Tacoma - A 37-year-old former military spouse was sentenced today in U.S. District Court in Tacoma to 12 years in prison for attempted enticement of a minor, announced U.S. Attorney Nick Brown. Jonathan David Carpenter was arrested in September 2018. In April of 2022, Carpenter pleaded guilty, admitting not only the attempted enticement, but also that prosecutors would be able to prove that he sexually assaulted two children under the age of 12 who had been left in his care. At Sentencing U.S. District Judge Robert J. Bryan said, “There is no doubt what happened here requires a serious sentence.”
“Mr. Carpenter impersonated a child in text messages, to try to get 12-year-olds to send him nude photos for his sexual gratification,” said U.S. Attorney Nick Brown. “This sentence also recognizes the significant evidence that he sexually assaulted children, as young as 7, who were left in his care. The prison term, the supervised release, and the fact that he will be a registered sex offender is designed to protect the community for as long as possible.”
According to records filed in the case in 2018, two children disclosed that they had been sexually assaulted by Carpenter when they were left in his care. The investigation revealed that Carpenter had taken the cell phone of one of the children, and posing as that child, texted three of the child’s friends asking for nude photos. None of the children sent photos. One child reported Carpenter’s conduct to a counselor at school. That report triggered the investigation.
Speaking to the court at sentencing, Assistant United States Attorney Kristine Foerster said, “Here we have a pattern of victimizing children… Children that are particularly vulnerable…. He used extreme cruelty in these rapes… He irrevocably changed these children’s lives.”
In addition to the prison time, Carpenter will be on supervised release for 20 years following prison and will be required to register as a sex offender.
The case was investigated by the FBI and the Army (CID).
The case was prosecuted by Assistant United States Attorneys Kristine Foerster, Laura Harmon, and Grady Leupold.
SUNG HONG, 45, and HYUN JOO HONG, 41, a Clyde Hill, Washington couple were arrested this morning on federal charges they defrauded multiple clients out of hundreds of thousands of dollars, announced U.S. Attorney Annette L. Hayes. SUNG HONG, aka LAURENCE HONG or LAWRENCE HONG, and his wife, HYUN JOO HONG, aka GRACE HONG, held themselves out as experienced investment advisors with a track record of performance in order to solicit investor funds for their hedge fund, Pishon Holdings, and for management through separately managed accounts. Authorities are still assessing the total amount of fraud in the case, but since 2011, the HONGs have solicited several million dollars in investor funds from numerous clients, and the losses to just three victims exceed $500,000. The HONGs will make their initial appearance in U.S. District Court in Seattle at 2:00 today.
According to records filed in the case, the HONGs recruited investors using religious organizations and shared religious beliefs. The couple claimed that LAURENCE HONG privately invests money for wealthy Korean families and that GRACE HONG holds a Series 65 securities license and previously worked for a large international investment firm. None of these statements appear to be true. Nor was LAURENCE HONG’s past history disclosed. The couple sent potential customers misleading and false investment prospectuses that contained an inaccurate record of their past investment performance and other plagiarized investment outlooks. They further misled investors as to the advisor fees they would charge and the amount of their funds that would be at risk.
The HONGs used investor funds for their own benefit. One church in California invested $1 million with the HONGs and lost about $300,000 on a single trade. Still, despite the steep losses and a fee arrangement based on investment gains, the HONGs withdrew almost $150,000, ostensibly as advisor fees, from the church’s account. Another couple allowed the HONGs to manage their $180,000 in retirement funds only to lose $100,000 within less than a year. After meeting with the HONGs, that couple then invested their remaining retirement funds in the HONGs’ hedge fund, only for those funds to be redirected into GRACE HONG’s personal account. The HONGs used those funds to pay credit card bills and other personal expenses, including a $16,000 payment to a resort in the Bahamas for a HONG family vacation.
Investigators have identified over $2 million in additional losses in several other investor accounts managed by the HONGs. The financial investigation to date has revealed investor money was used to pay for the HONGs’ extravagant lifestyle, which included a 9,000 square foot rental home in Clyde Hill; a 45-foot yacht; multiple high-end vehicles, such as BMWs, a Maserati, and a Lamborghini; and lavish vacations.
The FBI is investigating the case and is still determining the number of victims and the amount of fraud loss. Those who believe they have information about this case, please contact seattle.fbi@fbi.gov or call 206-622-0460.
The charges contained in the complaint are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.
Wire fraud is punishable by up to 20 years in prison.
The case is being prosecuted by Assistant United States Attorneys Justin Arnold and Steven Masada.
A Bellevue developer who fraudulently obtained over $235 million dollars during his real estate investment scheme, including over $140 million from immigrant investors, was sentenced today in U.S. District Court in Seattle to four years in prison, announced U.S. Attorney Annette L. Hayes. LOBSANG DARGEY, 43, entered guilty pleas in January 2017 to two federal felonies, admitting that he defrauded immigrant investors, federal regulators, and institutional investors. DARGEY promised to use the immigrant investors’ investment funds in compliance with a federal immigration program designed to stimulate growth and create jobs. Instead, he secretly diverted tens of millions of dollars of investor funds to unauthorized uses and used falsified financial records in an attempt to obtain additional funding to make up the shortfall. At the sentencing hearing, U. S. District Judge Robert S. Lasnik said DARGEY engaged in “reckless behavior . . . putting these people in jeopardy of never achieving their immigration dreams.”
“This defendant stole not just money but something that he knew from personal experience was much more valuable – the right to come to the United States and live the American dream,” said U. S. Attorney Annette L. Hayes. “Many of the investors that the defendant defrauded sold everything they had in China in reliance on his promises. They now live in limbo – with their money tied up in litigation and no idea of whether their dream to live in this country will come true.”
According to records filed in the case, between 2012 and 2015, DARGEY recruited overseas investors, primarily in China, to fund two development projects – one in Everett, Washington known as the “Path American Farmer’s Market” and one in Seattle’s Belltown neighborhood known as the “Potala Tower.” DARGEY promoted the projects under the federal “EB-5” program, which allows immigrant investors to qualify for permanent residency if they create American jobs by investing $500,000 in a qualifying American business project. DARGEY represented to the immigrant investors and to the U.S. Department of Homeland Security that he was investing all of investors’ funds in the Everett and Seattle projects in compliance with program requirements.
Contrary to his promises, DARGEY used tens of millions of investor dollars for uses not allowed under the federal program and not disclosed to investors. This included approximately $11.5 million of investor funds that DARGEY secretly used to pay unauthorized sales expenses, including sales commissions to Asian brokers. The money also went for lavish meals, expensive gifts, and cash withdrawals at casinos, and the purchase of a $1.4 million Bellevue home for a DARGEY business associate. DARGEY withdrew over $10 million in investor funds from the project as developer fees to fund his lavish lifestyle, including his purchase of a $2.5 million home in Bellevue.
In addition, DARGEY told investors and the United States government that DARGEY would contribute $32.5 million of his own money toward the projects. In fact, DARGEY admitted that he did not contribute any funds to the projects. DARGEY’s fraud resulted in tens of millions of dollars in funding shortfalls for the EB-5 approved projects. DARGEY attempted to fill these shortfalls by using a falsified bank statement to obtain a $25 million construction loan, and by using altered financial statements to obtain $60 million in additional funding from a private institutional investor.
Of the 281 foreign investors defrauded by DARGEY, none has received permanent resident status in the United States. A majority of the investors have had their applications denied because of DARGEY’s fraud, and are appealing the denials. Some wrote to the court explaining the damage DARGEY’s conduct caused:
Investor Y.Y. wrote: In order to provide our children with better lives and study environments, we sold our one and only real estate so as to accumulate money for the American EB-5 investment immigration [program]…. Lobsang’s illegal behavior has destroyed our immigration dream.
Investor Y.W. wrote: Many younger investors like me had to dramatically alter their life path. Some adults were forced to return to China without finishing their college degree.
Investor Z.C. wrote: “…because of defendant’s illegal behavior, it led us to live in fear and suffer huge mental damage because our lives can be cancelled at any moment…. My wife is so afraid that she dares not pick up the mail for fear of receiving a deportation notification.”
“Mr. Dargey’s selfish greed twice robbed his investors as he seized both their funds and jeopardized their dreams for a future life in the United States,” said Acting Director of U.S. Citizenship and Immigration Services James McCament. “We are grateful to our many law enforcement partners who helped to deliver justice in this case and uphold the integrity of the EB-5 Program.”
U.S. Citizenship and Immigration Services administers the EB-5 Program. Under this program, entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for permanent residence if they make the required investment in a commercial enterprise in the United States and plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers.
DARGEY’s fraudulent conduct came to an end in August 2015, when the Securities and Exchange Commission filed a civil suit and won a court order freezing his assets. The FBI simultaneously executed search warrants at DARGEY’s offices in Bellevue and Everett.
As part of his plea agreement in this case, DARGEY agreed to provide restitution of more than $24 million to the investors.
The case was investigated by the FBI and is being prosecuted by Assistant United States Attorneys Justin Arnold and Seth Wilkinson. The Department of Justice appreciates the assistance of the Securities and Exchange Commission and U.S. Citizenship and Immigration Services in connection with this matter.
Seattle – A 42-year-old Las Vegas man, who previously lived in Bellevue, Washington, is facing a 25-count indictment charging him with wire fraud and securities fraud, announced U.S. Attorney Nick Brown. Justin Costello allegedly victimized marijuana business owners, private investors and investors who purchased stock over-the-counter. The Securities and Exchange Commission also filed a civil suit against Costello today.
“Mr. Costello allegedly told many tall tales to convince victims to invest millions of dollars -- money he then used for his own benefit,” said U.S. Attorney Nick Brown. “In a complex scheme involving shell companies, penny stocks, and financial services for marijuana businesses, Mr. Costello used Twitter, press releases, securities filings, and claims of great wealth to paint a picture of fabulous financial success. In truth that picture was a mirage.”
According to the indictment, in 2017 Costello owned and operated a company called Pacific Banking Corp that provided banking services to marijuana businesses in Washington, Colorado, California, Illinois, and Alaska. Between 2019 and 2021, Costello allegedly diverted money from three marijuana business to benefit himself and his companies. The diversions were contrary to the promises he had made to the marijuana businesses. The three marijuana businesses lost about $3.7 million.
As part of his scheme, Costello purchased two companies that were trading for pennies on the over-the-counter market and renamed them GRN Holding Corporation and Hempstract Inc. Costello also recruited investors in these companies, allegedly making numerous false statements about the size and success of his marijuana banking business. Costello told potential private investors several falsehoods – that he had an MBA from Harvard, that he had served in the military and had done two tours in Iraq and had been wounded twice, that he was a billionaire, that he had 14 years of experience on Wall Street and that GRN Funds LLC, a private equity and hedge fund he owned, had over $1 billion in assets under management. None of that is true.
With these falsehoods, Costello convinced various investors across the country to invest in his companies. One deceived couple provided Costello with more than $2 million for shares in companies that he controlled. Additionally, they opened a $4 million TD Ameritrade account at Costello’s direction and provided him with the passwords that allowed him to trade in their account. Costello allegedly used the account to purchase the penny stock of companies he controlled driving up the share price to enrich himself.
Costello used the same lies with other investors and allegedly used investor funds for his own expenses. For example, Costello used at least $42,000 of investor money for personal expenses include costs associated with his wedding. In all, some 29 investors invested directly with Costello and lost $6 million because they relied on Costello’s false representations.
In 2019, Costello’s entity GRN Funds, LLC purchased the outstanding shares of Discovery Gold Corp., changing the name to GRN Holding Corp. In SEC filings about the purchase Costello lied repeatedly about his background, education, and the financial success of the LLC. In various filings with the SEC, and in press releases, Costello lied about GRN Holding Corp’s possible acquisition of other companies and revenue – causing the share price to increase. From December 2019 and into January and February 2020, Costello directed others to issue ten press releases about acquiring other companies. None of the acquisitions occurred even though Costello controlled these other companies. Between July 2019 and May 2021, 7,500 investors lost about $25 million after purchasing and selling GRN Holding Corp stock.
Finally, between October 2019, and January 2021, Costello hired an unindicted coconspirator to use Twitter in a pump and dump stock scheme. Costello would acquire the penny stock of a company and then instruct his prolific Twitter user to tweet falsehoods about the company that would drive up the stock price. The coconspirator would tweet about the stock as often as 90 times a day. In one instance Costello didn’t just use Twitter, he also instructed some of his “investors” to purchase stock in the company, driving the share price from a nickel to $2 per share. After driving the share price up, Costello sold the shares for a profit of more than $355,000. The prolific Twitter user was given a share of Costello’s profits from the pump and dump scheme. In all Costello made $576,466 in the pump and dump scheme.
The charges contained in the indictment are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.
Wire fraud is punishable by up to 20 years in prison and fine of $250,000 or twice the gain the Costello or the loss to the victims of his offenses. Securities Fraud is punishable by up to 20 years in prison and a $5,000,000 fine.
The case was investigated by the FBI. If you have information, or believe you were a victim in this fraud, please email: CostelloFraud@fbi.gov.
The SEC conducted their own separate investigation.
The case is being prosecuted by Assistant United States Attorney Justin Arnold and Michael Dion.
Seattle – A 48-year-old citizen of Romania, who has no legal status in the U.S., was indicted this week for thirteen federal crimes for his attempt to smuggle six other Romanian nationals into the U.S., announced Acting U.S. Attorney Tessa M. Gorman. Ionel Niculae, aka Adrian Dumitrescu, was taken into custody near Lynden, Washington, at an accident scene where the car he was driving flipped over, badly injuring three passengers.
“We are responding to an increase in dangerous smuggling events on our northern border,” said Acting U.S. Attorney Tessa M. Gorman. “This case illustrates how these illegal smuggling efforts endanger not only those being smuggled into the U.S., but also others traveling near the border. The driver who was hit by the fleeing SUV was injured and is still recovering from the crash.”
“We have seen an uptick in the number of human smuggling events here in Washington State along our northern border with Canada,” said Special Agent in Charge (SAC) Robert Hammer, who oversees HSI operations in the Pacific Northwest. “HSI will continue to prioritize investigations into these organizations using dangerous tactics that jeopardize not only the lives of the individuals being smuggled, but also the lives of those in our communities who may be in danger by this reckless behavior.”
The indictment charges Niculae with one count of improper entry by an undocumented individual, three counts of bringing an undocumented individual into the United States at a place other than a designated Port of Entry and causing serious bodily injury, three counts of bringing an undocumented individual into the United States at a place other than a designated Port of Entry, and six counts of aiding and abetting the improper entry of an undocumented individual.
According to the criminal complaint, the Jeep Niculae was driving was seen crossing into Canada illegally three days before the September 17, 2023, accident. On the day of the crash, Canadian Border officers obtained images of the Jeep traveling near the Canada/U.S. Border and, moments later, a camera on the U.S. side picked up images of the Jeep crossing the border via some agricultural fields near Lynden.
Border Patrol agents set out to find the Jeep and were quickly alerted by the Sumas Police Department that the Jeep was involved in a crash with another SUV. The Jeep had flipped and three of the six passengers in the car had broken bones – two had broken pelvises and one had a broken leg. Niculae was not injured.
“Due to the exceptional vigilance and response of our Border Patrol Agents, Blaine Sector agents were able to assist with the accident scene and link the accident to a recent vehicle that illegally crossed the border smuggling several Romanian citizens. Events like this highlight the disregard smugglers have for human life,” said Chief Rosario Vasquez, Blaine Sector Chief Patrol Agent.
None of the people in the Jeep were legally present in the United States. Niculae possessed drivers licenses for both Washington and California and appears to have been residing in Southern California. He has been detained at the Federal Detention Center at SeaTac since being charged by criminal complaint on September 20, 2023.
Bringing an undocumented individual into the U.S. at a place other than a designated Port of Entry resulting in serious bodily injury is punishable by up to 20 years in prison. Bringing an undocumented individual into the U.S. at a place other than a designated Port of Entry is punishable by up to ten years in prison. Aiding and abetting improper entry by an undocumented individual is punishable by up to six months in prison.
The case is being investigated by Homeland Security Investigations (HSI) and U.S. Border Patrol with assistance from the Washington State Patrol and Sumas Police Department.
The case is being prosecuted by Assistant United States Attorney Sanaa Nagi.
Seattle - The suspect in the theft of nearly 40 firearms from two different gun stores was sentenced today in U.S. District Court in Seattle to 58 months in prison for two counts of theft of firearms from a federal firearms licensee, announced U.S. Attorney Brian T. Moran. JOEY A. MAILLET, 39, pleaded guilty in February 2020. At the sentencing hearing, U.S. District Judge Richard A. Jones ordered MAILLET to serve three years of supervised release following the prison term.
In May 2019, MAILLET was identified as the suspect in the April 13, 2019, burglary of Fred’s Guns in Sequim, Clallam County, and in the May 3, 2019, burglary of All American Armory in Bow, Skagit County. According to records filed in the case, forensic evidence, including blood and fingerprints, as well as surveillance video, link MAILLET to the crimes. In Sequim, MAILLET used a backhoe to ram the doors of the store and then broke glass display cases to steal 26 firearms. MAILLET cut his arm on the glass case and left blood and fingerprints at that scene. At All American Armory in Bow, surveillance video showed MAILLET used a stolen pick-up truck to back into the doors of the store, shattering them. MAILLET then used a garbage can, stolen from the neighboring post office, to load up 13 rifles from the store and drove away with them in the stolen pick-up.
The pick-up truck was ultimately found abandoned in Birch Bay State Park in Whatcom County, Washington. Shattered glass was in the truck bed, as well as a stolen boat motor and battery. The truck was reported stolen from an agricultural operation not far from the Bow gun store, and the boat motor and battery were reported stolen by a resident of Ferndale, Washington.
On May 10, 2019, a Ferndale Police Officer encountered MAILLET and arrested him on an outstanding warrant for an Everett, Washington, burglary. After obtaining a court-authorized search warrant, investigators determined items in MAILLET’s backpack linked him to the thefts at the Bow gun store. Additionally, video from the boat motor and battery theft clearly showed MAILLET was the thief.
As for the status of the guns, prosecutors noted in their sentencing memo: “To date, seven of the handguns have been recovered by law enforcement agencies in Canada. The government does not have the full information about these recoveries, but is aware that one was recovered from a woman arrested for theft in Vancouver, BC, and another was recovered from two men arrested in Calgary, AB, with about 250 fentanyl pills and several grams of methamphetamine.” None of the rifles taken in the Bow gun store burglary have been recovered.
Under the terms of the plea agreement, MAILLET is to pay restitution to both stores for the damages to the buildings and the value of the guns. MAILLET is also responsible for damages to the businesses from which he stole the truck and backhoe used in the burglaries. He also will pay restitution to the owner of the stolen boat motor and battery.
At the sentencing hearing, the owners of Fred’s Guns told the judge the burglary had severely impacted their business and their family’s sense of security and wellbeing.
The case was investigated by the Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF), with assistance from the Clallam County Sheriff’s Office, Sequim Police Department, Washington State Patrol, Skagit County Sheriff’s Office, Ferndale Police Department, and Washington State Parks Rangers.
The case is being prosecuted by Assistant United States Attorney Erin H. Becker.
Seattle – U.S. Attorney Nick Brown has named two veteran Assistant United States Attorneys to lead the Western District of Washington Environmental Justice Initiative. Criminal AUSA Seth Wilkinson and Civil AUSA Kayla Stahman will lead the district efforts on environmental prosecutions and civil enforcement.
“Both these attorneys have deep experience not only with investigating and prosecuting environmental crimes, but with the Affirmative Civil Enforcement the Justice Department uses to hold companies accountable for their conduct,” said U.S. Attorney Nick Brown. “As we look at issues surrounding Environmental Justice in disadvantaged communities, it will take all our tools, civil and criminal, to make positive change and protect our fragile Northwest environment.”
For example, AUSA Wilkinson previously prosecuted the CEOs of Total Reclaim, the Northwest’s largest electronics recycler, for secretly exporting mercury-laden electronics to Hong Kong, potentially exposing local workers and residents to toxic material. AUSA Wilkinson is currently prosecuting the owners of a Washington company for removing federally-required emissions control devices from diesel vehicles in violation of the Clean Air Act.
AUSA Stahman has handled a variety of affirmative civil litigation from protecting the elderly from financial scams to holding medical labs accountable for overbilling government programs and accepting kickbacks.
AUSAs Wilkinson and Stahman recently coordinated the civil and criminal prosecution related to steel that did not meet military requirements being sold to the Navy. Coordinating the civil settlement as well as the criminal case required the close coordination that will now be brought to the environmental justice work of the U.S. Attorney’s Office.
The district’s Environmental Justice Coordinators will lead efforts to enforce environmental laws, including the Clean Air Act, Clean Water Act, and hazardous waste laws. An intentional decision to violate these laws may be a federal crime. For example, intentionally discharging pollutants into a river without a permit, or bypassing a required pollution control device, is a criminal act that carries the possibility of incarceration and monetary fines.
The district’s Environmental Justice Coordinators also will lead efforts to remedy environmental violations and contaminations by pursuing actions under the civil rights laws, worker safety and consumer protection statutes, and the False Claims Act. For example, a federal contractor who violates a contractual provision mandating the proper disposal of hazardous waste may be subject to liability under the False Claims Act; a landlord who leases a home without disclosing known information about lead-based paint may violate federal lead disclosure rules.
Other examples of civil or criminal environmental misconduct include:
Air emissions of toxic pollutants resulting from inadequate or nonexistent pollution control
Illegal asbestos removals that expose and create health risks for workers and the public
Illegal discharges into waters or sewer systems that threaten public safety and cause damage to our water infrastructure
Illegal handling, transportation, and disposal of hazardous wastes and pesticides
Oil spills or other incidents that compromise the fishing rights or practices of indigenous or disadvantaged communities
False statements to the EPA or other regulatory agencies that threaten the integrity of environmental protection programs
More information about the environmental justice initiative is on our website.
If you suspect an environmental violation report it to the Environmental Protection Agency.
WASHINGTON – Massachusetts-based DUSA Pharmaceuticals Inc. (DUSA), a subsidiary of Sun Pharmaceutical Industries Inc. (Sun Pharma), has agreed to pay the United States $20.75 million to resolve allegations that DUSA caused physicians to submit false claims to Medicare and the Federal Employee Health Benefit Program (FEHBP) by knowingly promoting an administration process for the drug Levulan Kerastick that contradicted the product instructions approved by the U.S. Food and Drug Administration (FDA) and was unsupported by sufficient clinical evidence.
“The department is committed to protecting taxpayer-supported health care programs from fraud and abuse,” said Acting Assistant Attorney General Ethan P. Davis for the Justice Department’s Civil Division. “We will hold drug manufacturers accountable when they knowingly promote ineffective uses of their products that undermine patient care or waste program funds.”
“While this scheme to provide false instructions on the use of its product may have resulted in more sales and bigger profits, it also meant customers endured the frustration of being repeatedly subjected to less effective treatments to try to get their skin lesions to clear,” said U.S. Attorney Brian T. Moran for the Western District of Washington. “This investigation seeks to restore money to taxpayers and discourage those who put profits over effective treatment.”
“Drug makers that push the inappropriate use of their products undermine the health of patients and the financial integrity of federal health care programs, said Special Agent in Charge Steven J. Ryan of the U.S. Department of Health and Human Services Office of Inspector General. “Our oversight agency, working closely with our law enforcement partners, will continue to thoroughly investigate those who engage in such schemes.”
“The OPM OIG will always seek to hold accountable those prioritizing profits over patient health and safety,” said Norbert E. Vint, Deputy Inspector General Performing the Duties of the Inspector General, Office of Personnel Management (OPM) OIG. “This settlement demonstrates the commitment of our investigative staff and partners at the Department of Justice to combat health care fraud against the FEHBP.”
Levulan Kerastick is a prescription topical solution approved by the United States Food and Drug Administration (FDA) for the treatment of minimally to moderately thick actinic keratosis (AKs) of the face or scalp. At all relevant times, the “Dosage and Administration” section of the drug’s FDA-approved instructions described a two-stage process involving application of the topical solution to the target lesions and then, following an incubation period of 14 to 18 hours, illumination of the target lesion with blue light.
The United States alleged that, by January 2014, senior management at both DUSA and Sun Pharma knew that administration of Levulan Kerastick employing short incubation periods ranging from one to three hours resulted in AK clearance rates significantly lower than those achieved in clinical trials using 14 to 18-hour incubation. Nonetheless, between January 2014 and December 2016, DUSA allegedly encouraged physicians to use these demonstrably less effective short incubation periods by using, among other things, paid physician speaker programs, paid physician peer-to-peer discussions, promotion by DUSA’s sales force, and the dissemination of incomplete or misleading responses to questions from prescribing doctors. The department further alleged that DUSA failed to inform physicians that administering the drug using short incubation periods resulted in significantly lower AK clearance rates than achieved with the longer incubation period described in the FDA-approved instructions, and, in some instances, the company falsely stated that AK clearance rates were the same for the shorter and less effective incubation periods.
As part of the settlement, DUSA and its parent company, Sun Pharma, have agreed to enter into a Corporate Integrity Agreement with HHS-OIG. That agreement provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to this matter.
The settlement with DUSA 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 Aaron Chung, who formerly worked for DUSA as a sales representative. As part of today’s resolution, Chung will receive approximately $3.5 million.
The settlement with DUSA was the result of a coordinated effort among the U.S. Attorney’s Office for the Western District of Washington and the Commercial Litigation Branch (Fraud Section) of the Justice Department’s Civil Division, with assistance from HHS’ Office of Counsel to the Inspector General, FDA’s Office of Chief Counsel, and HHS’ Office of General Counsel.
The settlement was handled by Assistant United States Attorneys Kayla Stahman for U.S. Attorney’s Office, Western District of Washington and Breanna Peterson of DOJ’s Civil Division Commercial Litigation Branch.
The claims resolved by this settlement are allegations only, and there has been no determination of liability. The lawsuit is captioned United States of America ex rel. Chung v. DUSA Pharmaceuticals, Inc., No. 16 cv 1614-JLR.
SEATTLE – Binance Holdings Limited (Binance), the entity that operates the world’s largest cryptocurrency exchange, Binance.com, pleaded guilty today and has agreed to pay over $4 billion to resolve the Justice Department’s investigation into violations related to the Bank Secrecy Act (BSA), failure to register as a money transmitting business, and the International Emergency Economic Powers Act (IEEPA).
Binance’s founder and chief executive officer (CEO), Changpeng Zhao, a Canadian national, also pleaded guilty to failing to maintain an effective anti-money laundering (AML) program, in violation of the BSA and has resigned as CEO of Binance.
Binance’s guilty plea is part of coordinated resolutions with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) and the U.S. Commodity Futures Trading Commission (CFTC).
“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed – now it is paying one of the largest corporate penalties in U.S. history,” said Attorney General Merrick B. Garland. “In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases. The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.”
“Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,” said Secretary of the Treasury Janet L. Yellen. “Today’s historic penalties and monitorship to ensure compliance with U.S. law and regulations mark a milestone for the virtual currency industry. Any institution, wherever located, that wants to reap the benefits of the U.S. financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime or face the consequences.”
“A corporate strategy that puts profits over compliance isn’t a path to riches; it’s a path to federal prosecution,” said Deputy Attorney General Lisa O. Monaco. “Today’s charges and guilty pleas – combined with a more than $4 billion financial penalty – sends an unmistakable message to crypto and defi companies: if you serve U.S. customers, you must obey U.S. law.”
“Changpeng Zhao made Binance, the company he founded and ran as CEO, into the largest cryptocurrency exchange in the world by targeting U.S. customers, but refused to comply with U.S. law,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division. “Binance’s and Zhao’s willful violations of anti-money laundering and sanctions laws threatened the U.S. financial system and our national security, and each of them has now pleaded guilty. Make no mistake: when you place profits over compliance with the law, you will answer for your crimes in the United States.”
“Binance’s crimes gave sanctioned customers unfettered access to American capital and financial services,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division (NSD). “This prosecution is a warning that companies that do not build sanctions compliance into their services face serious criminal penalties, as do the executives who lead them.”
“From the beginning of its existence, Binance and founder Changpeng Zhao chose growth and personal wealth over following financial regulations aimed at stopping the laundering of criminal cash,” said Acting U.S. Attorney Tessa M. Gorman for the Western District of Washington. “Because Changpeng Zhao knowingly operated a financial platform without basic anti-money laundering safeguards, the company caused illegal transactions between U.S. users and users in sanctioned jurisdictions such as Iran, Cuba, Syria, and Russian-occupied regions of Ukraine – transactions for which Binance profited with significant fees.”
“Binance’s activities undermined the foundation of safe and sound financial markets by intentionally avoiding basic, fundamental obligations that apply to exchanges, all the while collecting approximately $1.35 billion in trading fees from U.S. customers,” said Chairman Rostin Behnam of the Commodity Futures Trading Commission (CFTC). “American investors, small and large, have demonstrated eagerness to incorporate digital asset products into their portfolios. It is our duty to ensure that when they do so, the full protections afforded by our regulatory oversight are in place, and that illegal and illicit conduct is swiftly addressed. When, as here, an entity goes even further, deliberately avoiding to employ meaningful access controls, intentionally avoiding knowing customers’ identities, and actively concealing the presence of U.S. customers on its platforms, there is no question that the CFTC will strike hard and aggressively.”
“When you put growth above compliance, you end up in hot water,” said Chief Jim Lee of the IRS Criminal Investigation (IRS-CI). “Our team of investigators uncovered that Binance disregarded anti-money laundering Know Your Customer laws, failed to register as a money transmitter, and willfully violated U.S. sanctions tied to the International Emergency Economic Powers Act. When you do so, your business becomes a playground for bad actors. Hundreds of millions of dollars in illicit proceeds from ransomware variants, darknet transactions, and various internet-related scams moved through Binance in an attempt to evade detection by law enforcement.”
According to court documents, Binance admitted to prioritizing growth and profits over compliance with U.S. law. Binance launched in 2017 and focused on attracting high-volume customers, including U.S.-based customers. Binance quickly became the largest cryptocurrency exchange in the world, with the greatest share of its customers coming from the United States. As a result of serving U.S. customers, Binance was required to register with FinCEN as a money services business and to implement an effective AML program that was reasonably designed to prevent Binance from being used to facilitate money laundering. Binance chose not to comply with U.S. law and failed to implement controls and procedures to prevent money laundering. Binance also did not implement controls that would have prevented U.S. customers from conducting transactions with customers in sanctioned jurisdictions, despite knowing that the system it used to match customers for transactions would necessarily cause transactions in violation of IEEPA.
Instead of complying with U.S. law, in 2019, Binance announced that it would block U.S. customers and launched a separate U.S. exchange, Binance.US. Despite this announcement, Binance took steps to maintain a substantial number of U.S. customers. In particular, Binance focused on retaining valuable “VIP” customers, which were responsible for a large portion of Binance’s trading volume and revenue. These VIP customers were critical to Binance’s business because they helped provide the necessary liquidity to facilitate trades of digital assets. For example, Binance executives, including Zhao, made a plan to contact VIP customers and help the VIP register a new account for an offshore entity and transfer holdings to that account. Binance employees also called U.S. VIPs to encourage them to provide information that suggested the customer was not located in the United States.
Binance also did not implement the core components of an effective AML program: Binance did not implement comprehensive know-your-customer (KYC) protocols or systematically monitor transactions, and Binance never filed a suspicious activity report (SAR) with FinCEN. For years, Binance allowed users to open accounts and trade without submitting any identifying information beyond an email address. Binance began requiring all users to provide KYC information in August 2021 but allowed users who had not provided KYC to continue trading on the exchange until May 2022. Between August 2017 and October 2022, U.S. users, including VIPs, conducted trillions of dollars in transactions on the platform, generating over $1.6 billion in profit for Binance.
As Binance’s internal communications showed, Binance’s compliance employees recognized that Binance did not have protocols to flag or report transactions for money laundering risks, which employees recognized would attract criminals to the exchange. As one compliance employee wrote, “we need a banner ‘is washing drug money too hard these days - come to binance we got cake for you.’” Due in part to Binance’s failure to implement an effective AML program, illicit actors used Binance’s exchange in various ways, including conducting transactions for mixing services that obfuscated the source and ownership of cryptocurrency; transferring illicit proceeds from ransomware variants; and moving proceeds of darknet market transactions, exchange hacks, and various internet-related scams.
Binance also knew that U.S. sanctions laws prohibited U.S. persons – including its U.S. customers – from trading with its customers subject to U.S. sanctions, including customers in comprehensively sanctioned jurisdictions, such as Iran. Binance knew that it had a significant number of users from comprehensively sanctioned jurisdictions and a substantial number of U.S. users and that its matching engine would necessarily cause U.S. users to transact with users in sanctioned jurisdictions in violation of U.S. law. Nonetheless, Binance did not implement controls that would prevent U.S. users from trading with users in Iran; and, because of this intentional failure, between January 2018 and May 2022, Binance willfully caused over $898 million in trades between U.S. users and users ordinarily resident in Iran.
As part of the plea agreement, Binance has agreed to forfeit $2,510,650,588 and to pay a criminal fine of $1,805,475,575 for a total financial penalty of $4,316,126,163. Binance has also agreed to retain an independent compliance monitor for three years and remediate and enhance their anti-money laundering and sanctions compliance programs. Binance separately has also reached agreements with the CFTC, FinCEN, and OFAC, and the Department will credit approximately $1.8 billion toward those resolutions.
The Department reached its resolution with Binance based on a number of factors, including the nature, seriousness, and pervasiveness of the offense, as a result of which Binance processed billions of dollars of cryptocurrency transactions for U.S. persons and caused U.S. customers to engage in transactions in violation of U.S. sanctions. Binance did not make a timely and voluntary disclosure of wrongdoing, but it received partial credit for its cooperation with the Department’s investigation, and it has taken steps to remediate its compliance program. Binance did not receive full credit for its cooperation because it delayed producing relevant evidence, including recorded meetings in which Binance executives discussed U.S. legal requirements. Accordingly, the total criminal penalty reflects a 20% reduction off the bottom of the applicable U.S. sentencing guidelines fine range.
In addition, according to court documents, Zhao, Binance’s founder, owner, and CEO, admitted that he understood that Binance served U.S. users and was thus required to register with FinCEN and implement an effective AML program. Zhao knew that U.S. users were essential to Binance’s growth and were a significant source of revenue and knew that an effective AML program would include KYC protocols that would mean that some customers would choose not to use Binance. Zhao told employees it was “better to ask for forgiveness than permission,” and prioritized Binance’s growth over compliance with U.S. law. Without an effective AML program, Binance caused transactions between U.S. users and users in jurisdictions subject to U.S. sanctions. These illegal transactions were a clear and foreseeable result of Zhao’s decision to prioritize Binance’s profit and growth over compliance with the BSA.
IRS-CI is investigating the case. The case is being prosecuted by Bank Integrity Unit Deputy Chief and National Cryptocurrency Enforcement Team Deputy Director Kevin Mosley and Trial Attorney Elizabeth Carr of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS), Trial Attorneys Beau Barnes and Alex Wharton of NSD’s Counterintelligence and Export Control Section (CES), and Assistant U.S. Attorney (AUSA) Mike Dion for the Western District of Washington. Trial Attorney Julia Jarrett, formerly of MLARS and currently an AUSA for the District of Oregon, and Trial Attorney Matthew Anzaldi, formerly of CES and currently with NSD’s National Security Cyber Section, made substantial contributions to this investigation and prosecution.
MLARS’s Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system. The Criminal Division has surged resources to the Bank Integrity Unit, which has imposed over $12 billion in penalties on financial institutions for sanctions violations over the last decade. NSD’s Counterintelligence and Export Control Section investigates and prosecutes individuals and corporations for violations of export control and sanctions laws, in addition to other national security crimes. NSD continues to expand its corporate enforcement efforts – including growing the ranks of prosecutors dedicated to this work and establishing a Chief Counsel and Deputy Chief Counsel for Corporate Enforcement.
Seattle – The U.S. Attorney’s Office Western District of Washington has seen a recent increase in phone calls that “spoof,” or fake, the U.S. Attorney’s Office main phone number, so the call appears to originate from the office on the recipient’s caller ID. Fraudulent callers pose as a “Justice Department investigator.” The scammers attempt to use a fake name and nonexistent case number to trick the victim. The fraudsters have demanded money claiming it is “attorney fees” to resolve the case. In some instances, the scammers appear to have some personally identifiable information on the victim or have reviewed social media posts for information that makes their spiel sound credible.
Law enforcement defines this type of scam as government impersonation fraud, in which criminals impersonate government officials. The criminals often threaten to extort victims with physical or financial harm. Scammers are becoming more sophisticated and organized in their approach, are technologically savvy, and often target young persons and the elderly.
The U.S. Attorney’s Office staff will never ask for money or personally identifying information over the phone.
According to the Internet Crime Complaint Center (IC3), 12,334 people reported being victims of government impersonation scams in 2020, with losses totaling more than $106 million. In Washington State in 2020, 358 victims reported $2 million in losses. Since January 1, 2021, 106 victims have already reported $777,045 in losses in Washington State. To protect yourself from falling victim to this scam, be wary of answering phone calls from unrecognized numbers. Do not send money to anybody that you do not personally know and trust. Never give out your personal information, including banking information, Social Security number, or other personally identifiable information, over the phone or to individuals you do not know.
Anyone who feels they were the victim of this or any other online scam should report the incident immediately using the IC3 website at www.ic3.gov. More information about government impersonation schemes and other online fraud schemes can be found at https://www.fbi.gov/scams-and-safety/common-fraud-schemes.
Seattle – A 42-year-old Ferndale, Washington woman was sentenced today in U.S. District Court in Seattle to three months in prison and three months home confinement for trafficking in counterfeit goods, announced U.S. Attorney Nick Brown. Kara Suneva Allen, aka Kara Suneva Mitchell, pleaded guilty in October 2022. At the sentencing hearing, U.S. District Judge Richard A. Jones said, “We cannot tolerate a robin hood mentality in the community…even though you thought you were helping other mothers afford luxury goods, you were actually helping them participate in criminal activity.”
According to records filed in the case, Allen operated a business named ‘Keepin Up With Kara’ LLC. The business was located in a warehouse space in Ferndale, Washington. As of March 2022, a website associated with the business advertised 467 different items for sale that appeared to be products made by Adidas, Burberry, Cartier, Chanel, Christian Dior, Fendi, Gucci, Hermès, Louis Vuitton, MCM, Nike, Prada, Saint Laurent, Tiffany & Co., Tory Burch, and UGG. All the products were priced substantially below the suggested retail price for the genuine items.
An investigation by Homeland Security Investigations, U.S. Customs and Border Protection, and the Whatcom County Sheriff’s Office revealed that in August and September 2021, three shipments destined for Allen and her company were seized from the mail in Oakland, California. The shipments, which originated in China and Hong Kong, contained a wide variety of counterfeit goods, including handbags, wallets, and jewelry. Allen was notified of these seizures, but never petitioned to have the goods in the shipments released. An analysis of shipping records revealed that between September 2021 and March 2022, approximately 46 shipments from China and Hong Kong had been sent to the Ferndale warehouse where ‘Keepin Up With Kara’ operated.
To document Allen’s sale of counterfeit goods, an undercover agent made online purchases from the company’s website. In one instance, the agent made an undercover purchase of a Louis Vuitton-branded handbag for $110. The suggested retail price for that specific authentic Louis Vuitton handbag is $1,690.00. A Louis Vuitton representative confirmed the handbag purchased from the website was counterfeit.
On May 2, 2022, law enforcement executed search and seizure warrants at Allen’s place of business, home, and vehicle. Over 1,800 items of suspected counterfeit merchandise were seized, including purses, scarves, belts, luggage tags, sunglasses, tumblers, and other accessories.
In total, between June 2021 and May 2022, Allen acquired, attempted to acquire, or sold more than 1,900 counterfeit items with an estimated retail value of $185,842. Her profit over that time was approximately $43,430.
As noted in the government’s sentencing memorandum, before the search warrant was executed, Allen was told more than once that what she was doing was illegal. Allen “received several letters from CBP and Louis Vuitton’s counsel putting her on notice that her business activities were unlawful. It is an aggravating factor that, despite these numerous opportunities to cease … operations, Allen nonetheless persisted in obtaining and selling counterfeit merchandise, and even instructed an employee to describe that merchandise using coded language to avoid detection,” Special Assistant United States Attorney Jessica M. Ly wrote in her sentencing memorandum.
The case was investigated by Homeland Security Investigations with assistance from U.S. Customs and Border Protection, the Whatcom County Sheriff’s Office, U.S. Postal Inspection Service, the Ferndale Police Department, and the National Intellectual Property Rights Center.
The case was prosecuted by Special Assistant United States Attorney Jessica M. Ly.
A former Seattle Police Officer was sentenced today to 6 years in prison, and his co-conspirator in an interstate marijuana distribution scheme was sentenced today to 14 years in prison, in U.S. District Court in Seattle, announced U.S. Attorney Annette L. Hayes. Former officer ALEX CHAPACKDEE, 44, of Seattle pleaded guilty in November 2017 to conspiracy to distribute marijuana and conspiracy to commit money laundering. Ring leader TUAN VAN LE, 43, of Maple Valley pleaded guilty in December 2017 to conspiracy to distribute marijuana and conspiracy to commit money laundering. At Chapackdee’s sentencing hearing U.S. District Judge Thomas S. Zilly said Chapackdee’s actions resulted in “[a] shame on his badge, his department, and on this community . . . and deserves to be punished accordingly.”
“These defendants – including a sworn law enforcement officer – flouted all applicable law when they shipped hundreds of pounds of marijuana to the East Coast in order to make the biggest possible buck,” said U.S. Attorney Annette L. Hayes. “Marijuana remains illegal under federal law and shipping unlicensed and untaxed marijuana across state lines certainly is illegal under state law as well. We will continue working with our federal, state, local and tribal partners to ensure that federal drug and money laundering laws are properly enforced.”
An investigation by the FBI’s Public Corruption Squad, the Drug Enforcement Administration (DEA), the Seattle Police Department, and Homeland Security Investigations revealed that on multiple occasions between January of 2015, and April 2017, LE and others made repeated trips between Seattle and Baltimore. While LE often flew one way or roundtrip, other members of the conspiracy made the trip by driving virtually non-stop. The vehicles carried hundreds of pounds of marijuana to the Baltimore area and the cash proceeds back to Seattle. CHAPACKDEE participated in multiple trips, driving his RV one or both ways in September, October and November, 2016, as well as in March and April 2017. CHAPACKDEE -- who was an SPD officer throughout the conspiracy -- admits that while he was furthering the conspiracy he was armed and carried his Seattle Police Department badge. CHAPACKDEE, LE and the other conspirators linked up at both ends of the trip, distributing the marijuana on the East Coast and then returning with the cash proceeds to Western Washington. Bank records indicate CHAPACKDEE repeatedly deposited his share of the cash in his personal account, in amounts just under $10,000, thereby avoiding reports to law enforcement. CHAPACKDEE used his status as a police officer to cover and protect the conspiracy.
The bulk of the proceeds were laundered into a marijuana growing/processing business, Tetra Holding Company (THC) that was ostensibly “legal” under Washington law and in the process of applying for a license from the State of Washington. On paper, the business was owned by two of the co-defendants, LE’s nephew, Hoang Le and his girlfriend, MEIFANG YU, 45. In reality, TUAN VAN LE was the primary investor, and was in control of the business. However, as a convicted felon, TUAN VAN LE is prohibited under Washington State law from being an owner/investor in any permitted marijuana business. TUAN VAN LE nonetheless provided his nephew, often through his girlfriend, with very large amounts of money to get THC up and running – close to $1 million dollars.
MEIFANG YU was sentenced today to 3 years of probation, including 180 days of home confinement and 150 hours of community service for her role in the conspiracy.
In addition to the prison terms both LE and CHAPACKDEE will be on federal supervision following prison of 5 years and 4 years, respectively. Both men have been in custody since their arrest on May 8, 2017.
Coconspirator Samath Khanhphongphane was sentenced to 5 years in prison on February 8, 2018. Defendants Phi Nguyen and Hoang Le will be sentenced on April 12, 2018.
This was an Organized Crime and Drug Enforcement Task Force (OCDETF) investigation, providing supplemental federal funding to the federal and state agencies involved. The case was investigated by the FBI, DEA, Seattle Police Department and Homeland Security Investigations (HSI). Multiple agencies assisted with the arrests and the serving of search warrants including the Port of Seattle Police Department.
The case is being prosecuted by Assistant United States Attorneys Vince Lombardi and Justin Arnold.
Seattle – U.S. Attorney Brian T. Moran today announced that more than $65 million in Department of Justice grants is available to help communities combat human trafficking and serve adults and children who are victimized in trafficking operations.
“During this unprecedented time of anxiety and fear over COVID-19, it is critical that work continue to assist the vulnerable in our nation, especially the victims of human trafficking – modern day slavery,” said U.S. Attorney Brian Moran. “I want our partners in this work to be able to apply for this federal financial assistance, something that can happen even as we face the pressing need to combat the spread of the virus.”
“Our nation is facing difficult challenges, none more pressing than the scourge of human trafficking. Human traffickers pose a dire threat to public safety and countering this threat remains one of the Administration’s top domestic priorities,” said Katharine T. Sullivan, Principal Deputy Assistant Attorney General for the Office of Justice Programs. “The Department of Justice is front and center in the fight against this insidious crime. OJP is making historic amounts of grant funding available to ensure that our communities have access to innovative and diverse solutions.”
The funding is available through OJP, the federal government’s leading source of public safety funding and crime victim assistance in state, local and tribal jurisdictions. OJP’s programs support a wide array of activities and services, including programs that support human trafficking task forces and services for human trafficking survivors.
A number of funding opportunities are currently open, with several more opening in the near future.
Missing and Exploited Children Training and Technical Assistance Program
(Seattle)–U.S. Attorney Brian T. Moran of the Western District of Washington today announced that three Western Washington non-profit organizations received nearly $1.5 million from the Department of Justice’s Office of Justice Programs (OJP) and its component, the Office for Victims of Crime (OVC), to provide safe, stable housing and appropriate services to victims of human trafficking.
“Human trafficking is a barbaric criminal enterprise that subjects its victims to unspeakable cruelty and deprives them of the most basic of human needs, none more essential than a safe place to live,” said Attorney General William P. Barr. “Throughout this Administration, the Department of Justice has fought aggressively to bring human traffickers to justice and to deliver critical aid to trafficking survivors. These new resources, announced today, expand on our efforts to offer those who have suffered the shelter and support they need to begin a new and better life.”
“The Western District of Washington is a leader in investigating and prosecuting human trafficking, due to key partnerships between federal, state, and local law enforcement,” said U.S. Attorney Brian Moran. “Our relationships with non-profit organizations who provide support to human trafficking victims is key to rescuing victims from this modern day slavery.”
The three grants, awarded to YouthCare, The YMCA of Greater Seattle, and the International Rescue Committee Inc., will provide 6 to 24 months of transitional or short-term housing assistance for trafficking victims, including rental, utilities, or related expenses, such as security deposits and relocation costs. The grant will also provide funding for support needed to help victims locate permanent housing, secure employment, as well as occupational training and counseling. YouthCare and the YMCA each are receiving $500,000. The International Rescue Committee Inc., is receiving $499,996. The three non-profits are among 73 organizations receiving more than $35 million in OVC grants to support housing services for human trafficking survivors.
“Human traffickers dangle the threat of homelessness over those they have entrapped, playing a ruthless game of psychological manipulation that victims are never in a position to win,” said OJP Principal Deputy Assistant Attorney General Kathrine T. Sullivan. “These grants will empower survivors on their path to independence and a life of self-sufficiency and hope.”
Human trafficking offenses are among the most difficult crimes to identify, and the scope of human trafficking victimization may be much greater than the limited data reflect. A new report issued by the National Institute of Justice, another component of the Office of Justice Programs, found that the number of human trafficking cases captured in police reports may represent only a fraction of all such cases. Expanding housing and other services to trafficking victims remains a top Justice Department priority.
The Office for Victims of Crime, for example, hosted listening sessions and roundtable discussions with stakeholders in the field in 2018 and launched the Human Trafficking Capacity Building Center. From July 2018 through June 2019, 118 OVC human trafficking grantees reported serving 8,375 total clients, including confirmed trafficking victims and individuals showing strong indicators of trafficking victimization.
For a complete list of individual award amounts and jurisdictions that will receive funding, visit: https://www.ojp.gov/sites/g/files/xyckuh241/files/media/document/htvictimsfactheet.pdf
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The Office of Justice Programs, directed by Principal Deputy Assistant Attorney General Katharine T. Sullivan, provides federal leadership, grants, training, technical assistance, and other resources to improve the nation’s capacity to prevent and reduce crime, assist victims, and enhance the rule of law by strengthening the criminal and juvenile justice systems. More information about OJP and its components can be found at www.ojp.gov.
The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.
Seattle – A 42-year-old former Bellevue, Washington, man was sentenced today in U.S. District Court in Seattle to 12 years in prison for securities fraud, announced U.S. Attorney Nick Brown. Justin Costello victimized marijuana business owners, private investors, and investors who purchased stock in the public market. Costello used fraud proceeds for an expensive lifestyle, including an elaborate wedding with a James Bond theme. At the sentencing hearing, U.S. District Judge Ricardo S. Martinez said the frauds “caused a severe impact financially, and a severe emotional impact…. People felt betrayed and violated by (Costello’s) actions.
"Mr. Costello had ‘big dreams’ -- building a lifestyle that emulated his hero, 007 James Bond — but he did so by victimizing dozens of people and businesses who entrusted their personal savings to him,” said U.S. Attorney Nick Brown. “When he was indicted, he fled with fake ID, cash, gold, and jewelry to finance a life on the run. But his story is not fiction and the $35 million damage to his victims is all too real. This prison sentence is fully appropriate.”
“After finally having to answer for his crimes, Mr. Costello went on the run” said Richard A. Collodi, Special Agent in Charge of the FBI’s Seattle field office. “His flight to avoid prison demonstrates that is exactly where he belongs. I applaud the work of our investigators and prosecutors who finally put an end to his elaborate fraud, and to our partners who were able to apprehend him before he could leave the country.”
As part of his securities fraud scheme, Costello purchased two companies that were trading for pennies on the over-the-counter market and renamed them GRN Holding Corporation and Hempstract Inc. Costello recruited investors in these companies, allegedly making numerous false statements. Costello told potential private investors that he had an MBA from Harvard, that his personal wealth was significantly larger than it was, and that GRN Funds LLC, a private equity and hedge fund he owned, had over $1 billion in assets under management. None of that was true.
With these falsehoods, Costello convinced various investors across the country to invest in his companies.
Today., some of those recruited investors told the court how Costello preyed on their friendship to get them to invest. One told the court “Nothing with Costello was real… We were groomed by this predator… The stage was set for this big con.”
Another told the court “He is a liar, a financial psychopath, and a human wrecking ball.”
A third told the court that her husband was a changed man after losing all of their money investing with Costello. She described how her husband became depressed and took his own life.
Costello did not just defraud friends, he also committed fraud on those investing on public markets. He had press releases and securities filings made with multiple false representations. Between July 1, 2019, and May 18, 2021, over 7,500 investors purchased and sold GRN Holding Corp. securities while Costello was making, and causing to be made, material misrepresentations concerning GRN Holding Corp. Collectively, these investors lost approximately $25 million. Similarly, with Hempstract Inc., he made false statements and defrauded investors. Between November 2018 and June 2021, 29 private investors lost about $6 million.
Between October 2019, and January 2021, Costello hired an unindicted coconspirator to use Twitter in a pump and dump stock scheme. Costello would acquire the penny stock of a company and then instruct his prolific Twitter user to tweet falsehoods about the company that would drive up the stock price. The coconspirator would tweet about the stock as often as 90 times a day. In one instance Costello didn’t just use Twitter, he also instructed some of his “investors” to purchase stock in the company, driving the share price from a nickel to $2 per share. After driving the share price up, Costello sold the shares for a profit of more than $355,000. The prolific Twitter user was given a share of Costello’s profits from the pump and dump scheme. In all Costello made $625,092 in the pump and dump scheme.
Along with the securities fraud, in 2017 Costello owned and operated a company called Pacific Banking Corp that provided banking services to marijuana businesses in Washington, Colorado, California, Illinois, and Alaska. Costello sent false account statements to the marijuana businesses, so that they were lulled into thinking their money was secure. However, between 2019 and 2021, Costello diverted money from three marijuana business to benefit himself and his other companies. The three marijuana businesses lost about $3.7 million.
Costello was apprehended October 6, 2022, by law enforcement in Southern California. He had fake identification documents, cash, and valuables indicating he hoped to flee to Mexico to avoid prosecution.
In addition to the financial harm, prosecutors noted that Costello’s investors suffered a betrayal that stays with them to this day. “Costello’s deceit – about his background, his education, and his purported success – was designed to convince unwitting investors to trust him. And trust him they did. But when lies and fraud are exposed, victims are left with significant emotional and psychological damage. They blame themselves for being gullible and overly trusting. The resulting stress, anxiety, and sense of betrayal causes great emotional and psychological harm, and damages the victims’ relationships with friends, family, and others,” prosecutors wrote in their sentencing memo.
Judge Martinez recognized that harm in imposing the sentence saying, “in many financial crimes the victims are not known to the fraudster… Financial crimes where the defendant befriends the individual and uses them to entice others to the scheme has a completely different emotional impact. It leaves victims feeling helpless and hopeless.”
In his Plea Agreement, Costello agreed to pay no less than $35 million in restitution, but the Court will enter the final restitution amount in August 2023. Costello is forfeiting assets that were seized at the time of his arrest including $60,000 in cash, gold bars, Mexican pesos, two designer watches, and gem encrusted jewelry.
The case was investigated by the FBI.
The case is being prosecuted by Assistant United States Attorneys Justin Arnold and Michael Dion.
Seattle – The U.S. Department of Justice and Kaiser Foundation Health Plan of Washington (KFHPW) today resolved allegations from several complainants that it repeatedly failed to provide interpreters to patients who are deaf or deaf-blind, in violation of the Americans with Disabilities Act (ADA), announced U.S. Attorney Nicholas W. Brown. The settlement establishes a $1 million fund to pay claims to those patients whose rights were violated. KFHPW also agrees to update and improve procedures for evaluating the need for interpreters, contracting with interpreters, and training staff surrounding those procedures.
“When health care facilities fail to provide interpreters to patients and their families, including those who are who are deaf or hard of hearing, it creates a major barrier to safe and appropriate medical care.” said U.S. Attorney Brown. “Our investigation uncovered evidence of systemic failures to provide interpreters when necessary, leading patients to delayed care and problems with communication. This settlement is a necessary step to ensuring that people receiving care through this system are able to communicate timely and effectively about their medical needs.”
An investigation by the U.S. Attorney’s Office revealed that in approximately 400 instances over a 4-year period, an interpreter was requested by KFPW staff, but none was provided, or other problems related to effective communication were raised by patients or their companions.
Under the terms of the settlement, KFHPW will establish a third-party claims administrator to allocate the settlement funds based on the harm suffered by each complainant. The administrator will work with KFHPW records to locate claimants. The U.S. Attorney’s Office will review the allocations after the claims have been submitted and reviewed.
For a two-year period, the U.S. Attorney’s Office will review new procedures and training of KFHPW staff to ensure patients who are deaf or deaf-blind receive appropriate interpreter services at the 41 medical facilities it operates in Northwest Washington, Central Washington, Eastern Washington, the Coastal and Olympic region, and Puget Sound.
Under the settlement some of the changes include: consistent screening of patients for the need of interpreter services; contracting with two interpreter services companies per facility to better provide services; contracting with video interpreter services for those occasions when in-person interpretation is not possible. The policies surrounding interpreter services will be posted on the KFHPW website as well as in KFHPW facilities. KFHPW will keep logs of interpreter requests and how they were fulfilled.
In addition to the $1 million fund for claimants, KFHPW will pay $85,000 to the United States to resolve the allegations.
The investigation in this case was conducted by Assistant United States Attorney Christina Fogg, the Civil Rights Program Coordinator for the U.S. Attorney’s Office for the Western District of Washington.
Seattle – A 42-year-old Las Vegas man, who previously lived in Bellevue, Washington, pleaded guilty today in U.S. District Court in Seattle to securities fraud, announced U.S. Attorney Nick Brown. Justin Costello admits in his plea agreement that he victimized marijuana business owners, private investors and investors who purchased stock in the public market. Under the terms of the plea agreement, both the prosecutors and the defense will recommend a ten-year prison sentence when Costello is sentenced on April 21, 2023. U.S. District Judge Ricardo S. Martinez is not bound by the recommendation and can impose any sentence allowed by statute.
While Costello pleaded guilty to one count of securities fraud, the plea agreement specifies that the court can take into account all of Costello criminal conduct as relevant conduct for sentencing purposes. Costello not only defrauded investors, he stole from three marijuana business who trusted him for banking services.
As part of his securities fraud scheme, Costello purchased two companies that were trading for pennies on the over-the-counter market and renamed them GRN Holding Corporation and Hempstract Inc. Costello recruited investors in these companies, allegedly making numerous false statements. Costello told potential private investors that he had an MBA from Harvard, that his personal wealth was significantly larger than it was, and that GRN Funds LLC, a private equity and hedge fund he owned, had over $1 billion in assets under management. None of that is true.
With these falsehoods, Costello convinced various investors across the country to invest in his companies. Costello also had press releases and securities filings made with multiple false representations. Between July 1, 2019, and May 18, 2021, over 7,500 investors purchased and sold GRN Holding Corp. securities while Costello was making, and causing to be made, material misrepresentations concerning GRN Holding Corp. Collectively, these investors lost approximately $25 million. Similarly, with Hempstract Inc., he made false statements and defrauded investors. Between November 2018 and June 2021, 29 private investors lost about $6 million.
Between October 2019, and January 2021, Costello hired an unindicted coconspirator to use Twitter in a pump and dump stock scheme. Costello would acquire the penny stock of a company and then instruct his prolific Twitter user to tweet falsehoods about the company that would drive up the stock price. The coconspirator would tweet about the stock as often as 90 times a day. In one instance Costello didn’t just use Twitter, he also instructed some of his “investors” to purchase stock in the company, driving the share price from a nickel to $2 per share. After driving the share price up, Costello sold the shares for a profit of more than $355,000. The prolific Twitter user was given a share of Costello’s profits from the pump and dump scheme. In all Costello made $625,092 in the pump and dump scheme.
Along with the securities fraud, in 2017 Costello owned and operated a company called Pacific Banking Corp that provided banking services to marijuana businesses in Washington, Colorado, California, Illinois, and Alaska. Costello sent false account statements to the marijuana businesses, so that they were lulled into thinking their money was secure. However, between 2019 and 2021, Costello diverted money from three marijuana business to benefit himself and his other companies. The three marijuana businesses lost about $3.7 million.
Costello was apprehended October 6, 2022, by law enforcement in Southern California. He had fake identification documents, cash and valuables indicating he hoped to flee to Mexico to avoid prosecution.
In the plea agreement Costello agrees to pay at least $35 million in restitution. He is also forfeiting assets that were seized at the time of his arrest including $60,000 in cash, gold bars, Mexican pesos, two designer watches, and gem encrusted jewelry.
The case was investigated by the FBI.
The case is being prosecuted by Assistant United States Attorney Justin Arnold and Michael Dion.
SUNG HONG, 47, and HYUN JOO HONG, 42, of Clyde Hill, Washington were sentenced today in U.S. District Court in Seattle to lengthy prison terms for defrauding more than 55 clients out of $12.7 million, announced U.S. Attorney Annette L. Hayes. SUNG HONG, aka LAURENCE HONG or LAWRENCE HONG, was sentenced to 15 years in prison. His wife, HYUN JOO HONG, aka GRACE HONG, was sentenced to six years in prison. From 2010 until their arrest in June 2017, the couple held themselves out as experienced investment advisors with a track record of performance in order to solicit investor funds for their hedge fund, Pishon Holdings, and for management through separately managed accounts. In fact, SUNG HONG had just completed a 33 month sentence for committing investment fraud when he launched this new scheme in 2010. At the sentencing hearing U.S. District Judge Thomas S. Zilly said, “This scheme was a serious, complex fraud over seven years. You targeted religious victims. You used God as a way to gain trust…. You have emotionally and spiritually damaged these victims and most of them will never recover.”
“Using faith and fraud, this couple stole millions from people whose dreams of a better life have now been shattered,” said U.S. Attorney Annette L. Hayes. “Both repeatedly lied to their investors, all while spending their hard earned money on high-end shopping sprees, luxurious vacations, a yacht and an expensive rental home. Their victims now live paycheck to paycheck with college and retirement funds depleted and a very different financial future than they expected.”
According to records filed in the case, the HONGs recruited investors using religious organizations and shared religious beliefs. The couple claimed that LAURENCE HONG privately invested billions of dollars for wealthy Korean families and that GRACE HONG held a Series 65 securities license and previously worked for a large international investment firm. None of these statements were true. Likewise, the defendants did not disclose LAURENCE HONG’s past criminal conviction for investment fraud. The couple sent potential investors misleading and false investment prospectuses that contained an inaccurate record of their past investment performance and other plagiarized investment outlooks.
Throughout their fraudulent scheme, the HONGs used stolen investor funds for their own benefit, including payments for a 9,000 square foot rental home in Clyde Hill; a 45-foot yacht; multiple high-end vehicles, such as BMWs, a Maserati, an Aston Martin, and a Lamborghini; and numerous expensive vacations to locations such as the Bahamas and Beverly Hills.
One church in California invested $1 million with the HONGs and lost about $300,000 on a single trade. Still, despite the steep losses and a fee arrangement based on investment gains, the HONGs withdrew almost $150,000, ostensibly as advisor fees, from the church’s account. Another couple allowed the HONGs to manage their $180,000 in retirement funds only to lose $100,000 within less than a year. After meeting with the HONGs, that couple then invested their remaining retirement funds in the HONGs’ hedge fund, only for those funds to be redirected into GRACE HONG’s personal account. The HONGs used those funds to pay credit card bills and other personal expenses, including a $16,000 payment to a resort in the Bahamas for a HONG family vacation.
Speaking to LAWRENCE HONG, Judge Zilly noted his prior conviction for a similar fraud: “You clearly did not learn anything from the fact you were convicted and sentenced to prison…. You are one of those con men who will never be able to stop conning people.” Judge Zilly noted that GRACE HONG played “an intricate and important role in the entire scheme. She misrepresented her credentials… she took God’s name – she used that to entice investors to put money in their pockets.”
Judge Zilly ordered the pair to pay more than $12.7 million in restitution. The losses for certain investors represented their entire life or retirement savings.
The case was investigated by the FBI. The United States Attorney’s Office thanks the Commodity Futures Trading Commission (CFTC) for its assistance in the investigation.
The case is being prosecuted by Assistant United States Attorneys Justin Arnold and Steven Masada.
Seattle – A 62-year-old Seattle woman was sentenced today in U.S. District Court in Seattle to 52 consecutive weekends (208 days) of confinement at FDC-SeaTac beginning on March 22, 2024 as a special condition of a 3-year term of supervision for her scheme to steal nearly half a million dollars in COVID 19 benefits, announced U.S. Attorney Tessa M. Gorman. Danni Walker was indicted on six counts of wire fraud in July 2022. She pleaded guilty to one count of wire fraud in August 2023. Prosecutors sought a 21-month custodial sentence, while the United States Probation Office recommended a custodial sentence of 12 months and 1 day. At today’s sentencing hearing U.S. District Judge Lauren King said, “this is a very serious offense” and noted the defendant’s use of pandemic relief funds for “lavish expenditures” that she “flaunted on social media.”
“This defendant took resources intended to help businesses struggling to stay afloat in the pandemic, and used them for a high-end car, luxury travel and shopping sprees and unsuccessful trading in cryptocurrency,” said U.S. Attorney Gorman. “Some businesses that needed loans did not get them, because Ms. Walker and others like her committed fraud on government programs.”
According to records filed in the case, between April 2020 and March 2021, Walker used false information to apply for and obtain $473,082 in Paycheck Protection Program (PPP) loans through the Small Business Administration. Walker submitted the applications on behalf of three different companies, only one of which was in operation, and none of which had the employees she claimed in her applications. Instead of using the PPP money for payroll and other legitimate business expenses, as intended by the program, Walker used it, among other things, to purchase a Jaguar coup; spent $34,000 on a luxury vacation to New York – including a Louis Vuitton shopping spree -; and invested unsuccessfully in cryptocurrency. She also gave large cash gifts to family and friends.
Walker also attempted to obtain two additional PPP loans through the Small Business Administration (SBA) totaling approximately $165,000. However, SBA caught the fraud and those loans were declined.
In asking for a 21-month prison sentence, prosecutors highlighted that Walker’s theft of tax dollars meant others did not get the financial support they needed. “This was a calculated and sophisticated offense…. Over a period of approximately 11 months, through six fraudulent PPP loan applications, Walker stole close to a half million dollars in pandemic relief funds. These funds could and should have been provided to businesses that actually qualified for them so those business could pay their employees and other approved business expenses– i.e., to stay afloat during a historic crisis,” Assistant United States Attorney Michelle Jensen wrote in her sentencing memo.
The case was investigated by the Small Business Administration Office of Inspector General (SBA-OIG) and the FBI.
The case was prosecuted by Assistant United States Attorneys Michelle Jensen and Sok Jiang.
On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form
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.
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.
