hosting services to the GozNym criminal network.

Alexander Van Hoof, aka “al666,” age 45, of Nikolaev, Ukraine, was a “cash-out” or “drop master” who provided fellow members of the conspiracy with access to bank accounts he controlled that were designated to receive stolen funds from GozNym victims’ online bank accounts.              

Eduard Malanici, aka “JekaProf,” and “procryptgroup, age 32, of Balti, Moldova, provided crypting services to cybercriminals.  Malanici crypted GozNym malware in furtherance of the conspiracy to enable the malware to avoid detection by anti-virus tools and protective software on victims’ computers.  Malanici, along with two associates, is being prosecuted in Moldova.

Victims of the GozNym malware attacks include:

An asphalt and paving business located in New Castle, Pennsylvania;

A law firm located in Washington, DC;

A church located in Southlake, Texas;

An association dedicated to providing recreation programs and other services to persons with disabilities located in Downers Grove, Illinois;

A distributor of neurosurgical and medical equipment headquartered in Freiburg, Germany, with a U.S. subsidiary in Cape Coral, Florida;

A furniture business located in Chula Vista, California;

A provider of electrical safety devices located in Cumberland, Rhode Island;

A contracting business located in Warren, Michigan;

A casino located in Gulfport, Mississippi;

A stud farm located in Midway, Kentucky; and

A law office located in Wellesley, Massachusetts;

Five Russian nationals charged in the Indictment who remain fugitives from justice include:

Vladimir Gorin, aka “Voland,”  “mrv,” and “riddler,” of Orenburg, Russia.  Gorin was a malware developer who oversaw the creation, development, management, and leasing of GozNym malware, including to Alexander Konovolov. 

Konstantin Volchkov, aka “elvi,” age 28, of Moscow, Russia, provided spamming services to cybercriminals.  Volchkov conducted spamming operations of GozNym malware on behalf of the conspiracy.  The spamming operations involved the mass distribution of GozNym malware through “phishing” emails.  The phishing emails were designed to appear legitimate to entice the victim recipients into opening the emails and clicking on a malicious link or attachment, which facilitated the downloading of GozNym onto the victims’ computers. 

Ruslan Katirkin, aka “stratos,” and “xen,” age 31, of Kazan, Russia, resided in Khmelnytskyi, Ukraine, during the time frame of the charged conspiracy.  Katirkin, like Krasimir Nikolov, was a “casher” or “account takeover specialist” who used victims’ stolen online banking credentials captured by GozNym malware to access victims’ online bank accounts and attempt to steal victims’ money through electronic funds transfers into bank accounts controlled by fellow conspirators. 

Viktor Vladimirovich Eremenko, aka “nfcorpi,” age 30, of Stavropol, Russia, and Farkhad Rauf Ogly Manokhin, aka “frusa,” of Volgograd, Russia, were “cash-outs” or “drop masters” on behalf of the GozNym criminal network.  Like Alexander Van Hoof, Eremenko and Manokhin provided fellow members of the conspiracy with access to bank accounts they controlled that were designated to receive stolen funds from GozNym victims’ online bank accounts.  Manokhin was arrested at the request of the United States while visiting Sri Lanka in February 2017.  Following his arrest, Manokhin was released on bail but was required to remain in Sri Lanka pending the outcome of his extradition proceedings to the United States.  In December 2017, Manokhin unlawfully absconded from Sri Lanka and successfully fled back to Russia prior to the conclusion of the extradition proceedings.     

Other agencies and organizations partnering in this effort include the United States Secret Service, the National Cyber-Forensics and Training Alliance (NCFTA) in Pittsburgh and the Shadowserver Foundation.  The Justice Department’s Office of International Affairs provided significant assistance throughout the investigation and spearheaded the efforts to enable the United States to request searches, arrests, and extraditions in the foreign countries as well as the sharing of evidence with those countries through Mutual Legal Assistance Treaty requests.  

The case is being prosecuted by Assistant U.S. Attorney Charles A. “Tod” Eberle, Chief of National Security and Cybercrime for the Western District of Pennsylvania.   

The Justice Department today announced that California Auto Finance, a subprime auto lending company based in Orange County, California, has agreed to enter into a court-enforceable consent order to resolve allegations that it illegally repossessed two servicemembers’ cars without court orders while they were on active duty. The Justice Department filed a lawsuit against California Auto Finance and a related entity called 3rd Generation Inc., on March 28, 2018, alleging that their repossession practices violated the Servicemembers Civil Relief Act (SCRA). Under the proposed consent order, which is still subject to approval by the United States District Court for the Central District of California, California Auto Finance must adopt new repossession policies, pay one servicemember $30,000, which is the highest amount ever recovered by the Department for a single servicemember in an automobile repossession case, and pay a $50,000 civil penalty to the United States.

“This case sends a message to financial institutions, large and small, that they must live up to their obligations to our servicemembers,” said Assistant Attorney General Eric Dreiband. “We will continue to vigorously pursue lenders who fail to take the simple steps necessary to determine, before repossessing a car, whether it belongs to a servicemember. Servicemembers who are going through basic training or another kind of military service should not have to worry that their cars will be repossessed with no court supervision during their time of service to our country.”

“Individuals who take up the call to protect our nation by serving in the armed forces make an enormous sacrifice for us all,” said United States Attorney Nicola T. Hanna. “We have a legal and moral duty to safeguard the rights of our men and women in uniform.  California Auto Finance failed to uphold this duty through its repossession practices. Today’s consent order demonstrates that we will tolerate no abuses of servicemembers’ rights in our district.”

The Justice Department initiated its investigation of California Auto Finance after receiving a complaint in November 2016 from United States Army Private Andrea Starks. The United States alleges that in April 2016, Private Starks notified California Auto Finance that she would be entering the military the following month. Despite this advance notice, California Auto Finance repossessed Private Starks’ vehicle without a court order on May 9, 2016, her first day of military training duty at Fort Leonard Wood, Missouri. At the time of repossession, the vehicle was parked at the home of Private Starks’ grandmother in Cedar Rapids, Iowa.  

The Justice Department’s investigation corroborated Private Starks’ complaint, found that California Auto Finance had no policies related to SCRA compliance, and revealed that California Auto Finance had also violated the SCRA rights of U.S. Army Specialist Omar Martinez. The United States alleges that Specialist Martinez informed California Auto Finance that he would be entering the military, and that he would have limited means of communication during basic training. Nonetheless, California Auto Finance repossessed Specialist Martinez’s vehicle during his first month of military service. The repossession severely damaged Specialist Martinez’s credit, and, as a result, he was unable to purchase a new car. For over a year while living on base at Fort Benning, Georgia, Specialist Martinez had to rely on rideshares and taxis to buy groceries and take care of other personal needs. In March 2018, Specialist Martinez deployed to Afghanistan, where he served until November 2018.   

The proposed consent order requires California Auto Finance to pay $30,000 in compensation to Specialist Martinez, and to take steps to repair his credit. In addition, the proposed consent order requires California Auto Finance to take steps to ensure it does not repossess servicemembers’ cars without court orders in the future. Private Starks reached a private settlement with California Auto Finance before the proposed consent order was filed.

The SCRA protects servicemembers against certain civil proceedings that could affect their legal rights while they are in military service. It requires a court to review and approve any repossession if the servicemember took out the loan and made a payment before entering military service. The court may delay the repossession or require the lender to refund prior payments before repossessing. The court may also appoint an attorney to represent the servicemember, require the lender to post a bond with the court and issue any other orders it deems necessary to protect the servicemember. By failing to obtain court orders before repossessing motor vehicles owned by protected servicemembers, California Auto Finance prevented servicemembers from obtaining a court’s review of whether their repossessions should have been delayed or adjusted to account for their military service.

The Justice Department’s enforcement of the SCRA is conducted by the Civil Rights Division’s Housing and Civil Enforcement Section, often in partnership with United States Attorney’s Offices. Housing and Civil Enforcement Section attorneys worked jointly with the Civil Rights Section within the Civil Division of the United States Attorney’s Office in this action. Since 2011, the Justice Department has obtained over $469 million in monetary relief for over 119,000 servicemembers through its enforcement of the SCRA. The SCRA provides protections for servicemembers in areas such as evictions, rental agreements, security deposits, prepaid rent, civil judicial proceedings, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosures, automobile leases, life insurance, health insurance, and income tax payments. For more information about the Justice Department’s SCRA enforcement, please visit www.servicemembers.gov.

Servicemembers and their dependents who believe that their rights under the SCRA have been violated should contact the nearest Armed Forces Legal Assistance Program Office. Office locations may be found at http://legalassistance.law.af.mil/.

Henry “Enrique” Tarrio, the former national chairman of the Proud Boys, was arrested today following his indictment on conspiracy and other charges related to the breach of the U.S. Capitol on Jan. 6, 2021, which disrupted a joint session of the U.S. Congress that was in the process of ascertaining and counting the electoral votes related to the presidential election.

Tarrio, 38, of Miami, was arrested in Miami and is to make his initial appearance today in the Southern District of Florida. He was named in a superseding indictment returned Monday in the District of Columbia that also includes five previously charged defendants.

Others named in the superseding indictment include Ethan Nordean, 31, of Auburn, Washington; Joseph Biggs, 38, of Ormond Beach, Florida; Zachary Rehl, 36, of Philadelphia; Charles Donohoe, 34, of Kernersville, North Carolina; and Dominic Pezzola, 44, of Rochester, New York. All were previously detained. They earlier pleaded not guilty to charges.

According to court documents, the Proud Boys describes itself as a “pro-Western fraternal organization for men who refuse to apologize for creating the modern world, aka Western Chauvinists.” Through at least Jan. 6, 2021, Tarrio was the national chairman of the organization. In mid-December, Tarrio created a special chapter of the Proud Boys known as the “Ministry of Self Defense.”

As alleged in the indictment, from in or around December 2020, Tarrio and his co-defendants, all of whom were leaders or members of the Ministry of Self Defense, conspired to corruptly obstruct, influence and impede an official proceeding, the certification of the Electoral College vote.  On Jan. 6, the defendants directed, mobilized and led members of the crowd onto the Capitol grounds and into the Capitol, leading to dismantling of metal barricades, destruction of property and assaults on law enforcement.

Although Tarrio is not accused of physically taking part in the breach of the Capitol, the indictment alleges that he led the advance planning and remained in contact with other members of the Proud Boys during their breach of the Capitol. Tarrio was arrested on Jan. 4, 2021, on a warrant charging him in the Superior Court of the District of Columbia with destruction of property in the Dec. 12, 2020, burning of a Black Lives Matter banner. He was released at approximately 5 p.m. on Jan. 5, 2021. As a condition of his release, he was ordered by the court to stay out of Washington.

The indictment alleges that Tarrio nonetheless continued to direct and encourage the Proud Boys prior to and during the events of Jan. 6, 2021, and that he claimed credit for what had happened on social media and in an encrypted chat room during and after the attack.

Tarrio was indicted on one count of each conspiracy to obstruct an official proceeding and obstruction of an official proceeding, as well as two counts each of assaulting, resisting or impeding certain officers and destruction of government property.

This case is being prosecuted by the U.S. Attorney’s Office for the District of Columbia and the Department of Justice National Security Division’s Counterterrorism Section. Valuable assistance was provided by U.S. Attorney’s Office in the Southern District of Florida.

The case is being investigated by the FBI’s Washington and Miami Field Offices. The charges in the investigation are the result of significant cooperation between agents and staff across numerous FBI Field Offices, and law enforcement agencies.

In the 14 months since Jan. 6, more than 775 individuals have been arrested in nearly all 50 states for crimes related to the breach of the U.S. Capitol, including over 245 individuals charged with assaulting or impeding law enforcement. The investigation remains ongoing.

Anyone with tips can call 1-800-CALL-FBI (800-225-5324) or visit tips.fbi.gov.

An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The Justice Department, together with the Federal Trade Commission (FTC), announced today that the United States has resolved a case against Microsoft Corp. regarding its practices for collecting and retaining personal information from children who use Microsoft’s Xbox Live service. The stipulated order issued by the court today requires Microsoft to pay $20 million in civil penalties and imposes injunctive relief to settle allegations that Microsoft violated the Children’s Online Privacy Protection Act (COPPA) and the Children’s Online Privacy Protection Rule (COPPA Rule) in connection with the Xbox Live service, which consumers use to connect online and with others through the Xbox brand of gaming consoles.

In a complaint filed in the U.S. District Court for the Western District of Washington, the United States alleges that Microsoft knew that certain users were children but nonetheless continued to collect personal information, such as telephone numbers, before notifying parents of Microsoft’s information collection practices and before obtaining parental consent. In addition, the complaint alleges that, while Microsoft provided some notice to parents, that notice was incomplete and thus failed to comply with the COPPA Rule’s requirements. Finally, the complaint alleges that in certain instances when children started, but did not complete, creating Xbox Live accounts, Microsoft retained their personal information for longer than permitted by the COPPA Rule.

“It is essential that before collecting children’s personal information, online companies provide complete and timely disclosures about their information collection practices so that parents can make informed decisions,” said Principal Deputy Assistant Attorney General Brian Boynton, head of the Justice Department's Civil Division. “The department and the FTC are committed to ensuring that companies comply with the laws specifically designed to safeguard the privacy of children.”

“This settlement requires Microsoft to clearly communicate with parents about their child’s data and sets up procedures to monitor Microsoft’s compliance with federal statutes regarding children’s online privacy. This work will make children safer online,” said U.S. Attorney Nick Brown for the Western District of Washington. “I commend Microsoft for quickly acknowledging it was illegally collecting and retaining personal data of children younger than 13, and for taking steps to fix the problem.”

“Our proposed order makes it easier for parents to protect their children’s privacy on Xbox, and limits what information Microsoft can collect and retain about kids,” said Director Samuel Levine of the FTC’s Bureau of Consumer Protection. “This action should also make it abundantly clear that kids’ avatars, biometric data, and health information are not exempt from COPPA.”

This matter is being handled by Trial Attorney Katherine M. Ho, Senior Trial Attorney James T. Nelson, and Assistant Director Lisa K. Hsiao of the Civil Division’s Consumer Protection Branch, and Assistant U.S. Attorney Rebecca S. Cohen for the Western District of Washington. Megan Cox and Peder Magee represent the FTC.

For more information about the Consumer Protection Branch and its enforcement efforts, visit its website at www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Northern District of California, visit its website at www.justice.gov/usao-wdwa. For more information about the FTC, visit its website at www.FTC.gov.

The United States has intervened in a lawsuit against the City of Los Angeles and the CRA/LA (formerly the Community Redevelopment Agency of the City of Los Angeles) alleging that they falsely certified compliance with federal accessibility laws in connection with claims submitted to the U.S. Department of Housing and Urban Development (HUD) for housing grants, the Department of Justice announced today. The accessibility laws allegedly violated include Section 504 of the Rehabilitation Act, the Fair Housing Act, and the duty to affirmatively further fair housing, which are meant to ensure that people with disabilities have fair and equal access to public housing.

 

The lawsuit alleges that the City applied for and received from HUD millions of dollars in federal housing funds, a portion of which it provided to the CRA/LA, to develop affordable housing that was accessible for people with disabilities. As recipients of HUD funds, the City and the CRA/LA must comply with the accessibility laws allegedly violated. Among other things, these laws require that five percent of all units in certain federally-assisted multifamily housing be accessible for people with mobility impairments, and an additional two percent be accessible for people with visual and auditory impairments. They also require that the City and the CRA/LA maintain a publicly available list of accessible units and their accessibility features. Likewise, they require that the City and the CRA/LA have a monitoring program in place to ensure people with disabilities are not excluded from participation in, denied the benefits of, or otherwise subjected to discrimination in, federally-assisted housing programs and activities solely on the basis of a disability.

 

The City annually had to certify compliance with Section 504, the Fair Housing Act, and the duty to affirmatively further fair housing as a precondition for receiving HUD funds. The lawsuit alleges that none of the HUD-assisted multifamily housing supported by the CRA/LA, or other developers, met the minimum number of accessible units. The lawsuit also alleges that the City and the CRA/LA neither monitored sub-recipients of HUD funds for compliance with federal accessibility laws nor maintained a publicly-available list of accessible units and their accessibility features.

 

“Recipients of federal housing funds must honor their commitments to accommodate people with disabilities,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Denying people with disabilities equal access to public housing deprives one of the most disadvantaged groups in society of fair housing opportunities.”

 

“This case alleges that the City of Los Angeles repeatedly violated the law by falsely certifying that millions of federal dollars were being used to build housing that included units accessible to people with disabilities,” said Acting U.S. Attorney Sandra R. Brown for the Central District of California. “While people with disabilities struggled to find accessible housing, the city and its agents denied them equal access to housing while falsely certifying the availability of such housing to keep the dollars flowing. The conduct alleged in this case is very troubling because of the impact on people who did not have access to housing that met their needs.”

 

“This case demonstrates the important role whistleblowers play in the process of uncovering waste, fraud, and abuse,” said HUD Inspector General David A. Montoya. “It further displays our commitment to fully pursue allegations that are brought to our attention.”

 

The lawsuit, United States ex rel. Ling, et al. v. City of Los Angeles, et al., No. CV11-00974 (PG), was filed in the U.S. District Court in Los Angeles by Mei Ling, a resident of Los Angeles who uses a wheelchair, and the Fair Housing Council of San Fernando Valley, a nonprofit civil rights advocacy group. The lawsuit was filed under the qui tam or whistleblower provisions of the False Claims Act, which permit private parties to sue on behalf of the United States when they believe that a party has submitted false claims for government funds, and to receive a share of any recovery. The False Claims Act permits the government to intervene in such a lawsuit, as it has done in this case.

 

These matters were investigated by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Central District of California, and the HUD Office of Inspector General.

 

The claims asserted against the City of Los Angeles and the CRA/LA are allegations only; there has been no determination of liability.

 

Evaded More than $8.3 Million in Federal Taxes Over Seven Years

 

A Los Angeles, California businessman was sentenced to 24 months in prison today for hiding more than $23.5 million in offshore bank accounts, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.

 

According to court documents, Masud Sarshar, a U.S. citizen, maintained several undeclared bank accounts at Bank Leumi and two other Israeli banks, both in his name and in the names of entities that he created. Sarshar owned and operated Apparel Limited Inc., a business that designed, manufactured and sold clothing and other apparel. For decades, with the assistance of at least two relationship managers from Bank Leumi and a second Israeli bank (Israeli Bank A), Sarshar hid tens of millions of dollars in assets in these accounts in an effort to conceal income and obstruct the Internal Revenue Service (IRS). Between 2006 and 2009, Sarshar diverted more than $21 million in untaxed gross business income to those undeclared accounts and earned more than $2.5 million in interest income from the funds. Sarshar reported none of this income on his 2006 through 2012 individual and corporate tax returns. He also filed false Reports of Foreign Bank and Financial Accounts, commonly known as FBARs, with the U.S. Department of Treasury on which he omitted his ownership and control of these offshore accounts.

 

“Masud Sarshar used every trick to avoid paying his taxes: he moved his money from foreign bank to foreign bank; switched passports and had his statements smuggled to the United States on a thumb drive secreted in the necklace of a bank manager,” said Acting Deputy Assistant Attorney General Goldberg. “He even tapped the funds in his offshore accounts through financial maneuvers that he thought would not leave a paper trail. However, Sarshar found out today -- with the imposition of a two-year prison sentence -- that secret foreign bank accounts can no longer be safely hidden from the Department of Justice and the IRS.”

 

“Mr. Sarshar’s conduct was both egregious and staggering,” said Chief Richard Weber of IRS Criminal Investigation. “He knew the laws and purposefully hid his income to avoid paying taxes, cheating not only the U.S. government, but other law abiding tax payers who uphold their tax obligations. Hiding income in offshore banks is not tax planning, it’s fraud.”

 

Sarshar’s relationship managers at Israeli Bank A (RM1) and Bank Leumi (RM2) visited him frequently in Los Angeles. At Sarshar’s request, neither bank sent him his account statements by mail. Instead, RM1 and RM2 provided Sarshar with his account information in person. RM2 concealed Sarshar’s account statements on a USB drive hidden in a necklace that she wore when she visited Sarshar in the United States. Sarshar’s meetings with RM1 sometimes occurred in Sarshar’s car. RM1 and RM2 used their visits to offer Sarshar other bank products, including “back-to-back” loans. Through back-to-back loans, which Bank Leumi made to Sarshar through its branch in the United States and which Sarshar collateralized with funds from his account at Israeli Bank A, Sarshar was able to bring back to the United States approximately $19 million of his assets without creating a paper trail or otherwise disclosing the existence of the offshore accounts to U.S. authorities. At the direction of RM1 and RM2, Sarshar also obtained Israeli and Iranian passports in an effort to avoid being flagged as a U.S. citizen by the banks’ compliance departments. The banks still flagged Sarshar as a U.S. citizen after Sarshar received these two passports, so RM1 and RM2 advised him to transfer his remaining funds from Israeli Bank A to Israeli Bank B, which Sarshar did in late 2011. In addition, with the help of someone identified as Individual 1, Sarshar transferred approximately $5.8 million from his Bank Leumi accounts to an account at Hong Kong Bank A, which Individual 1 then helped transfer to Sarshar in the United States, disguising it as a loan to Apparel Limited.

 

In addition to the term of prison imposed, Sarshar was ordered to serve three years of supervised release and to pay more than $8.3 million in restitution to the IRS, plus interest and penalties. Sarshar also agreed to pay an FBAR penalty of more than $18.2 million for failing to report his Israeli bank accounts.

 

Acting Deputy Assistant Attorney General Goldberg commended special agents of IRS-Criminal Investigation, who conducted the investigation, and Assistant Chief Tino M. Lisella and Trial Attorney Timothy M. Russo of the Tax Division, who prosecuted the case. Acting Deputy Assistant Attorney General Goldberg also thanked the U.S. Attorney’s Office for the Central District of California for their substantial assistance in the case.

 

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