Northern District of Illinois

CHICAGO — A former Chicago area real estate investment partner was indicted on federal charges alleging that he fraudulently obtained more than $10 million from more than 50 investors, many of whom lived in the Chicago area, and misused the funds he obtained from them as well as lenders. The defendant, MATTHEW STOEN, was a founder of Stone Rose, LP, and effectively was its managing general partner.

Stoen, 35, of Wayzata, Minn., and formerly of St. Charles and Chicago, was charged with four counts of mail fraud and two counts of wire fraud in an indictment returned by a federal grand jury on Wednesday and announced today. He will be arraigned on a date to be determined in U.S. District Court in Chicago.

The indictment also seeks forfeiture of more than $10 million in alleged fraud proceeds.

According to the indictment, Stoen falsely represented to investors and lenders his personal background and financial condition, including claiming that he was the beneficiary of a trust fund, which he knew was false. He allegedly carried out a financing fraud scheme to benefit himself by fraudulently raising millions of dollars through the offer and sale of limited partnership interests and through loans. Stoen fraudulently obtained and retained these funds by making false representations regarding the intended use of the funds raised for Stone Rose, the terms of Stone Rose’s real estate transactions, Stone Rose’s financial condition, his personal financial condition, and his interest in Stone Rose real estate transactions. Stoen misappropriated Stone Rose funds for his own benefit, and concealed his scheme by creating and distributing to investors a false and misleading financial review of Stone Rose, the indictment states.

Stoen allegedly represented to investors and lenders that funds invested in Stone Rose would be used for real estate investment projects in the Kansas City area as well as certain Stone Rose fees and expenses, knowing that he intended to misappropriate a portion of the funds for other purposes, including for his own use and benefit.

Each count of mail and wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The government is being represented by Assistant U.S. Attorney Kenneth Yeadon.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

CHICAGO ― A Chicago man who committed 20 armed robberies of stores and businesses during a five-month period in 2010, was sentenced today to more than 15 years in federal prison. The defendant, CARLOS OCHOA, had admitted committing 15 robberies in Chicago, three in Berwyn, and one each in Aurora and Indian Head Park, sometimes for as little as $25, between July and November 2010.

Ochoa, 50, pleaded guilty last September to three counts of interstate robbery and one count of using a firearm during a violent crime. In pleading guilty, he admitted committing 17 additional armed robberies. U.S. District Judge Charles Norgle sentenced Ochoa to 130 months in prison for the robberies, consecutive to 60 months for using a gun, for a total of 190 months in prison. Ochoa was also ordered to pay restitution totaling $21,847 representing the net proceeds from all 20 robberies.

Three victims of Ochoa’s robberies testified about the lasting impact of the trauma they experienced before Judge Norgle imposed the sentence.

“For five months, [Ochoa] and his co-defendant went on a crime spree terrorizing individuals at their places of employment by pointing a gun, racking the slide of the gun, and making it clear to the victims that they would shoot them if they did not comply with their demands,” Assistant United States Attorneys Maribel Fernandez-Harvath, argued at sentencing.

Ochoa’s co-defendant, Juan Sanchez, who briefly escaped from state custody in late 2011, died of natural causes in January 2012 after he was indicted in the case.

Ochoa admitted that he and Sanchez conspired to rob various retail stores and businesses in Chicago and its suburbs. They identified stores to rob with a firearm, wore sunglasses and hats, and conducted surveillance inside the stores and businesses before the robberies.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Carl Vasilko, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives. The Chicago, Aurora, Berwyn, and Indian Head Park police departments, as well as the Cook County State’s Attorney’s Office, also participated in the investigation.

CHICAGO — A Chicago-based construction company will pay the United States and the State of Illinois $12 million to resolve allegations of fraud on government programs designed to benefit women- and minority-owned sub-contractors under the terms of a civil settlement agreement announced today. The contractor, James McHugh Construction Co., Inc., allegedly failed to abide by federal and state requirements for the participation of disadvantaged businesses in contracts to perform seven public construction projects. The work on area roads, highways, and transit lines was funded by the federal and state governments between 2004 and 2011.

The federal and state governments claimed that McHugh violated the federal and Illinois False Claims Acts by making false statements and claims for payment to government agencies regarding McHugh’s compliance with federal and state requirements to include disadvantaged businesses in the construction projects.

As a result of the $12 million settlement, the federal government will receive $7.2 million and the state government will receive $4.8 million. In a separate administrative settlement and compliance agreement, McHugh agreed to implement a corporate compliance program, appoint a compliance officer, and be subject to an independent monitor for three years, in exchange for the federal, state, and City of Chicago transportation agencies and contracting authorities’ agreement not to bar McHugh from future government contracts. This allows McHugh to continue pursuing and performing public works projects while ensuring that it remains compliant with disadvantaged business regulations.

“It was more costly in the long run for McHugh to avoid its obligations to hire womenand minority-owned businesses than it would have been simply to comply with the requirements and retain disadvantaged businesses to actually participate in these public construction projects,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “It’s important that McHugh and other companies realize that compliance with these requirements is both a good business decision and the right thing to do,” he added.

“Our investigation revealed that McHugh Construction falsely used subcontractors to help secure bids for major construction projects funded by and for Illinois taxpayers,” Illinois Attorney General Lisa Madigan said. “The company used women-owned businesses to submit false claims to the state and federal governments for millions of dollars when in fact, those businesses never completed the level of work required by law.”

Mr. Fardon and Attorney General Madigan announced the settlement with Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Michelle McVicker, Special Agent-in-Charge of the U.S. Department of Transportation Office of Inspector General in Chicago; and James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago.

The settlement arose from a lawsuit that was filed under seal in 2008 by Ryan Keiser, who was a project manager for Perdel Contracting Corp. and Accurate Steel Installers, Inc. (ASI), at three of the McHugh construction sites. The lawsuit, which was unsealed today, was filed under the qui tam or whistleblower provisions of the federal and state False Claims Acts. United States, et al., ex rel. James McHugh Construction Co., et al., No. 08 C 2443 (N.D. Ill.).

The similar federal and state statutes permit private individuals to sue for false claims on behalf of the government and to share in any recovery. Mr. Keiser will receive 17 percent of the $12 million settlement or $2,040,000 ― $1,224,000 from the United States share, and $816,000 from Illinois’ portion of the settlement.

The settlement covers McHugh’s contracts on the following projects: the Washington/Monroe Viaducts over Interstate 90/94 for the Chicago Department of Transportation (CDOT) in 2005; the Red Line Howard Station for the Chicago Transit Authority in 2006; the North Avenue Bridge for CDOT in 2006; the Brown Line for the CTA in 2006; the Eastbound Interstate 88/Fox River Bridge for the Illinois State Toll Highway Authority in 2007; the Westbound Interstate 88/Fox River Bridge for the toll highway authority in 2008; and the Wacker Drive Viaduct Reconstruction from Randolph to Monroe streets for CDOT in 2010.

The federal and state governments contended that in bids for these contacts, in the final contracts, and in claims for payment, McHugh falsely stated that Perdel and ASI, which were both certified as “disadvantaged business enterprises” (DBE) owned by Elizabeth Perino, would perform or had performed work on the projects in satisfaction of federal and state DBE participation requirements in the contracts. The governments contended that contrary to McHugh’s statements, Perdel and ASI often functioned merely as “pass-throughs,” performing little, if any, work that would qualify for participation credit under federal and state DBE requirements. Perino, who owned Perdel and ASI in Lockport, was charged with federal mail fraud in 2011, and the case remains pending.

According to the settlement agreement, the governments also contended that Perdel and ASI’s contracted work for McHugh often exceeded the companies’ capacity and experience. Although their projects with McHugh were substantially greater in size and scope than they had previously performed, Perdel and ASI’s expertise to perform larger and more complex projects did not change correspondingly. Rather than Perdel and ASI performing, managing, or supervising the work that McHugh represented they would, McHugh frequently managed union workers they each hired. In some cases, McHugh directed Perdel and ASI as to which union crews to hire.

McHugh, not Perdel or ASI, also selected certain suppliers on each of the contracts, determined the quantity and quality of those materials, negotiated the price, and often drafted a purchase order for Perdel or ASI to put on their letterhead, the governments contended. That kind of conduct violates federal and state provisions that are designed to give a share of the actual work of government-funded construction projects to minority- and women-owned businesses.

The settlement is neither an admission of liability by McHugh nor a concession by the state and federal governments that their contentions are not well founded, and McHugh expressly denies the claims.

The settlement was reached on behalf of the U.S. Department of Transportation, the Illinois Department of Transportation, the Illinois State Toll Highway Authority, and the Regional Transportation Authority.

The separate three-year administrative monitoring settlement and compliance agreement was reached between McHugh and the Federal Transit Administration, the Federal Highway Administration, the U.S. and Illinois Transportation Departments and their procurement officers, and the City of Chicago. In exchange for the government entities’ agreement not to pursue any suspension or debarment action against McHugh for the covered conduct, McHugh agreed to implement a corporate compliance program and appoint a compliance officer who is knowledgeable about DBE programs. The company also agreed to retain an independent monitor to evaluate McHugh’s performance and submit periodic reports to the government agencies and officials, and to make six presentations to those agencies and officials to discuss and promote compliant policies and procedures for working with DBE firms.

Assistant U.S. Attorney Donald Lorenzen represented the U.S. Attorney’s Office in the case. Assistant Illinois Attorney General Kate Pomper Costello represented the Illinois Attorney General’s office.

Settlement Agreement

Settlement and Compliance Agreement

CHICAGO — A Chicago man was sentenced today to more than two years in federal prison for mailing more than 90 threatening and/or harassing letters to Chicago police officers, other government and law enforcement officials, private individuals, schools, and religious institutions in the Chicago area between November 2003 and December 2012. The defendant, RICHARD HYERCZYK, had pleaded guilty in January to one count of mailing a threatening communication.

Hyerczyk, 54, of Chicago’s Garfield Ridge neighborhood, was ordered to begin a 27- month prison term on July 29, followed by three years on supervised release, and he was fined $10,000 by U.S. District Judge Gary Feinerman. In imposing the sentence, the judge cited the “cold-blooded nature of the threats and the fear, harm, and apprehension that was created by these threats.”

When he was charged in January, prosecutors said Hyerczyk had been cooperative in the investigation and was not believed to be a danger to the community or a risk of flight. The prosecution followed a lengthy investigation by the FBI-led Chicago Joint Terrorism Task Force.

In pleading guilty, Hyerczyk admitted mailing a letter on April 21, 2008, that threatened to kill Chicago Police Department officers and members of their families. That letter followed local news media reports on April 15, 2008, that Chicago police officers had shot and killed a cougar that was located on the city’s north side. Hyerczyk admitted that he drafted letters containing threats to kill and commit violence against CPD officers and members of their families.

The plea agreement detailed one such letter, which began with the salutation, “Dear Cougar Killers (aka Chicago PIG Police),” and included the following threatening messages: “Prepare to DIE like the Cougar you killed. On May 4th at your St. Jude Memorial March several PIGS will be shot by snipers.”; “BURN down the Daley house in Michigan.”; and “Kill any Police Officer, where ever they are found, like they killed the Cougar.”

Hyerczyk admitted that he drafted a second letter, which contained a title that referenced a severely injured former Chicago police officer by name and referred to the officer as the “PARALIZED [sic] PIG,” and which title contained the phrase “St. Jude Memorial PIG March.” This second letter threatened that: “A police officer will be SHOT DEAD, like they shot the cougar, at the May 4th St. Jude Memorial PIG March.”; “A celebration of DEAD police officers. Ha ha ha ha you are all better off DEAD.”; and “When the PIGS are at the parade, we will be at their homes. You can=t guard every PIGS house...watch your young children.”

After drafting these letters, Hyerczyk printed multiple copies of each and placed them into envelopes bearing first class postage and addressed to, among others: a university in Orland Park; the same university’s office of graduate studies in Chicago; the same university’s English Department in Chicago; and a Chicago Police officer and executive officer of a Fraternal Order of Police lodge in Chicago.

Hyerczyk admitted that he mailed these letters knowing and intending that they would be interpreted as threatening by the intended victims, including Chicago Police officers and their families.

The Chicago Joint Terrorism Task Force began investigating the threatening letters in this case after they were first received in 2003. The investigation resulted in a federal search warrant being executed on Hyerczyk’s residence and automobile, as well as for his DNA, in January 2013. The JTTF is composed of special agents of the FBI, officers of the Chicago Police Department, and representatives from an additional 20 federal, state, and local law enforcement agencies.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

The government was represented by Assistant U.S. Attorneys Christopher Veatch and Steven Dollear.

CHICAGO — A former Crest Hill man was sentenced to more than nine years in federal prison for illegally trafficking and possessing five firearms that his sister illegally bought in Missouri and shipped to him in Illinois. The defendant, RICHARD CARRINO, a previously convicted felon who was barred from possessing guns, obliterated the serial numbers on at least three of the guns that he sold to an undercover ATF agent who was posing as a convicted felon and could not obtain guns on his own.

Carrino, 29, also known as “R.J.,” was sentenced to 110 months in prison by U.S. District Judge Rebecca Pallmeyer who imposed the sentence yesterday in Federal Court in Chicago.

“Carrino’s conduct reflects a complete lack of respect for the laws and rules of society, particularly with respect to keeping handguns out of the hands of felons,” Assistant U.S. Attorney Christopher McFadden argued at sentencing.

Carrino’s sister, ANGELA MARIE CARRINO, 25, of O’Fallon, Mo., is scheduled to be sentenced on May 23 after also pleading guilty in the case.

Both defendants pleaded guilty to conspiracy to deliver firearms to a person who did not live in the same state, to sell firearms to a convicted felon, and to make false statements in records kept by a federally licensed gun dealership, and Richard Carrino also pleaded guilty to being a felon-in-possession of firearms.

Both defendants admitted that they conspired between November 2012 and February 2013 to have Angela Marie Carrino make illegal “straw purchases” of firearms from licensed dealers in Missouri, and illegally transfer them to her brother, a convicted felon who lived in Illinois. They discussed types of guns to obtain and Richard Carrino sent his sister money to make the purchases. She falsely certified that she was the actual buyer of the firearms and then shipped at least five firearms from Missouri to her brother in Illinois. Richard Carrino, in turn, sold or transferred three of the firearms to an undercover agent, believing that the individual was a convicted felon.

Three of the firearms – two .45 caliber semi-automatic Hi-Point pistols and a 9- millimeter semi-automatic Hi-Point model C-9 handgun – were obtained by ATF agents during the investigation.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Carl Vasilko, Special Agent-in-Charge of the Bureau of Alcohol, Tobacco, Firearms and Explosives in Chicago.

CHICAGO — A federal jury today convicted a River Forest man of mailing and emailing threatening communications to kill Chicago area politicians, River Forest police officers, as well as oil executives in Texas and California. The defendant, RONALD HADDAD, Jr., 38, was found guilty of all 30 counts against him ― 28 counts of mailing threats and two counts of emailing threats.

The jury deliberated less than four hours this afternoon following a trial that began last Tuesday in U.S. District Court.

U.S. District Judge Virginia Kendall set sentencing for July 21. Haddad faces a maximum sentence of five years in prison and a $250,000 fine on each count. The Court must impose a reasonable sentence under federal statues and the advisory United States Sentencing Guidelines.

Haddad remains in federal custody without bond while awaiting sentencing. He has been in custody most of the time since he was arrested and charged in 2009, and during that time he underwent several mental competency evaluations.

The evidence at trial showed that Haddad sent multiple threatening communications in three waves starting in Dec. 2007, again in June and July 2008, and again in January 2009. The first group of letters, addressed to individuals such as former Chicago Mayor Richard M. Daley and former Chicago Ald. Bernard Stone, contained white powder. The letters in June and July 2008 contained a brown substance, and the letters and packages in January 2009 contained an oily substance or shotgun shells that appeared to be rigged to explode. None of the substances or shells proved to be harmful but witnesses who opened the letters and packages testified that they were fearful when they opened them.

The guilty verdicts were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of investigation; and Chicago Police Superintendent Garry F. McCarthy. The government was represented by Assistant U.S. Attorneys Joseph Thompson and William Ridgway.

CHICAGO — The federal government and more than 200 public school districts in 19 states, including Illinois, were defrauded of more than $33 million by two Niles–based companies and two of their executives, who purported to provide government-funded tutoring services to low-income students, according to a federal indictment announced today. The father and son executives were also charged with paying bribes to three school officials in Texas and one state education official in New Mexico, who were also indicted for accepting bribes, in exchange for recruiting students and steering federal and state funds from school districts.

Indicted were BRILLIANCE ACADEMY, INC., which contracted with school districts to provide “supplemental educational services” (SES) under the 2001 No Child Left Behind Act by tutoring students on-site at schools; its wholly-owned subsidiary, BABBAGE NET SCHOOL, INC., which contracted to tutor students through laptop computers provided to students; JOWHAR SOULTANALI, director of operations for Brilliance and Babbage; and his son, KABIR KASSAM, president of both companies, which Soultanali and Kassam now own.

Soultanali, 58, of Morton Grove, and Kassam, 34, of Wheeling, allegedly obtained between $8 million and $13.6 million for themselves and their families from the more than $33 million they fraudulently obtained from school districts around the country.

Soultanali and Babbage were each charged with five counts of mail fraud and three counts of federal program bribery, while Kassam and Brilliance were each charged with five counts of mail fraud and two counts of federal program bribery in a 12-count indictment returned by a federal grand jury last Thursday.

The indictment also seeks forfeiture from Soultanali, Kassam, Brilliance, and Babbage of more than $33 million, including approximately $1.77 million that was seized from the companies’ bank accounts in 2010 or relinquished by Babbage in 2011, as well as Soultanali’s and Kassam’s residences, and three additional condominiums, five luxury automobiles, six whole life insurance policies, and various items of diamond jewelry purchased in 2009.

Also indicted on one count each of federal program bribery were: ARTURO MARTINEZ, 52, of Rio Rancho, N.M., who was an educational administrator with the New Mexico Public Education Department; CEDRIC PETERSEN, 61, of San Antonio, who was the SES coordinator and assistant principal at Fox Tech High School in San Antonio; ARMANDO RODRIGUEZ, 54, of Corpus Christi, Tex., who was the SES coordinator at Miller High School in Corpus Christi; and BRIAN HARRIS, 33, of San Antonio, who was the SES coordinator at Sam Houston High School in San Antonio.

All eight defendants – six individuals and two companies – will be arraigned on dates to be determined in U.S. District Court in Chicago.

Between July 2008 and February 2012, Soultanali, Kassam, Brilliance and Babbage allegedly defrauded the United States and hundreds of public school districts nationwide by misrepresenting the nature and quality of the tutoring services the companies provided, instead providing substandard supplemental educational materials to students, falsely inflating invoices the companies submitted to school districts for purported tutoring services, and creating and distributing false student progress and improvement reports.

According to the indictment, on behalf of Brilliance and Babbage, Soultanali and Kassam were approved as SES providers in Illinois, Colorado, Georgia, Hawaii, Idaho, Indiana, Louisiana, Maine, Minnesota, Montana, New Mexico, New York, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Virginia, and Washington during the 2008-09 and 2009-10 school years. Those school years are the focus of the charges.

Each of the four indicted school officials allegedly received an unspecified amount of money from Soultanali, Kassam, Brilliance and Babbage, sometimes through the companies’ senior regional manager who oversaw Babbage’s activities in Texas and New Mexico. Petersen allegedly also received Caribbean cruise vacations. Martinez, who oversaw New Mexico’s SES program, was in charge of approving and auditing the state’s SES providers, and oversaw New Mexico’s migrant education program, allegedly also received meals and services at a gentlemen’s club.

In order to receive payment for tutoring services, Brilliance and Babbage were required to compile the number of hours spent tutoring eligible school children and submit a bill to each local school district those children attended. Local districts then paid the defendants from federal and other funds, including funds disbursed pursuant to the No Child Left Behind Act. Under the 2001 law, if a school was considered failing after being identified for “school improvement,” school districts were required to make “supplemental educational services,” or tutoring, available to eligible children from a provider with a demonstrated record of effectiveness. The provider was to be selected by students’ parents and approved by the state educational agency. The law required local educational agencies to spend a portion of their federal funding to pay for supplemental educational services, with a maximum allotment per pupil.

In marketing materials and state provider applications, Soultanali and Kassam allegedly falsely represented that:

• Babbage pre-tested enrolled students by administering to them the Basic Achievement Skills Inventory test, which measured students’ academic proficiency in various subjects;
• after reviewing the results of students’ BASI exams, Brilliance and Babbage created tutoring programs customized to address students’ academic needs;
• Brilliance provided students with customized tutoring workbooks, and Babbage provided students with customized laptop computer tutoring programs;
• once students began tutoring, Babbage provided ongoing progress reports to students’ schools and parents; and
• once students completed tutoring, Brilliance and Babbage post-tested students with the BASI exam to determine whether the tutoring had increased students’ academic proficiency, and provided student improvement results to schools.

In fact, the indictment alleges that Babbage and Kassam intentionally failed to properly pre-test students with assessment exams and, instead, administered partial assessment exams, and in some cases, no assessment exams at all; and intentionally failed to review the results of students’ assessment exams before providing them with purportedly customized tutoring materials. Instead, they provided tutoring programs that were not configured to students’ academic needs, and in many cases, were generic tutoring programs configured at or below students’ grade level.

The charges allege that Babbage and the companies’ executive director falsified students’ progress reports, and intentionally failed to post-test tutored students to determine whether the tutoring had improved their academic proficiency. Kassam directed an employee to configure a computer program to ensure that students’ post-test scores were always higher than their purported pre-test scores.

As part of the fraud scheme, the defendants also allegedly engaged in fraudulent billing, including creating inflated invoices based on false attendance records, spreadsheets, and a computer program that contained false tutoring time summaries. When questioned by school districts, Soultanali allegedly lied and said that overbilling had occurred as the result of mistake.

Each count of federal program bribery carries a maximum sentence of 10 years in prison and a $250,000 fine, while each count of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine or an alternate fine totaling twice the gross gain or loss, whichever is greater. Brilliance and Babbage face a maximum penalty of five years’ probation and a $250,000 fine on each count or an alternate fine totaling twice the gross gain or loss, whichever is greater. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Thomas D. Utz, Jr., Special Agent-in-Charge of the U.S. Department of Education Office of Inspector General. The Chicago Public Schools Office of Inspector General also assisted in the investigation.

The government is being represented by Assistant U.S. Attorneys Rachel Cannon and Barry Jonas.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

CHICAGO ― Former Illinois State Rep. KEITH FARNHAM was charged today with possession of child pornography in a criminal complaint filed in U.S. District Court in Chicago. Farnham allegedly possessed two videos depicting child pornography on a computer that was seized from his state office in Elgin in March.

Farnham, 66, of Elgin, was not arrested and no date has been set yet for him to appear voluntarily for an initial appearance in Federal Court.

On March 13, agents with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) executed a federal search warrant at Farnham’s office and residence in Elgin. Several computers and electronic storage devices were recovered that contained child pornography images, including the two charged videos, according to the complaint affidavit. The office computer that contained the videos was labeled “PROPERTY OF THE STATE OF ILLINOIS HOUSE OF REPRESENTATIVES.”

Farnham resigned his seat in the Illinois General Assembly on March 19.

According to the complaint, HSI agents were investigating information received from the HSI Cyber Crimes Center that an email address, later linked to Farnham, was being used to trade child pornography on the Internet. After agents linked the email account to Farnham they obtained and reviewed instant message chats that occurred between last June and January this year. Excerpts of those chats are detailed in the affidavit.

Possession of child pornography carries a maximum sentence of 10 years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The complaint was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Gary Hartwig, Special Agent-in-Charge of HSI in Chicago

A complaint contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Complaint

CHICAGO — A west suburban investment advisor was indicted on federal charges alleging that he fraudulently obtained approximately $2.9 million from at least 10 investors and misused the funds in a Ponzi-type scheme. The defendant, JOSEPH HENNESSY, co-owned and co-operated the now-defunct Resource Planning Group, Inc., formerly a registered investment advisor with the U.S. Securities and Exchange Commission.

Hennessy, 53, of Western Springs, was charged with seven counts of wire fraud in an indictment returned by a federal grand jury on Wednesday and announced today. He is scheduled to be arraigned next Wednesday in U.S. District Court in Chicago.

The indictment also seeks forfeiture of at least $2.9 million in alleged fraud proceeds.

According to the indictment, Hennessy and Resource Planning Group formed and operated the Midwest Opportunity Fund, a private equity fund that purported to invest in small to medium-sized companies based in the Midwest. Between 2007 and 2012, Hennessy allegedly made false statements to investors and used their investments to return principal and pay interest to earlier investors, all of which he concealed and intentionally failed to disclose to both new and existing investors. In fraudulently obtaining and retaining these funds, Hennessy falsely represented the use of the funds, the repayment of the investors’ principal, the expected return on investments ―which he claimed would yield between 10 and 15 percent a year ― the risks involved in the investment, and the status of the investments, the indictment adds.

Hennessy also falsely represented that he personally guaranteed investments in the fund, knowing that he did not have sufficient assets to repay investors, and he misappropriated funds from the individual retirement accounts of certain clients to pay existing investors in the Midwest Opportunity Fund, the indictment alleges.

Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. They thanked the U.S. Securities and Exchange Commission for its assistance. The government is being represented by Assistant U.S. Attorney Sunil Harjani.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

CHICAGO ― A longtime member of the Traveling Vice Lords street gang who managed a heroin distribution spot between 2008 and 2010 at the corner of North St. Louis Avenue and West Ohio Street on the city’s west side was sentenced to 24 years in federal prison, federal law enforcement officials announced today. The defendant, TIMOTHY ALLISON, was responsible for supervising the distribution of 39 kilograms of heroin, a federal judge determined before imposing the sentence.

Allison, also known as “Shaw,” 34, pleaded guilty to conspiracy to distribute heroin in March 2012, and he has seven prior felony convictions, including aggravated unlawful use of a weapon. U.S. District Judge John W. Darrah imposed the 24-year sentence on Wednesday.

According to court documents, Allison was involved in around-the-clock retail sales of heroin averaging around $10,000 a day, both at St. Louis and Ohio, as well as at a second corner nearby at West Chicago and North Christiana avenues.

Allison was among 31 federal and 65 state defendants who were arrested in November 2010 following a Chicago Police and FBI investigation, code-named Operation Blue Knight, of drug trafficking by TVL members and associates in the area of Kedzie Avenue and Ohio Street, known as “KO.” A lead defendant in a related federal case, Jason Austin, also known as “J Rock,” is scheduled to be sentenced on June 10.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Chicago Police Superintendent Garry F. McCarthy. The investigation was led by the FBI-Chicago Police Joint Task Force on Gangs and the Chicago Police Department’s Gang Investigations Division, and was conducted under the umbrella of the U.S. Organized Crime Drug Enforcement Task Force (OCDETF). The Cook County State’s Attorney’s Office, the U.S. Marshals Service, and the High Intensity Drug Trafficking Area Task Force (HIDTA) also participated in the investigation.

The government is being represented by Assistant United States Attorneys Maribel Fernandez-Harvath and Matthew Madden.

CHICAGO — Three Chicago men are facing federal charges for their alleged roles in a series of armed robberies of various retail businesses in Chicago and several suburbs late last year and early this year, federal law enforcement officials announced today. The indictments charge nine armed robberies and an attempted armed robbery of gas stations, convenience stores, jewelry stores, and others businesses in Chicago, Arlington Heights, Berwyn, Glenview, Hometown, Lincolnwood, North Chicago, Skokie, and Wilmette between October 2013 and February this year.

Two defendants, TYREE CRAIG, 29, and JACOBI PICKETT, 21, were charged together in a 13-count indictment returned by a federal grand jury yesterday. They were each charged with one count of robbery conspiracy, eight counts of robbery, two counts of brandishing a firearm during a violent crime, and Pickett alone was charged with being a felon-in-possession of a firearm.

Craig was also charged with JARRYL WILLIAMS, 42, in a separate four-count federal indictment involving the Jan. 10 armed robbery, involving four suspects, of James and Williams Jewelers, located at 7020 West Cermak Rd., in Berwyn. Craig and Williams were each charged with one count of robbery conspiracy, attempted robbery, and brandishing a firearm. Williams, who was shot by a store security officer, was also charged with being a felon-in-possession of a firearm with a partially obliterated serial number.

Craig and Williams have each pleaded not guilty to the charges involving the Berwyn attempted robbery. Craig and Pickett are scheduled to be arraigned on May 1 in U.S. District Court. Craig and Williams were initially arrested previously on related state charges but were later transferred to federal custody, where they remain. Pickett has been in federal custody since he was arrested in March on a criminal complaint.

According to the Craig and Pickett indictment returned yesterday, both defendants allegedly participated in the following robberies:

Dunkin Donuts, 3910 West Touhy Ave., Lincolnwood, on Oct. 20, 2013;

Phillips 66 gas station, 1234 Sheridan Rd., North Chicago, on Oct. 21, 2013;

Shell gas station, 9600 Crawford Ave., Skokie, on Oct. 21, 2013;

Shell gas station, 3 East Algonquin Rd., Arlington Heights, on Oct. 31, 2013;

Marathon gas station, 242 Waukegan Rd., Glenview, on Oct. 31, 2013;

Shell gas station, 5055 Touhy Ave., Skokie, on Nov. 30, 2013; and

Seven-Eleven, 500 Skokie Blvd., Wilmette, on Nov. 30, 2013.

Craig alone was also charged with the Dec. 13, 2013, robbery of Ted’s Jewelers, 5334 South Archer Ave., Chicago, while Pickett alone was charged with the Feb. 19, 2014, robbery of EZ Pawn store, 4080 Southwest Hwy., Hometown, in which jewelry valued at approximately $73,000 was stolen.

According to court documents, the charges stem from an FBI investigation of a series of similar armed robberies and attempted robberies last fall and winter of retail stores and businesses in Chicago, as well as northern and western suburbs. Typically, one or more participants entered each business and brandished a black semi-automatic handgun while demanding money or jewelry, and, in some instances Newport cigarettes. The participant or participants attempted to disguise their appearance but video surveillance provided a similar pattern of clothing and appearance.

The investigation is continuing.

Each count of robbery and robbery conspiracy carries a maximum penalty of 20 years in prison and a $250,000 fine, and each count of brandishing a firearm carries a consecutive, mandatory minimum of seven years in prison and a maximum of life. Williams and Picket also faces a maximum 10-year sentence on the felon-in-possession charges. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The indictments were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The case was investigated by the FBI’s Safe Streets Task Force, which is comprised of the FBI and the Chicago Police Department. The police departments in Chicago, Arlington Heights, Berwyn, Glenview, Hometown, Lincolnwood, North Chicago, Skokie, and Wilmette also assisted in the investigation, as well as the Illinois State Police.

The government is being represented by Assistant U.S. Attorneys Lindsay Jenkins and Angel Krull.

The public is reminded that indictments contain only charges and are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Craig/Pickett Indict.

Craig/Williams Indict.

ROCKFORD — A Freeport, Ill. man was sentenced yesterday in federal court by U.S. District Judge Frederick J. Kapala on a federal charge relating to his preparation of fraudulent federal income tax returns.  The defendant, JASON BOOTH, 32, was sentenced to 51 months in federal prison, to be followed by 3 years of supervised release, and was ordered to pay restitution of $159,926.98 to the IRS, and $90,200.00 to the Iowa Department of Revenue, for a total of $250,126.98.

Booth pled guilty to the charge on Jan. 16, 2014, admitting that he conspired with others to defraud the U.S. Department of the Treasury by obtaining payments through fraudulent claims for individual income tax refunds.  According to the written plea agreement, between March 2006 and January 2008, Booth created false returns, knowing that the taxpayers whose names he put on the false returns had not authorized him to use false information in the returns.  Some of the taxpayers had authorized Booth to create income tax returns for them, but many did not know Booth. Due to the false information, the income tax returns claimed refunds that were not actually owed to the taxpayers.  After creating the false returns, Booth filed them electronically with the IRS.  When claimed refunds were approved and disbursed by the IRS, the refunds were wired to bank accounts that had been designated by Booth when he electronically filed the false returns. Some of those accounts were owned by Booth, but several were owned by others that conspired with Booth.  The co-conspirators were allowed to keep a portion of each refund in exchange for the use of their accounts for the deposit of the refunds.  They delivered the balance of the refunds to Booth.  Booth used the co-conspirators accounts because he was not always able to open accounts in his name and because using varied accounts made discovery of his filing false returns less likely.  Booth admitted that as a result of the filing of the false federal income tax returns, $159,926.98 was disbursed by the IRS into the accounts he designated.

The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-In-Charge of the Chicago Field Office of Internal Revenue Service - Criminal Investigation Division.

The government was represented by Assistant U.S. Attorney Michael D. Love.

CHICAGO — A Dutch man who allegedly used the shuttered Silk Road underground website to sell illegal drugs for bitcoins worth millions of dollars has agreed to plead guilty to a federal drug conspiracy charge filed against him today.  The defendant, CORNELIS JAN SLOMP, through his attorney, authorized the government to disclose that he will plead guilty to conspiracy to import and distribute various controlled substances when he is arraigned on the charge that was brought in a criminal information filed in U.S. District Court.

Slomp, also known as “SuperTrips,” 22, of Woerden, the Netherlands, was charged following an undercover investigation led by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

He was charged with distributing worldwide approximately 104 kilograms of powder 3,4-methylenedioxy-N-methylamphetamine, also known as MDMA; 566,000 ecstasy pills containing MDMA; four kilograms of cocaine; three kilograms of Benzodiazepine; and substantial quantities of amphetamine, lysergic acid diethylamide (LSD), and marijuana, in addition to allowing substantial quantities of methamphetamine, ketamine, and Xanax to be distributed through his SuperTrips vendor account from March 2012 through August 2013.

Slomp was arrested on Aug. 27, 2013, at the Miami International Airport where he arrived on a flight from Europe.  Court documents allege that Slomp was intending to meet with alleged co-conspirators in Florida and to spin-off his entire U.S. Silk Road operations and customers to one of his co-conspirators, as well as to retrieve from that individual Slomp’s share of the illegal drug proceeds that the individual generated as Slomp’s largest wholesale re-distributor in the U.S. of fronted illegal drugs.

Slomp was arrested based on a warrant and criminal complaint filed in Federal Court in Chicago and, after he was transferred here to face prosecution, he did not contest detention and was ordered to remain in federal custody.

Upon conviction, he faces a mandatory minimum of five years and a maximum of 40 years in prison and a $5 million fine, and the Court must impose a reasonable sentence.  The government is also seeking forfeiture of approximately $3,030,000 in alleged proceeds from Slomps’ drug trafficking.  The government seized the equivalent of that amount in bitcoins, a digital currency, and exchanged it for cash.

“Illegal drug-trafficking is not new but drug-trafficking using a sophisticated underground computer network designed to protect anonymity of buyers and sellers presents new challenges to law enforcement that we are prepared to meet,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.

“In the global black market for all things illegal, Slomp allegedly was a prolific vendor on Silk Road,” said Gary Hartwig, Special Agent-in-Charge of HSI in Chicago.  “HSI will remain vigilant against criminals who traffic contraband and illicit goods across our nation’s borders. Those who mistakenly believe the anonymity of the Internet ― even on the Deep Web ― shields them from scrutiny are finding out they can’t evade detection in cyberspace.”

Messrs. Fardon and Hartwig commended U.S. Customs and Border Protection and U.S. Postal Inspection Service agents in Chicago for their assistance in the investigation.  The HSI office in Miami, the HSI Attaché Office in The Hague, and the Justice Department’s Office of International Affairs also provided assistance with this case.      

According to court documents, Slomp used Silk Road to sell illegal drugs and received approximately 385,000 in bitcoins from more than 10,000 transactions as payment.  From January 2011 until it was shut down by law enforcement in October 2013, Silk Road allowed vendors and buyers to exchange goods and services online.  It was dedicated to the sale of illegal drugs and other illicit, black market goods using bitcoins and was designed to facilitate illegal commerce by ensuring anonymity among its users.  The underground website operated on a special worldwide network of computers that concealed the true Internet Protocol (IP) addresses of the users.  Each communication, wrapped in a layer of encryption, bounced through numerous relays within the network so the end recipient had no way of tracing the communication back to its true originating IP address.

During the undercover investigation, HSI agents surreptitiously entered the website and observed a vendor who had offered various controlled substances for sale for about 18 months.  In April 2012, U.S. Customs and Border Protection officers at Chicago’s O’Hare International Airport seized an envelope mailed from the Netherlands that tested positive for MDMA concealed inside an empty DVD case.  During the investigation, agents collected more than 100 similar envelopes in Chicago, each mailed from the Netherlands or Germany, containing various controlled substances.  The investigation resulted in identifying Slomp as the alleged Silk Road vendor who was responsible for mailing the envelopes seized in Chicago.

The charge describes 11 unnamed co-conspirators in Europe and the U.S. who allegedly assisted Slomp in supplying, manufacturing, selling, packaging, shipping, and distributing various illegal drugs.  Two of these individuals in the Netherlands allegedly manufactured hundreds of thousands of ecstasy pills of different colors, most of which bore a question mark, which was Slomp’s unique identifying logo.

In August 2012, Slomp and Individual J in Florida allegedly agreed that Slomp would front wholesale quantities of illegal drugs on credit and they would divide the proceeds in half after Individual J resold the drugs to Silk Road customers under the vendor names “UnderGroundSyndicate” and “BTCMaster.”  Slomp allegedly imported a half-kilogram of fronted MDMA every week for a year to Individual J, as well as substantial quantities of other illegal drugs.

The government is being represented by Assistant U.S. Attorney Andrew S. Boutros.

The public is reminded that an information contains only charges and is not evidence of guilt.  The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Information

CHICAGO ― Ten Chicago and area defendants were charged in separate federal criminal cases with stealing a total of more than $1.27 million from the federal government by fraudulently obtaining Social Security benefits. Six of the defendants allegedly engaged in the fraud by using false identities. These individuals either applied for Social Security benefits under multiple names or worked under one name and applied for benefits using another name, according to the charges. Other defendants allegedly continued to receive benefits from the account of a beneficiary who they knew was deceased and no longer entitled to receive payments. The cases were announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and William Cotter, Special Agent-in-Charge of the Chicago Office of the Social Security Administration Office of Inspector General.

In the false identity cases, the charges allege that those six defendants obtained Social Security benefits by claiming they were disabled or otherwise unable to maintain employment while simultaneously working and earning wages using a different identity.

SSA administers the payment of benefits from the United States to qualified individuals under various programs, including the Old-Age and Survivors Insurance (OASI) program, the disability insurance program, and the supplemental security income program (SSI).  The OASI program provides monthly cash benefits to retired individuals and to the surviving family members of individuals who had worked and were insured under the Social Security Act based on contributions from earnings.  The SSI program provides monthly cash benefits to aged, disabled, and blind individuals who have assets and income levels that fall below certain levels.

The criminal cases were filed this month in U.S. District Court in Chicago.  Eight defendants were indicted by a federal grand jury and two were charged in criminal informations, each on one felony count of theft of government funds.  Seven defendants pleaded not guilty at their arraignments in U.S. District Court and the remaining three are scheduled to be arraigned this week.

“Stealing from the Social Security trust fund hurts the millions of hardworking Americans who contribute to the Social Security system,” Mr. Fardon said.  “We will vigorously pursue those who abuse the system, so that we can protect those who legitimately need it.”

Each defendant faces a maximum penalty of 10 years in prison and a $250,000 fine. If convicted, restitution is mandatory and the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.  The public is reminded that indictments and informations contain only charges and are not evidence of guilt.  The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

The defendant and the total fraud amount alleged in each case follow:

DAVID BAILOG, also known as “David Conti” and “David Bailey,” 45, of Chicago
Loss amount: $43,422
(Assistant U.S. Attorney Christopher Parente)

SHARIA BRYANT, a/k/a “Sharia Bailey,” 64, of Chicago
Loss amount: $69,241
(Special Assistant U.S. Attorney Bill Thomas)

IMOGENE DAVIS, a/k/a “Imogene Neely,” 63, of Chicago
Loss amount: $91,566
(AUSA Timothy Storino)

RONNIE DAVIS, a/k/a “Ronnie Wofford,” 67, of Chicago
Loss amount: $101,872
(AUSA Derek Owens)

SHERRI MARSHALL, a/k/a “Sherri Williams,” 49, of Chicago
Loss amount: $43,189
(AUSA Kelly Greening)

PATRICIA McQUEEN, 58, of Chicago
Loss amount: $203,505
(SAUSA Thomas)

BETSY MINOR, 63, of Oak Lawn
Loss amount: $369,188
(SAUSA Thomas)

SIMONIA PATTERSON, 39, of Chicago
Loss amount: $130,929
(SAUSA Thomas)

LEIN SCOTT, a/k/a “Barry Scott,” 64, of Chicago
Loss amount: $126,919
(AUSA Ryan Fayhee)

SHIRLEY SIMMONS, 50, of Chicago
Loss amount: $95,247
(SAUSA Thomas)

CHICAGO — A Chicago real estate developer was arrested today on federal charges alleging that he defrauded the south suburban Village of Riverdale of public funds provided for the redevelopment of the now closed-Riverdale Marina. The defendant, JOHN THOMAS, allegedly fraudulently obtained approximately $370,000 for himself from $900,000 in Tax Increment Financing (TIF) payments in 2012 and used the public funds to repay personal loans and debts, legal fees, rent and other personal expenses.

Thomas, 51, of Chicago, was charged with three counts of wire fraud in a federal grand jury indictment that was returned Wednesday and unsealed today after his arrest. He is expected to be arraigned later today in U.S. District Court.

Thomas owned and controlled Nosmo Kings LLC, which had offices at 215 West Ontario St., in Chicago, and at the Riverdale Marina, 13100 South Halsted St., in Riverdale, which consisted of boat docks and a restaurant on 11 acres along the Little Calumet River.

Between February and April 2012, Riverdale paid Thomas’s company $900,000 in TIF funds for three phases of construction and reimbursement based on false supporting documents. Thomas used a portion of the money for legitimate renovations costs while fraudulently using approximately $370,000 for his personal benefit. The indictment seeks forfeiture of at least $370,000.

According to the indictment, Nosmo Kings entered into a TIF agreement with Riverdale in February 2012. Riverdale’s TIF program allowed taxpayer funds to be used to redevelop certain property in the village. Under the agreement, Riverdale agreed to reimburse Nosmo Kings’ expenses up to $1.2 million as long as the total renovation costs equaled or exceeded approximately $5.25 million. The TIF funds were to be disbursed in four phases, each capped at $300,000, after Nosmo Kings paid for and completed each phase of construction. To obtain TIF funds, Thomas was required to submit certain documents identifying completed construction expenses, including invoices from and checks paid to vendors.

In early 2012, Thomas allegedly created and submitted fake invoices for non-existent companies and for companies that never performed work at the marina in order to fraudulently obtain reimbursement from the village. The indictment alleges he submitted numerous false documents supporting reimbursement for expenses that he had not incurred. These included $132,000 and $8,815 in payments to contractors for construction work; $22,994 for an insurance policy that was later cancelled for non-payment; and $56,000 and $67,000 for construction supplies using the same supporting invoices and receipts to double-bill the village.

The indictment alleges that Thomas claimed $25,750 for construction supplies from a company that was actually a currency exchange he owed money, and he submitted other fraudulent documents to obtain payment of tens of thousands of dollars to law firms and an individual attorney for personal legal fees for himself and one of his employees. Thomas used other TIF funds to pay his apartment rent, the charges allege.

Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The arrest and indictment were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The government is being represented by Assistant U.S. Attorney Sunil Harjani.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

CHICAGO ― Two former analysts for the Cook County Board of Review were sentenced today for accepting $1,500 to facilitate reducing by more than $10,000 the property taxes on three residential properties. THOMAS HAWKINS was sentenced to 24 months in prison and JOHN RACASI was sentenced to 18 months in prison after they were convicted of federal conspiracy, bribery, and fraud charges. They were captured scheming with others to facilitate reducing property tax assessments in exchange for bribes in undercover recordings that were played at their week-long trial last October in U.S. District Court.

Hawkins, 50, and Racasi, 53, half-brothers and both of Chicago, were analysts on the staff of one of the three Board of Review commissioners in September 2008, when they accepted the $1,500 bribe payment. Each of the three commissioners has analysts who handle residential property tax appeals and at least two of the three commissioners’ analysts must agree in order to reduce the Cook County Assessor’s property tax assessments.

“Offenses like [these], betray the citizens who pay property taxes in Cook County and who expect the process in place for assessing property values and appealing those property tax assessments to operate fairly and legitimately,” Assistant U.S. Attorneys Margaret J. Schneider and Michael T. Donovan, argued at sentencing.

According to the evidence at trial, Ali Haleem, a former Chicago police officer who began cooperating with the FBI in July 2008 and is awaiting sentencing on other federal charges, was introduced to Hawkins, who, in turn, introduced him to Racasi. Haleem recorded numerous meetings and telephone conversations with both defendants in which they discussed facilitating property tax assessment reductions in exchange for bribes.

In September 2008, Haleem, Hawkins and Racasi discussed the specifics of the bribe Haleem would pay for reducing tax assessments on properties in Chicago, Burbank, and Tinley Park. On Sept. 11, 2008, Hawkins and Racasi agreed to reduce the assessed values on properties Haleem owned in Chicago and Burbank, as well as a property in Tinley Park owned by another individual, for three years beginning with the 2008 tax year. Hawkins and Racasi provided Haleem with analysis sheets for these properties, which could be used to calculate the tax savings that a property owner would realize over the three-year period. In return for the $1,500 bribe, Hawkins and Racasi promised Haleem a total tax savings for the three properties over the threeyear period of at least approximately $10,000. The payment was made on Sept. 17, 2008, when Haleem met with Hawkins and Racasi and handed the money to Racasi. Hawkins assured Haleem that Racasi would later provide Hawkins with his share of the money.

Hawkins and Racasi also facilitated a reduction in property tax assessments on 11 condominium units in Chicago, expecting to receive bribe payments that Haleem would collect from the property owners once the reductions were verified.

The sentences were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The FBI=s Chicago City Public Corruption Task Force led the investigation with assistance from the Chicago Police Department’s Internal Affairs Division, which is a task force member.

CHICAGO ― A former Des Plaines man was sentenced to 50 years in federal prison for sexually molesting nine children and producing child pornography with seven of those victims, as well as creating pornographic images of two other victims whom he sexually exploited. The defendant, BOBBY CRUZ, 34, pleaded guilty last September to one count of interstate travel to engage in sex with a minor and two counts of producing child pornography, resolving separate federal cases that were brought in both the Northern and Central Districts of Illinois. He has remained in federal custody since he was arrested in November 2011.

In an emotional sentencing hearing yesterday afternoon, two victims and a parent of six other victims told U.S. District Judge Robert M. Dow, Jr., about the traumatic damage that Cruz inflicted upon their lives.

“The harm to the victims is incalculable,” Judge Dow said in imposing the maximum sentence under the terms of Cruz’s plea agreement. The “victims are the most vulnerable in society” and Cruz’s crimes were “brazen beyond belief,” the judge added.

Cruz sexually exploited boys and girls, who were between the ages of 2 and 11 when the abuse began, to produce child pornography. None of the victims were random and all were children that Cruz had access to being around. Cruz was ordered to remain under court supervision for life, and he must serve at least 85 percent of his sentence. There is no parole in the federal prison system.

“The defendant has imposed a life sentence on each one of these victims,” Assistant U.S. Attorney Jennie Levin argued in seeking the 50-year sentence.

“No amount of prison time seems sufficient for the unspeakable trauma Cruz inflicted on his innocent victims,” said Gary J. Hartwig, Special Agent-in-Charge of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) in Chicago. The sentence was announced by Mr. Hartwig and Zachary T. Fardon, United States Attorney for the Northern District of Illinois,

The investigation of Cruz began just before he was arrested when Cruz traded images of child pornography with an undercover law enforcement officer. Ultimately, agents seized 300 videos and images of homemade child pornography from Cruz’s residence, along with 1,130 additional videos and images that he possessed.

The investigation was part of Operation Predator, a nationwide HSI initiative to protect children from sexual predators, including those who travel abroad for sex with minors, Internet child pornographers, criminal alien sex offenders, and child sex traffickers. The Des Plaines Police Department and the Cook County State’s Attorney’s Office assisted in the investigation.

CHICAGO ― Seven Chicago and suburban residents, among others, are facing federal prosecution for alleged federal income tax crimes in various separate cases filed recently. Two defendants were arrested by IRS agents today after they were indicted in an alleged scheme to use stolen identities to fraudulently claim and obtain tax refunds based on fictitious returns. Other defendants include Dolton and Lockport businessmen and a retired Chicago police officer and his wife.

“The IRS Criminal Investigation Division is focused on ensuring that taxpayers pay their fair share,” said James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago. “Tax fraud does not know a season ― IRS special agents pursue criminals year round, not only at filing deadlines. Taxpayers who might be thinking about cheating should think twice or they will risk the consequences,” he said.

“Federal tax prosecutions occur throughout the year but at this time of year it is especially prudent to remind taxpayers of the importance of voluntary compliance with their tax obligations,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.

In addition to criminal penalties, including incarceration, fines, and the costs of prosecution, convicted defendants remain responsible for any taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed, Mr. Fardon noted. And those making false claims against the government may be required to pay restitution or may be sued civilly for an amount greater than the fraudulent claims, he added.

In the case involving today’s arrests, three defendants were indicted in an alleged scheme to fraudulently claim tax refunds in excess of $350,000, and fraudulently obtaining approximately $180,000, after filing 173 fictitious returns. WILLIS PATTON, 43, of Woodridge, and STEVIE SHELTON, 54, of Chicago, were arrested today, while KENYA BOND, 35, of Chicago, will be arraigned on a date to be determined in U.S. District Court. Each of them was charged with six counts of wire fraud, while Patton and Bond were also charged with two counts each of making false claims, and Shelton was charged with two counts of theft of government funds in a 10-count indictment that was returned by a federal grand jury on April 2 and unsealed today.

According to the indictment, Bond misappropriated the names, social security numbers, and dates of birth of 29 patients of the suburban Woodridge dentist’s office where she worked, and provided the identity information to Patton for a fee. Patton used that information, as well as identifying information obtained from other unspecified sources, to file 173 fictitious tax returns for 2011 that contained false information about income, tax withholdings, and supporting documents. Patton directed the IRS to send electronic tax refunds to bank accounts controlled by Shelton and other individuals, the indictment alleges. In fact, Patton allegedly controlled these bank accounts and recruited Shelton and others to open and maintain them in their names for Patton to obtain tax refunds.

For the 2011 tax year, Patton allegedly received approximately $180,000 in false tax refunds, including $67,000 that was electronically transferred into accounts maintained by Shelton. Patton and Shelton were both ordered to remain in federal custody pending a detention hearing at 2 p.m. Thursday before Magistrate Judge Geraldine Soat Brown in U.S. District Court.

Each count of wire fraud carries a maximum sentence of 20 years in prison, each count of making a false claim carries a maximum of five years, and each count of theft of government funds carries a maximum of 10 years, and all counts carry a maximum fine of $250,000. The government is being represented by Assistant U.S. Attorney Jessica Romero.

In other recent cases:

• VICTOR SHAW, 53, of Dolton, was charged in a criminal information filed Friday with six misdemeanor counts of failing to file federal income tax returns for each year between 2007 and 2012. He will be arraigned on a date to be determined in U.S. District Court. Each count of failing to file an income tax return, a misdemeanor, carries a maximum sentence of a year in prison and $100,000 fine. (AUSA Maureen Merin.)
• RONALD MUHAMMAD, 63, who retired as a Chicago police officer in 2007, and his, wife, WILHELMENIA MUHAMMAD, 64, a retired Social Security Administration employee, both of Chicago, were each indicted on four counts of tax evasion and four counts of failing to file a federal income tax return in a 12-count indictment that was returned by a federal grand jury last Thursday. Between 2007 and 2010, the couple allegedly failed to file tax returns and evaded paying taxes on hundreds of thousands of dollars in income from pension payments and wages, including Ronald’s earnings at the Chicago Park District after he retired from the police department. Among the couple’s other wages and retirement earnings, Ronald allegedly withdrew the following amounts in police pension and annuity payments: $537,514 in 2008, $514,043 in 2009, and $149,490 in 2010.
  
  According to the indictment, either or both of the Muhammads responded to various letters from the IRS by saying they viewed a letter as a “fraudulent document that had no legal basis,” or the IRS “has no jurisdiction over our personal affairs,” as well as claiming at times that they were exempt from federal withholding.
  
  The Muhammads are scheduled to be arraigned at 9 a.m. Wednesday in U.S. District Court. Each count of tax evasion carries a maximum sentence of five years in prison and a $250,000 fine, and each count of failing to file an income tax return, a misdemeanor, carries a maximum sentence of a year in prison and $100,000 fine. (AUSA Bethany Biesenthal.)
• PAUL WEST, 61, of Lockport and formerly of Frankfort, also known as “Thomas Wilson,” and “Tom Wilson,” was indicted last Thursday on two counts of filing a false federal income tax return and three counts of failing to file a federal income tax return. West, who was in the business of selling materials for recycling, including scrap cardboard, had gross income in excess of $450,000 in 2007, and more than $200,000 in 2011, and allegedly under-reported his income for both years, reporting that he owed little or no taxes, according to the indictment. It further alleges that he had gross income in excess of $250,000 in 2008, $150,000 in 2009, and 200,000 in 2010, and failed to file federal income tax returns for those years.
  
  West will be arraigned on a date to be determined in U.S. District Court. Each count of filing a false income tax return carries a maximum sentence of three years in prison and a $250,000 fine, and each count of failing to file an income tax return, a misdemeanor, carries a maximum sentence of a year in prison and $100,000 fine. (AUSA Kaarina Salovaara.)

In each case, if convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The public is reminded that criminal charges are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

CHICAGO — A high-level member of the Sinaloa Cartel in Mexico pleaded guilty a year ago to participating in a vast narcotics trafficking conspiracy and is cooperating with the United States, federal law enforcement officials announced today. A written plea agreement with the defendant, JESUS VICENTE ZAMBADA-NIEBLA, was made public today in U.S. District Court for the Northern District of Illinois.

Zambada-Niebla, 39, pleaded guilty on April 3, 2013, before U.S. District Chief Judge Ruben Castillo. Zambada-Niebla was arrested in Mexico in 2009, and he was extradited to the United States in February 2010.

Zambada-Niebla remains in U.S. custody and no sentencing date has been set. Under the plea agreement, he faces a maximum sentence of life in prison¸ a mandatory minimum sentence of 10 years, and a maximum fine of $4 million. If the government determines at the time of sentencing that Zambada-Niebla has continued to provide full and truthful cooperation, as required by the plea agreement, the government will move to depart below the anticipated advisory federal sentencing guideline of life imprisonment. In addition, Zambada-Niebla agreed not to contest a forfeiture judgment of more than $1.37 billion.

“This guilty plea is a testament to the tireless determination of the leadership and special agents of DEA’s Chicago office to hold accountable those individuals at the highest levels of the drug trafficking cartels who are responsible for flooding Chicago with cocaine and heroin and reaping the profits,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. Mr. Fardon announced the guilty plea with Jack Riley, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration.

Zambada-Niebla pleaded guilty to one count of conspiracy to possess with intent to distribute multiple kilograms of cocaine and heroin between 2005 and 2008. More specifically, the plea agreement describes the distribution of multiple tons of cocaine, often involving hundreds of kilograms at a time on a monthly, if not weekly, basis between 2005 and 2008. The guilty plea means that there will be no trial for Zambada-Niebla, whose case was severed from that of his co-defendants. Among his co-defendants are his father, Ismael Zambada-Garcia, also known as “Mayo,” and Joaquin Guzman-Loera, also known as “Chapo,” both alleged leaders of the Sinaloa Cartel. Zambada-Garcia is a fugitive believed to be in Mexico, and Guzman-Loera is in Mexican custody after being arrested this past February.

Zambada-Niebla admitted that between May 2005 and December 2008, he was a highlevel member of the Sinaloa Cartel and was responsible for many aspects of its drug trafficking operations, “both independently and as a trusted lieutenant for his father,” for whom he acted as a surrogate and logistical coordinator, the plea agreement states. Zambada-Niebla admitted he was aware that his father was among the leaders of the Sinaloa Cartel since the 1970s and their principal livelihood was derived from their sale of narcotics in the United States.

Zambada-Niebla admitted that he participated in coordinating the importation of multiton quantities of cocaine from Central and South American countries, including Colombia and Panama, into the interior of Mexico, and facilitated the transportation and storage of these shipments within Mexico. The cartel used various means of transportation, including private aircraft, submarines and other submersible and semi-submersible vessels, container ships, go-fast boats, fishing vessels, buses, rail cars, tractor-trailers, and automobiles.

Zambada-Niebla “subsequently assisted in coordinating the delivery of cocaine to wholesale distributors in Mexico, knowing that these distributors would in turn smuggle multiton quantities of cocaine, generally in shipments of hundreds of kilograms at a time, as well as on at least one occasion, multi-kilogram quantities of heroin, from Mexico across the United States border, and then into and throughout the United States, including Chicago,” according to the plea agreement.

On most occasions, the Sinaloa Cartel supplied this cocaine and heroin to wholesalers on consignment, including to cooperating co-defendants Pedro and Margarito Flores, whom Zambada-Niebla knew distributed multi-ton quantities of cocaine and multi-kilogram quantities of heroin in Chicago, and in turn sent payment to Zambada-Niebla and other cartel leaders. Zambada-Niebla also admitted being aware of, and directly participating in, transporting large quantities of narcotics cash proceeds from the U.S. to Mexico.

Zambada-Niebla also admitted that he and his father, as well as other members of the Sinaloa Cartel, “were protected by the ubiquitous presence of weapons,” and that he had “constant bodyguards who possessed numerous military-caliber weapons.” Zambada-Niebla also admitted that he was aware that the cartel used violence and made credible threats of violence to rival cartels and to law enforcement in Mexico to facilitate its business.

The DEA in Chicago led the investigation, joined by the Internal Revenue Service Criminal Investigation Division and the Chicago Police Department. Also assisting were the DEA=s National Drug Intelligence Center, the High-Intensity Drug Trafficking Area task force, the U.S. Attorney=s Office in Milwaukee and the Milwaukee Police Department; the U.S. Attorney=s Office for the Central District of Illinois; the Chicago and Peoria offices of the Federal Bureau of Investigation; the Chicago offices of the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and the U.S. Marshals Service; the Cook County Sheriff’s Department, and other state and local law enforcement agencies. The investigation was assisted by agents and analysts of the Special Operations Division (SOD), and attorneys from the Justice Department Criminal Division’s Narcotic and Dangerous Drug Section. The Criminal Division’s Office of International Affairs assisted with Zambada-Niebla’s extradition.

Assistant U.S. Attorneys Thomas D. Shakeshaft and Michael J. Ferrara are representing the government.

Plea Agreement

CHICAGO — The former deputy police chief in south suburban Markham was sentenced today to the maximum of five years in federal prison after a judge ruled that he sexually assaulted a woman in police custody in 2010. The defendant, TONY D. DEBOIS, pleaded guilty last September to lying to FBI agents in 2012 about having had sex in his office, but he contended at a lengthy sentencing hearing last month that the woman he had sex with was not the victim, and the sex was consensual.

“It is a case about lying about a rape that occurred under the most egregious circumstances that law enforcement could imagine,” Assistant U.S. Attorney April Perry argued today before the sentence was imposed by U.S. District Judge Joan Lefkow.

“The seriousness should not be underestimated,” Judge Lefkow said, adding that she found Debois’ conduct “revolting.”

Debois, 42, of Frankfort, was also placed on supervised release for three years following his sentence, which he was ordered to begin serving on June 10.

Judge Lefkow ruled today that the government established that Debois raped the 21-yearold highly vulnerable victim by a “considerable” preponderance of the evidence presented at the hearing last month, including the victim’s testimony, which the judge said was corroborated by other factors. The victim and a man were arrested by Markham police officers on Sept. 23, 2010, after the man was suspected of engaging in a counterfeit currency transaction. The victim, who had no prior contact with law enforcement, was handcuffed, taken to the Markham Police Department, and placed in a holding cell for about 30 minutes. One of the arresting officers then took her to Debois’ tactical office, where, according to Judge Lefkow’s ruling, “he insinuated she could escape further trouble if she engaged in sex with him.” The judge found that Debois’ conduct was rape and that he later obstructed justice to avoid punishment for the sexual assault.

DeBois served as deputy chief in Markham between 2008 and 2011 and also served as the department’s head of internal affairs until 2011, when he became Markham’s inspector general until 2012. DeBois began his law enforcement career with the former Chicago Housing Authority Police Department in the 1990s, and he was a police officer in south suburban Harvey from 1999 to 2007, when he joined the Markham department.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. They thanked the Illinois State Police and the Cook County State’s Attorney’s Office for their extensive cooperation in the investigation.

The government was represented by Ms. Perry and Assistant U.S. Attorney Patrick Pope.

CHICAGO — A clerk for the City of Chicago’s Department of Transportation (CDOT) was arrested today for allegedly embezzling more than $741,000 from fees that were paid for certain city permits. The defendant, ANTIONETTE CHENIER, a city clerk since 1990, allegedly diverted the funds from checks that were written by companies that applied for and received city permits to block public ways with dumpsters or moving vans.

Chenier, 50, of Homewood, was charged with embezzlement in a criminal complaint that was unsealed following her arrest this morning. She is scheduled to appear at 3 p.m. today before Magistrate Judge Sheila Finnegan in U.S. District Court.

The arrest and charge follow an investigation by the Chicago Office of the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigation Division, and the City of Chicago Office of Inspector General.

From 1993 through 2005, Chenier was assigned to CDOT, and from 2006 through 2008, she was assigned to the city’s Office of Emergency Management and Communication (OEMC) before being transferred back to CDOT. As a clerk, working in CDOT’s City Hall permitting office, she was involved in processing the moving van and dumpster permit fees.

The city charges a $25 daily fee for a residential moving van and between $50 and $200 (or higher) per dumpster, depending on the size, location, and length of time the dumpster will be on a city street. For several years, companies have been able to apply for permits through a website operated by CDOT. Although CDOT issues the permits and collects payment, the checks are often made payable to OEMC, which previously administered the permit process.

According to the complaint affidavit, bank records show that Chenier opened a personal bank account in August 2008 and a business account at the same bank in March 2009 under the name “OEMC Chenier,” and she was the sole signatory on both accounts. Between August 2008 and January 2014, she allegedly deposited several hundred checks, totaling $741,299, payable to OEMC and other city departments into her personal and business accounts.

In January this year, bank officials noticed Chenier’s unusual banking activity and froze her business account, according to the affidavit.

The arrest and complaint were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the FBI; James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago; and Chicago Inspector General Joseph Ferguson.

Embezzlement carries a maximum penalty of 10 years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The government is being represented by Assistant U.S. Attorney Steven Block.

A complaint contains merely charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Complaint

CHICAGO ― A leader of two Chinatown charitable organizations, GENE LEE, pleaded guilty today to federal charges of theft and filing a false federal income tax return for misappropriating as much as $92,800 from one of the charities, which received federal funds as well as donations, and failing to report and pay taxes on the stolen funds.

Lee, 65, of Chicago, served as chairman of the Chicago Chinatown Summer Fair, which was sponsored and overseen by the Chinese Consolidated Benevolent Association, a charity that received federal funds. He was also president of the Chicago Dragons Athletic Association, which sponsored youth and adult basketball teams, traditional dancing and music, and in 2009 began overseeing the Summer Fair, a single-day event held in July in Chinatown. Between 2007 and 2010, Lee was responsible for soliciting and obtaining donations to the Summer Fair and the Chicago Dragons.

Lee, also a former deputy chief of staff to former Chicago Mayor Richard M. Daley during that time, pleaded guilty to one count each of theft of federal funds and filing a false federal income tax return. He remains free on his own recognizance pending sentencing on Aug. 28 by U.S. District Judge John W. Darrah. Lee faces a maximum sentence of 10 years in prison on the theft count and three years in prison on the tax count, and a maximum fine of $250,000 on each count. His plea agreement provides for an advisory sentencing guidelines range of 18 to 24 months in prison, according to the government’s calculation.

In pleading guilty, Lee admitted that between 2007 and 2010 he took a portion of the donations he solicited for the Summer Fair and used the money for personal expenses. He did so by creating and sending two invoices to donors and sponsors of the Summer Fair, with the second version requesting that all donation checks be made payable to the Chicago Dragons, which facilitated his ability to misappropriate donations to the Summer Fair to his personal use.

Lee admitted that he cashed approximately 161 donation checks, totaling approximately $132,000, at a restaurant and used a portion of these checks for his own use instead of for the benefit of the Summer Fair or the Chicago Dragons. He also used a portion of the cashed checks for legitimate expenses, according to the plea agreement.

In order to hide his theft, Lee admitted that he provided the charity’s accountant with a false expense summary about donations made to the 2008 Summer Fair, including false information that Home Depot and Western Union had donated 3,000 when each company had actually donated $5,000. The false summary also omitted additional donations, including $10,000 from McDonald’s, $5,000 from ComEd, and $3,000 from Nielsen Media. At the same time, Lee maintained a separate spreadsheet of donations that included these contributions to the 2008 Summer Fair.

By the government’s calculations, Lee misappropriated approximately $92,841 and failed to report that amount as income on his federal income tax returns for 2007 through 2010, resulting in a tax loss of approximately $21,177. Lee disagrees with the government’s figures, the plea agreement states.

The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago. The City of Chicago Office of Inspector General assisted in the investigation.

The government is being represented by Assistant U.S. Attorney Margaret J. Schneider.

Plea Agreement

CHICAGO — A federal indictment returned under seal in June 2013 and unsealed today charges six foreign nationals, including a Ukrainian businessman and a government official in India, with participating in an alleged international racketeering conspiracy involving bribes of state and central government officials in India to allow the mining of titanium minerals. Beginning in 2006, the defendants allegedly conspired to pay at least $18.5 million in bribes to secure licenses to mine minerals in the eastern coastal Indian state of Andhra Pradesh. The mining project was expected to generate more than $500 million annually from the sale of titanium products, including sales to unnamed “Company A,” headquartered in Chicago.

One defendant, DMITRY FIRTASH, aka “Dmytro Firtash” and “DF,” 48, a Ukrainian businessman, was arrested March 12 in Vienna, Austria. Firtash was released from custody on March 21 after posting 125 million euros (approximately $174 million) bail, and he pledged to remain in Austria until the end of extradition proceedings.

Five other defendants remain at large: ANDRAS KNOPP, 75, a Hungarian businessman; SUREN GEVORGYAN, 40, of Ukraine; GAJENDRA LAL, 50, an Indian national and permanent resident of the United States who formerly resided in Winston-Salem, N.C.; PERIYASAMY SUNDERALINGAM, aka “Sunder,” 60, of Sri Lanka; and K.V.P. RAMACHANDRA RAO, aka “KVP,” and “Dr. KVP,” 65, a Member of Parliament in India who was an official of the state government of Andhra Pradesh and a close advisor to the nowdeceased chief minister of the State of Andhra Pradesh, Y.S. Rajasekhara Reddy.

“Criminal conspiracies that extend beyond our borders are not beyond our reach,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “We will use all of the tools and resources available to us to ensure the integrity of global business transactions that involve U.S. commerce,” he said.

“Fighting global corruption is part of the fabric of the Department of Justice,” said Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division. “The charges against six foreign nationals announced today send the unmistakable message that we will root out and attack foreign bribery and bring to justice those who improperly influence foreign officials, wherever we find them.”

Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, said: “This case is another example of the FBI’s willingness to aggressively investigate corrupt conduct around the globe. With the assistance of our law enforcement partners, both foreign and domestic, we will continue to pursue those who allegedly bribe foreign officials in return for lucrative business contracts.”

The five-count indictment was returned under seal by a federal grand jury in Chicago on June 20, 2013. All six defendants were charged with one count each of racketeering conspiracy and money laundering conspiracy, and two counts of interstate travel in aid of racketeering. Five defendants, excluding Rao, were charged with one count of conspiracy to violate the federal Foreign Corrupt Practices Act.

As described in the indictment, Firtash controls Group DF, an international conglomerate of companies that was directly and indirectly owned by Group DF Limited, a British Virgin Islands company. Group DF companies include: Ostchem Holding AG, an Austrian company in the business of mining and processing minerals, including titanium; Global Energy Mining and Minerals Limited, a Hungarian company, and Bothli Trade AG, a Swiss company, for which Global Energy Mining and Minerals was the majority shareholder. In April 2006, Bothli Trade and the state government of Andhra Pradesh agreed to set up a joint venture to mine various minerals, including ilmenite, a mineral which may be processed into various titanium-based products such as titanium sponge, a porous form of the mineral that occurs in the processing of titanium ore.

In February 2007, Company A entered into an agreement with Ostchem Holding, through Bothli Trade, to work toward entering into a supply agreement in which Bothli Trade would sell 5 million to 12 million pounds of titanium sponge from the Indian project to Company A on an annual basis. The mining project required licenses and approval of both the Andhra Pradesh state government and the central government of India before the licenses could be issued.

The racketeering conspiracy count alleges that the defendants:

• used U.S. financial institutions to engage in the international transmission of millions of dollars for the purpose of bribing Indian public officials to obtain approval of the necessary licenses for the project;
• used Group DF, including its business reputation and financial resources, to advance, participate in, and finance the project, as well as to fund, transfer, and conceal bribe payments connected with the project; and
• used threats and intimidation to advance the interests of the enterprise’s illegal activities.

According to the indictment, Firtash was the leader of the enterprise and oversaw, directed and guided certain of its illegal activities. Firtash allegedly:

• caused the direct and indirect participation of certain Group DF companies in the project;
• met with Indian government officials, including Chief Minister Reddy, to discuss the project and its progress;
• authorized payment of at least $18.5 million in bribes to both state and central government officials in India to secure the approval of licenses for the project;
• directed his subordinates to create documents to make it falsely appear that money transferred for the purpose of paying these bribes was transferred for legitimate commercial purposes; and
• appointed various subordinates to oversee efforts to obtain the licenses through bribery.

Knopp allegedly supervised the enterprise and, together with Firtash, met with Indian government officials. Knopp also met with Company A representatives to discuss supplying titanium products from the project. Gevorgyan allegedly traveled to Seattle and met with Company A representatives. Gevorgyan also engaged in other activities, including allegedly signing false documents, monitoring bribe payments, and coordinating transfers of money to be used for bribes. Lal, also known as “Gaj,” allegedly engaged in similar activities, reported to Firtash and Knopp on the status of obtaining licenses, and recommended whether, and in what manner, to pay certain bribes to government officials.

Sunderalingam allegedly met with Rao to determine the total amount of bribes and advised others on the results of the meeting, and identified various foreign bank accounts held in the names of nominees outside India that could be used to funnel bribes to Rao. Rao allegedly solicited bribes for himself and others in return for approving licenses for the project, and warned other defendants concerning the threat of a possible law enforcement investigation of the project.

As part of both the racketeering and money laundering conspiracies, the indictment alleges that one or more of the defendants caused funds to be transferred to and from the United States to promote the bribery of public officials in India. The indictment lists 57 transfers of funds between various entities, some controlled by Group DF, in various amounts totaling $10,597,050, beginning April 28, 2006, through July 13, 2010.

The indictment seeks forfeiture from Firtash of his interests in Group DF Limited and its assets, including 14 companies registered in Austria and 18 companies registered in the British Virgin Islands, as well as 127 other companies registered in Cyprus, Germany, Hungary, the Netherlands, Seychelles, Switzerland, the United Kingdom, and one unknown jurisdiction, and all funds in 41 bank accounts in several of those same countries. Further, the indictment seeks forfeiture from all six defendants of more than $10.59 million.

The charges in the indictment carry the following maximum penalties on each count: racketeering conspiracy ― 20 years in prison and a $250,000 fine; money laundering conspiracy ― 20 years and a $500,000 fine, or a fine totaling twice the value of the funds involved in the money laundering; interstate travel in aid of racketeering ― five years and a $250,000 fine; and conspiracy to violate the Foreign Corrupt Practices Act ― five years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The case is being investigated by the Chicago Office of the FBI. The government is being represented in court by Assistant U.S. Attorneys Amarjeet Bhachu and Michael Donovan, and Trial Attorney Ryan Rohlfsen, of the Criminal Division’s Fraud Section.

The Justice Department has worked closely with and has received significant assistance from its law enforcement counterparts in Austria, as well as the Hungarian National Police, and greatly appreciates their assistance in this matter. Significant assistance was also provided by the Criminal Division’s Office of International Affairs.

An indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proof beyond a reasonable doubt.

Indictment

CHICAGO ― A Chicago tax return preparer was indicted on federal charges alleging that he was responsible for submitting more than 150 false federal individual income tax returns seeking over $1 million in refunds for individuals whom he knew were not entitled to them. The defendant, PHILLIP SMITH, allegedly was paid a portion of the tax refunds his clients received. The case is typical of federal tax prosecutions that occur throughout the year, but it serves as a reminder to taxpayers of the importance of voluntary compliance with their tax obligations as the April 15 filing deadline approaches.

Smith, 51, was charged with 11 counts of wire fraud and two counts of making a false claim to the Internal Revenue Service in an indictment returned yesterday by a federal grand jury. The indictment also seeks forfeiture of approximately $840,706 in fraudulently obtained refunds. Smith will be arraigned on a date to be determined in U.S, District Court.

“One of our top priorities is to maximize revenue by investigating abusive tax return preparers,” said James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago. “IRS Criminal Investigation investigates tax fraud year round, not just at tax time. Taxpayers who might be thinking about cheating with next month’s deadline looming should think twice or they risk literally paying the consequences. We are committed to assuring honest taxpayers that everyone pays their fair share.” Mr. Lee also cautioned that taxpayers should choose carefully when hiring a tax preparer.

According to the indictment, in exchange for fees, Smith fabricated false Forms W-2 that purported to be issued by fictitious companies, knowing that his clients would use them to support false tax returns that would be submitted to the IRS. The bogus W-2s stated false annual wage and tax withholding amounts designed to fraudulently generate significant Earned Income Credits and tax refunds from the IRS. Smith fraudulently obtained employer identification numbers for the fictitious companies from the IRS, which he included on the bogus W-2s.

Between January 2010 and April 2013, Smith allegedly prepared and caused to be submitted to the IRS more than 150 false tax returns seeking more than $1 million in refunds.

In some instances, Smith directed clients to provide the bogus W-2s to reputable tax preparation businesses knowing that the tax preparers would rely on the false information and submit false returns on behalf of his clients, the indictment alleges. In other instances, Smith prepared the false returns and submitted them electronically for his clients, it adds.

At times, Smith posed as the employer during telephone calls with IRS representatives to verify his clients’ purported employment, and he created false employment verification letters and paystubs for his clients to submit to the IRS when it sought additional records, the charges allege.

The indictment details 11 examples of false returns in which Smith caused taxpayers to seek and obtain fraudulent refunds ranging from $5,292 to $9,864.

Each count of wire fraud carries a maximum sentence of 20 years in prison and a $250,000 fine, and each count of making a false claim on the United States carries a maximum penalty of five years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

Zachary T. Fardon, United States Attorney for the Northern District of Illinois, announced the indictment with Mr. Lee. The government is being represented by Assistant U.S. Attorney Michelle M. Petersen.

The public is reminded that an indictment contains merely charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

CHICAGO — Seventeen defendants are facing federal fraud or related charges for their alleged roles in an international ATM skimming and money laundering scheme involving hundreds of thousands of dollars. Two defendants were arrested in Sofia, Bulgaria, and 13 defendants were arrested yesterday in Chicago and several suburbs by FBI agents following a lengthy international investigation.

The alleged scheme involved using ATM and debit card numbers and the personal identification numbers associated with them, which were fraudulently obtained in Europe, to withdraw money from victims’ accounts using automated teller machines at various locations in the Chicago area. The charges were brought in a 29-count indictment, which was returned by a federal grand jury on March 12 and was unsealed following the arrests and made public today.

“These charges are the result of the hard work of dedicated law enforcement personnel both here and abroad to address a transnational crime problem that can affect virtually anyone with a bank account and carries significant financial consequences. Cooperation with international law enforcement agencies was crucial to the investigation, and we are grateful for the assistance that led to these arrests,” said Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

The arrests and charges were announced by Mr. Holley and Zachary T. Fardon, United States Attorney for the Northern District of Illinois. They praised the cooperation of the State Agency National Security and the Supreme Prosecutor’s Office of Cassation in Bulgaria. The investigation is continuing, they said.

Two defendants, RADOSLAV PAVLOV, 36, of Sofia, Bulgaria, also known as “Radi,” charged with wire fraud, and MIHAIL PETROV, 41, of Sofia, charged with wire fraud, money laundering conspiracy and money laundering, were arrested in Sofia. The United States intends to seek their extradition to face the charges in U.S. District Court in Chicago. The indictment alleges that Pavlov, Petrov, and DOMENIKO EVITMOV, 46, of Chicago, who was arrested here, were located outside the United States and fraudulently obtained ATM and debit card numbers and PINs from locations in Europe and elsewhere without the actual account-holders’ knowledge.

Pavlov, Petrov, Evitmov, ALEXANDER SAVOV, 47, of Carol Stream, and others they directed, then transferred the fraudulently obtained information, often by Skype or email, to GHEORGUI MARTOV, also known as “Mitsubishi” and “Mitsu,” 39, of Schiller Park, who allegedly directed the scheme in the Chicago area. Martov gave the information to numerous codefendants to make the fraudulent withdrawals from area ATMs, the charges allege, and the defendants divided the money they obtained.

Martov and his wife, TEMENUGA KOLEVA, aka “Nushka,” 37, also of Schiller Park, were each charged with obstruction of justice for allegedly destroying computer files and internet browsing history during the course of the FBI’s investigation. KOLEVA was also charged with being an accessory after the fact to wire fraud.

Martov, Petrov, and EMIL GOSPODINOV, 44, of Chicago, who owned and operated BG Center Rodina, located 4828 N. Cumberland Ave., in Norridge, a business that transmitted funds via MoneyGram, among other things, were charged with money laundering conspiracy for allegedly transmitting the fraudulently obtained funds from the United States to Bulgaria and elsewhere. After receiving funds from Martov, Gospodinov transmitted the funds to Martov’s alleged co-schemers outside the United States using nominee senders and receivers on the transactions to disguise the true identities of those sending and receiving the funds.

The indictment seeks forfeiture of approximately $200,000 from 15 defendants as alleged proceeds of the fraud, and it also seeks approximately $50,000 from Martov, Petrov and Gospodinov as alleged proceeds of the money laundering.

The indictment alleges that once Martov obtained the ATM and debit card and PIN information he gave it to the following defendants to fraudulently withdraw money from area ATMs: IVAN KOTSELOV, 32, of Schiller Park; GEORGI VANGELOV, aka “Zhoro,” 26, of Schiller Park; SVETOSLAV NEDELCHEV, aka “Svetlyo,” 28, of Chicago; DANIEL YORDANOV, aka “Dani,” 29; DEYAN SLAVCHEV, aka “Dido,” 28, of Schiller Park; KARL POPOVSKI, aka “Kiro Papata,” 23, of Chicago; NIKOLAY TODOROV, aka “Niketsa,” 35, of Schiller Park; MLADEN GUEORGUIEV, 25, of Chicago; NEDISLAV GABOV, 33, of Chicago; and DIMO DESHKOV, 28, of Chicago.

After receiving the fraudulently obtained account data, defendants Kotselov, Vangelov, Nedelchev, Yordanov, Slavchev, Popovski, Todorov, Gueorguiev, and Gabov allegedly encoded the data onto the magnetic strip of blank or recycled cards. Once in possession of the encoded cards, various defendants traveled to Chicago area ATMs to withdraw funds. The defendants, acting at Martov’s direction, made ATM withdrawals shortly before and after midnight in the time zone of the issuing bank in an attempt to circumvent the daily withdrawal limits on the victims’ accounts. The defendants also coordinated ATM transactions to withdraw money before the issuing banks could detect the fraud and deactivate the ATM and debit card numbers.

Martov was charged with 22 counts of wire fraud and four counts of money laundering in addition to the money laundering conspiracy and obstruction counts. Fourteen other defendants were each charged with one or more counts of wire fraud. Gospodinov was charged with four counts of money laundering in addition to the money laundering conspiracy.

Martov, his wife and 11 other defendants were arraigned yesterday and pleaded not guilty to the charges against them before U.S. Magistrate Judge Daniel Martin. Two defendants, Gueorguiev and Gabov were released on bonds, while the other 11 defendants who appeared in court yesterday remain in federal custody pending detention hearings scheduled for tomorrow and Friday. Yordanov is a fugitive and a warrant was issued for his arrest. Todorov is in state custody and will be arraigned on the federal charges on a date to be determined.

Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. Money laundering conspiracy and each count of money laundering carry a maximum penalty of 20 years in prison and a $500,000 fine, or a fine totaling twice the value of the funds involved in the money laundering. The obstruction of justice count against Martov and Koleva carries a maximum of 20 years in prison and a $250,000 fine, and the accessory count against Koleva carries a maximum of 10 years in prison and a $125,000 fine. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The government is being represented by Assistant U.S. Attorneys Scott Edenfield, Matthew Getter, and Timothy Chapman. Assistant U.S. Attorney Matthew Burke guided the investigation before he transferred last week from the U.S. Attorney’s Office in Chicago to the Eastern District of Virginia. The Office of International Affairs of the Justice Department’s Criminal Division provided assistance with this case.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

CHICAGO ― The chief executive officer of the bankrupt Sentinel Management Group, Inc., was convicted today of defrauding more than 70 customers of over $500 million before the firm collapsed in August 2007. The defendant, ERIC A. BLOOM, misappropriated securities belonging to customers by using them as collateral for a loan that Sentinel obtained from Bank of New York Mellon Corp., which was used, in part, to purchase millions of dollars’ worth of highrisk, illiquid securities not for customers, but for a trading portfolio maintained for the benefit of Sentinel=s officers, including Bloom, members of his family, and corporations controlled by the Bloom family.

A federal jury deliberated less than two hours after a four-week trial in U.S. District Court before returning guilty verdicts on 18 counts of wire fraud and one count of investment adviser fraud. The case is one of the largest financial fraud cases ever prosecuted in Federal Court in Chicago.

Bloom, 49, of Northbrook, remains free on bond while awaiting sentencing, which was not scheduled pending post-trial motions. Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or, alternatively, a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater, and restitution is mandatory. The investment adviser fraud count carries a maximum penalty of five years in prison and a $250,000 fine. The government is also seeking a forfeiture judgment of more than $500 million. The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

Sentinel was located in suburban Northbrook and managed short-term cash investments of futures commission merchants, commodity pools, hedge funds, and other customers. Sentinel’s head trader, Charles K. Mosley, 50, of Vernon Hills, pleaded guilty last October to two counts of investment adviser fraud and is awaiting sentencing.

“Sentinel was sinking like the Titanic,” Assistant U.S. Attorney Clifford Histed told the jury in closing arguments. “Sentinel was not a victim of the credit crisis,” he said, adding that the “financial crisis merely exposed the fraud” that had been going on for years.

According to the evidence at trial, Bloom, the president and CEO of Sentinel who was responsible for its day-to-day operations, misled customers four days before Sentinel declared bankruptcy by blaming Sentinel=s financial problems on the “liquidity crisis” and “investor fear and panic” when he knew that the actual reasons for Sentinel=s financial problems were its purchase of high-risk, illiquid securities, excessive use of leverage, and the resulting indebtedness on the Bank of New York loan, which had a balance exceeding $415 million on Aug. 13, 2007. Sentinel declared bankruptcy on Aug. 17, 2007.

Between January 2003 and August 2007, Bloom fraudulently obtained and retained under management more than $1 billion of customers’ funds by falsely representing the risks associated with investing with Sentinel, the use of customers’ funds and securities, the value of customers’ investments, and the profitability of investing with Sentinel. Bloom used customers’ securities invested in Sentinel=s “125 Portfolio” and its “Prime Portfolio” as collateral for its loan with Bank of New York to purchase millions of dollars’ worth of high-risk, illiquid collateralized debt obligations (CDOs).

Bloom lied about customers’ investments and engaged in an undisclosed trading strategy with Sentinel’s own “House Portfolio,” which they traded for the benefit of themselves and Bloom family members. The undisclosed trading strategy included extensive borrowing and a high concentration of CDOs that were inconsistent with the representations Bloom made to customers regarding separate investment portfolios. The undisclosed strategy affected all customers, regardless of the trading portfolio in which they were invested, because Bloom directed employees to use customers’ securities as collateral when Sentinel borrowed money from the Bank of New York and so-called “repo” lenders, and then used the borrowed money to carry out the undisclosed trading strategy. (Under a repurchase agreement, known as a “repo,” a party such as Sentinel, effectively a borrower, sold securities to a counterparty, effectively a lender, with an agreement to repurchase the securities at a later date.)

As part of the fraud scheme, Bloom falsely represented the returns generated by the securities in each Sentinel portfolio to customers. Rather than giving customers the actual returns generated by a particular portfolio, Bloom directed employees on a daily basis to pool the trading results for all of Sentinel’s portfolios and then allocated the returns to the various portfolios as they saw fit. To conceal the scheme, to encourage customers to invest additional funds, and to otherwise lull customers, Bloom on a daily basis caused false and misleading account statements to be created and distributed to customers, including via email. These account statements reported returns earned by customers without disclosing that the returns actually were allocated by Bloom and his employees and were not the result of the market performance of the customers’ particular portfolios. The account statements also listed the purported value of securities being held by each portfolio without disclosing that the securities were being used as collateral for Sentinel’s loan from Bank of New York.

In July and August 2007, Bloom knew that Sentinel was approaching insolvency and that defaulting on the Bank of New York loan was a real possibility, yet he caused Sentinel to take in more than $100 million in customers’ money and continued to conceal Sentinel’s true financial condition from customers.

The verdict was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago. Also assisting in the investigation were the Labor Department=s Employee Benefits Security Administration, the Commodity Futures Trading Commission, and the Securities and Exchange Commission. The CFTC and the SEC filed separate civil enforcement lawsuits following the collapse of Sentinel, which remains in bankruptcy proceedings.

The government is being represented by Assistant U.S. Attorneys Clifford C. Histed and Patrick M. Otlewski.

CHICAGO ― A suspended physician formerly affiliated with three Chicago hospitals pleaded guilty today to a federal charge of illegally distributing a prescription drug in exchange for sex in 2009. The defendant, JOSHUA D. BARON, a pediatric neurologist, also admitted that he provided approximately 149 prescriptions for controlled substance medications, totaling thousands of doses, to 16 individuals in exchange for sex between 2006 and 2011. These individuals were never patients of Baron, they never visited his office as a patient, and he never asked them about medical issues, took their medical history, conducted an examination, or attempted to diagnose them.

Baron, 40, of Forest Park and formerly of Oak Park, remains free on his own recognizance pending sentencing on June 30 by U.S. District Judge Rebecca Pallmeyer. He faces a maximum sentence of 20 years in prison and a $1 million fine, and his plea agreement provides for an advisory sentencing guidelines range of 108 to 135 months in prison, according to the government’s calculation.

Baron was initially charged by the state in January 2011 after an undercover investigation by the Wilmette Police Department. He was charged federally in October 2011 following a broader investigation by the U.S. Drug Enforcement Administration and the Chicago Police Department.

Baron was licensed in Illinois in May 2006 and, until January 2011, treated patients at Rush University Medical Center, John H. Stroger, Jr., Hospital of Cook County, and St. Anthony=s Hospital, all in Chicago. He voluntarily surrendered his medical license and his DEA registration in 2011.

According to his written plea agreement, between 2006 and 2011, Baron dispensed prescriptions for controlled substances outside the usual course of professional practice and without a legitimate medical purpose in exchange for sex and/or money. He admitted posting at least 78 advertisements offering to trade various prescription drugs on the website Craigslist.com, and all of the ads were placed under the sections, “Men Who Would Pay” and “Casual Encounters.”

Through these prescriptions, Baron dispensed to the 16 individuals the following controlled substances and amounts: 1,680 pills Adderall, 1,830 pills of Norco, 180 pills of Percocet, 1,710 pills of Xanax, 270 pills of Vicodin, 180 pills of Demerol, 90 pills of Dilaudid, 120 pills of Focalin, 150 pills of Phentermine, 30 pills of Klonopin, and 15 pills of morphine sulfate.

In January, the Wilmette police conducted an undercover sting that led to Baron=s arrest when he arrived at a specified location, allegedly expecting to trade a prescription for Adderall with a fictitious woman in exchange for sex.

The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Jack Riley, Special Agent-in-Charge of the DEA=s Chicago Field Division. The Wilmette Police Department, the Chicago Police Department Organized Crime Division=s narcotics and gang section, and the Illinois Department of Financial and Professional Regulation assisted in the investigation.

The government is being represented by Assistant U.S. Attorney Carol Bell.

Plea Agreement

CHICAGO — A Lake County man is now facing federal charges for allegedly committing eight armed robberies, which netted more than $1,700, over 10 days last August of retail stores across Lake County and northern Cook County. In one of the robberies, shots were fired from the getaway car, but no one was injured. The defendant, LEROY REGAN, initially faced state charges filed in Lake County following his arrest last summer, but he was indicted on federal charges this week after the case was adopted from the state under the umbrella of Project Safe Neighborhoods. A second defendant, JEFFREY VALENTINE, was charged with committing the last of the eight robberies with Regan.

Regan, also known as “Outlaw,” 38, of Grayslake, was charged with eight counts of robbery and eight counts of brandishing or discharging a firearm in a 16-count indictment that was returned by a federal grand jury on Tuesday. Regan, who is federal custody without bond, pleaded not guilty on Wednesday before U.S. District Judge Matthew Kennelly, who set trial for Oct. 20. If convicted of a single gun count, Regan faces a maximum of life imprisonment.

Valentine, aka “Goldie,” 31, of Chicago, who is currently in state custody, was charged with one count of robbery. He is scheduled to be arraigned on April 3 in U.S. District Court.

“I am pleased with the cooperative teamwork of state and federal investigators and prosecutors that resulted in this federal indictment. We are all working toward the same goal of justice and will continue to coordinate so that, in appropriate cases, a state investigation may turn into a federal prosecution,” said Lake County State’s Attorney Mike Nerheim.

According to court records, in each of the robberies, the suspect entered the store wearing a hooded sweatshirt with the hood pulled up over his head and brandishing a handgun. After taking money from the cash register, the robber fled the store.

The indictment alleges that Regan committed the following robberies in August 2013:

• Aug. 5 ― Dollar General store, 1917 Martin Luther King Jr. Dr., North Chicago;
• Aug. 6 ― Family Dollar store, 1701 Martin Luther King Jr. Dr., North Chicago, approximately $131 stolen;
• Aug. 8 ― Citgo gas station, 2135 Green Bay Rd., Waukegan, approximately $300;
• Aug. 8 ― Taco Bell restaurant, 3200 North Lewis Ave., Waukegan, approximately $180. Two customers were shot at from a fleeing vehicle as they attempted to get the license plate of the auto;
• Aug. 11 ― 7-11 store, 37763 North Green bay Rd., Beach Park, approximately $422;
• Aug. 12 ― Thornton’s gas station, 55 Skokie Valley Rd., Highland Park, approximately $145;
• Aug. 14 ― Family Dollar store, 1106 Washington St., Waukegan, approximately $398; and
• Aug. 15 ― 7-11 store, 500 Skokie Blvd., Wilmette, approximately $160 and six to eight cartons of cigarettes. Valentine was charged with this robbery alone.

Regan was arrested in Waukegan on Aug. 17, 2013, following an intensive investigation by the Waukegan and Wilmette police departments. The Highland Park Police Department and the Lake County Sheriff’s Department also assisted in the investigation, which was joined by the Bureau of Alcohol, Tobacco, Firearms and Explosives, leading to the federal charges.

Each count of robbery carries a maximum penalty of 20 years in prison and a $250,000 fine. Each count of brandishing a firearm carries a consecutive, mandatory minimum of seven years (10 years on the charge of discharging a firearm) in prison and a maximum of life on any one count, and conviction on one or more subsequent gun counts carries a mandatory minimum of 25 years consecutive to any other sentence imposed. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Carl Vasilko, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives.

The government is being represented by Assistant U.S. Attorney Joseph Thompson.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

CHICAGO ― A Cook County official was sentenced today to 51 months in federal prison for steering four county contracts, each just under $25,000, to four acquaintances and then taking a portion of the contract payments as kickbacks from each of them, totaling $34,700. The defendant, EUGENE MULLINS, who was director of the Cook County Department of Public Affairs and Communications between March 2008 and November 2010, was sentenced after being convicted of three counts of wire fraud and four counts of bribery at trial last September in U.S. District Court.

Mullins, 50, of Chicago, a former Chicago police officer, was also ordered to pay restitution and forfeiture, both in the amount of $34,700. He was ordered to begin serving his sentence on June 19 by U.S. District Judge Amy J. St. Eve.

“Public corruption does not pay and has significant consequences,” Judge St. Eve said in imposing the sentence after finding that Mullins obstructed justice by committing perjury in his testimony at trial.

The four individuals who received county contracts and returned a portion of the payments to Mullins were each charged with misprision of a felony for concealing Mullins’ fraud and kickback scheme. Each of them entered into pretrial diversion agreements and were placed on probation, were ordered to pay full restitution to the county, and testified as government witnesses at Mullins’ trial. They are: Gary Render, Michael L. Peery, and Clifford Borner, all of Chicago, and Kenneth Gregory Demos, of Oak Park.

Evidence at Mullins’ trial showed that between January 2010 and January 2011, he used his county position to submit and cause others to submit false documents to the county to assist the four vendors in obtaining professional and managerial service contracts and payment from the county. Mullins then solicited the individuals who obtained contracts for payments from the proceeds for his own benefit.

Cook County contracts for professional and managerial services under $25,000 required approval only by the county purchasing agent and did not require approval by the county Board of Commissioners. In 2010, Mullins’ public affairs and communications department, as well as other county departments, had access to federal funds and county money to promote awareness and increase response rates by county residents for the 2010 U.S. Census, to promote awareness and assist residents impacted by floods in 2008, and to promote and increase energy efficiency and conservation.

During 2010, Mullins schemed to fraudulently steer the following contracts: a $24,980 disaster grant contract to Render, who paid Mullins $9,000; a $24,985 energy grant contract to Peery, who paid Mullins $12,000; a $24,995 census contract to Borner, who paid Mullins $5,000; and a $24,997 census contract to Demos, who paid Mullins $8,700.

Evidence also showed that Mullins told the individuals who received the contracts that he could arrange for a subcontractor to perform some of the work in exchange for a portion of the county payments they received. In fact, the money that Mullins received from the individuals was not used for any subcontracts. Instead, Mullins used it for his own benefit, while Render, Peery, Borner, and Demos performed little or no work for the county.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Anita Alvarez, Cook County State’s Attorney; and Patrick Blanchard, Cook County Inspector General.

The government was represented by Assistant U.S. Attorneys Lindsay Jenkins and Sarah E. Streicker.

CHICAGO ― Author and television pitch-man KEVIN TRUDEAU was sentenced today to 10 years in federal prison for criminal contempt for violating a 2004 federal court order that prohibited him from making deceptive television infomercials that misrepresented the contents of his weight loss cure book. Trudeau was convicted by a jury last November after a week-long trial in U.S. District Court.

Trudeau, 51, formerly of Oak Brook, who has been in custody since he was convicted, was also placed on supervised release for five years following his sentence by U.S. District Judge Ronald Guzman. During supervised release, Trudeau was ordered to cooperate in the collection of civil judgments and abide by court orders.

“Since the age of 25, [Trudeau] has attempted to cheat others for his own personal gain,” Judge Guzman said, adding he has a lengthy “history of refusal to follow court orders to tell the public the truth.”

Trudeau “is an unrepentant, untiring, and uncontrollable huckster who has defrauded the unsuspecting for 30 years. He is the type of person the Court should expect to defraud his fellow inmates while in custody, and to continue to commit fraud into old age. He appears capable of nothing else,” prosecutors argued in a sentencing memo.

Criminal contempt has no statutory maximum sentence. The judge found that Trudeau faced an advisory federal sentencing guidelines range of 235 to 293 months in prison and said that such a sentence would be reasonable, but cited prosecutors’ request for a sentence of at least 10 years in imposing the sentence.

During the sentencing hearing, a man who twice shouted from the gallery was removed by court security officers. The U.S. Marshals Service issued a petty offense citation to Ed Foreman, 80, of Dallas, for allegedly causing a disturbance. He was given a June 9 court date unless he pays a fine and court costs totaling $175 before that date.

According to the evidence at trial, Trudeau appeared in three television infomercials between December 2006 and July 2007 in which he willfully misrepresented the contents of his book The Weight Loss Cure “They” Don’t Want You to Know About. In April 2010, U.S. District Judge Robert Gettleman issued an order to show cause why Trudeau should not be held in criminal contempt of a Sept. 2, 2004, settlement in which Trudeau agreed not to directly or indirectly produce and broadcast any deceptive infomercials that misrepresented the contents of any book, including the weight loss cure book. Federal Trade Commission v. Trudeau, No. 03 C 3904.

Prosecutors cited a litany of blatant lies and misrepresentations made by Trudeau in his infomercials. These included his claims that his book was not a “diet,” when in fact it required at least three weeks of eating 500 calories or less a day, and that a hormone found only in pregnant women that was required to be injected daily could be obtained “anywhere,” when in fact it could be obtained in the United States only through a doctor’s prescription. He also claimed that after finishing the diet, consumers could eat anything they wanted without regaining weight, when in fact the diet required severe food deprivation that lasts for life.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

The government was represented by Assistant U.S. Attorneys April Perry and Marc Krickbaum.

CHICAGO — A former clerk for a lean hogs futures trader was convicted of commodities fraud for manipulating trades to profit more than $200,000 for herself to the detriment of public customers, federal law enforcement officials announced today.

The defendant, NICOLE M. GRAZIANO, 33, of Addison and formerly of Roselle, was found guilty of four counts of commodities fraud on Friday following a four-day bench trial before U.S. District Judge James Zagel in Federal Court.

Graziano’s scheme resulted in an “almost unbelievable success rate” of 90 to 100 percent of winning trades for her own account, which would have been impossible in an ordinary market setting, Judge Zagel said in delivering his verdict. Graziano faces a maximum penalty of 10 years in prison and a $1 million fine on each count. Judge Zagel set sentencing on June 25.

According to the evidence, Graziano, who was a clerk for a member broker at the Chicago Mercantile Exchange, now CME Group, secretly inserted order tickets for her own personal orders into the decks of tickets submitted by public customers. She provided the tickets and trade cards to brokers to execute during the closing bracket of trading in lean hogs futures contracts. Using her position as a clerk, Graziano fraudulently allocated favorable prices to her own trades (giving herself low prices for buy orders and high prices for sell orders), and reaped profits to the detriment of public customers. Between September 2009 and August 2010, Graziano submitted at least 89 fraudulent trade cards to the appropriate clearing firms, resulting in $213,680 in illegal profits to her during the closing bracket.

Judge Zagel said that the scheme damaged “the legitimacy of the exchange itself” and hurt customers because she took away benefits that could have gone to them for her own advantage.

The verdict was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The CME Group assisted in the investigation.

The government is being represented by Assistant U.S. Attorneys Christopher R. McFadden and Tiffany McCormick.

CHICAGO — A federal jury deliberated approximately an hour last night and this morning before convicting a Chicago area man on all charges against him for directing a six-year conspiracy to distribute at least a kilogram of heroin on the city’s west side. Attorneys for the defendant, DAVID PRICE, 34, conceded that Price possessed and sold heroin and laundered the cash proceeds by purchasing expensive suburban properties, automobiles, and jewelry, but they denied he conspired to traffic heroin during the week-long trial in U.S, District Court.

The jury’s guilty verdict on the conspiracy count alone means that Price is facing a mandatory minimum of 20 years in prison and a maximum of life in federal prison. U.S. District Judge Harry Leinenweber set sentencing for July 30.

Price, also known as “Shorty,” “Lil Dave,” and “Hot Sauce,” was convicted on 13 counts, including the heroin conspiracy, using a telephone to facilitate a drug-trafficking crime, money laundering conspiracy, nine counts of money laundering totaling approximately $448,000, and being a convicted felon-in-possession of an Uzi-style 9 millimeter semi-automatic pistol that was loaded with a 30-round extended magazine.

Originally from Chicago, Price was living in Brookfield at the time of his arrest in August 2012 and he remains in federal custody without bond. At various times, Price has lived in homes or apartment buildings in Country Club Hills, Darien, Lombard, Bolingbrook, and high-rises in downtown Chicago, which he purchased or rented in the names of other individuals, including his father, with drug proceeds. Evidence at the trial also established that Price bought at least six luxury vehicles, including a Corvette and a motor cycle, and expensive jewelry with drug money. Jurors were shown a $35,000 watch with 1,018 diamonds, totaling approximately 22 karats, which was seized from Price.

The government’s bid to forfeit the watch, vehicles, and properties, as well as $1.1 million in proceeds, remains pending and will be decided later by Judge Leinenweber.

Evidence showed that Price ran the heroin distribution ring from 2005 through 2011, but focused on 2007-08. Price “fronted” wholesale quantities of heroin to be sold at various west side drug spots and rotated sharing the profits with the supervisors of those locations, which included street corners along Augusta at Keeler, Lawler, and Laramie/Leamington; Kostner and Cortez; Iowa and Lamon; and Erie and Kilptarick, among others.

Price and others involved in the conspiracy ― all of whom have been convicted separately ― used an apartment at 5242 West Division, which they referred to as “Up Top,” to mix heroin with the sleeping pill Dormin, and package it for sale in retail packages and bundles. Three co-conspirators testified as government witnesses, including James Brown. The evidence established that Price directed two members of his crew to shoot and kill Brown on Jan. 25, 2008, because Brown owed a drug debt to Price and believed he was cooperating with law enforcement. Brown survived the shooting.

The verdict was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Jack Riley, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration; James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago; Carl Vasilko, Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives; and Chicago Police Superintendent Garry McCarthy.

The government is being represented by Assistant U.S. Attorneys Angel Krull, Erik Hogstrom, and Ryan Fayhee.

ROCKFORD — A Rockford man was sentenced today in federal court for bank robbery. TONY WALKER, 56, was sentenced by U.S. District Judge Frederick J. Kapala to 80 months in federal prison, to be followed by 3 years of supervised release, for the robbery of Associated Bank, 600 North Main St., in Rockford, on July 12, 2013. Walker was also ordered to pay restitution to the bank.

Walker pleaded guilty to the charge on Dec. 2, 2013. According to the written plea agreement, Walker admitted that on July 12, 2013, at approximately 3:50 p.m., he entered Associated Bank and approached a bank teller. Walker was carrying a black bag with one of his hands inside the bag. Walker placed the bag on the counter and moved it toward the teller who believed that there was a dangerous weapon in the bag. Walker handed the teller a note which stated “Give me 1,000 dollars and won’t nobody get hurt.” The teller then gave Walker $1,330 in U.S. currency. Walker was arrested on July 15, 2013, and has since been in federal custody.

The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; and Chet Epperson, Chief of the Rockford Police Department.

The government is represented by Assistant U.S. Attorney Joseph C. Pedersen.

CHICAGO — Pharmaceutical manufacturer Teva Pharmaceuticals USA, Inc. and a subsidiary, IVAX LLC, will pay the United States and the state of Illinois more than $27.6 million to resolve false billing allegations, under the terms of a settlement agreement announced today. The agreement settles claims that Teva and IVAX violated the federal False Claims Act by making payments to Dr. Michael J. Reinstein, a Chicago physician, in return for Reinstein prescribing an anti-psychotic medication to thousands of Medicare and Medicaid patients at dozens of area nursing homes and hospitals.

Within 10 days, Teva will pay the United States nearly $15.5 million and the State of Illinois more than $12.1 million, plus interest from September 2013. The settlement was reached without civil litigation by the Justice Department, the U.S. Attorney’s Office for the Northern District of Illinois, and the Illinois Attorney General’s Office on behalf of the U.S. Department of Health and Human Services and the Illinois Department of Healthcare and Family Services. Teva Pharmaceuticals USA, located in North Wales, Pa., and IVAX LLC, a Florida company, are both subsidiaries of Teva Pharmaceuticals Industries, Ltd., headquartered in Israel.

“Pharmaceutical companies must not be allowed to improperly influence physicians’ decisions in prescribing medication for their patients,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “Instead, those decisions must be made solely on the basis of the patient’s best medical interests,” he said.

“The Department of Justice is committed to ensuring that pharmaceutical manufacturers who pay kickbacks to doctors to influence prescribing decisions are held accountable,” said Assistant Attorney General Stuart F. Delery for the Justice Department’s Civil Division. “Schemes such as the one alleged in this case undermine the health care system and take advantage of vulnerable patients.”

Illinois Attorney General Lisa Madigan said: “Teva Pharmaceuticals pushed its drug onto thousands of vulnerable patients without regard to their health and at the expense of the state Medicaid program and Illinois taxpayers.”

The settlement involves the promotion of generic clozapine, a rarely used anti-psychotic medication that has serious potential side effects and is generally considered a drug of last resort, particularly for elderly patients. While clozapine has been shown to be effective for treatmentresistant forms of schizophrenia, it is also known to cause numerous side effects, including a potentially deadly decrease in white blood cells, seizures, inflammation of the heart muscle, and increased mortality in elderly patients.

In November 2012, the United States filed a civil False Claims Act lawsuit in U.S. District Court in Chicago against Reinstein, alleging that, since at least August 2003, he schemed to switch his patients to generic clozapine if IVAX agreed to pay him $50,000 under a one-year “consulting agreement” and provide other benefits to him, in violation of the federal Medicare and Medicaid Anti-Kickback Statute.

Reinstein, a psychiatrist in the Chicago area since 1973 with an office in Chicago’s Uptown neighborhood since at least 1999, quickly became the largest prescriber of generic clozapine in the country. The payments and other forms of remuneration from Ivax, and later Teva Pharmaceuticals, including annual renewal of the consulting agreement, travel, meals and entertainment expenses, and tickets to sporting events, continued through at least November 2009. In addition to direct payments to Reinstein, Ivax also provided an all-expenses-paid trip to Miami for Reinstein, his wife, and various employees of Reinstein.

The alleged scheme resulted in the submission of thousands of false claims to Medicare Part D and Illinois Medicaid. The civil case against Reinstein remains pending in Federal Court in Chicago.

Federal law prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and other federally funded programs. The law is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.

The settlement with Teva Pharmaceuticals and Ivax was the result of a coordinated effort by the U.S. Attorney’s Office for the Northern District of Illinois, the Civil Fraud Section of the Commercial Litigation Branch of the Justice Department’s Civil Division, the Department of Health and Human Services Office of Inspector General, the Chicago Office of the Federal Bureau of Investigation, and the Illinois Attorney General’s Office.

The settlement agreement is neither an admission of liability by Teva or IVAX, nor a concession by the United States or the State of Illinois that their claims were not well-founded.

Assistant U.S. Attorney Eric S. Pruitt represented the U.S. Attorney’s Office in the settlement negotiations. Assistant Illinois Attorney General Robert Barba represented the Illinois Attorney General’s office.

Settlement Agreement

ROCKFORD — The former Energy Director for the City of Rockford was sentenced today in federal court by U.S. District Judge Frederick J. Kapala for mail fraud. MARK E. BIXBY, 58, of Rockton, Ill., was sentenced to 14 months in federal prison, to be followed by 3 years of supervised release, and was ordered to pay restitution in the total amount of $41,618.33 to the two victims. Judge Kapala immediately remanded Bixby to the custody of the U.S. Marshal’s Service to begin serving his sentence.

Bixby pled guilty on November 21, 2013, admitting that between December 2006 and March 2010 he defrauded a heating contractor and window contractor, both of whom did work under the weatherization program for the City’s Energy Division, by causing them to provide funds and benefits to him through false representations and pretenses. According to the written plea agreement, Bixby, as the Energy Director, managed the City of Rockford’s Energy Division. The Energy Division operated the Illinois Home Weatherization Assistance Program in Winnebago and Boone counties. The purpose of the weatherization program was to help low-income residents save energy and money by providing services that included repairing and replacing heating systems, windows, and doors.

According to the plea agreement, the funds and benefits Bixby obtained from the two contractors included the following: (1) use of a new, 2007, two-door, red, convertible Pontiac Solstice; (2) a total of $18,440 in donations to “charities,” which were deposited into bank accounts controlled by Bixby and a family member, and which were used to pay their personal expenses; (3) $2,980 for the “sale” of cemetery plots by Bixby to the heating contractor, for which Bixby never turned over the titles or deeds to the heating contractor; and (4) a $2,000 “loan” from the window contractor, which Bixby never repaid.

The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The Winnebago County State’s Attorney’s Office and the Rockford Police Department assisted in the investigation.

The government was represented by Assistant U.S. Attorney Mark T. Karner.

CHICAGO — Three members of a suburban Northbrook family were arrested and charged with interstate transportation of stolen property following a purported shopping odyssey that started on Feb. 17 in Oklahoma, continued two days later at malls in Texas, and wound through Louisiana on Feb. 20, before they returned to Northbrook the next day. The defendants, together with a cooperating individual who acted as their “fence,” and others sold merchandise with a retail value of $7.1 million for a combined total of $4.2 million through their eBay online merchant accounts over the last decade, according to a federal criminal complaint announced today.

The defendants, BRANKO BOGDANOV, 58; his wife, LELA BOGDANOV, 52; and their daughter, JULIA BOGDANOV, 34, were arrested by Secret Service agents yesterday afternoon at their residence on Weller Lane in Northbrook. They were each charged with interstate transportation of stolen property in a criminal complaint that was filed in U.S. District Court. All three are scheduled to appear at 11 a.m. today before U.S. Magistrate Judge Michael Mason.

According to the complaint affidavit, loss prevention executives at Barnes and Noble, Inc., and Toys R Us, Inc., recently told Secret Service agents that their stores had sustained a huge loss in merchandise, including American Girl dolls, Furby robotic toys, Lego blocks, baby monitors, and baby carriers. With eBay’s assistance, the retail executives further determined that a particular eBay account sold large quantities of these specific items and that the amount of merchandise sold often matched the quantities of the same item stolen from one of their stores.

Representatives of Barnes and Noble, Toys R Us, and eBay provided substantial assistance to law enforcement in the investigation.

The store officials further obtained information identifying the owner of the eBay account, who resides in a Chicago suburb. They learned that the individual, who is now cooperating with law enforcement, sold $3.4 million in merchandise, with an estimated retail value of $6 million, over the past 10 years, and that the cooperating individual (CI) had purchased the merchandise from a man the CI knew as “Franko Kalath,” an alias linked to Branko Bogdanov.

Secret Service agents corroborated information from the store and eBay officials, and the CI provided them with extensive hand-written notes and receipts indicating a vast variety of items that the CI allegedly purchased from Branko Bogdanov, including toys, electronic equipment, baby supplies, and kitchenware. Agents also seized from the CI numerous items that the CI had purchased from the individual known as “Franko Kalath,” all of which appeared to be new and in their original packaging.

Further investigation revealed that Bogdanov family members share a single PayPal account and that together they had sold $692,278 in merchandise through their individual eBay accounts. Many of the items sold were similar to the items sold by the CI, the complaint alleges.

As background, the complaint affidavit details additional thefts from Barnes and Noble, Toys R Us, and other retailers that occurred between October and December 2012 in Pikesville, Md., Pembroke Pines, Fla., and Murfreesboro, Tenn., where either telephone records, video surveillance, or both allegedly show the Bogdanovs were at or near at the time and date of specific retail thefts.

On Feb. 19, surveillance followed the defendants from store to store at or near the Woodlands and Willowbrook malls in the vicinity of The Woodlands, Tex., north of Houston. During a traffic stop by Houston police, the Bogdanovs gave officers numerous items from their vehicle, and those items later matched merchandise that various stores confirmed were stolen that day, according to the complaint.

The surveillance continued the following day through Louisiana, where additional merchandise was stolen at stores in Baton Rouge and New Orleans, resulting in another traffic stop that night on northbound I-55 near Canton, Miss. The trio arrived back in Northbrook in Feb. 21. A few days later, the CI received messages from “Franko Kalath” with photos showing an array of merchandise that was available for sale, the charges allege.

The complaint describes repeated instances of Lela Bogdanov wearing a long black skirt that appeared larger and fuller when she exited various retail stores than when she entered. The dress, which was seized shortly after she was arrested, has a blue lining capable of containing multiple rectangular objects, and was allegedly used to cart hidden merchandise from stores. At times, surveillance showed items protruding from the skirt when she exited stores, often accompanied by various diversions instigated by one of more of the family members, according to the complaint.

Interstate transportation of stolen property carries a maximum penalty of 10 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The arrests and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Frank Benedetto, Special Agent-in-Charge of the Chicago Office of the U.S. Secret Service. Numerous local police departments are also assisting in the investigation.

The government is being represented by Assistant U.S. Attorney Renato Mariotti.

The public is reminded that a complaint contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Complaint

CHICAGO ― A chiropractor and a physician with offices in Buffalo Grove, their billing manager, and three purported patients were indicted on federal charges for their alleged roles in a $2.98 million health care fraud scheme. Five of the six defendants were also charged with hindering the investigation, federal law enforcement officials announced today. The defendants allegedly schemed over the course of a decade to obtain health insurance payments from various private insurers for patient services that were never rendered.

The chiropractor, IGOR SHER, and the physician, EGUERT NAGAJ, controlled North Suburban Chiropractic Clinic, Ltd., Advanced Arlington Medical Center, Ltd., and Advanced Arlington Sports Medicine Center, Ltd., with all three practices operating from a suite of offices at 329 and 333 West Dundee Rd., in Buffalo Grove. A third defendant, IGOR FILATOV, was the billing manager for all three practices.

Sher, 42, of Palatine; Nagaj, 48, of Buffalo Grove; and Filatov, 61, of Wheeling, were each charged with 16 counts of mail fraud, as well as one count of obstruction of justice against Sher and one count of making false statements against Filatov. The indictment also seeks forfeiture of approximately $2.98 million and four luxury automobiles from Sher, Nagaj, and Filatov, as well as five residences belonging to Sher or Nagaj or entities they controlled in Palatine, Vernon Hills, and Long Grove, in addition to commercial suites adjacent to their current offices in Buffalo Grove.

Also charged in the 21-count indictment, which was returned by a federal grand jury last Thursday, were DIMITRI KONOVOLOV, 48, of Wheeling; MARICELA HERNANDEZ, 35, of Arlington Heights; and VERA SMOLYANSKY, 53, of Wheeling, all of whom purported to be patients and allowed their personal identifying information to be used by Sher, Nagaj, and Filatov in fraudulently obtaining insurance payments. They were each charged with one count of mail fraud and one count of perjury.

All six defendants will be arraigned on dates to be set in U.S. District Court.

According to the indictment, between 2003 and January 2014, the defendants, together with unnamed co-schemers, fraudulently obtained approximately $2.98 million from insurance companies by falsely claiming that certain chiropractic or medical services were provided to patients, knowing that those services were never provided. Filatov, who also purported to be a patient, together with Konovolov, Hernandez, and Smolyansky and others, allegedly allowed their insurance information to be used by Sher and Nagaj to submit false claims for reimbursement.

The insurance companies allegedly defrauded included Blue Cross Blue Shield of Illinois, Aetna Insurance, United Healthcare, and Allstate Fire and Casualty Insurance Company.

Sher and Nagaj allegedly paid Konovolov, Hernandez, Smolyansky and other purported patients a portion of the insurance payments, or arranged to have their yearly insurance deductibles satisfied, for their participation in the scheme. As part of the scheme, Sher and Nagaj also instructed purported patients, including three co-defendants, to lie when asked about the medical or chiropractic services or purpose of the money they received, the indictment alleges.

Sher was charged with obstruction of justice for allegedly instructing others to lie to federal agents conducting the investigation. Filatov was charged with making false statements for allegedly lying to agents. Konovolov, Hernandez, and Smolyansky were each charged with perjury for allegedly lying when they testified before a federal grand jury.

Mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine on each count and mandatory restitution. The obstruction of justice count against Sher carries a maximum of 20 years in prison, and the false statements and perjury counts against other defendants carry a maximum of five years in prison, and each of those counts carry a maximum $250,000 fine. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The government is being represented by Assistant U.S. Attorney Heather McShain.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago, and Tony Gómez, Inspector-in- Charge of the U.S. Postal Inspection Service in Chicago.

An indictment contains merely charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

CHICAGO — An owner of a bankrupt Palatine company that sold refurbished semiconductor-making machinery and the owner of a Pennsylvania company that sold machine tools were indicted for allegedly engaging in a scheme to fraudulently obtain approximately $190 million from banks and financing companies and, eventually, causing those lenders to lose at least $100 million.

One defendant, MARK ANSTETT, 58, of Lake Forest, was president and co-owner of Equipment Acquisition Resources, Inc., (EAR), of Palatine, which purported to make semiconductor wafers and refurbish machinery used to make semiconductor wafers. His co-defendant, GEORGE FERGUSON, 69, of Carlisle, Pa., was owner and president of the former Machine Tools Direct, Inc., (MTD) of Carlisle. A third individual, Sheldon Player, who hid his involvement and role at EAR and whose wife was a co-owner, was named as an unindicted co-schemer. Player, who lived in Chicago before moving to Hoback Junction, Wyo., died last November.

Anstett and Ferguson were each charged with five counts of wire fraud, four counts of bank fraud, and one count of mail fraud in a 10-count indictment returned by a federal grand jury yesterday and announced today. They will be ordered to appear for arraignment on a date to be determined in U.S. District Court in Chicago.

The indictment also seeks forfeiture of approximately $190 million.

According to the indictment, between 2006 and October 2009, Anstett, Ferguson, Player and others used EAR and MTD to fraudulently obtain approximately $190 million in financing from various lenders based on false representations about EAR’s business operations, financial status, independence from MTD, and need for financing, resulting in losses to those lenders of at least $100 million. The defendants allegedly obtained financing for EAR to purchase equipment from MTD, and arranged sham sales transactions between the two companies, knowing there were no actual sales. Anstett, Ferguson, and Player falsely represented to lenders that EAR and MTD were separate companies engaged in arms-length sales transactions, the indictment alleges. However, after MTD received financing payments from lenders, Ferguson’s company sent most of the proceeds to EAR so that EAR could use the money to make payments on other loans.

In addition to the indictment, the United States today filed a civil lawsuit in Federal Court in Chicago to forfeit a bed and breakfast inn in Hoback Junction, Wyo., where Player lived. According to the civil complaint, MTD transferred fraud proceeds it received from lenders to various EAR bank accounts, which were then transferred to other accounts, including a joint account of Player and his wife and another account Player controlled.

Player allegedly used proceeds of the EAR fraud scheme to pay down mortgages on the bed and breakfast. Between 2006 and May 2008, he used approximately $1.8 million in fraud proceeds to pay off two mortgages, making the property subject to forfeiture, according to the civil suit against the premises.

Each count of mail, wire, and bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The indictment and forfeiture complaint were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and John Lucas, Special Agent-in-Charge of the Federal Deposit Insurance Corp., Office of Inspector General in Chicago.

The government is being represented by Assistant U.S. Attorney Jason Yonan.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

Complaint

CHICAGO — More than 200 investors in an Elk Grove Village company that purportedly made homeland security and food safety products lost more than $9 million through the offer and sale of stock, according to a federal fraud indictment against the company’s majority owner and chief executive. The defendant, GREGORY WEBB, chairman, chief executive officer, president, and majority shareholder of InfrAegis, Inc., was charged with eight counts of mail fraud and three counts of wire fraud in an 11-count indictment returned by a federal grand jury yesterday and announced today.

Webb, 68, of Dallas and formerly of Arlington Heights, will be arraigned on a date to be determined in U.S. District Court in Chicago.

The indictment also seeks forfeiture of more than $9 million in alleged fraud proceeds.

According to the indictment, between 2007 and October 2013, Webb and InfrAegis obtained more than $9 million from investors through offering and selling stock in the company by making false representations about the solvency and financial condition of InfrAegis, the contracts that it expected to be awarded or had been awarded, and the expected and actual returns on investments in the company. Webb formed InfrAegis in 2003 under the name Intelagents, Inc., and changed its name to InfrAegis in 2005.

Webb allegedly knew that stock-offering materials falsely portrayed InfrAegis as a financially successful company that had both high-level connections in the homeland security market and lucrative contracts for the sale of its products. Between 2007 and 2010, Webb and InfrAegis falsely represented in written materials and investor conference calls that the City of Chicago had agreed to install InfrAegis’ iaMedium ― a kiosk that purportedly could detect the presence of nuclear or biological weapons ― throughout the city and the agreement would result in profits of more than $80 million a year, the indictment alleges. While InfrAegis engaged in some discussions with the city about the installation of iaMediums in 2007 and 2008, there was never any agreement or contract to install the system in Chicago.

In 2009 and 2010, Webb and InfrAegis allegedly falsely represented that the company had a contract with the Washington Metropolitan Area Transit Authority (WMATA) to install iaMediums throughout the Washington, D.C., Metro train system. Again, there was never any agreement or contract beyond initial negotiations, which were terminated when WMATA determined that InfrAegis was not financially responsible.

The indictment alleges that Webb and InfrAegis concealed material facts from prospective and existing investors by failing to disclose that in 2007 and again in 2008, the Illinois Secretary of State’s Securities Department issued orders prohibiting Webb and InfrAegis from selling securities in or from Illinois until further order. Those orders were not lifted until June 2010, when Webb and InfrAegis entered into an agreement with the state requiring them to comply with state securities laws in the offer and sale of securities.

Each count of mail and wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The government is being represented by Assistant U.S. Attorneys Margaret Schneider and Kruti Trivedi.

The U.S. Securities and Exchange Commission filed a civil enforcement action against Webb and InfrAegis in 2011 in Federal Court in Chicago.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

CHICAGO — The co-founder and president of a defunct mortgage escrow company was indicted on federal fraud charges for allegedly misappropriating more than $500,000 of customer funds for his own personal use, as well as to pay operating expenses of two other businesses. The defendant, DEREK LURIE, who controlled American Escrow LLC until it collapsed in March 2009, was charged with five counts of mail fraud in an indictment returned by a federal grand jury yesterday and announced today. Lurie also allegedly engaged in a Ponzi-type scheme in which American Escrow made the property tax and insurance payments for some customers ahead of other customers.

Separately, a former American Escrow employee, JACQUELINE CRUZ, was indicted earlier this month for allegedly fraudulently obtaining more than $400,000 from the company.

Lurie, 40, of Highland Park, was ordered to appear for arraignment on March 11 in U.S. District Court. Cruz, 38, formerly of Highland Park and currently residing in Okinawa, Japan, pleaded not guilty on Feb. 19 to three counts of mail fraud, following her indictment on Feb. 5.

According to the Lurie indictment, American Escrow ― which had offices on West Randolph and North May streets in Chicago ― fraudulently obtained and managed more than $5 million of customer escrow funds, and purported that it would hold the money in secured FDICinsured accounts to make timely tax and insurance payments for customers. Instead, between 2003 and March 2009, Lurie used approximately $554,000 for such personal expenses as parking tickets, car payments, and renovating a condominium in Miami, as well as to operate his other business interests, American Tax Reporting, Inc., and Woodland Technologies, Inc., the charges allege.

Lurie allegedly knew that all of the customers’ escrow funds were not FDIC-insured, that American Escrow was operating at a deficit, and that the funds were being used for unauthorized purposes. As a result of the deficit, Lurie made Ponzi-type payments to satisfy earlier customers’ tax and insurance debts with more recent customers’ escrow funds, and concealed the scheme from his customers, the indictment alleges.

Cruz, whose duties included accounting, issuing company checks, and overseeing the payment of customers’ property taxes and private mortgage insurance, allegedly misappropriated approximately $412,000 from American Escrow. Between May 2005 and March 2009, she wrote 122 company checks to herself, knowing that they were unauthorized and she was not entitled to the funds, according to her indictment. It alleges that she either forged Lurie’s signature or signed the check herself.

Both indictments seek forfeiture of the alleged fraud proceeds: $554,000 against Lurie and $412,000 against Cruz.

In both cases, each count of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The indictments were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

The government is being represented by Assistant U.S. Attorney Jessica Romero.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Lurie Indictment

Cruz Indictment

CHICAGO — A Chicago pharmacist was sentenced to seven years in federal prison after being convicted at trial of collecting more than $1.7 million through false claims he submitted to insurance companies for a drug that he never dispensed and stealing the identities of unsuspecting pharmacy customers to make that money, which he used to finance a lavish lifestyle. The defendant, RONALD KIELAR, also created fake documents to make his false insurance claims appear legitimate.

Kielar, 76, of Mundelein, was a pharmacist at the former Cartagena Pharmacy, located in the 1500 block of West Devon Avenue, which was owned by his ex-wife. He was sentenced to five years in prison on six counts of health care fraud and one count of obstruction of justice, and received a mandatory consecutive sentence of two years on three counts of aggravated identity theft. Kielar, who was convicted on all 10 counts he was charged with at a trial last fall, was ordered to begin serving the 84-month sentence on June 10.

U.S. District Judge Robert M. Dow, Jr., who imposed the sentence on Friday, also ordered Kielar to pay more than $1.725 million in restitution and to forfeit nearly $78,000 in proceeds from the sale of property he owned in Florida.

According to court documents, Kielar used patients’ insurance information, including their names and dates of birth, to bill for the drug Procrit, which stimulates the production of red blood cells. These patients, however, were never prescribed Procrit, Kielar never provided them with the medication, and the patients never authorized the use of their insurance information to submit claims for payment. After he was indicted, Kielar forged prescriptions, patient receipts, and false invoices to make the insurance claims look legitimate. Between November 2004 and August 2010, Kielar submitted 603 false claims and received more than $1.7 million from Blue Cross and Blue Shield of Illinois and the United Food and Commercial Workers Unions and Employers Midwest Health Benefit Fund.

“Each time [Kielar] hit the submit button on the pharmacy’s computer for a Procrit claim, he made a calculated choice: to lie to the victim insurance company who received, processed, and paid on the claim,” Assistant U.S. Attorney Heather McShain wrote in a sentencing memo. Kielar also betrayed a physician who had been his friend for 40 years and whose name and DEA registration number Kielar used without permission, as well as unsuspecting patients whose personal information he used.

Evidence showed that Kielar used proceeds from the fraud scheme to pay salaries to himself and his ex-wife, and then used those funds to pay mortgages on his home in Illinois, as well as properties in Florida and Arizona.

The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago; and John Redmond, Special Agent-in-Charge of the Chicago Office of the U.S. Food and Drug Administration Office of Criminal Investigations.

The government was represented by Assistant U.S. Attorneys Heather McShain and Steven J. Dollear.

ROCKFORD — A former Sycamore, Ill. resident was indicted today by a federal grand jury in Rockford for allegedly transporting and possessing child pornography. MICHAEL PODOLSKY, 26, now of Elkader, Iowa, was charged with two counts of transporting child pornography via the internet, and one count of possessing child pornography that had crossed state lines.

Transporting child pornography carries a mandatory minimum sentence of five years and a maximum of 20 years in prison, while possessing child pornography carries a maximum of 10 years in prison. If convicted, the actual sentence will be determined by a United States District Court Judge, guided by the United States Sentencing Guidelines.

The indictment was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; and Donald M. Thomas, Chief of the Sycamore Police Department. The government is represented by Assistant United States Attorney Michael D. Love.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

ROCKFORD — A former Rockford physician was indicted today by a federal grand jury in Rockford on two counts of making false statements in a bankruptcy case and three counts of mail fraud. The indictment alleges that LYNN Y. ZOIOPOULOS (also known as Lynn Shelton-Zoiopoulos, Lynn Y. Shelton, Lynn Yenko, Lynn Yenko Zoiopoulos, Lynn Yenko Shelton-Zoiopoulos, and Lynn Zoiopoulos), 58, now of Chicago, Ill., filed a Chapter 7 Bankruptcy Petition on August 11, 2009. As alleged in the indictment, Zoiopoulos failed to disclose that she had an interest in the estate of her deceased grandmother, and that she fraudulently concealed property from the bankruptcy trustee, creditors, and the United States Trustee. The indictment further alleges that Zoiopoulos made false statements on a bankruptcy schedule and a Statement of Financial Affairs, both of which were filed under penalty of perjury.

According to the indictment, Zoiopoulos was Executor of her deceased grandmother’s estate, in which she and her sister were beneficiaries. It is alleged Zoiopoulos devised a scheme to defraud the estate and her sister, by misappropriating hundreds of thousands of dollars of assets of the estate for her own personal use and benefit. It is further alleged that Zoiopoulos concealed her embezzlement of estate assets by not filing the required inventory, accounting, tax returns, and status reports for the estate, and falsely asserted to the Trustee of her bankruptcy case that the remainder of the estate’s assets were earmarked for her sister. It is also alleged that in carrying out the scheme, Zoiopoulos caused checks representing assets of the estate to be sent to her using the United States mail.

Each charge of mail fraud carries a maximum penalty of up to 20 years in prison, and each count of providing material false statements or documents under penalty of perjury in a bankruptcy case carries a maximum penalty of 5 years in prison. Each count also carries a fine of up to $250,000, or twice the gross gain or gross loss resulting from that offense, whichever is greater. The judge may also impose a sentence of probation of one to five years, and a term of supervised release of up to three years. If convicted, the Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines.

Members of the public are reminded that a criminal indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt of the defendant beyond a reasonable doubt.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation.

The government is represented by Assistant U.S. Attorney Michael D. Love.

Indictment

CHICAGO — A Chicago woman was sentenced today to more than 13 years in federal prison for swindling at least 1,000 elderly victims of cash and credit cards, causing a loss of at least $800,000, over a period of five years. The defendant, TIFFANY HALL, was the mastermind of a scheme that targeted elderly victims, often widowed and living alone, and bilked some of them of their retirement and life savings.

Hall, 30, of Chicago, was sentenced to 159 months in prison and was ordered to pay $328,353 in restitution to more than 70 known, identified victims, by U.S. District Judge Amy J. St. Eve. Hall pleaded guilty to wire fraud and aggravated identity theft in January 2013, and has been in federal custody since she was arrested in early 2011.

Between 2006 and 2011, Hall, whose conduct was described as “ruthless” by Assistant U.S. Attorney Jennie Levin, spent nearly every day contacting victims and obtained cash and/or credit cards. Between 2009 and 2011 alone, Hall stole approximately $300,000 to $400,000 in cash from victims, and she used the stolen money to gamble and to purchase cars, designer bags and shoes, televisions, gift cards, clothes, consumer electronics, and other items. She also used the money to pay bills and expenses for herself and her husband, Lawrence Hall, 33, who was sentenced on Jan. 29 to 10 years in prison for his participation in the fraud scheme.

In pleading guilty, Hall admitted that, in 2006, she began calling victims and falsely telling them that she was a fraud investigator, either with the State of Illinois or a specific bank. She told the victims that their credit cards had been stolen or there was unusual activity on their accounts. After she gained the victims’ trust, she coaxed them to provide her with their credit or debit card numbers and personal identifying information, which she then used to purchase merchandise online and pay expenses for herself and her husband.

Beginning in 2007, Hall began meeting victims in person, asking them to provide her with their actual credit cards. In 2009, Lawrence Hall began recruiting runners to pick up victims’ cards and the Halls paid them in cash or allowed them to use the cards to purchase merchandise for themselves. About the same time, the Halls and their runners also started fleecing victims of their cash in addition to credit and debit cards.

Two other co-defendants were indicted with the Halls. Shana Banks, 30, of Chicago, pleaded guilty and is awaiting sentencing next month. Creassi Harris, 23, of Chicago, has pleaded not guilty and the charges are pending.

The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Chicago Police Superintendent Garry McCarthy.

ROCKFORD — Two former employees of Milledgeville Community Credit Union, have pleaded guilty in separate federal cases to embezzling money from Milledgeville Community Credit Union, in Milledgeville, Ill. KIMBERLY KENT, 53, who was also a former Treasurer of Wysox Township, pleaded guilty in federal court today, and KELSEY SELMAN, 37, pleaded guilty on Jan. 28, 2014.

According to Kent’s written plea agreement, from October 2005 through February 2012, Kent embezzled approximately $219,600 from Milledgeville Community Credit Union, where she was the manager and responsible for supervising other employees. Kent was also responsible for her own cash drawer and for handling various transactions on accounts, including the deposit and withdrawal of funds to and from customers’ accounts. As stated in the plea agreement, to conceal her embezzlement, Kent created fictitious loans using the names of family members and fictitious certificates of deposit. In 2009, Kent was elected treasurer of Wysox Township. Kent admitted that in August 2010, in her capacity as treasurer of Wysox Township, she used funds from Wysox Township’s account at Milledgeville Community Credit Union to cover her embezzlement. Kent used the money she embezzled for personal purposes. The deposits of the credit union were insured by the National Credit Union Administration Board.

In Selman’s written plea agreement, Selman admitted that from 2007 through February 2012, she embezzled approximately $100,975.74 from Milledgeville Community Credit Union. Selman worked as a teller for the credit union handling deposits and withdrawals on accounts, including her own credit union account. According to the plea agreement, Selman repeatedly took money over that period of time, using the credit union’s computer system to apply credits to her personal account that did not have a corresponding deposit. As a result, the credit union’s records falsely reflected that Selman’s cash drawer increased by an amount to offset the deposit into her account. After she credited the money into her account, Selman used the money she embezzled for personal purposes.

Kent and Selman each face a maximum sentence of 30 years’ imprisonment, a term of supervised release of up to 5 years following imprisonment, and a fine of up to $1 million. Each defendant has repaid Milledgeville Community Credit Union for the full amount of the loss. Sentencing for Kent is set for June 2, 2014, at 2:30 p.m. Sentencing for Selman is set for May 7, 2014, at 2:30 p.m.

The guilty pleas were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation.

The government is represented by Assistant U.S. Attorney Scott R. Paccagnini.

Kent Plea Agreement

Selman Plea Agreement

CHICAGO — A Tinley Park man who escaped from the Metropolitan Correctional Center in the city’s Loop in December 2012 while he was awaiting sentencing for bank robbery, today was sentenced to 41 months in prison for the escape, which he was ordered to serve consecutively to the 20-year sentence he received last year for the bank robbery. The defendant, KENNETH CONLEY, 39, remained at large for approximately two weeks after the escape before he was apprehended in south suburban Palos Hills.

Noting Conley’s extensive criminal history, U.S. District Judge Gary Feinerman called him “incorrigible,” and said Conley “needs to be incapacitated for a lengthy time to protect the public.” The judge ordered the 41-month term to be served consecutively to the maximum 20- years sentence Conley received from a different judge for the bank robbery. Conley faced a maximum sentence of five years in prison for the escape.

Conley was also ordered to pay $1,324 in restitution to the U.S. Bureau of Prisons for damage to the MCC. Conley and another convicted bank robber, Joseph Banks, escaped through the wall of their cell and repelled down the exterior of the high-rise federal detention facility. Banks was apprehended a few days later and is still awaiting sentencing for his earlier trial conviction on four counts of bank robbery.

The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and U.S. Marshal Darryl McPherson.

CHICAGO — A southwest suburban physician was arrested yesterday on federal charges for allegedly conspiring to illegally dispense a prescription medication and health care fraud, federal law enforcement officials announced today. The defendant, SATHISH NARAYANAPPA BABU, the owner of Anik Life Sciences Medical Corp., allegedly conspired to illegally dispense oxycodone and fraudulently billed Medicare for services he purportedly provided.

Federal agents with the Drug Enforcement Administration, the U.S. Department of Health and Human Services Office of Inspector General, and the FBI yesterday executed federal search and seizure warrants at Bubu’s residence in Bolingbrook and Anik’s offices in Darien in connection with the ongoing investigation of alleged prescription drug diversion and health care fraud. Agents seized more than $100,000 from Anik’s bank accounts. Anik Life Sciences was located in Arlington Heights before relocating to Darien last fall.

Babu, 47, was charged with one count each of conspiracy to illegally dispense a controlled substance and health care fraud in a criminal complaint. He was released on a $100,000 unsecured bond and prohibited from writing any prescriptions or submitting any claims to Medicare by U.S. Magistrate Judge Sheila Finnegan. Babu was ordered to return for a status hearing at 9:15 a.m. next Tuesday in U.S. District Court.

According to the complaint, between November 2012 and December 2013, Babu issued five prescriptions, each for 60 doses of 80mg strength OxyContin, to a patient who was actually an undercover agent, despite never having seen or examined the patient, and Babu permitted unlicensed personnel associated with Anik Life Sciences to issue prescriptions to the patient. During the same period, Babu allegedly submitted false claims to Medicare for services purportedly provided to the patient that were not rendered by Babu or another medical professional licensed in Illinois.

The undercover agent posed as a healthy individual purportedly covered by Medicare and seeking physician services to obtain prescription medication, including oxycodone. The agent further purported to have shoulder pain from a previous injury and to be on disability. On approximately 10 occasions, representatives from Anik Life Sciences, none of whom were licensed as physicians, nurses, or other medical professionals in Illinois, visited the undercover agent in his purported apartment.

Babu allegedly caused unlicensed personnel from Anik Life Sciences to provide purported medical care ― including prescriptions issued under Babu’s name and DEA registration number for controlled substances ― to the undercover agent and then billed Medicare for that purported care. Furthermore, the approximately 300 OxyContin pills that Babu allegedly prescribed to the undercover agent were paid for in large part by Medicare.

The arrest and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Jack Riley, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration; Lamont Pugh III, Special Agent-in-Charge of the Chicago Regional Office of the HHS-OIG; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

The government is being represented by Assistant U.S. Attorney Sarah Streicker.

Conspiracy to illegally dispense oxycodone carries a maximum penalty of 20 years in prison and a $1 million fine, and health care fraud carries a maximum penalty of 10 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The public is reminded that a complaint is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Complaint

CHICAGO — An Ottawa, Ill., man was sentenced yesterday to 7½ years in federal prison for amassing a large collection of child pornography over more than four years. The defendant, JAY ARTHUR WIDEMANN, 57, of Ottawa, pleaded guilty last October to receiving child pornography, admitting that he had collected more than 10,500 illicit images and videos.

Widemann formerly owned an appliance store in Ottawa and there were no allegations or indications of any sexual contact with minors.

Widemann was also ordered to pay $70,000 in restitution ― $10,000 to each of seven identified victims ― and he was placed on supervised release for five years following his prison term by U.S. District Chief Judge Ruben Castillo. Widemann was ordered to surrender on April 2 and must serve at least 85 percent of his sentence before he is eligible for release. There is no parole in the federal prison system.

In imposing the sentence, Judge Castillo said it sends a message that such collections of child pornography must be stopped.

According to court documents, Widemann was charged after the Ottawa Police Department received information from the Dutch National Police in Holland that a computer in Ottawa had been used to download child pornography from a Dutch website with massive collections of child pornography. The internet protocol address of that computer was traced to Widemann’s store in Ottawa. After further investigation, Ottawa police learned that Widemann maintained a large collection of child pornography on his computers at his store and residence, which he had accumulated between 2004 and 2009.

Widemann’s “collection of child pornography contained approximately 10,532 images and videos of child pornography, including acts of penetration, extreme degradation, bestiality, and bondage,” Assistant U.S. Attorney Jennie Levin wrote in a sentencing memo.

The federal investigation was conducted by the FBI's Child Exploitation Task Force. The task force is part of a nationwide effort known as the Innocence Lost National Initiative targeting those involved in the commercial sexual exploitation of children in the United States. In Chicago, the CETF is comprised of FBI special agents and officers and investigators from the Chicago Police Department, the Cook County Sheriff's Office, and the Cook County State's Attorney's Office.

The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

CHICAGO — Former Cook County Commissioner JOSEPH MARIO MORENO was sentenced today to 11 years in federal prison for engaging in a series of public and personal corruption schemes over a span of three years. Moreno pleaded guilty on July 1, 2013, to conspiracy to commit extortion after he was initially charged in late June 2012, about 18 months after he left public office.

Moreno, 61, of Chicago, a lawyer who served more than 16 years as an elected county commissioner until December 2010, was sentenced to 132 months in prison, and he was ordered to forfeit $100,000 and pay a total of more than $138,000 in restitution by U.S. District Judge Gary Feinerman. Moreno was ordered to begin serving his sentence on April 21.

“Mr. Moreno was not a reluctant participant in these schemes; he was an eager participant,” Judge Feinerman said, adding that Moreno “embraced them with gusto and pursued them with vigor.”

Moreno “repeatedly pursued his own interests at the expense of those he was supposed to serve. . . . [H]e extorted a reputable business and corrupted the highest levels of Cook County government, the Town of Cicero, and a private hospital. He also evaded taxes and suborned perjury so he could reduce his child support obligations. And when he was confronted about his crimes, he obstructed justice by providing the government with false invoices in an effort to conceal his criminal conduct,” Assistant U.S. Attorneys Christopher J. Stetler and Megan C. Church wrote in a government sentencing memo.

Notably, they argued, Moreno conceived a motto of governing that captured his corrupt approach to public office: “I don’t want to be a hog. I just want to be a pig. Hogs get slaughtered. Pigs get fat.”

Moreno pleaded guilty to conspiracy to extort an un-named company that was awarded a contract to help improve Cook County Hospital’s revenue cycle into using his friend and codefendant, Ron Garcia, and his business, Chicago Medical Equipment & Supply, Inc., as a minority subcontractor in return for a $100,000 bribe. Garcia forgave a $100,000 mortgage loan to Moreno in exchange for Moreno’s efforts to steer the lucrative sub-contract to Garcia’s company, and Moreno tried to disguise the bribe by claiming that he had repaid the purported loan.

In pleading guilty, Moreno also agreed that he sought to obtain orders of Dermafill bandages from Cook County in return for kickbacks while he and his staffer, co-defendant and former Chicago Ald. Ambrosio Medrano, were Cook County officials; sought to obtain approval for a waste-transfer station in return for kickbacks while a Town of Cicero official; and evaded his federal income taxes between 2007 and 2010 by misreporting the income from his law office.

According to sentencing documents, between 2008 and 2010, Moreno engaged in those schemes, as well as five other schemes to:

• enrich himself through kickbacks in return for passing a “green” resolution while a Cook County Commissioner;
• obtain medical-transcription business from Cook County in return for kickbacks concealed as legal fees;
• obtain orders of Dermafill bandages from a private hospital by bribing a hospital official;
• enrich himself through kickbacks while a Town of Cicero official;
• reduce his child-support obligations by suborning perjury during a court hearing.

Medrano, 60, of Chicago, the former alderman who later worked on Moreno’s county staff, was sentenced last month to a total of 13 years in federal prison after pleading guilty in one case involving Moreno and being convicted at trial last year in a separate corruption case that stemmed from the same FBI undercover investigation.

Garcia, 54, of Homer Glen, and two other co-defendants, Gerald W. Lombardi, 61, of Darien, and his son, Jerry A. Lombardi, 34, of Downers Grove, who were agents of Chasing Lions, LLC, a disabled-veterans-owned business in Lisle that sold the Dermafill bandages, pleaded guilty to their roles in the scheme and are awaiting sentencing. A sixth co-defendant, Stanley Wozniak, 51, of Chicago, is awaiting the disposition of charges.

The Moreno sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division.

CHICAGO ― Two defendants who engaged in a fraudulent financing scheme involving the offer and sale of investments in four Las Vegas companies were sentenced to 3½ and four years in federal prison, respectively, for defrauding approximately 125 investors of about $6.6 million, including some victims who lost some or all of their retirement or college savings funds.

RODERICK RIEMAN, 69, of St. Charles, who owned and operated Innovative Financial Services, Inc., a former insurance and investment business in St. Charles, was sentenced to four years in prison and ordered to begin serving his sentence on May 27. MICHAEL CROOK, 55, of Los Angeles and formerly of Chicago and Las Vegas, the former president of the Las Vegas companies, which purportedly engaged in interactive kiosks, prepaid debit cards, and restaurant reservation software, was sentenced to 42 months in prison and ordered to begin serving his sentence on June 24.

U.S. District Judge Harry Leinenweber, who sentenced both men yesterday, also ordered each to pay $6.6 million in restitution.

Crook, was president of Z Touch Systems, Inc., Global Payment Solutions, Inc., Bluko Information, Inc., and Smart Restaurant Solutions, Inc., and Rieman, through his company and salesmen working for him, was primarily responsible for making the offers and sales of investments in Crook’s companies. Crook cooperated with the government’s investigation and both defendants pleaded guilty to mail fraud after they were indicted in 2011.

According to court documents, between 2004 and August 2007, Crook and Rieman misrepresented the expected return on investments, the risks associated with the investments, the existence and value of collateral, the use of proceeds, the source of funds used to make promised payments, the status of investments, and the financial condition and business transactions of the companies. They misappropriated a part of the funds raised to make Ponzi-type payments to investors and to benefit companies and individuals other than those directly relating to the particular investment.

For example, the defendants offered and sold investments in interactive kiosks called “ODIEs” (On Demand Interactive Environments), purportedly manufactured and sold by Z Touch. The investments offered an annual return of 18 percent in monthly payments, repayment of principal in 36 months and a security interest in a particular ODIE. Although the defendants offered and sold more than 250 of these investments, only a small number of ODIEs were ever built, none were successfully placed in businesses, and no revenues were generated.

One victim, a retired school teacher, made two separate investments totaling $500,000 of her retirement funds in what Rieman purported were 27 ODIEs and, ultimately, she lost more than $400,000 of her investment.

The government was represented by Assistant United States Attorneys Edward G. Kohler and Kruti Trivedi.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The Illinois Department of Securities assisted in the investigation.