District of Minnesota

United States Attorney Gregory G. Brooker today announced the sentencing of BRANDON SCOTT CLOUD, 36, to 60 months in prison for sexually assaulting a minor victim. CLOUD, who was charged via criminal information on July 21, 2017, pleaded guilty on September 21, 2017, and was sentenced yesterday before Senior Judge Michael J. Davis in United States District Court in Minneapolis, Minn.

 

According to the defendant’s guilty plea and documents filed in court, on August 11, 2016, within the exterior boundaries of the Red Lake Indian Reservation, CLOUD sexually assaulted a 13-year-old minor victim. The victim, who was visiting a family member at CLOUD’S residence, was assaulted by CLOUD while she was sleeping. Following the assault, the victim contacted her mother who notified the Red Lake Police Department.

 

This case is the result of an investigation conducted by the Red Lake Police Department and the FBI Headwaters Safe Trails Task Force.

 

Assistant U.S. Attorney Clifford B. Wardlaw prosecuted the case.

 

 

Defendant Information:                                                                                                                     

 

BRANDON SCOTT CLOUD, 36

Red Lake, Minn.

 

Convicted:

• Sexual abuse of a minor, 1 count

 
Sentenced:

• 60 months in prison
• Three years supervised release

 
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United States Attorney’s Office, District of Minnesota: (612) 664-5600

A New Mexico man pleaded guilty today in St. Paul, Minnesota, to engaging in and directing distributed denial of service (DDoS) attacks against the websites of his prior employers, business competitors and public services, as well as felon-in-possession charges.  Acting Assistant Attorney General John P. Cronan of the Department of Justice’s Criminal Division, U.S. Attorney Gregory G. Brooker of the District of Minnesota and Special Agent in Charge Richard T. Thornton of the FBI’s Minneapolis Field Office made the announcement.

 

John Kelsey Gammell pleaded guilty to one count of conspiracy to commit intentional damage to a protected computer and two counts of being a felon-in-possession of a firearm before District Judge Wilhelmina M. Wright of the District of Minnesota.  He will be sentenced at a later date.

 

According to admissions made in connection with his plea, from at least in or about July 2015 through in or about March 2017, Gammell engaged in a campaign of DDoS attacks on websites throughout the United States.  A DDoS attack is a malicious attempt to disable or interrupt service to a computer or website, usually by causing large amounts of internet traffic to be directed to the computer or website.  Gammell directed DDoS attacks at a number of victims’ websites, including websites operated by companies he used to work for, companies that declined to hire him, competitors of his business, and websites for law enforcement agencies and courts, among others. 

 

Gammell admitted that he caused DDoS attacks by using computer programs on his own computers, as well as by directing “DDoS-for-hire” companies from which he purchased services to launch the DDoS attacks.  Gammell purchased subscriptions to multiple DDoS-for-hire companies, including VDoS, CStress, Inboot, Booter.xyz and IPStresser.  He initiated attacks using these DDoS-for-hire companies against dozens of victims, including but not limited to Washburn Computer Group, the Minnesota State Courts, Dakota County Technical College, Minneapolis Community and Technical College, the Hennepin County Sheriff’s Office and others.  Gammell took a variety of steps to avoid detection and circumvent his victims’ DDoS attack mitigation efforts, such as using IP address anonymization services to mask his identity and location, using cryptocurrency in payment for DDoS-for-hire services, using multiple DDoS-for-hire services at once to amplify his attacks, using spoofed emails to conceal his conduct, and using encryption and drive-cleaning tools to conceal digital evidence of his conduct on his computers.

           

Gammell, who is prohibited from possessing firearms or ammunition based on prior felony convictions, also admitted that he possessed parts for use in the building of AR-15 assault rifles, upper and lower receivers, a pistol grip, a trigger guard, 15 high-capacity magazines, a buttstock, a buffer tube and 420 rounds of 5.56 x 45mm full metal jacket rifle ammunition in Colorado, where he worked.  He further admitted that he possessed a Heckler & Koch P2000 handgun, and a Springfield Armory model 1911-A1, .45 caliber handgun, as well as hundreds of rounds of ammunition in New Mexico, where he resided.

 

This case was investigated by the FBI’s Minneapolis Field Office.  Assistant U.S. Attorney Timothy C. Rank of the District of Minnesota and Trial Attorney Aaron R. Cooper of the Criminal Division’s Computer Crime and Intellectual Property Section are prosecuting the case.  The U.S. Attorney’s Offices for the District of Colorado and the District of New Mexico also provided substantial assistance in this matter.

A New Mexico man pleaded guilty today in St. Paul, Minnesota, for directing computer attacks against the websites of his prior employers, business competitors and public services, as well as felon-in-possession charges. Acting Assistant Attorney General John P. Cronan of the Department of Justice’s Criminal Division; United States Attorney Gregory G. Brooker of the District of Minnesota; and Special Agent in Charge Richard T. Thornton of the Federal Bureau of Investigation-Minneapolis Field Office made the announcement.

U.S. Attorney Greg Brooker stated, "Cyber-attacks, such as the ones perpetrated by the defendant, are serious crimes that cause real harm to real victims. As this prosecution shows, these crimes also carry serious consequences. This Office will continue to prioritize the prosecution of cybercriminals that pose a substantial threat to private businesses, public entities, and critical infrastructure."

FBI Minneapolis Division Special Agent in Charge Richard Thornton added, "Unfortunately, crime on the internet has become an everyday reality across the United States. Cybercriminals looking to turn a buck or with an axe to grind mistakenly see the internet as fertile ground for anonymous criminal activity." "Cybercrime," Thornton explained, "has real world consequences. While many cases involve the loss of money or personal information, it’s no less impactful when victims are denied internet services that have become vital in our personal and commercial lives. We’re grateful to our corporate and law enforcement partnerships that helped achieve justice for the victims in this case."

JOHN KELSEY GAMMELL, 55, pleaded guilty to one count of conspiracy to cause intentional damage to a protected computer and two counts of being a felon-in-possession before District Judge Wilhelmina M. Wright of the District of Minnesota. He will be sentenced at a later date.

According to admissions made in connection with his plea, from at least in or about July 2015 through in or about March 2017, GAMMELL engaged in a campaign of distributed denial of

service ("DDoS") attacks on websites throughout the United States. A DDoS attack is a malicious attempt to disable or interrupt service to a computer or website, usually by causing large amounts of internet traffic to be directed to the computer or website. GAMMELL directed DDoS attacks at a number of victims’ websites, including websites operated by companies he used to work for, companies that declined to hire him, competitors of his business, and websites for law enforcement agencies and courts, among others.

GAMMELL admitted that he caused DDoS attacks by using computer programs on his own computers, as well as by directing "DDoS-for-hire" companies from which he purchased services to launch the DDoS attacks. GAMMELL purchased subscriptions to multiple DDoS-for-hire companies, including VDoS, CStress, Inboot, Booter.xyz, and IPStresser. He initiated attacks using these DDoS-for-hire companies against dozens of victims, including but not limited to Washburn Computer Group, the Minnesota State Courts, Dakota County Technical College, Minneapolis Community and Technical College, the Hennepin County Sheriff’s Office, and others. GAMMELL took a variety of steps to avoid detection and circumvent his victims’ DDoS attack mitigation efforts, such as using IP address anonymization services to mask his identity and location, using cryptocurrency in payment for DDoS-for-hire services, using multiple DDoS-for-hire services at once to amplify his attacks, using spoofed emails to conceal his conduct, and using encryption and drive-cleaning tools to conceal digital evidence of his conduct on his computers. GAMMELL, who is a convicted felon, also admitted that he possessed parts for use in the building of AR-15 assault rifles, upper and lower receivers, a pistol grip, a trigger guard, 15 high-capacity magazines, a buttstock, a buffer tube, and 420 rounds of 5.56 x 45mm full metal jacket rifle ammunition in Colorado, where he worked. He further admitted that he possessed a Heckler & Koch P2000 handgun, and a Springfield Armory model 1911-A1, .45 caliber handgun, as well as hundreds of rounds of ammunition in New Mexico, where he resided.

This case was investigated by the FBI’s Minneapolis Field Office.

Assistant U.S. Attorney Timothy C. Rank of the District of Minnesota and Trial Attorney Aaron R. Cooper of the Criminal Division’s Computer Crime and Intellectual Property Section are prosecuting the case. The U.S. Attorney’s Offices for the District of Colorado and the District of New Mexico also provided substantial assistance in this matter.

 

Defendant Information:

JOHN KELSEY GAMMELL, 55

Las Cruces, N.M.

Convicted:

• Conspiracy to commit intentional damage to a protected computer, 1 count
• Felon in possession of a firearm, 2 counts

 

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United States Attorney’s Office, District of Minnesota: (612) 664-5600

MINNEAPOLIS – Attorney General Jeff Sessions today announced the appointment of Gregory G. Brooker as Interim United States Attorney pursuant to 28 U.S.C. § 546, which provides that “the Attorney General may appoint a United States Attorney for the district in which the office of United States Attorney is vacant.”  This appointment will take effect on January 5, 2018.

 

“For the past 18 years, Gregory Brooker has ably represented the people of Minnesota as a leader in the U.S. Attorney’s Office,” said Attorney General Sessions. “He has invaluable experience both in private practice and as a federal prosecutor. He has put fraudsters and other criminals behind bars. I am confident that he will make an excellent Interim U.S. Attorney for Minnesota, and I am pleased to appoint him today.”

 

Mr. Brooker joined the United States Attorney’s Office in 1999 as an Assistant U.S. Attorney. From 2007-2014, he served as Chief of the Civil Division and in February 2014, he was appointed to the position of First Assistant U.S. Attorney. Mr. Brooker has served as Acting U.S. Attorney since March 11, 2017. Prior to joining the Office, Mr. Brooker spent five years with the Minneapolis law firm of Popham, Haik, Schnobrich, Kaufman and Doty, handing a wide variety of commercial litigation cases.

 

Mr. Brooker is a Minnesota native who attended Rush City High School in Rush City, Minn., and received his law degree in 1985 from the University of Minnesota Law School. More information about Mr. Brooker’s biography is available at www.justice.gov/usao-mn/

 

 

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Acting United States Attorney Gregory G. Brooker today announced the filing of a felony information charging ALEX REAVES LUNDIN, 25, with conspiracy for her role in a $1 million Ponzi scheme orchestrated by her husband, Jeremy Lundin. LUNDIN will make her initial appearance in U.S. District Court at a later date. Jeremy Lundin, who has already pled guilty to charges of mail fraud and money laundering for his role in orchestrating the scheme, is scheduled to be sentenced on February 1, 2018.

 

According to the information, from approximately December 2014 through May 2017, Jeremy Lundin claimed that he conducted “options trading” through his business Big Island Capital. He worked through a network of associates and friends to solicit investors by promising to generate exponential growth through options trading, and obtained more than $1 million from 51 investors over a roughly two-year period.  However, instead of using the funds for options trading, Jeremy Lundin and LUNDIN spent investors’ money to fund their lavish lifestyle. 

 

According to the information, as part of the scheme, Jeremy Lundin provided investors with a “Welcome Packet,” consisting of an “Investment Advisory Agreement” and other materials describing his business. Through these materials, Jeremy Lundin claimed that Big Island Capital investments earned a 67 percent rate of return in 2013 and a 97.8 percent rate of return in 2014. In order to appear legitimate and promote his scheme, Jeremy Lundin also created phony account statements which commonly and falsely showed double-digit gains on a weekly or quarterly basis. Between May 2015 and May 2017, at least $992,000 in investor funds was deposited into Jeremy Lundin’s “Big Island Capital” bank account. During roughly the same time period, however, Jeremy Lundin transferred $933,950 from the business account directly into his and LUNDIN’s personal checking account. The couple then used the majority of those investor funds on their personal expenses including travel, luxury automobiles, a boat, jewelry, retail purchases, and more than $366,000 in credit card payments.

 

According to the information, after LUNDIN became aware that her husband was not conducting options trading as he promised investors, she continued to assist him in carrying out the scheme by, among other actions, soliciting new investors and drafting correspondence intended to lull current victim-investors into believing their money was safe, despite knowing that she and Jeremy Lundin had spent all of the investor funds on personal expenses.

 

This case is the result of an investigation conducted by the Criminal Investigation Division of the IRS, Federal Bureau of Investigation, United States Postal Inspection Service, and Minnesota Department of Commerce Fraud Bureau.

 

Assistant United States Attorney Amber M. Brennan is prosecuting the case.

 

 

Defendant Information:

 

ALEX REAVES LUNDIN, 25

Mound, Minn.

 

Charges:

• Conspiracy to commit mail fraud, 1 count

 

 

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

Acting United States Attorney Gregory G. Brooker, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Acting Special Agent in Charge Kirk Howard and Saint Paul Police Chief Todd Axtell today announced a federal indictment charging six members of a Saint Paul criminal street gang known as the HAM Crazy for conspiring to illegally possess firearms.

 

“This indictment represents the aggressive action this Office and our law enforcement partners are taking against gun violence in Saint Paul,” said Acting U.S. Attorney Gregory Brooker. “Working hand-in-hand with our partners at the ATF and Saint Paul Police Department, we are dedicating all necessary resources to investigate and prosecute the most violent offenders. This alarming uptick in gang activity and gun violence will not be tolerated in our cities and communities.”

 

“There are plenty of ways to settle disagreements between groups, but gun violence is not a method we will allow. The communities of Saint Paul deserve better,” said Acting Special Agent in Charge Kirk Howard of the Saint Paul Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives. “ATF, Saint Paul Police Department and the Department of Corrections have put forth maximum effort to reduce gun violence in Saint Paul. We’re happy to partner with the two agencies in this investigation and hope this indictment provides a word of warning to others who are inclined to be involved in this dangerous behavior.”

 

Saint Paul Police Chief Todd Axtell said, “Too many families are impacted by gun violence in Saint Paul. We welcome these indictments as they hold gun violence suspects responsible. We will continue to partner with our local and federal law enforcement agencies and rigorously pursue gun offenders whose crimes tear at the fabric of our community.”

 

According to the superseding indictment, since at least January 2014, defendants MARVELL VOSHON JEFFERSON, a/k/a “Vo,” a/k/a “Lil Vo,” CARMELO MANUEL MARRERO, a/k/a “Melo,” a/k/a “Mello,” CASEY JEMAR DAVIS, a/k/a “Casey Jermar Davis,” a/k/a “K Chop,” SHELBY DELANE ASHFORD, JR., a/k/a “Two Times,” PHILLIP DWAYNE JACKSON, a/k/a “Go,” a/k/a “Kid Go,” and NAKIA MARQUIRE MARTIN, a/k/a “Nakia Marquette Martin,” a/k/a “Freaky,” a/k/a “Freaky Nick,” have maintained active membership in the street gang known as the HAM Crazy. The main purpose of the HAM Crazy gang is to preserve and protect their territory, power, status, and reputation through the use of violence and intimidation against rival Saint Paul gangs, such as the Hit Squad.

 

According to the superseding indictment, since at least January 2014, the HAM Crazy gang has been in an ongoing gang war with several rival gangs, including the Hit Squad, that has resulted in gang members on both sides of the rivalry being shot and/or killed. HAM Crazy members and their rival gang members often use social media platforms, such as Facebook, YouTube, and Snapchat, as a way to disrespect, intimidate, and threaten rivals by brandishing firearms, displaying money, making gang signs, and publishing rap videos.

 

According to the superseding indictment, due to the ongoing gang war and the need for firearms to conduct gang-related activity, the defendants conspired to illegally obtain and jointly possess firearms. The defendants and other HAM Crazy members also attempted to buy, sell, trade, and obtain firearms using social media. All six defendants have prior convictions that prohibit them from legally possessing firearms.

 

According to the superseding indictment, the defendants and other HAM Crazy members conspired to illegally possess at least nine firearms during the timeframe of the superseding indictment.

 

Five of the defendants, JEFFERSON, DAVIS, ASHFORD, JACKSON, and MARTIN, have made their initial appearances in federal court and have been arraigned on the charges in the superseding indictment. One defendant, MARRERO, remains at large.

 

This case is the result of an investigation conducted by the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Saint Paul Police Department, and the Minnesota Department of Corrections.

 

Assistant U.S. Attorneys Benjamin Bejar and Thomas Calhoun-Lopez are prosecuting the case.

 

 

Defendant Information:                                                                                                                     

 

MARVELL VOSHON JEFFERSON, a/k/a “Vo,” a/k/a “Lil Vo,” 23

Saint Paul, Minn.

 

Charges:

• Conspiracy – Felon in possession of a firearm, 1 count
• Felon in possession of a firearm, 1 count

 
CARMELO MANUEL MARRERO, a/k/a “Melo,” a/k/a “Mello,” 23
Maplewood, Minn.
 
Charges:

• Conspiracy – Felon in possession of a firearm, 1 count
• Felon in possession of a firearm, 1 count
• Aiding and abetting felon in possession of firearms, 1 count

 
CASEY JEMAR DAVIS, a/k/a “Casey Jermar Davis,” a/k/a “K Chop,” 23
Saint Paul, Minn.
 
Charges:

• Conspiracy – Felon in possession of a firearm, 1 count
• Aiding and abetting felon in possession of firearms, 1 count

 
SHELBY DELANE ASHFORD, JR., a/k/a “Two Times,” 23
Columbia Heights, Minn.
 
Charges:

• Conspiracy – Felon in possession of a firearm, 1 count
• Aiding and abetting felon in possession of firearms, 1 count

 
PHILLIP DWAYNE JACKSON, a/k/a “Go,” a/k/a “Kid Go,” 23
Lino Lakes, Minn.
 
Charges:

• Conspiracy – Felon in Possession of a Firearm, 1 count
• Prohibited person in possession of firearm, 1 count

 
NAKIA MARQUIRE MARTIN, a/k/a “Nakia Marquette Martin,” a/k/a “Freaky,” a/k/a “Freaky Nick,” 24
Moose Lake, Minn.
 
Charges:

• Conspiracy – Felon in possession of a firearm, 1 count

 

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

Acting United States Attorney Gregory G. Brooker today announced the conviction of ADAM JOHN BURKE, 33, ABDIRAHIN KHALIF IBRAHIM, 26, and DANA ENOCH KIDD, 36, for their roles in a multi-million dollar insurance fraud conspiracy. BURKE, IBRAHIM, and KIDD were initially indicted on December 20, 2016, and following a two-week trial before Senior Judge Michael J. Davis in U.S. District Court in Minneapolis, Minn., the jury convicted BURKE, IBRAHIM, and KIDD on charges of conspiracy and mail fraud.

 

Assistant U.S. Attorney David Maria said, “Adam Burke, a licensed Doctor of Chiropractic, used his professional position and private medical practice to perpetrate an egregious fraud scheme that cost automobile insurers and, ultimately, policyholders in Minnesota, millions of dollars. We are thankful for the hard work and dedication put into this case by our partners at the Commerce Fraud Bureau and the FBI.”

 

“Insurance fraud costs all Minnesotans in the form of higher premiums,” said Commerce Commissioner Jessica Looman. “The Commerce Fraud Bureau investigates sophisticated fraud schemes and works closely with our other law enforcement partners to bring criminals perpetrating fraud to justice. Today’s verdict makes it clear that Minnesota does not tolerate insurance fraud.”

 

“The defendants in this case defrauded automobile insurance companies by submitting false no-fault insurance claims and subsequently received reimbursements for chiropractic services that were either not medically necessary or were never rendered. Their greed had real consequences for the people of Minnesota in terms of higher insurance costs and tax dollars spent investigating their illegal conduct,” said Special Agent in Charge of the FBI Minneapolis Division Richard T. Thornton. “The FBI and its partners will continue to aggressively pursue insurance fraud schemes to protect the public from dishonest fraudsters damaging our insurance companies, regardless of their position in the medical community.”

 

As proven at trial, beginning in at least 2012, BURKE, a licensed Doctor of Chiropractic, participated in a scheme to defraud automobile insurance companies by hiring patient recruiters, known as “runners,” to solicit automobile accident victims to attend treatments at BURKE’S clinic, Burke Chiropractic Center, P.A. (“Burke Chiropractic”). BURKE typically paid the runners, including IBRAHIM and KIDD, between $1,000 and $2,000 for each patient they brought to Burke Chiropractic so that BURKE could bill services to the insurance companies. To disguise the payments, BURKE would write checks to the runners with false descriptions in the memo lines such as “marketing,” “consulting fee,” or “pt transportation.” BURKE also required the runners to form corporate entities, such as limited liability companies, with names that sounded like legitimate businesses that performed marketing or transportation services, again, to hide the true nature of the payments. BURKE wrote more than 280 checks, totaling more than $590,000.

 

As proven at trial, BURKE structured the scheme in a way that would maximize Burke Chiropractic’s billings to the insurance companies. BURKE typically withheld kickback payments to the runners until after the patients had attended a certain number of treatment sessions. Frequently, the runners paid a portion of the kickback payments they had received from BURKE to the patients they referred in order to make sure that the patients attended the minimum number of treatment sessions. Thus, the kickback payments were intended to ensure that patients came for treatments at Burke Chiropractic because of the payments, as opposed to the necessity and reasonableness of the treatments. As an additional incentive to continue attending treatments, BURKE often referred patients to personal injury attorneys, and BURKE instructed the runners to advise patients that following through on all treatment sessions would result in a bigger settlement from the insurance company. As a result of this fraud scheme, BURKE and Burke Chiropractic billed millions of dollars to the automobile insurance companies.

 

This case is the result of an investigation conducted by the Minnesota Commerce Fraud Bureau and the Federal Bureau of Investigation. Additional assistance was provided by the Minneapolis Police Department, Saint Paul Police Department, Minnesota State Patrol, and Homeland Security Investigations.

 

This case is being prosecuted by Assistant U.S. Attorneys David M. Maria and John E. Kokkinen. 

 

 

Defendant Information:                                                                                                                     

 

ADAM JOHN BURKE, 33

Minneapolis, Minn.

 

Convicted:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 12 counts

 

ABDIRAHIN KHALIF IBRAHIM, 26

Saint Paul, Minn.

 

Convicted:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 3 counts

 

DANA ENOCH KIDD, 36

Elk River, Minn.

 

Convicted:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 1 count

 

 

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Acting United States Attorney Gregory G. Brooker today announced the conviction of ALEJANDRO LLAMAS-DELGADO, 24, GREGORIO RAMIREZ-MALDONADO, 28, and ERICK PARRA-SALAZAR, 24, for drug trafficking-related offenses. Following a three-day trial before U.S. District Judge Joan N. Ericksen in Minneapolis, Minn., the jury found all three defendants guilty of conspiracy to distribute controlled substances, and possession with intent to distribute cocaine. In July 2017, co-defendant COLIN BLAIR MCAFEE, 46, pleaded guilty to one count of possession with intent to distribute cocaine. All four defendants will remain in federal custody pending their sentencing hearings.

 

Assistant U.S. Attorney Thomas Hollenhorst said: “This case involved the prosecution of one of the biggest methamphetamine and cocaine traffickers in the State of Minnesota. Mr. Llamas-Delgado’s drug trafficking organization spanned many states and involved numerous drug couriers and distributors. The community is safer with him behind bars.”

 

As proven at trial, since at least 2014, LLAMAS-DELGADO operated a drug trafficking organization responsible for transporting and distributing methamphetamine and cocaine from Texas and California into Minnesota. RAMIREZ-MALDONADO and PARRA SALAZAR assisted LLAMAS-DELGADO by transporting approximately two kilograms of cocaine from Texas to the Twin Cities.

 

As proven at trial, law enforcement agents in California seized approximately 17 pounds of suspected cocaine and 25 pounds of suspected methamphetamines concealed in hidden compartments under the front seats of a 2005 Mini-Cooper that had been loaded onto a vehicle transport carrier destined for LLAMAS-DELGADO in the Twin Cities area. During the spring of 2017, law enforcement agents in the Twin Cities area conducted surveillance of LLAMAS-DELGADO and his co-conspirators that revealed multiple residences linked to the conspiracy’s drug trafficking activities. On May 15, 2017, law enforcement agents conducted simultaneous searches of several residences, resulting in the seizure of more than $40,000 in cash, 28 pounds of marijuana, over 750 grams of cocaine, a firearm, and other drug trafficking paraphernalia.

 

This case is the result of an investigation by the U.S. Drug Enforcement Administration, Orono Police Department, Riverside County Sheriff’s Office (California), Albertville Police Department, Brooklyn Center Police Department, Wright County Sheriff’s Office, Hennepin County Sheriff’s Office, the Minnesota State Patrol, and the California Highway Patrol.  

 

Assistant U.S. Attorneys Thomas M. Hollenhorst and Sarah E. Hudleston prosecuted this case.

 

Defendant Information:

 

ALEJANDRO LLAMAS-DELGADO, 24

Brooklyn Center, Minn.

 

Convicted:

• Conspiracy to distribute methamphetamine and cocaine, 1 count
• Possession with intent to distribute cocaine, 1 count

 

GREGORIO RAMIREZ-MALDONADO, 28

Houston, Texas

 

Convicted:

• Conspiracy to distribute cocaine, 1 count
• Possession with intent to distribute cocaine, 1 count

 

ERICK PARRA-SALAZAR, 24

Houston, Texas

 

Convicted:

• Conspiracy to distribute cocaine, 1 count
• Possession with intent to distribute cocaine, 1 count

 

 

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Yesterday in federal court, United States District Judge Ann D. Montgomery issued an order approving a final distribution of payments to victims of FRANK E. VENNES, JR., and dissolving the Liquidating Trusteeship established to administer the Asset Distribution Plan.

 

“Although nothing can erase entirely the years of financial hardship and emotional stress caused by this massive fraud scheme, we hope that through the Liquidating Trustee’s administration of the Asset Distribution Plan victims have experienced some measure of relief and closure,” said Acting U.S. Attorney Gregory Brooker.

 

Gary Hansen, the Liquidating Trustee, noted the many complexities in liquidating the VENNES assets, which included multiple business entities; office buildings, apartment buildings, and other real estate; an extensive art and rare coin collection; and many other assets spread across the country. “This has been a long and challenging process. We appreciate Judge Montgomery’s practical and flexible approach, which permitted us to resolve issues creatively and without substantial litigation or undue administrative expense. Many of those who placed their trust in Frank Vennes lost much or all of their life savings. We have not been able to make them whole, but have worked hard to provide the maximum possible recovery from the available assets,” said Hansen.

 

On October 18, 2013, VENNES was sentenced to 15 years in prison for fraudulently raising money from individuals and through hedge funds for investment in Petters Company, Inc. (“PCI”). VENNES was a long-time associate of Thomas J. Petters, the Minnesota businessman who was convicted in 2009 of orchestrating a $3.65 billion Ponzi scheme. In January 2011, the Court issued an order approving an Asset Distribution Plan that provided for the distribution of cash or assets to the victims and creditors of the Vennes Defendants1, in connection to the Petters Ponzi scheme. After the final distribution, the total value of assets and cash distributed to victims and creditors through the Liquidating Trustee will total approximately $20 million.

 

This case was handled by the Civil Division of the U.S. Attorney’s Office for the District of Minnesota.

 

The case is captioned United States of America v. Frank E. Vennes, Jr., et al. Case No. 8-cv-5348 (ADM/TNL).

 

 

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1The Vennes Defendants are: Frank E. Vennes, Jr.; Metro Gem Finance; Metro Gem, Inc.; Grace Offerings of Florida, LLC; Metro Property Financing, LLC; 38 E. Robinson, LLC; 55 E. Pine, LLC; Orlando Rental Pool, LLC; 100 Pine Street Property, LLC; Orange Street Tower, LLC; Cornerstone Rental Pool, LLC; 2 South Orange Avenue, LLC; Mandan Properties, LLC; Century Apartments, LLC; Youngstown Holdings, LLC; Metro Development Properties, LLC; Grace Offerings of St. Paul, LLC; Project Riverwatch, LLC; Friends of Hope Academy, LLC; Plando, LLC; Art Group, LLC; and Metro Gold, LLC.

Acting United States Attorney Gregory G. Brooker today announced the sentencing of ELFRED WILLIAM PETRUK, 39, to 31 years in prison for methamphetamine-related trafficking offenses. PETRUK was found guilty on June 12, 2017, following a four-day trial, of one count of conspiracy to distribute methamphetamine and one count of possession with intent to distribute methamphetamine. PETRUK was sentenced to 31 years for each count and will serve those terms concurrently. PETRUK was indicted on these counts while on supervised release for a previous federal conviction. As a result, he will serve an additional two-and-one-half years consecutively for violating his supervised release terms and conditions. He was sentenced on December 13, 2017, before U.S. District Judge Ann D. Montgomery.

 

“Methamphetamines are destroying lives across Minnesota. Today’s sentence highlights our commitment to prosecuting individuals, such as Mr. Petruk, who are intent on bringing these dangerous drugs into our communities,” said Acting United States Attorney Gregory G. Brooker. “This case reflects the collaborative work of federal, state, and local task forces and their dedication to combating drug trafficking.”

 

“Mr. Petruk has had a history of criminal behavior dating back two decades. Getting him off the streets is a big win for these communities,” said Acting Special Agent in Charge Kirk Howard of the Saint Paul Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives. “In fact, our local ATF office has built a number of cases on Mr. Petruk resulting in three separate federal indictments. We are extremely happy with the sentencing. We owe a big thanks to the Lake Superior Drug and Violent Crime Task Force with whom we worked closely during this investigation. This is a big win for them, too.”

 

As proven at trial, in July 2016, law enforcement agents received information that PETRUK, who then had only recently been released from prison and placed on federal supervised release, was trafficking large quantities of methamphetamine from the Twin Cities area to the Twin Ports area. In September 2016, on at least three separate occasions, law enforcement agents observed PETRUK traveling from the Twin Ports area to the Twin Cities, making short-duration stops at remote locations and at homes of known methamphetamine users and dealers. On September 20, 2016, agents stopped and detained PETRUK and, upon execution of a search warrant, recovered more than 800 grams of highly pure methamphetamine hidden in a compartment under the hood of PETRUK’S vehicle.

 

As proven at trial, following PETRUK’S arrest, law enforcement agents executed search warrants at several of the locations in Duluth, Minn. and Superior, Wisc. believed to be related to PETRUK’S drug-trafficking activities. During the course of the searches, law enforcement agents seized a loaded 9mm handgun, methamphetamine, cash, digital scales, drug-packaging materials, and other drug-trafficking paraphernalia.

 

The defendant has multiple prior criminal convictions in state and federal courts. In September 2006, PETRUK pleaded guilty in federal district court to one count of possession with intent to distribute methamphetamine and was sentenced to 120 months in prison. In July 2015, PETRUK was found guilty by a federal jury of one count of corruptly attempting to obstruct an official proceeding and was sentenced to 46 months in prison.

 

This case is the result of an investigation by the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives; the Duluth Police Department; the Superior, Wisconsin Police Department; and the Lake Superior Drug and Violent Crime Task Force.

 

Assistant U.S. Attorneys Allen A. Slaughter and Benjamin Bejar prosecuted the case.

 

 

Defendant Information:

 

ELFRED WILLIAM PETRUK, 39

Duluth, Minn.

 

Convicted:

• Conspiracy to distribute methamphetamine, 1 count
• Possession with intent to distribute methamphetamine, 1 count

 

Sentenced:

• 402 months in prison (372 months each count to be served concurrently, plus 30 months for violation of supervised release conditions to be served consecutively)
• 10-year term of supervised release (10 years each count, served concurrently)

 

 

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of JOHN BURWOOD ROBINSON, 50, to 33 months in federal prison for stealing more than $1.1 million from his employer. ROBINSON, who was charged on July 26, 2017 with one count of mail fraud and one count of filing a false tax return, pleaded guilty on August 17, 2017, to both counts. He was sentenced on November 30, 2017, before Senior Judge Paul A. Magnuson in U.S. District Court in Saint Paul, Minn.

 

“This is an appropriate sentence for a defendant who abused his long-held position of trust by stealing more than a million dollars from his employer to fund his preoccupation with classic automobiles,” said Assistant U.S. Attorney Surya Saxena. “I am grateful for the combined efforts of the investigative agencies whose work brought this case to a successful conclusion.”

 

“IRS Criminal Investigation remains committed to uncovering financial fraud schemes,” stated Acting Special Agent in Charge Hubbard Burgess of the St. Paul Field Office IRS Criminal Investigation. “The recent 33-month sentencing of John Robinson shows that filing a filing false tax return will result in severe consequences.”

 

“Robinson was entrusted with managing the finances of the business that employed him, but instead he violated that trust by defrauding and stealing from the business,” said Minnesota Commerce Commissioner Jessica Looman. “This successful criminal investigation was the result of a coordinated effort by the Commerce Fraud Bureau with the Blaine Police and the IRS.”

 

According to the defendant’s guilty plea and documents filed in court, from 1991 through 2016, ROBINSON was employed by North Central Stamping & Manufacturing, Inc. (“NCSMI”), and in 2003, he became NCSMI’s controller. As the controller, ROBINSON managed NCSMI’s bank accounts, bookkeeping records, and financial reports.

 

According to the defendant’s guilty plea and documents filed in court, ROBINSON devised a fraud scheme to steal money that was paid to NCSMI by its clients. ROBINSON opened a bank account in the name of NCSMI without the company’s knowledge or authorization. ROBINSON then deposited payments made by NCSMI’s customers into the fraudulent bank account he had set up. ROBINSON used the money to pay for his own personal expenses, to fund his hobby of buying and restoring automobiles and automobile parts, and to pay for a storage facility to store the automobiles and parts. In total, ROBINSON stole approximately $1,200,000 from NCSMI.

 

According to the defendant’s guilty plea and documents filed in court, in addition to his theft, ROBINSON admitted to filing false tax returns by understating his total income for the calendar years 2009 through 2015, in order to lower his tax liability and to avoid detection of his fraud scheme. In total, ROBINSON caused a total tax loss of $291,757.31.

 

This case is the result of an investigation conducted by the Criminal Investigation Division of the IRS, the Minnesota Department of Commerce Fraud Bureau, and the Blaine Police Department.

 

Assistant U.S. Attorney Surya Saxena prosecuted the case.

 

 

Defendant Information:

 

JOHN BURWOOD ROBINSON, 50

Crystal, Minn.

 

Convicted:

• Mail fraud, 1 count
• Filing a false tax return, 1 count

 

Sentenced:

• 33 months in prison
• 3 years supervised release
• $624,132.99 in restitution

 

 

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Acting United States Attorney Gregory G. Brooker today announced that Skin Care Doctors, P.A. and its founder and CEO, Michael J. Ebertz, M.D. have agreed to pay $850,000 to the United States to resolve allegations of false claims submitted for certain dermatology procedures in violation of the False Claims Act (“FCA”).

 

Assistant U.S. Attorney Ann Bildtsen said, “Medicare is a public trust. This resolution against both the company and its CEO safeguards that trust and restores needed funds to Medicare. This Office is committed to taking necessary actions to rectify inflated billing to federal programs.”

 

The United States contended that between January 2008 and December 2015, Skin Care Doctors, P.A. ("SCD") and Michael J. Ebertz, M.D. (“Ebertz”) submitted false claims for payment to the Medicare Program.  The billing in question spanned four different areas, including billing Medicare for free samples of a phototherapy drug and upcoding office visits, lesion removal procedures, and phototherapy services. As outlined in the settlement agreement, Ebertz and SCD will pay to the United States a settlement amount of $850,000.

 

The settlement resolves a civil lawsuit brought by a whistleblower, a doctor who formerly worked with Ebertz, under the qui tam provisions of the False Claims Act.  The False Claims Act allows private parties to bring suit on behalf of the government for false claims and to share in any recovery.  Such whistleblowers bring fraud schemes to light that might otherwise go undetected.

 

The case was handled by the Civil Frauds Unit of the U.S. Attorney’s Office for the District of Minnesota, with assistance from the Office of Inspector General of the U.S. Department of Health and Human Services and the Federal Bureau of Investigation.

 

The case is United States of America and the State of Minnesota ex rel. Jeff Samuelson, M.D. v. Skin Care Doctors, P.A., and Michael J. Ebertz, M.D., 15-cv-3132 (SRN/BRT). The settlement resolved false claims allegations prior to any determination of liability.

 

 

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Acting United States Attorney Gregory G. Brooker today announced a federal indictment charging three members of the North Minneapolis-based 1-9 Block Dipset Gang with crimes related to violent gang activity, including conspiracy, possession and distribution of heroin, and illegal possession of firearms and ammunition. DOMONICK DESHAY WRIGHT, a/k/a “Freaky,” 29, BRIAN FUNTANOUS MACK, a/k/a “B-Mack,” 32, and HAKEEM MALIK DONTAE FLAX, a/k/a “Keem,” 31, are currently in custody and are awaiting court appearances before a United States Magistrate Judge.

 

According to the indictment, from at least August 2016 through the present, the defendants maintained active membership in the 1-9 Block Dipset Gang, with the purpose of making money for the gang through criminal acts, including distribution of heroin. As part of their heroin distribution scheme, WRIGHT, MACK, FLAX and other members of the gang possessed, used and carried firearms in order to protect themselves from rival gang members and maintain drug distribution territory. WRIGHT, MACK and FLAX have prior felony offenses that make them ineligible to possess firearms.

 

According to the indictment, members of the 1-9 Block Dipset Gang were involved in a violent gang war with rival North Minneapolis gangs, including the Tre Tre Crips and the Young-N-Thuggin gangs, which resulted in the shooting deaths of gang members on both sides of the conflict. Disputes over gang territories and retaliation for prior acts of violence also contributed to the gun violence. As an example, on August 5, 2017, FLAX shot and killed a member of the rival Tre Tre Crips gang in a parking lot outside of a North Minneapolis restaurant.

 

This indictment is the result of an investigation conducted by the Bureau of Alcohol, Tobacco, Firearms and Explosives and the Minneapolis Police Department. 

 

This case is being prosecuted by Assistant U.S. Attorney Thomas Calhoun-Lopez.

 

 

Defendant Information:

 

DOMONICK DESHAY WRIGHT, a/k/a “Freaky,” 29

Brooklyn Center, Minn.

 

Charges:

• Conspiracy to possess a firearm in furtherance of a drug trafficking crime, 1 count
• Conspiracy to distribute heroin, 1 count
• Possession with intent to distribute heroin, 1 count
• Felon in possession of a firearm, 2 counts
• Possession of a firearm in furtherance of a drug trafficking crime, 1 count

 
BRIAN FUNTANOUS MACK, a/k/a “B-Mack,” 32
Minneapolis, Minn.
 
Charges:

• Conspiracy to possess a firearm in furtherance of a drug trafficking crime, 1 count
• Conspiracy to distribute heroin, 1 count
• Possession with intent to distribute heroin, 1 count
• Felon in possession of a firearm, 3 counts
• Possession of a firearm in furtherance of a drug trafficking crime, 1 count

 
HAKEEM MALIK DONTAE FLAX, a/k/a “Keem,” 31
Vadnais Heights, Minn.
 
Charges:

• Conspiracy to possess a firearm in furtherance of a drug trafficking crime, 1 count
• Conspiracy to distribute heroin, 1 count
• Felon in possession of ammunition, 1 count
• Discharge of a firearm in furtherance of a drug trafficking crime, 1 count

 

 

 

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

Acting United States Attorney Gregory G. Brooker today announced the guilty plea of JOSEPH ARNOLD MCGLYNN, JR., 33, former owner, CEO and President of United Credit Consulting (“UCC”), for failing to account for and pay over employment taxes. MCGLYNN, JR., who was indicted on August 8, 2017, pleaded guilty yesterday before Judge Ann D. Montgomery in U.S. District Court in Minneapolis, Minn.

 

According to the plea agreement and documents filed in court, while MCGLYNN, JR. was the owner, CEO and President of UCC, a credit repair service company located in Burnsville, Minn., MCGLYNN, JR. was responsible for ensuring that UCC’s Employer’s Quarterly Federal Tax Returns were filed and that employment taxes were paid. However, although MCGLYNN, JR. caused employment taxes to be withheld from the wages of UCC employees, he failed to pay over such taxes to the Internal Revenue Service (“IRS”). Instead, MCGLYNN, JR. used the money to fund a lavish lifestyle, including luxury vacations, rentals of luxury vehicles, visits to strip clubs and purchases of luxury items such as jewelry and handbags. In total, MCGLYNN, JR. failed to pay to the IRS at least $159,157 in employment taxes.

 

The defendant’s wife and former employee of United Credit Consulting, TARA MARIE MCGLYNN, 32, pleaded guilty on January 17, 2017, to filing a false tax return.

 

Both cases are the result of an investigation conducted by the Criminal Investigation Division of the IRS and the United States Postal Inspection Service.

 

Assistant U.S. Attorney Michelle E. Jones is prosecuting the cases.

 

 

Defendant Information:

                                                                                                                                                           

JOSEPH ARNOLD MCGLYNN, JR., 33

Burnsville, Minn.

 

Convicted:

• Willful failure to account for and pay over employment taxes, 2 counts

 

 

TARA MARIE MCGLYNN, 32

Eden Prairie, Minn.

 

Convicted:

• Filing a false tax return, 1 count

 

 

 

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Acting United States Attorney Gregory G. Brooker today announced a federal indictment charging ANTONIO CARLOS DE GODOY BUZANELI, 56, and JOSE MANUEL ORDOÑEZ, JR., 46, in a $150 million investment fraud scheme involving purported Brazilian factoring. JULIO ENRIQUE RIVERA, 61, a third defendant involved in the conspiracy, was charged by felony information and pleaded guilty on November 9, 2017. BUZANELI and ORDOÑEZ were taken into custody on November 17, 2017, and made their initial appearance in U.S. District Court in Miami, Fla., that afternoon. A detention hearing for BUZANELI and ORDOÑEZ is scheduled for November 21, 2017, before Magistrate Judge John O’Sullivan at the C. Clyde Atkins U.S. Courthouse in Miami, Fla.

 

According to the indictment and documents filed in court, BUZANELI, ORDOÑEZ and RIVERA were the principals of Providence Holdings International, Inc., a company based in Key Biscayne, Fla. In 2009 and 2010, BUZANELI, ORDOÑEZ and RIVERA formed Providence Financial Investments, Inc. and Providence Fixed Income Fund LLC (collectively, along with Providence Holdings International, Inc., “Providence”) in order to raise money from investors.

 

According to the indictment and documents filed in court, from about 2010 until June 2016, Providence raised approximately $150 million from investors worldwide by representing that Providence would invest the money in Brazilian factoring. “Factoring” is a financial transaction in which accounts receivable are purchased at a discount. Providence’s marketing materials explained that in Brazil consumers write ten separate post-dated checks for $100 – one per month – to pay for $1,000 in retail items such as consumer electronics or groceries. The retailer then sells the post-dated checks to Providence for approximately $820, and Providence earns $180 over ten months as the checks mature. As a result, Providence claimed to make a 48 percent annual return on money invested in Brazil.

 

According to the indictment and documents filed in court, Providence raised more than $64 million from U.S. investors by employing a network of unlicensed brokers who sold promissory notes bearing annual interest rates between 12 percent and 24 percent. Investors were told their money would be used to factor accounts receivable in Brazil. BUZANELI, ORDOÑEZ and RIVERA provided the brokers with marketing materials to show investors that their money would be used to factor accounts receivable in Brazil. The materials falsely stated that funds would be used “for the sole purpose” of making loans to a Brazilian subsidiary of Providence “which will use the proceeds of the loan to acquire receivables or financial instruments such a post-dated checks and/or Duplicatas in the Brazilian Factoring Market.”

 

The indictment alleges that BUZANELI and ORDOÑEZ instead used a significant amount of the investors’ funds to pay purported profits to other investors and to make commission payments to brokers. BUZANELI and ORDOÑEZ also diverted investor funds to other companies they controlled, including an import/export company, a travel company, a credit restoration service, a catering company and a food truck operated by BUZANELI’S wife.

 

According to the indictment and documents filed in court, one of Providence’s brokers, an individual identified in the indictment as J.C., owned and operated a financial advisory firm in Saint Louis Park, Minn. Between July 2013 and January 2016, J.C. raised approximately $2.4 million for Providence from Minnesota investors by representing that Providence would invest their money in factoring in Brazil.

 

According to the indictment and documents filed in court, BUZANELI and ORDOÑEZ also opened Providence offices and affiliates around the world, including in London, Hong Kong, Taipei, Shanghai, Singapore, Vancouver, and Panama. In about 2011, for example, BUZANELI and ORDOÑEZ opened Providence-affiliated entities in the Bailiwick of Guernsey and in Hong Kong, through which they raised approximately $85 million from offshore investors by falsely representing they would use the investors’ money to invest in Brazilian factoring. In reality, Providence did not use the international investors’ money to purchase receivables in the Brazilian factoring market.  Instead, much of the investors’ money was transferred to other Providence-controlled entities around the world as well as to bank accounts controlled by BUZANELI and ORDOÑEZ, where the money was used for payments unrelated to Brazilian factoring, including to pay commissions to U.S. brokers and to make interest payments to American investors in Providence’s U.S.-based entities.

 

According to the indictment and documents filed in court, on July 28, 2016, Providence Financial Investments, Inc. and Providence Fixed Income Fund LLC declared bankruptcy, claiming to have estimated assets between $0 an $50,000. As a result of the fraud scheme, Providence investors worldwide lost a total of more than $100 million.

 

This case is the result of an investigation conducted by the FBI, United States Postal Inspection Service, and the Minnesota Commerce Fraud Bureau.

 

Assistant U.S. Attorneys Kimberly A. Svendsen and Joseph H. Thompson are prosecuting the case.

 

 

Defendant Information:                                                                                                                     

 

ANTONIO CARLOS DE GODOY BUZANELI, 56

Coral Gables, Fla.

 

Charges:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 12 counts

 

JOSE MANUEL ORDOÑEZ, JR., 46

Davie, Fla.

 

Charges:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 12 counts

 

JULIO ENRIQUE RIVERA, 61

Pembroke Pines, Fla.

 

Convicted:

• Conspiracy to commit mail fraud, 1 count

 

 

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

Acting United States Attorney Gregory G. Brooker today announced the sentencing of RONALD DAVID JOHNSON, 51, to 126 months in prison for stealing more than $2.1 million from victims who were hoping to invest successfully in the North Dakota oil boom. On June 19, 2017, following a five-day trial, a jury convicted JOHNSON on nine counts of wire fraud and one count of money laundering. JOHNSON was sentenced this morning by Judge Wilhelmina M. Wright in U.S. District Court in St. Paul, Minn.

 

“Ronald Johnson abused the trust of his victims only to enrich himself at their expense. He promised investors he would use their money to purchase land in North Dakota and to build indoor RV parks, but it was all a lie. Johnson simply stole their money,” said Assistant U.S. Attorney Joseph Thompson. “With today’s sentence, which includes prison time, restitution and a forfeiture order, Johnson is now being held accountable for his crimes.”

 

“IRS Criminal Investigation remains committed to uncovering investment fraud schemes and bringing to justice those who prey on investors for their personal financial gain,” said Acting Special Agent in Charge Jeremy Shivers of the St. Paul Field Office IRS Criminal Investigation.  “Those who line their pockets with profits from investment fraud schemes should know they will not go undetected and there will be detrimental consequences for this type of criminal behavior as in the case of the 126- month sentencing handed down to Ronald Johnson today.”

 

“The FBI together with our law enforcement partners will tirelessly pursue those responsible for investment fraud schemes,” said FBI Special Agent in Charge Richard T. Thornton, Minneapolis Division. “The sentence handed down today to include time in prison reflects the seriousness of the defendant's crimes.”

 

As proven at trial, JOHNSON came up with an investment idea to address the need to house oil workers in the Bakken in North Dakota and Montana. The idea, registered as Indoor RV Parks, LLC (“IRVPK”), would allow oil workers to eschew more common barracks-style housing in favor of comfortable indoor RV parks, specifically large climate-controlled warehouses where oil workers could park their RVs and have access to shared amenities like on-site storage, laundry and vending machines. Johnson promised his investors that as “members” of IRVPK, they would, based on the amount of the investment, receive a percentage of the rental income and other revenue generated by the indoor RV park. As part of his scheme, JOHNSON sent emails and letters to investors designed to lull them into a false sense of security and to postpone complaints regarding delays in the project.

 

As proven at trial, JOHNSON fraudulently solicited $2.1 million from four investors in IRVPK, telling the investors that their money would be used to build and manage indoor RV parks for oil workers. Instead of using the investor money to purchase land and start construction on the RV parks, JOHNSON used the funds to repay prior investors, fund his personal 51-acre cattle farm, take vacations, buy vintage Chevrolets, and purchase real estate, including a 17-acre island on Mink Lake in Maple Lake, Minn. As of today, IRVPK has not built any indoor RV Parks, has not acquired any property in North Dakota or Montana, and has a bank account that is empty.

 

This case is the result of an investigation conducted by the Criminal Investigation Division of the IRS and the FBI.

 

This case was prosecuted by Assistant U.S. Attorneys Benjamin Langner and Joseph H. Thompson.

 

 

Defendant Information:

 

RONALD DAVID JOHNSON, 51

Corcoran, Minn.

 

Convicted:

• Wire fraud, 9 counts
• Money laundering, 1 count

 

Sentenced:

• 126 months in prison
• Three years of supervised release
• $2,303,629 in restitution
• Forfeiture of all property derived from criminal proceeds 

 

 

 

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Acting United States Attorney Gregory G. Brooker today announced the guilty plea of ARON AVRAM SHAMILOV, 24, for impersonating a federal officer. SHAMILOV, who was indicted on September 19, pleaded guilty on November 13, 2017, before United States District Judge Susan Richard Nelson in Saint Paul, Minn. A sentencing hearing is scheduled for March 16, 2018.

 

According to his guilty plea and documents filed in court, on March 29, 2017, SHAMILOV submitted to an apartment leasing office a letter purportedly authored by a Special Agent of the FBI in support of the defendant’s attempt to lease an apartment. The letter, which was intended to explain SHAMILOV’S low credit score, falsely stated that SHAMILOV was the victim of identity theft. The fabricated letter included the FBI seal and was purportedly authored by a Special Agent of the Minneapolis Division of the FBI, and falsely stated that the Special Agent had been assigned to investigate SHAMILOV’S identity theft case. On May 2, 2017, the property manager of the apartment complex contacted the FBI Minneapolis Division to verify the validity of the letter. After reviewing the letter, the FBI informed the property manager that the letter was not genuine.

 

This case is the result of an investigation conducted by the FBI.

 

Assistant United States Attorneys Charles J. Kovats and Timothy C. Rank are prosecuting the case.

 

 

Defendant Information:

 

ARON AVRAM SHAMILOV, 24

St. Louis Park, Minn.

 

Convicted:

• Impersonation of an Officer or Employee of the United States, 1 count
   

 

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Acting United States Attorney Gregory G. Brooker today announced the indictment of MATTHEW ALLEN AMUNDSON, 30, a registered nurse, for fraudulently obtaining hydromorphone, a prescription opioid pain medication.  AMUNDSON, who is charged with one count of obtaining a controlled substance by fraud, made his initial appearance in U.S. District Court in Minneapolis, Minn. earlier today.

 

According to the indictment, from January 2015 through April 2015, AMUNDSON, while employed as a registered nurse at Abbott Northwestern Hospital in Minneapolis, Minn., fraudulently obtained possession of controlled substances, namely, hydromorphone, which was intended for hospital patients. While working in his capacity as a nurse, AMUNDSON accessed the hospital’s secured automated medication dispensing systems and used syringes to extract hydromorphone from vials intended for patient use. AMUNDSON subsequently injected the vials with saline solution to replace the missing hydromorphone before returning the vials to the medication dispensing systems.

 

This case is the result of an investigation conducted by the U.S. Food and Drug Administration, Office of Criminal Investigations and the Drug Enforcement Administration (DEA) Tactical Diversion Squad, which is comprised of agents, officers and deputies from the DEA, Federal Bureau of Investigation, Minneapolis Police Department, Plymouth Police Department, Washington County Sheriff’s Office, and the Minnesota Army National Guard.

 

Assistant U.S. Attorney Richard A. Newberry is prosecuting the case.

 

 

Defendant Information:                                                                                                                     

 

MATTHEW ALLEN AMUNDSON, 30

Northfield, Minn.

 

Charges:

• Obtaining a controlled substance by fraud, 1 count

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

Acting United States Attorney Gregory G. Brooker today announced the sentencing of JOSHUA NOBLE, 39, to 60 months in federal prison for distributing child pornography through online chatrooms. NOBLE was charged by felony information on April 17, 2017, and pleaded guilty on June 29, 2017, to one count of distribution of child pornography. NOBLE was sentenced yesterday before Judge Ann D. Montgomery in U.S. District Court in Minneapolis, Minn.

 

According to the defendant’s guilty plea and documents filed in court, NOBLE was a substitute teacher in Fergus Falls, Minn. for approximately 15 years. On March 4, 2016, undercover law enforcement officers observed NOBLE using an internet-based messaging service called Chatstep.com to obtain and distribute images depicting the sexual abuse of children. Noble possessed at least 244 such images, including depictions of prepubescent children under 12 years of age and infants and toddlers.

 

This case resulted from an investigation conducted by Homeland Security Investigations-Grand Forks and Washington, D.C.

 

Assistant U.S. Attorney Miranda E. Dugi prosecuted the case.

 

This case is part of Project Safe Childhood (PSC), a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the U.S. Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, PSC marshals resources to locate, apprehend, and prosecute individuals who sexually exploit children while identifying and rescuing victims. For more information about PSC, please visit http://www.justice.gov/psc/  For more information about internet safety education, please visit http://www.justice.gov/psc/resources.html and click on the tab “resources.”

 

 

Defendant Information:

 

JOSHUA NOBLE, 39

Fergus Falls, Minn.

 

Convicted:

• Distribution of child pornography, 1 count

 
Sentenced:

• 60 months in prison
• 10 year term of supervised release
• $26,000 in restitution
• $5,000 special assessment paid to the Domestic Trafficking Victims Fund

 

 
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Acting United States Attorney Gregory G. Brooker today announced the conviction of IAN SCOT LAURIE, 49, for distribution of child pornography. Following a four-day trial before Senior Judge David S. Doty in Minneapolis, Minn., the jury found LAURIE guilty on all counts. A sentencing hearing is yet to be scheduled.

 

“The sexual exploitation of children via the Internet is a heinous crime. Thanks to the nationwide coordination and painstaking efforts of the FBI investigators, this defendant has been brought to justice,” said Assistant U.S. Attorney Kate Buzicky.

 

As proven at trial, LAURIE, an attorney in private practice, used a peer-to-peer file-sharing platform known as GigaTribe to share and receive child pornography. In the fall of 2014, undercover law enforcement agents conducted an investigation of a GigaTribe user named “Arlobingo,” who was sharing images and videos depicting the sexual abuse of children. During the course of their investigation, law enforcement agents were able to identify LAURIE as Arlobingo and determined that LAURIE had used a computer at his St. Louis Park law firm as well as a computer in his Maple Grove apartment to share child pornography on GigaTribe. Law enforcement agents executed a search warrant at LAURIE’S residence and recovered a computer containing evidence of child pornography as well as numerous chats between Arlobingo and other GigaTribe users regarding his sexual interest in children.

 

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorney’s Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

 

This case is the result of an investigation conducted by the FBI.

 

Assistant U.S. Attorneys Katharine T. Buzicky and Bradley M. Endicott are prosecuting the case.

 

Defendant Information:

 

IAN SCOT LAURIE, 49

Maple Grove, Minn.

 

Convicted:

• Distribution of child pornography, 5 counts

 

 

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of DARRIS JAY KINGBIRD, 33, to 15 months in prison for assault with intent to commit a felony offense. KINGBIRD, who was indicted on January 25, 2017, pleaded guilty on May 31, 2017, before Chief Judge John R. Tunheim in United States District Court in Minneapolis, Minn.

 

According to the defendant’s guilty plea and documents filed in court, on October 8, 2016, the Red Lake Police Department received a report of a female victim being physically assaulted by a man, who was later identified as KINGBIRD. Immediately after the assault, the victim was placed into the trunk of her car by KINGBIRD. The victim was eventually able to escape and KINGBIRD drove off in the victim’s car. Law enforcement later recovered the victim’s vehicle, which was parked next door to KINGBIRD’S residence. They also found multiple blood stains in the trunk and passenger compartment of the vehicle. As a result of the assault, the victim sustained injuries to her face, abdomen and legs.

 

This case is the result of an investigation conducted by the Red Lake Police Department and the FBI.

 

Assistant U.S. Attorney Clifford B. Wardlaw prosecuted the case.

 

 

Defendant Information:                                                                                                                     

 

DARRIS JAY KINGBIRD, 33

Ponemah, Minn.

 

Convicted:

• Assault with intent to commit a felony offense, 1 count

 
Sentenced:

• 15 months in prison
• Three years supervised release

 

###
 
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United States Attorney’s Office, District of Minnesota: (612) 664-5600

 

 

Acting United States Attorney Gregory G. Brooker today announced the conviction of PRESTON ELLARD FORTHUN, 39, on charges of conspiracy, mail fraud, and wire fraud. Co-defendants ABDISALAN ABDULAHAB HUSSEIN, 48, and CARLOS PATRICIO LUNA, 49, were also convicted for their roles in the scheme. FORTHUN, HUSSEIN and LUNA were initially indicted on December 20, 2016, and following a ten-day trial before U.S. District Judge Michael J. Davis, the jury returned guilty verdicts on all counts.

 

“Preston Forthun orchestrated a scheme to exploit Minnesota’s no-fault auto insurance laws by employing a corrupt approach to running his chiropractic practice. The result was millions of dollars in fraudulent claims to automobile insurance companies, which, unfortunately, is a burden ultimately shouldered by automobile insurance policyholders in Minnesota,” said Acting United States Attorney Greg Brooker. “I commend the Minnesota Commerce Fraud Bureau and the FBI for their collaborative investigative efforts, skills and resources that contributed to this successful outcome.”

 

“This verdict sends a very clear message to insurance scam artists in Minnesota that they will be caught and brought to justice,” said Minnesota Commerce Commissioner Mike Rothman. “By committing insurance fraud, these chiropractors chose to put personal greed above their professional oath, and all of us end up paying for it. The Commerce Fraud Bureau will continue to vigorously investigate allegations of insurance fraud and will do everything in its power to shut down these schemes and hold criminals accountable.”

 

“Not only did Mr. Forthun violate his professional oath, he violated the public’s trust”, added Special Agent in Charge of the FBI Minneapolis Division Richard T. Thornton. “His betrayal of the medical profession cost the public millions and robbed funds that may have helped cover the expenses of people with legitimate health care needs. The FBI and its law enforcement partners will continue to aggressively pursue insurance fraud schemes like this this one to protect the public from unscrupulous criminals and corrupt practices. I would like to thank our partners in the U.S. Attorney’s Office and the Commerce Fraud Bureau for their invaluable collaboration in this investigation.”

 

As proven at trial, beginning in at least 2010, FORTHUN, a licensed Doctor of Chiropractic, devised a scheme to defraud automobile insurance companies by hiring patient recruiters, known as “runners,” to solicit automobile accident victims to attend treatments at FORTHUN’S clinic, Comprehensive Rehabilitation Centers of MN (“Comprehensive Rehab”). FORTHUN, and his co-defendant DARRYL HUMENNY, who was also a Doctor of Chiropractic with Comprehensive Rehab and previously pled guilty, paid the runners, including HUSSEIN and LUNA, between $1,000 and $1,500 for each patient they brought to Comprehensive Rehab so that FORTHUN and HUMENNY could bill services to the insurance companies. To disguise the payments, FORTHUN typically paid the runners in cash or wrote checks made out to “cash,” along with a bogus description in the memo line indicating that the payment was for “marketing,” “petty cash,” “transportation,” “interpreting,” or “supplies.” From 2011 through 2015, FORTHUN and HUMENNY wrote more than 400 checks, totaling at least $500,000.

 

As proven at trial, FORTHUN structured the scheme in a way that would maximize Comprehensive Rehab’s billings to the insurance companies. FORTHUN and HUMENNY withheld kickback payments to the runners until after the patients had attended a certain number of treatment sessions, typically between six and twelve treatment sessions. Frequently, the runners gave a large portion of the kickback payments they had received to the patients they had referred in order to make sure that patients attended the minimum number of treatment sessions. Thus, the kickback payments were intended to ensure that patients came for treatments at Comprehensive Rehab because of the payments, as opposed to the necessity and reasonableness of the treatments. Through the execution of their fraud scheme, FORTHUN and HUMENNY billed millions of dollars to the automobile insurance companies.

 

This case is the result of an investigation conducted by the Minnesota Commerce Fraud Bureau and the FBI. Additional assistance was provided by the Minneapolis Police Department, Saint Paul Police Department, Minnesota State Patrol, and Homeland Security Investigations.

 

Assistant U.S. Attorneys Amber M. Brennan and John E. Kokkinen are prosecuting this case.

 

 

Defendant Information:

 

PRESTON ELLARD FORTHUN, 39

Bloomington, Minn.

 

Convicted:

• Conspiracy to commit mail fraud and wire fraud, 1 count
• Mail fraud, 6 counts
• Wire fraud, 7 counts

 

ABDISALAN ABDULAHAB HUSSEIN, 48

Minneapolis, Minn.

 

Convicted:

• Conspiracy to commit mail fraud and wire fraud, 1 count
• Mail fraud, 2 counts
• Wire fraud, 2 counts

 

CARLOS PATRICIO LUNA, 49

Minneapolis, Minn.

 

Convicted:

• Conspiracy to commit mail fraud and wire fraud, 1 count
• Mail fraud, 1 count
• Wire fraud, 1 count

 

 

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United States Attorney’s Office, District of Minnesota: (612) 664-5600

Acting United States Attorney Gregory G. Brooker today announced the sentencing of SENG XIONG, 49, to 87 months in prison for operating an affinity scheme targeting members of the Hmong community. XIONG, who was found guilty on January 26, 2017, following an eight-day jury trial, was sentenced today before Judge Susan Richard Nelson in U.S. District Court in Saint Paul, Minn.

 

As proven at trial, from at least mid-2014 through approximately March 2016, XIONG conducted a fraud scheme through his organization “Hmong Tebchaws,” which translates to “Hmong Country,” in which members of the Hmong community were directed to deposit $3,000 to $5,000 into a bank account held in the name of SENG XIONG. In exchange for the payments, victims were promised 10 acres of land, a house, and many other benefits in a future country that would be established as a Hmong homeland somewhere in Southeast Asia.

 

As proven at trial, XIONG claimed to be working closely with the United States government and the United Nations to establish the new Hmong country somewhere in Southeast Asia. Through a series of YouTube videos and nationwide conference calls, XIONG promoted his scheme in the Hmong language, claiming that he was working with high-ranking officials who had “approved” or “authorized” his proposal and had arranged for land to be set aside for XIONG and his followers.

 

As proven at trial, XIONG offered several investment options that purported to represent varying levels of return that “founders” would be able to receive on their investment in the new country. Investments between $3,000 and $5,000 would guarantee the investor and his or her future generations, land, a house, free healthcare, free education, and government financial assistance for people over 65 years of age, as well as a return on that investment equal to a percentage of the income generated by the new Hmong country.  Those who could not afford the $3,000 - $5,000 “founders” option could pay $20 per month, or $240 per year. This lesser investment would secure a spot in the new Hmong country along with some of the benefits.

 

This case was the result of an investigation conducted by the Saint Paul Police Department, United States Secret Service, Federal Bureau of Investigation, Minnesota Financial Crimes Task Force, and Appleton Police Department.

 

Special assistance was provided by the United States Attorney’s Offices for the Eastern District of California.

 

Assistant United States Attorneys Amber M. Brennan and Surya Saxena prosecuted this case.

 

 

Defendant Information:

 

SENG XIONG, 49

Maplewood, Minn.

 

Convicted:

• Wire fraud, 1 count
• Mail fraud, 1 count

 
Sentenced:

• 87 months in prison
• Three years supervised release
• $1,226,466.00 in restitution to victims
   

 

###

 

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United States Attorney’s Office, District of Minnesota: (612) 664-5600

 

 

Acting U.S. Attorney Gregory G. Brooker today announced the guilty plea of DONALD THOMAS PERRIN, 57, a registered sex offender, to child pornography charges. PERRIN, who was charged in a criminal complaint on November 9, 2016, pleaded guilty yesterday morning before Judge Wilhelmina M. Wright, moments before his jury trial was set to begin in U.S. District Court in St. Paul, Minn.

 

“This defendant, a registered sex offender who repeatedly exploited minors, has admitted his guilt and will now face the consequences of his egregious crimes,” said Assistant U.S. Attorney Kate Buzicky. “I am grateful for the dedication and hard work put forth by the FBI and the Carver County Sheriff’s Office throughout the investigation process and in preparation for trial.”

 

According to his guilty plea and documents filed in court, in the summer of 2014, PERRIN, a registered sex offender, began engaging in sexually explicit online chats with a fifteen-year-old minor. In the fall of 2014, PERRIN was arrested and jailed at Carver County Jail following a violation of his sex offender registration requirement. After he was released from Carver County Jail, PERRIN continued his online communications with the minor and made screen captures of their video chat sessions depicting sexually explicit activity. On February 12, 2016, PERRIN was again arrested and jailed as a result of his non-compliance with his sex offender registration requirements. Following his arrest, law enforcement executed search warrants at PERRIN’S home and recovered several digital devices containing thousands of child pornography files. PERRIN was scheduled to begin trial on October 10, before U.S. District Judge Wilhelmina M. Wright in St. Paul, Minn.

 

This case was brought as part of Project Safe Childhood, a nationwide initiative, launched in May 2006, to combat the growing epidemic of child sexual exploitation and abuse.  Led by U.S. Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims.  For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.  In addition, if you know of any child who may have been a victim of exploitation, please contact the National Center for Missing or Exploited Children (NCMEC) at 1-800-THE-LOST (1-800-843-5678) or visit NCMEC’s web site at www.missingkids.com.

 

This case is the result of an investigation conducted by the FBI and the Carver County Sheriff’s Office.

 

Assistant United States Attorneys Katherine T. Buzicky and Angela Munoz-Kaphing are prosecuting this case.

 

 

Defendant Information:

 

DONALD THOMAS PERRIN, 57

Sherburne County Jail

 

Convicted:

• Production of child pornography, 1 count
• Commission of a felony while being required to register as a sex offender, 1 count

 

 

###

 

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United States Attorney’s Office, District of Minnesota: (612) 664-5600

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division and Acting U.S. Attorney Gregory G. Brooker of the District of Minnesota announced the conviction of a former employee of Canadian Pacific Railway for causing intentional damage to Canadian Pacific’s computer network.

 

Christopher Victor Grupe, 46, of Minneapolis, Minnesota, was charged on April 11, with one count of intentional damage to a protected computer and on Oct. 6, following a five-day trial, was found guilty by a federal jury in Minneapolis, Minnesota. A sentencing date has not been set.

 

As proven at trial, from September 2013 until December 2015, Grupe was employed as an IT professional by Canadian Pacific Railway (CPR), a transcontinental railroad company headquartered in Alberta, Canada, with U.S. headquarters in Minneapolis, Minnesota. On Dec. 15, 2015, following a 12-day suspension, Grupe was notified by CPR management that he was going to be fired due to insubordination. However, at his request, Grupe was instead allowed to resign, effective that same day. In his resignation letter, Grupe indicated that he would return all company property, including his laptop, remote access device, and access badges, to the CPR office.

 

As proven at trial, on Dec. 17, 2015, before returning his laptop and remote access device, Grupe used both to gain access to the CPR network’s core “switches” – high-powered computers through which critical data in the CPR network flowed. Once inside, Grupe strategically deleted files, removed administrative-level accounts, and changed passwords on the remaining administrative-level accounts, thereby locking CPR out of these network switches. Grupe then attempted to conceal his activity by wiping the laptop’s hard drive before returning it to CPR.

 

On Jan. 6, 2016, while trying to address a networking problem, the CPR network staff discovered that they were unable to access the main network switches. After CPR IT staff was able to regain access to the switches through a risky, but successful, rebooting procedure, they discovered evidence in logging data stored in the memory of the switches connecting the damage to Grupe. CPR hired an outside computer security company to identify the source and scope of the intrusion as well as conduct an incident analysis, which also connected the damage to Grupe.  In total, CPR experienced a financial loss of approximately $30,000 as a result of Grupe’s conduct.

 

This case is the result of an investigation conducted by the FBI Minneapolis field office, with assistance from the Cybercrime Laboratory of the Criminal Division’s Computer Crime and Intellectual Property Section.

 

Trial Attorney Aaron R. Cooper of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Timothy C. Rank of the District of Minnesota are prosecuting the case.

 

Acting United States Attorney Gregory G. Brooker of the District of Minnesota and Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division today announced the conviction of a former employee of Canadian Pacific Railway for causing intentional damage to Canadian Pacific’s computer network. CHRISTOPHER VICTOR GRUPE, 46, was charged on April 11, 2017, with one count of intentional damage to a protected computer and on October 6, 2017, following a five-day trial, was found guilty by a federal jury in Minneapolis, Minn. A sentencing date has not been set.

 

“IT professionals with both substantial technical skills and trusted high-level access to the computer systems on which they work can cause significant and potentially catastrophic damage to businesses and critical infrastructure, and so when they use their skills and access to commit crimes there should be real consequences,” said Assistant U.S. Attorney Tim Rank. “This guilty verdict, which was the result of a thorough investigation by the FBI, demonstrates that there will be. I am grateful to the jury for their time and service.”

 

As proven at trial, from September 2013 until December 2015, GRUPE was employed as an IT professional by Canadian Pacific Railway (CPR), a transcontinental railroad company headquartered in Alberta, Canada, with US headquarters in Minneapolis, Minnesota. On December 15, 2015, following a twelve-day suspension, GRUPE was notified by CPR management that he was going to be fired due to insubordination. However, at his request, GRUPE was instead allowed to resign, effective that same day. In his resignation letter, GRUPE indicated that he would return all company property, including his laptop, remote access device, and access badges, to the CPR office.

 

However, on December 17, 2015, before returning his laptop and remote access device, GRUPE used both to gain access to the CPR computer network’s core “switches” – high-powered computers through which critical data in the CPR network flowed. Once inside, GRUPE strategically deleted files, removed administrative-level accounts, and changed passwords on the remaining administrative-level accounts, thereby locking CPR out of these network switches. GRUPE then attempted to conceal his activity by wiping the laptop’s hard drive before returning it to CPR.

 

On January 6, 2016, while trying to address a networking problem, the CPR network staff discovered that they were unable to access the main network switches. After CPR IT staff was able to regain access to the switches through a risky, but successful, rebooting procedure, they discovered evidence in logging data stored in the memory of the switches connecting the damage to GRUPE. CPR hired an outside computer security company to identify the source and scope of the intrusion as well as conduct an incident analysis, which also connected the damage to GRUPE. In total, CPR experienced a financial loss of approximately $30,000 as a result of GRUPE’S conduct.

 

This case is the result of an investigation conducted by the Federal Bureau of Investigation, with assistance from the Digital Forensic Laboratory of the Criminal Division’s Computer Crime and Intellectual Property Section.

 

Assistant United States Attorney Timothy C. Rank of the District of Minnesota and Trial Attorney Aaron R. Cooper of the Criminal Division’s Computer Crime and Intellectual Property Section are prosecuting the case.

 

 

Defendant Information:

 

CHRISTOPHER VICTOR GRUPE, 46

Minneapolis, Minn.

 

Convicted:

• Intentional damage to a protected computer, 1 count
   

 

###

 

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Today, Attorney General Jeff Sessions announced several Department of Justice actions to reduce the rising tide of violent crime in America. Foremost of those actions is the reinvigoration of “Project Safe Neighborhoods,” a program that has been historically successful in bringing together all levels of law enforcement to reduce violent crime and make our neighborhoods safer for everyone.

 

In announcing this recommitment to Project Safe Neighborhoods, the Attorney General issued a memo directing United States Attorneys to implement an enhanced violent crime reduction program that incorporates the lessons learned since Project Safe Neighborhoods launched in 2001.

 

In a statement on the program, Attorney General Jeff Sessions said, “According to the FBI, the violent crime rate has risen by nearly seven percent over the past two years, and the homicide rate has risen by more than 20 percent. We cannot be complacent or hope that this is just an anomaly: we have a duty to take action.”

 

“Fortunately, we have a President who understands that and has directed his administration to reduce crime. The Department of Justice today announces the foundation of our plan to reduce crime: prioritizing Project Safe Neighborhoods, a program that has been proven to work.”

 

“Let me be clear – Project Safe Neighborhoods is not just one policy idea among many. This is the centerpiece of our crime reduction strategy.”

 

“Taking what we have learned since the program began in 2001, we have updated it and enhanced it, emphasizing the role of our U.S. Attorneys, the promise of new technologies, and above all, partnership with local communities. With these changes, I believe that this program will be more effective than ever and help us fulfill our mission to make America safer.”

 

Acting United States Attorney Gregory Brooker said, “This office has actively participated in the Project Safe Neighborhoods initiative since it was launched in 2001. We will continue to develop our working partnerships with federal, state, local, and tribal law enforcement, utilize the full range of crime data and intelligence technologies to prosecute the most violent offenders, and focus on developing relationships with community members to better understand the community’s needs and priorities when it comes to reducing crime and increasing safety.”

 

The Attorney General also announced the following Department of Justice initiatives to help reduce violent crime:

 

Additional Assistant United States Attorney Positions to Focus on Violent Crime – The Department is allocating 40 prosecutors to approximately 20 United States Attorney’s Offices to focus on violent crime reduction.

 

More Cops on the Streets (COPS Hiring Grants) – As part of our continuing commitment to crime prevention efforts, increased community policing, and the preservation of vital law enforcement jobs, the Department will be awarding approximately $98 million in FY 2017 COPS Hiring Grants to state, local, and tribal law enforcement agencies.

 

Organized Crime and Drug Enforcement Task Force’s (OCDETF) National Gang Strategic Initiative –The National Gang Strategic Initiative promotes  creative enforcement strategies and best practices that will assist in developing investigations of violent criminal groups and gangs into enterprise-level OCDETF prosecutions.  Under this initiative, OCDETF provides “seed money” to locally-focused gang investigations, giving state, local, and tribal investigators and prosecutors the resources and tools needed to identify connections between lower-level gangs and national-level drug trafficking organizations.

 

Critical Training and Technical Assistance to State and Local Partners –The Department has a vast array of training and technical assistance resources available to state, local and tribal law enforcement, victims groups, and others.  To ensure that agencies in need of assistance are able to find the training and materials they need, OJP will make available a Violence Reduction Response Center to serve as a “hot line” to connect people to these resources. 

 

Crime Gun Intelligence Centers (CGIC) – The Department has provided grant funding to support a comprehensive approach to identifying the most violent offenders in a jurisdiction, using new technologies such as gunshot detection systems combined with gun crime intelligence from NIBIN, eTrace, and investigative efforts.  These FY 2017 grants were awarded to Phoenix, Arizona, and Kansas City, Missouri. 

 

Expand ATF’s NIBIN Urgent Trace Program – The Department will expand ATF’s NIBIN Urgent Trace Program nationwide by the end of the year.  Through this program, any firearm submitted for tracing that is associated with a NIBIN “hit” (which means it can be linked to a shooting incident) will be designated an “urgent” trace and the requestor will get information back about the firearm’s first retail purchaser within 24 hours, instead of 5 to 6 business days.

 

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Acting United States Attorney Gregory G. Brooker announced the guilty plea of BRANDON MARK BJERKNES, 35, for coercion and enticement of a minor and production of child pornography. BJERKNES, who was charged and taken into custody on May 30, 2017, pleaded guilty today before Judge Wilhelmina M. Wright in U.S. District Court in St. Paul, Minn.

 

“Brandon Bjerknes repeatedly victimized vulnerable young girls and boys, many of whom he personally knew because of his former role as Assistant Principal of Bemidji Middle School,” said Assistant U.S. Attorney Angela Munoz-Kaphing. “Due to a vigilant parent who initially reported disturbing social media messages, and the dedicated efforts of the Beltrami County Sheriff’s Office and the Minnesota Bureau of Criminal Apprehension, Bjerknes’ predatory actions were stopped.”

 

“This disturbing case is an example of why investigators must continue to identify and bring to justice those who would prey on children, and why parents must keep a watchful eye for predators lurking online,” said BCA Superintendent Drew Evans.

 

“The Beltrami County Sheriff’s Office is very pleased to learn that Brandon M. Bjerknes has pleaded guilty to the two felony counts of coercion and enticement of a minor and production of child pornography. Our hope now is that the victims and their families can begin the process of healing and finding closure,” said Ernie Beitel, Chief Deputy Sheriff of the Beltrami County Sheriff’s Office.

 

According to the defendant’s guilty plea and documents filed in court, since 2006, BJERKNES was employed by the Bemidji Area Schools and, beginning in 2014, served as the Assistant Principal of Bemidji Middle School until his resignation in April 2017. While holding the position of Assistant Principal, BJERKNES posed as a 13-15-year-old male named “Brett Larson,” and used various social media profiles on Facebook and Snapchat with “decoy photographs” to contact minor females and males in middle and high school. Using the alias profiles, BJERKNES directed the minor victims to send him sexually explicit photographs. BJERKNES also used the alias profiles to engage in sexually explicit conversations with the minor victims. Some of the minor victims BJERKNES contacted on social media were students at Bemidji Middle School.

 

According to the defendant’s guilty plea and documents filed in court, on March 20, 2017, law enforcement executed a search warrant at BJERKNES’ Bemidji residence. Officers seized a number of electronic devices including BJERKNES’ personal iPhone and work iPhone, multiple iPads, computers and external hard drives. The social media accounts and the electronic devices contained multiple sexually explicit photos and videos of multiple known minor victims. Law enforcement identified evidence that BJERKNES used the alias social media accounts to contact more than 50 minor victims.

 

This case is the result of an investigation conducted by the Minnesota Bureau of Criminal Apprehension and the Beltrami County Sheriff's Office.

 

This case is being prosecuted by Assistant United States Attorney Angela Munoz-Kaphing.

 

 

Defendant Information:                                                                                                                     

 

BRANDON MARK BJERKNES, 35

Bemidji, Minn.

 

Convicted:

• Coercion and enticement of a minor, 1 count
• Production of child pornography, 1 count

 

 

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of KENNETH FRANK HARYCKI, 54, to a year and a day in prison for his involvement in a tax conspiracy. HARYCKI, who pleaded guilty to one count of conspiracy to defraud the United States in the ascertainment and collection of taxes on January 15, 2015, was sentenced today before U.S. District Judge Ann D. Montgomery in Minneapolis, Minn.

 

“Mr. Harycki, a former elected official and certified public accountant, consciously chose to assist a criminal conspiracy,” said Assistant U.S. Attorney Robert Lewis. “He later made the right choice to plead guilty and assist in the investigation. Today’s sentencing should serve as a reminder that anyone who attempts to cheat the tax system, regardless of their position or status, will be held accountable for their actions.”

 

According to his guilty plea and documents filed in court, during the course of the conspiracy, HARYCKI owned and operated two businesses that provided bookkeeping, payroll, and accounting services, including tax-related services, to clients. In mid-2007, the defendant began providing payroll services for Model Health Care (Model). HARYCKI quickly learned that while payroll taxes were being withheld from the wages of employees, those taxes were not being paid over to the government. HARYCKI learned, in fact, there was a standing order that the payroll withholdings not be paid to the government but instead be used for other purposes, including compensating the co-conspirators and their family members and funding other businesses operated by the co-conspirators.

 

According to the defendant’s guilty plea and documents filed in court, in February 2010, HARYCKI formed a company of his own, MKH Holdings, to assume control over bank accounts receiving Medicare and Medicaid funds the government paid for claims submitted by his co-conspirators’ companies. MKH Holdings furthered the conspiracy by causing funds falsely reported on income tax returns to be funneled to the co-conspirators and others. During the course of the conspiracy, HARYCKI used his business and accounting skills for the conspiracy as well, incorporating businesses and obtaining employer identification numbers and new bank accounts, in order to avoid payment of all taxes due and owing on income. In total, HARYCKI’S offense led to a criminal tax loss of more than $2 million.

 

On September 14, 2017, the operator of Model, THURLEE BELFREY, pleaded guilty in a related case to conspiracy to defraud the federal-state Medicaid program and failing to withhold and pay over payroll taxes for his employees. On the same day, ROYLEE BELFREY pleaded guilty to failing to withhold and pay over payroll taxes for employees at related companies.

 

This case is the result of an investigation conducted by the Internal Revenue Service – Criminal Investigation Division, Federal Bureau of Investigation, and Department of Health and Human Services Office of the Inspector General.

 

This case was prosecuted by Assistant U.S. Attorney Robert Lewis.

 

 

Defendant Information:

 

KENNETH FRANK HARYCKI, 54

Stillwater, Minn.

 

Convicted:

• Conspiracy to defraud the United States, 1 count

 

Sentenced:

• 12 months and one day in prison
• Three years of supervised release
• $2,176,126.86 in restitution to the IRS

 

 

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Acting United States Attorney Gregory G. Brooker today announced the conviction of HASSAN OSMAN, 52, on charges of conspiracy, tax fraud and failing to appear on the day of trial. OSMAN was charged by superseding indictment on May 3, 2016. Following a four-day trial before U.S. District Judge David S. Doty, the jury convicted OSMAN on one count of conspiracy, 13 counts of aiding and assisting in the preparation of a false tax return, and one count of unlawful flight from prosecution.

 

“Hassan Osman participated in a tax fraud conspiracy that involved nearly 100 fraudulent tax returns claiming more than $1 million in fraudulent tax refunds,” said Assistant U.S. Attorney Joe Thompson. “Osman’s attempt to avoid responsibility for his actions by fleeing the country was unsuccessful. Thanks to the IRS and US Marshals, Osman was arrested in Canada and extradited back to the United States to face trial. He now faces the prospect of spending additional time in prison based on his flight from prosecution.”

 

“Hassan Osman’s attempt to evade the law was thwarted and he was found guilty of conspiracy to aid and assist in the preparation and filing of false tax returns by a jury of his peers,” said IRS Criminal Investigation, Acting Special Agent in Charge Hubbard Burgess, St. Paul Field Office. “Other persons thinking about participating in a scheme like this should understand that the consequences may include prison, being branded a convicted felon for the rest of their lives and paying restitution to the government.”

 

As proven at trial, between January 2008 and April 2011, OSMAN and his co-conspirators devised and carried out a tax fraud scheme by filing false federal income tax returns claiming fraudulent refunds. OSMAN and his co-conspirators prepared fraudulent tax returns using fake W-2s created in the name of several front companies. Most of the returns were filed electronically, either from coffee shops or from a business in south Minneapolis owned by OSMAN. The resulting refunds were split among OSMAN and his co-conspirators. Often times, the fraudulent refunds were deposited onto prepaid debit cards and sent to addresses controlled by OSMAN or his co-conspirators. During the course of the conspiracy, OSMAN and his co-conspirators filed more than 90 income tax returns claiming approximately $1,012,877 in fraudulent tax refunds.

 

As proven at trial, OSMAN was arrested on April 17, 2015 and was later released on bond pending trial. On July 28, 2015, when OSMAN failed to appear for a court ordered pretrial conference, a warrant was issued for his arrest. On April 14, 2016, OSMAN was arrested in Toronto, Canada and later extradited back to the United States to face trial.

 

This case is the result of an investigation conducted by the Criminal Investigation Division of the IRS.

 

This case is being prosecuted by Assistant U.S. Attorneys Joseph H. Thompson and Michelle E. Jones.

 

 

Defendant Information:

 

HASSAN OSMAN, 52

Minneapolis, Minn.

 

Convicted:

• Conspiracy, 1 count
• Aiding and assisting in the preparation of a false tax return, 13 counts
• Failure to appear, 1 count

 

 

 

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Acting United States Attorney Gregory G. Brooker today announced the guilty plea of JEREMY RICHARD LUNDIN, 30, for operating a Ponzi scheme through which he stole more than $1 million from individual investors. LUNDIN, who was charged via a criminal information on September 1, 2017, pleaded guilty yesterday before Judge Wilhelmina M. Wright in U.S. District Court in Saint Paul, Minn. A sentencing date has not yet been scheduled.

 

“Jeremy Lundin’s friends and associates gave him hundreds of thousands of dollars based upon outright lies. Mr. Lundin spent their hard-earned money – in some cases, their life savings – to travel, shop, drive luxury cars, and otherwise fund a lifestyle that many of his victims will never enjoy,” said Assistant U.S. Attorney Amber Brennan. “Mr. Lundin has admitted his crime and he will now face the consequences of his criminal actions.”

 

“IRS Criminal Investigation is committed to help put an end to the criminal behavior of those who prey on investors for their personal financial gain”, stated Hubbard Burgess, IRS Criminal Investigation Special Agent in Charge of the St. Paul Field Office. “The guilty plea of Jeremy Lundin again emphasizes that we and our law enforcement partners will continue our aggressive pursuit of those who defraud and harm investors.”

 

“Postal Inspectors will continue to protect the integrity of the US Postal Service and aggressively investigate and prosecute those cases where the US Mails are used to defraud individuals of their hard-earned money and property,” said Denver Division INC Nicole Davis. “The U.S. Postal Inspection Service and its law enforcement partners play a critical role in protecting the American consumer from these types of fraudulent schemes.”

 

According to the defendant’s guilty plea, from approximately December 2014 until May 2017, LUNDIN claimed that he conducted “options trading” through his company Big Island Capital. LUNDIN worked through a network of associates and friends to solicit investors to invest with Big Island Capital by promising those potential investors exponential growth through options trading. LUNDIN solicited more than $1 million from at least 51 investors, but instead of using the funds for options trading, LUNDIN spent investors’ money to fund his and his wife’s lavish lifestyle.

 

According to the defendant’s guilty plea, as part of the scheme, LUNDIN provided victim investors with written materials relating to his purported investment strategy. Through these materials, LUNDIN claimed that the goal of Big Island Capital was to “generate profits with options trading” and that while he could not “guarantee” an exact percent, he would “shoot for” returns of between 40 percent and 80 percent. LUNDIN also entered into contract agreements with victim investors. These agreements, titled, “Big Island Capital Investment Advisory Agreement,” purported that the assets of Big Island’s account would be held for safekeeping in a brokerage account. LUNDIN regularly represented that the value of the account was several hundred thousand dollars. For example, “Welcome Packet” materials LUNDIN sent to a new victim investor on November 24, 2015, claimed that the firm’s capital was then $730,000 when, in reality, LUNDIN did not even open the brokerage account until December 21, 2015.

 

According to the defendant’s guilty plea, in order to appear legitimate and promote his scheme, LUNDIN created phony account statements. He also provided victim investors with online access to fictitious quarterly statements and purportedly “up to date” information about the rate of growth and the market value of the accounts, which commonly and falsely showed double-digit gains. As part of the scheme, LUNDIN directed his victim investors to make their checks payable to “Big Island Capital,” he would then deposit those checks into a bank account he had established in the company’s name. Between May 2015 and May 2017, at least $992,000 was deposited into that account. During roughly the same time period, however, LUNDIN transferred $933,950 from the business account directly into his and his wife’s personal checking account. LUNDIN and his wife used the majority of those investor funds on personal expenses including travel, luxury automobiles, a boat, jewelry, retail purchases, and more than $366,000 in credit card payments.

 

This case is the result of an investigation conducted by the Criminal Investigation Division of the IRS, Federal Bureau of Investigation, United States Postal Inspection Service, and Minnesota Department of Commerce Fraud Bureau.

 

Assistant United States Attorney Amber M. Brennan is prosecuting the case.

 

 

Defendant Information:

 

JEREMY RICHARD LUNDIN, 30

Mound, Minn.

 

Convicted:

• Mail fraud, 1 count
• Money laundering – transaction involving fraud proceeds, 1 count

 

 

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Acting United States Attorney Gregory G. Brooker today announced an indictment charging LUMINAIRE ENVIRONMENTAL AND TECHNOLOGIES, INC., JOHN D. MILLER JR., 60, and JOSEPH V. MILLER, 57, with conspiracy, multiple counts of wire fraud, mail fraud and falsifying documents. The defendants will make their initial appearances in U.S. District Court at a later date.

 

According to the indictment, LUMINAIRE ENVIRONMENTAL AND TECHNOLOGIES, INC. (“LUMINAIRE”), purported to be a recycling and waste disposal business that offered to pick up customers’ fluorescent light ballasts containing polychlorinated biphenyls (“PCBs”), transport the PCB-containing ballasts to the LUMINAIRE facility located in Plymouth, Minn., and remove and dispose of all the PCBs in accordance with the Toxic Substances Control Act (TSCA). LUMINAIRE charged customers a significant fee for this service because the PCBs contained in the ballasts were considered a toxic chemical, and regulations promulgated by the United States Environmental Protection Agency (“EPA”) mandate special procedures for disposal of these materials. 

 

According to the indictment, from 2010 until 2015, JOHN and JOE MILLER, owner and manager, respectively, of LUMINAIRE, orchestrated a fraudulent scheme designed to generate business for LUMINAIRE by making false representations to customers that LUMINAIRE would properly dispose of customers’ toxic chemicals. Instead, after picking up loads of PCB-ballasts from customers, LUMINAIRE’s employees, at the direction of JOHN and JOE MILLER, would remove or otherwise obscure labels from the containers holding the PCB-ballasts, and then sell the PCB-ballasts as scrap metal to nearby metal recycling facilities. By doing so, JOHN and JOE MILLER were able to charge customers a significant fee for work that was never actually performed and obtain additional profits by fraudulently selling the PCB-ballasts to scrap yards.  Additionally, in order to conceal the true destination and disposal of customers’ toxic chemicals, JOHN and JOE MILLER and others would falsely certify on shipping manifests that the PCB-ballasts had been properly transported to LUMINAIRE’S facility. As a result of the scheme, LUMINAIRE fraudulently collected more than $1,000,000 in fees and additional profits.

 

This case is being prosecuted by Assistant U.S. Attorneys Benjamin F. Langner and Amber M. Brennan.

 

This case is the result of an investigation conducted by the U.S. Environmental Protection Agency.

 

 

Defendant Information:

 

LUMINAIRE ENVIRONMENTAL AND TECHNOLOGIES, INC.

Plymouth, Minn.

 

Charges:

• Conspiracy to commit mail and wire fraud, 1 count
• Mail Fraud, 5 counts
• Wire Fraud, 10 counts
• False entry in records, 6 counts

 

JOHN D. MILLER JR., 60

Plymouth, Minn.

 

Charges:

• Conspiracy to commit mail and wire fraud, 1 count
• Mail Fraud, 5 counts
• Wire Fraud, 10 counts
• False entry in records, 6 counts

 

JOSEPH V. MILLER, 57

Chanhassen, Minn.

 

Charges:

• Conspiracy to commit mail and wire fraud, 1 count
• Mail Fraud, 5 counts
• Wire Fraud, 10 counts
• False entry in records, 6 counts

 

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

Acting United States Attorney Gregory G. Brooker today announced the guilty pleas of three defendants for their involvement in a years-long, multi-million dollar heath care fraud and tax conspiracy. THURLEE BELFREY, 52, ROYLEE BELFREY, 52, and LANORE BELFREY, 42, pleaded guilty on September 14, 2017, before Senior U.S. District Judge Ann D. Montgomery in Minneapolis, Minn. THURLEE BELFREY pleaded guilty to conspiracy to defraud the federal-state Medicaid program and failing to pay over taxes withheld from employees’ pay. ROYLEE BELFREY pleaded guilty to two counts of failure to pay over taxes withheld from employees’ pay. LANORE BELFREY pleaded guilty to conspiring to evade personal income taxes.

 

Assistant U.S. Attorney Robert Lewis said, “This is another example of the close cooperation between the State of Minnesota and federal agents in exposing and bringing to justice those who commit fraud. Specifically, the efforts of the Medicaid Fraud Control Unit of the Minnesota Attorney General’s Office led to Thurlee Belfrey’s initial exclusion from the Medicaid and Medicare programs. And, thereafter federal and state law enforcement uncovered his concealed, continuing and illegal involvement in Model Health Care, the crux of this fraud.”

 

According to the defendants’ guilty pleas and the indictment in the case, brothers THURLEE and ROYLEE BELFREY ran multiple health care businesses that received funds from the Medicaid and Medicare programs funded by the federal government and the State of Minnesota. In 2003, following an investigation by the Minnesota Attorney General’s Office into Royal Health Care, a business they started together in the 1990s, THURLEE BELFREY was convicted of felony theft by false representation. Based on his conviction, in 2004 the Minnesota Department of Human Services (DHS) and the United States Department of Health and Human Services (DHHS) excluded THURLEE BELFREY indefinitely from participating in state and federal health care programs, with no right to seek reinstatement for up to 20 years.

 

Despite this, and as he admitted in his guilty plea, THURLEE BELFREY conspired with his wife LANORE BELFREY to incorporate a new health care company, Model Health Care (Model), to continue the business operations and conceal THURLEE BELFREY’S involvement therein. To do this, and part of the scheme, LANORE BELFREY was named the owner of Model and intentionally failed to disclose THURLEE BELFREY’S involvement in managing the business. Despite being excluded, THURLEE BELFREY continued to manage Model. Government payment records show Model received more than $10,000,000 from Medicaid that would not have been paid but for the fraudulent misrepresentations made about THURLEE BELFREY’S lack of involvement in the businesses. According to the investigation, THURLEE and LANORE BELFREY received millions of dollars from Model during the scheme.

 

While THURLEE BELFREY ran Model, ROYLEE BELFREY operated several health care businesses as well. According to the defendants’ guilty pleas, between 2007 and 2013, THURLEE and ROYLEE BELFREY deducted and collected money from their employees’ wages, ostensibly for the payment of federal payroll taxes and Federal Insurance Contribution Act (FICA) taxes. However, they intentionally failed to pay the withheld taxes over to the IRS over the course of many years and, instead, used the money for other purposes, including attempts to develop a reality show based on their lives, high-end housing, a Caribbean cruise, luxury retail purchases, and thousands of dollars in cash withdrawals. In total, THURLEE and ROYLEE BELFREY admitted deducting and unlawfully using for their own benefit more than $3,960,000 in withheld taxes between 2007 and 2014.

 

This case is the result of an investigation conducted by the Minnesota Attorney General’s Office, the Internal Revenue Service – Criminal Investigation Division, Federal Bureau of Investigation, and the Office of the Inspector General, United States Department of Health and Human Services.

 

This case is being prosecuted by Assistant U.S. Attorneys Robert Lewis and David Maria.

 

 

Defendant Information:

 

THURLEE BELFREY, 52

Saint Paul, Minn.

 

Convicted:

• Conspiracy to defraud the United States, 1 count
• Failure truthfully to account for and pay over withheld taxes, 1 count

 
ROYLEE BELFREY, 52
Saint Paul, Minn.
 
Convicted:

• Failure truthfully to account for and pay over withheld taxes, 2 counts

 
LANORE BELFREY, 42
Minnetonka, Minn.
 
Convicted:

• Conspiracy to defraud the United States, 1 count

 

 

 

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of NKAJLO VANGH, 61, and his wife TRUE YANG VANGH, 52, for orchestrating a years-long, multi-million dollar fraud scheme. NKAJLO VANGH was sentenced to 90 months in prison and TRUE VANGH was sentenced to 72 months in prison. Both defendants entered guilty pleas and were sentenced yesterday before Senior Judge Michael J. Davis in U.S. District Court in Minneapolis, Minn.

 

According to court documents, NKAJLO VANGH served as the President and Chairman of the Board of Directors for the Hmong American Federal Credit Union (“Hmong American FCU”) overseeing daily operations, authorizing checks, soliciting individuals to serve on the board of directors, and maintaining minutes for board meetings. TRUE VANGH was employed as the full-time manager of the Hmong American FCU and was responsible for hiring and managing employees, obtaining and maintaining credit union funds, assisting tellers with financial transactions, and ensuring proper reconciliation and documentation of credit union transactions.

 

According to the defendants’ guilty pleas and documents filed in court, the defendants diverted credit union funds to themselves and businesses they operated by fraudulently issuing loans from the Hmong American FCU and then transferring the money to accounts they controlled. As part of the scheme, the defendants submitted loan applications using fictitious names and falsified personal, employment and income information. In their respective capacities, the defendants approved the loans despite knowing that the information provided in the loan applications was false. After the loans were approved, the proceeds of the fraudulent loans were disbursed into accounts belonging to or controlled by the defendants. The defendants then used the proceeds to pay pre-existing, bogus loans that had also been disbursed by the Hmong American FCU to personal and business accounts they controlled. During the course of the scheme, the defendants approved and disbursed fraudulent loans totaling $2,075,000 from the Hmong American FCU.

This case is the result of an investigation conducted by the FBI.

Assistant U.S. Attorney Michelle E. Jones prosecuted the case.

 

 

Defendant Information:

 

TRUE YANG VANGH, 52

Rosemount, Minn.

 

Convicted:

• Bank Fraud, 1 count

 

Sentenced:

• 72 months in prison

• Four years of supervised release

• $1,781,106 joint restitution

 

NKAJLO VANGH, 61

Rosemount, Minn.

 

Convicted:

• Bank Fraud, 1 count

 

Sentenced:

• 90 months in prison

• Four years of supervised release

• $1,781,106 joint restitution

   

   

   

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Acting United States Attorney Gregory G. Brooker today announced federal criminal charges against JEREMY RICHARD LUNDIN, 30, for operating a Ponzi scheme through which he stole more than $1 million from individual investors. LUNDIN, who was charged via a criminal information, will make his initial appearance in U.S. District Court at a later date.

 

According to the information, from approximately December 2014 until May 2017, LUNDIN claimed that he conducted “options trading” through his company Big Island Capital. LUNDIN worked through a network of associates and friends to solicit investors to invest with Big Island Capital by promising those potential investors exponential growth through options trading. LUNDIN solicited more than $1 million from investors, but instead of using the funds for options trading, LUNDIN spent investors’ money to fund his and his wife’s lavish lifestyle.

 

According to the information, as part of the scheme, LUNDIN provided victim investors with written materials relating to his purported investment strategy. Through these materials, LUNDIN claimed that the goal of Big Island Capital was to “generate profits with options trading” and that while he could not “guarantee” an exact percent, he would “shoot for” returns of between 40 percent and 80 percent. LUNDIN also entered into contract agreements with victim investors. These agreements, titled, “Big Island Capital Investment Advisory Agreement,” purported that the assets of Big Island’s account would be held for safekeeping in a brokerage account. LUNDIN regularly represented that the value of the account was several hundred thousand dollars. For example, “Welcome Packet” materials LUNDIN sent to a new victim investor on November 24, 2015, claimed that the firm’s capital was then $730,000 when, in reality, LUNDIN did not even open the brokerage account until December 21, 2015.

 

According to the information, in order to appear legitimate and promote his scheme, LUNDIN created phony account statements. He also provided victim investors with online access to fictitious quarterly statements and purportedly “up to date” information about the rate of growth and the market value of the accounts, which commonly and falsely showed double-digit gains. As part of the scheme, LUNDIN directed his victim investors to make their checks payable to “Big Island Capital,” he would then deposit those checks into a bank account he had established in the company’s name. Between May 2015 and May 2017, at least $992,000 was deposited into that account. During roughly the same time period, however, LUNDIN transferred $933,950 from the business account directly into his and his wife’s personal checking account. LUNDIN and his wife used the majority of those investor funds on personal expenses including travel, luxury automobiles, a boat, jewelry, retail purchases, and more than $366,000 in credit card payments.

 

This case is the result of an investigation conducted by the Criminal Investigation Division of the IRS, Federal Bureau of Investigation, United States Postal Inspection Service, and Minnesota Department of Commerce Fraud Bureau.

 

Assistant United States Attorney Amber M. Brennan is prosecuting the case.

 

 

Defendant Information:

 

JEREMY RICHARD LUNDIN, 30

Mound, Minn.

 

Charges:

• Mail fraud, 1 count
• Money laundering – transaction involving fraud proceeds, 1 count

 

 

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

Acting United States Attorney Gregory G. Brooker today announced the conviction of KEVIN JAMES PETROSKE, 36, of Hibbing, Minnesota, for producing, attempting to produce and possessing images and videos containing child pornography. Following a three-day trial before Judge Patrick J. Schiltz, the jury found PETROSKE guilty on all counts. A sentencing hearing is scheduled for January 18, 2018.

 

“Mr. Petroske preyed on vulnerable and unsuspecting victims in their homes. Fortunately, the jury recognized Mr. Petroske for the predator he is and returned a just result,” said Assistant U.S. Attorney Manda Sertich. “I am grateful for the coordinated efforts of our law enforcement partners in working to achieve this successful conviction.”

 

As proven at trial, on October 23, 2015, law enforcement received a report of a man peering into residential windows of a home in Hibbing, Minn. Shortly after, law enforcement apprehended and identified the suspect as PETROSKE. Law enforcement investigators determined that PETROSKE had prior convictions in Stearns County for felony stalking and an open investigation in Benton County for possession of child pornography. Upon execution of a search warrant at PETROSKE’S residence, investigators seized a laptop computer containing hundreds of videos and images containing child pornography.

 

As proven at trial, many of the videos found on PETROSKE’S laptop, which were recorded between October 2011 and September 2015, contained surreptitious recordings of minor females filmed through the windows of their homes without their knowledge. PETROSKE captured the victims in their bedrooms and bathrooms in various private moments and, in many of the videos, PETROSKE is heard masturbating and making sexual comments.

 

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorney’s Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

 

This case is the result of an investigation conducted by the FBI, Minnesota Bureau of Criminal Apprehension, and the Hibbing Police Department.

 

Assistant U.S. Attorneys Manda M. Sertich and Melinda A. Williams are prosecuting the case.

 

Defendant Information:

 

KEVIN JAMES PETROSKE, 36

Hibbing, Minn.

 

Convicted:

• Production and attempted production of child pornography, 8 counts
• Possession of child pornography, 1 count

 

 

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of JUSTIN EDWARD WYLIE, 28, to 15 years in federal prison for production of child pornography. WYLIE was indicted on May 17, 2016, and pleaded guilty on November 14, 2016, to one count of production of child pornography. The defendant was sentenced on August 25, 2017, before Senior Judge Paul A. Magnuson in U.S. District Court in St. Paul, Minn.

 

According to the defendant’s guilty plea and documents filed in court, through online contact, WYLIE coerced three minor victims to engage in sexually explicit conduct for the purpose of producing child pornography. The defendant came to law enforcement's attention when law enforcement officers downloaded thirteen child pornography files from WYLIE’S IP address over the peer-to-peer file sharing network BitTorrent. On March 14, 2014, upon execution of a search warrant of WYLIE’S home and electronic devices, law enforcement recovered more than 7,000 suspected child pornography images and 102 suspected child pornography videos.

 

This case resulted from an investigation conducted by the FBI and the Breckenridge Police Department, and the North Dakota Bureau of Criminal Investigation.

 

The case was prosecuted by Assistant U.S. Attorney Melinda A. Williams.

 

This case is part of Project Safe Childhood (PSC), a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the U.S. Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, PSC marshals resources to locate, apprehend, and prosecute individuals who sexually exploit children while identifying and rescuing victims. For more information about PSC, please visit http://www.justice.gov/psc/ For more information about internet safety education, please visit http://www.justice.gov/psc/resources.html and click on the tab “resources.”

 

 

Defendant Information:

 

JUSTIN EDWARD WYLIE, 28

Wahpeton, N.D.

 

Convicted:

• Production of child pornography, 1 count

 

Sentenced:

• 180 months in prison

• 15 year term of supervised release

   

   

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of LILI HUANG, 36, for withholding documents as well as enslaving, starving and beating the victim in a forced labor case. HUANG, who pleaded guilty on May 31, 2017, was sentenced today before U.S. District Senior Judge David S. Doty in Minneapolis, Minn.

 

“With today’s sentencing, Lili Huang must accept the consequences of committing such an egregious crime – not only financial repayment, but also the loss of liberty and property,” said Acting U.S. Attorney Gregory Brooker. “I am grateful for the dedicated work of the ACTeam and our local law enforcement partners for their collaborative efforts in bringing this case to a successful resolution.”

 

“Homeland Security Investigations is committed to investigating and prosecuting all forms of human trafficking, including forced labor,” said Special Agent in Charge Alex Khu of HSI St. Paul. “Lili Huang’s prison sentence, and the forfeiture of her home and other assets, can never fully restore all that she took from her victim, but it shows that her actions will not be tolerated in our community. HSI is proud of the work accomplished in this case with the U.S. Attorney’s Office, the Washington County Attorney’s Office and the Woodbury, MN Police Department.”

 

“In February 2016, the Woodbury Public Safety Department received training on investigating human trafficking cases and identifying trafficking victims. As a result of this critical training, the responding officers quickly recognized that this individual was a victim of human trafficking and were able to access the appropriate help and resources for the victim,” said Woodbury Police Commander Steve Wills. “The Woodbury Police Department and Washington County Attorney’s Office remain committed to putting resources into combatting all forms of human trafficking.”

 

According to the defendant’s guilty plea and documents filed in both state and federal court, on February 25, 2016, HUANG brought the victim (identified as F.L.) from Shanghai, China to her home in Woodbury, Minn. to work as a nanny and housekeeper. Although F.L. had previously worked for the defendant in China where she cooked, cleaned and cared for the defendant’s children, the scope of work and the defendant’s treatment of F.L. was significantly different once she arrived in Minnesota. HUANG forced F.L. to work up to 18 hours a day cooking, cleaning, and providing childcare. HUANG was very demanding about household tasks and became emotionally and physically abusive toward F.L. if she did not do exactly what was asked.

 

According to the defendant’s guilty plea and documents filed in both state and federal court, on April 23, 2016, due to the repeated physical abuse, F.L. asked HUANG to buy her an airplane ticket so she could return home to China. Instead of buying her a ticket, HUANG took F.L.’s passport and told F.L. that she was not leaving. HUANG continued to physically abuse F.L. by kicking, punching, grabbing F.L. by her hair, and subjecting her to other abuse. F.L. was able to document the physical abuse by using her cell phone to take photographs of the bruises and other injuries. F.L. also hid clumps of her hair under her mattress, which had been grabbed and torn out by the defendant.

 

On July 13, 2016, F.L. fled the house after HUANG approached her with a large kitchen knife. Just after midnight on July 14, 2016, F.L. was found wandering the streets several miles from the defendant’s home walking in the direction of the airport. F.L., who was visibly shaken and crying, was taken to United Hospital for medical treatment. The victim sustained several bruises and injuries to her face, including two black eyes, significant weight loss, and fractures to her sternum and ribs.

 

HUANG was also pleaded guilty in Washington County to one felony count of third-degree assault and was sentenced on August 11, 2017.

 

The District of Minnesota is one of six districts designated through a competitive, nationwide selection process as a Phase II Anti-Trafficking Coordination Team (ACTeam), through the interagency ACTeam Initiative of the Departments of Justice, Homeland Security and Labor. ACTeams focus on developing high-impact human trafficking investigations and prosecutions involving forced labor, international sex trafficking and sex trafficking by force, fraud or coercion through interagency collaboration among federal prosecutors and federal investigative agencies.

 

This case is the result of an investigation conducted by Homeland Security Investigations, Woodbury Police Department, U.S. Department of State Diplomatic Security Service, U.S. Department of Labor, and the Washington County Attorney’s Office.

 

Assistant United States Attorneys Laura M. Provinzino and Manda M. Sertich prosecuted this case.

 

 

Defendant Information:

 

LILI HUANG, 36

Woodbury, Minn.

 

Convicted:

• Unlawful conduct with respect to documents in furtherance of forced labor, 1 count

 

Sentenced:

• 12 months and 1 day in prison

• Forfeiture of the defendant’s house

• $95,944.80 in restitution paid to the victim

• $27,344.73 in restitution paid for third-party victim services

• Removal from the United States to China following the defendant’s prison sentence

 

 

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Acting United States Attorney Gregory G. Brooker today announced an indictment charging STEVEN MARKUSEN, 63, and JAY COPE, 58, with multiple counts of wire fraud in a stock trading scheme.[1] MARKUSEN and COPE will make their initial appearances in U.S. District Court at a later date.

 

According to the indictment, MARKUSEN was the sole owner, CEO and managing member of Archer Advisors LLC (“Archer”), which he formed in 2002. COPE was employed by Archer and at various times held the titles of chief operating officer, managing member, and research associate, and whose primary duties were operations, investor relations, and marketing for Archer. The sole business purpose of Archer was to serve as the investment manager for two private hedge funds, the Archer Equity Fund LLC (“Equity Fund”) and the Archer Focus Fund LLC (“Focus Fund”) (collectively, the “Funds”). At their peak, the Funds had more than $36 million in net assets.

 

According to the indictment, the Funds paid Archer monthly management fees, annual performance fees, and reimbursements for eligible expenses incurred by Archer. All payments to Archer were made through a third-party administrator. To place trades, MARKUSEN and COPE used brokerage firms, including certain brokerage firms that offered what is known as a “soft dollar program,” which is an incentive program where Archer would be credited a percentage of the commission paid by the Funds to the brokerage firms for each trade. Archer could use these commission percentages, called “soft dollars,” for the limited purpose of purchasing third-party research services to help Archer make investment decisions for the Funds.

 

According to the indictment, in 2008, COPE began submitting monthly invoices to Archer claiming he had performed research for Archer. MARKUSEN would then request reimbursement from the third-party administrator for COPE’S expenses, which were paid to Archer separate from the monthly management fees. Beginning in approximately April 2009, Archer stopped paying COPE’S fees, however, from April 2009 through October 2013, MARKUSEN continued to falsely represent to the third-party administrator that Archer had paid COPE’S fees and to fraudulently request reimbursements when, in reality, the defendants had caused soft dollars to be used to pay for COPE’S research fees. Every time Archer executed trades using one of the brokers who offered a soft dollar program, additional soft dollars were generated. MARKUSEN authorized COPE’S monthly research invoices, as well as reimbursements for other purported expenses, to be paid from the soft dollar accounts. Between May 2009 and October 2013, soft dollars were used to pay more than $500,000 in research expenses purportedly incurred by Archer, more than 80 percent of which went to COPE.

 

According to the indictment, as part of the scheme, MARKUSEN and COPE engaged in fraudulent trading activity that was designed to ensure that the soft dollar accounts contained sufficient funds to cover COPE’S monthly invoices. MARKUSEN and COPE closely monitored the soft dollar balance, and, after learning that it was in arrears, they began “day trading,” buying and then selling a position on the same trading day. MARKUSEN and COPE also attempted to artificially inflate the value of the Funds through a market-manipulation scheme known as “marking the close.” Through this scheme, MARKUSEN and COPE purchased large volumes of shares of a thinly traded stock in the closing minutes of the last day of the month, oftentimes at or above the prevailing market prices. Through these efforts, MARKUSEN and COPE were able to cause the stock to close at artificially high prices at the end of numerous months, which resulted in an artificially exaggerated increase in the overall value of the Funds.

 

This case is the result of an investigation conducted by the FBI.

 

The case is being prosecuted by Assistant United States Attorney John E. Kokkinen and Special Assistant U.S. Attorney Ariella Guardi with the Securities and Exchange Commission.

 

 

Defendant Information:

 

STEVEN MARKUSEN, 63

Minneapolis, Minn.

 

Charges:

• Mail fraud, 8 counts

 

JAY COPE, 58

Victoria, Minn.

 

Charges:

• Mail fraud, 4 counts

   

 

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

Acting United States Attorney Gregory G. Brooker today announced the indictment of JULIE ANN LEE, 53, former controller of the Town & Country Club in St. Paul, Minn., on four counts of wire fraud and six counts of filing false tax returns. LEE is expected to make her initial appearances in U.S. District Court in Minneapolis later this week.

 

According to the indictment, from 2008 through 2016, LEE was the controller of the Town & Country Club (“TCC”), a private golf club in St. Paul, Minn. In her role, LEE was responsible for managing TCC’s finances and had authority to sign and issue checks on behalf of TCC as well as signing authority on TCC’s bank accounts, including a line of credit TCC had with Alliance Bank. LEE used her position as controller to devise a scheme to embezzle more than $1 million from TCC over the course of eight years.

 

According to the indictment, as part of her embezzlement scheme, LEE fraudulently issued herself more than 50 checks totaling more than $150,000 directly from TCC’s bank accounts. LEE also stole approximately $250,000 in cash from TCC, which she deposited into her personal bank account. As part of the scheme, LEE also made payments on her personal credit cards directly from TCC bank accounts totaling approximately $600,000. LEE spent the funds she embezzled on things unrelated to TCC, including personal travel, home improvements and her mortgage, a 2013 Dodge Charger, a 2015 GMC Sierra K3500 pickup truck, a motorcycle, a recreational vehicle, and 81 acres of land in northern Minnesota.

 

According to the indictment, LEE attempted to conceal her embezzlement scheme and cover the shortage of money in TCC’s bank accounts by taking advances on TCC’s line of credit at Alliance Bank. As a result of LEE’s embezzlement, TCC was left without sufficient funds to make its quarterly payroll tax payments to the IRS. In order to conceal the shortage of funds, LEE filed false quarterly payroll tax returns with the IRS understating TCC’s payroll tax liability. At times, LEE also filed TCC’s quarterly payroll tax returns late and made TCC’s quarterly tax payments late, which resulted in TCC paying more than $300,000 in interest and penalties to the IRS.

 

This case is being prosecuted by Assistant U.S. Attorney Joseph H. Thompson.

 

This case is the result of an investigation conducted by the Criminal Investigation Division of the IRS, the United States Secret Service, and the Saint Paul Police Department.

 

 

Defendant Information:

 

JULIE ANN LEE, 53

Farmington, MN

 

Charges:

• Wire Fraud, 4 counts
• Filing false tax returns, 6 counts

 

 

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

Acting United States Attorney Gregory G. Brooker today announced that Sightpath Medical, Inc. (n/k/a Sightpath Medical, LLC) (“Sightpath”), TLC Vision Corporation (n/k/a TLC Vision (USA, LLC)) (“TLC”) (collectively the “Sightpath Entities”) and their former CEO, JAMES TIFFANY, have agreed to pay more than $12 million to the United States to resolve kickback allegations under the False Claims Act (“FCA”). The United States also intervened in an underlying lawsuit against the Cameron-Ehlen Group, Inc. d/b/a Precision Lens (“Precision Lens”), Precision Lens’ owner PAUL EHLEN, and JITENDRA SWARUP.

 

“Medicare beneficiaries depend on their physicians to make decisions based on sound medical judgment,” said Assistant U.S. Attorney Chad Blumenfield. “Our office will take decisive action to address allegations that medical providers are receiving improper financial benefits that could influence medical decision making. We are grateful to our law enforcement partners for their excellent work in investigating this matter.”

 

“This settlement is an outstanding result and represents the third major False Claims Act case successfully handled by this Office in the last three months. These types of cases remain a top priority of our Office, I applaud the hard work and dedication of the Civil Frauds Unit and the agencies involved in the case,” said Acting U.S. Attorney Gregory Brooker.

 

“The FBI together with our law enforcement partners aggressively investigate companies and individuals who engage in kickback schemes at the expense of Medicare and other federal health care programs,” said FBI Special Agent in Charge Richard T. Thornton of the Minneapolis Division. “Those who seek to exploit the nation’s health care system through fraud will be held accountable.”

 

According to the complaint, brought by a whistleblower, Sightpath and Precision Lens supply intraocular lenses, as well as ophthalmic surgical equipment and services to medical facilities. These products and services are used by ophthalmologists in connection with eye surgeries, including cataract surgeries performed in Ambulatory Surgical Centers and hospitals for which federal payers, such as Medicare, provide reimbursements. The complaint alleges that Precision Lens, EHLEN and the Sightpath Entities paid kickbacks to physicians in various forms, including travel, entertainment and improper consulting agreements. The complaint identifies multiple examples of trips including luxury skiing vacations and high-end fishing, golfing and hunting trips. The complaint also alleges that these various items of value were provided in order to induce the physicians to use Precision Lens’ and the Sightpath Entities’ products and services.

 

According to the settlement agreements, the United States contends that between January 1, 2006 and January 1, 2015, the Sightpath Entities provided physicians items of value to induce the use of Sightpath Entities’ products and services, which resulted in the submission of false claims to the United States for ophthalmological products and services. These items of value included hunting, skiing, fishing, and golf trips. Additionally, the Sightpath Entities entered into consulting agreements with physicians and physician practices for services that were never performed or not properly tracked, resulting in payments in excess of fair market value.

 

According to the settlement agreements, the United States further alleged that TIFFANY directed much of the conduct at issue, particularly between 2010 and 2013 when he was CEO of Sightpath and TLC, and that TIFFANY was directly involved in setting up and participating in several of the trips with physicians who were either Sightpath customers or potential customers. In addition, TIFFANY directly participated in establishing and continuing the lucrative consulting agreements with physicians and physician practices. The United States contends that by providing these items of value, the Sightpath Entities and TIFFANY knowingly induced physicians to utilize the Sightpath Entities’ products and services and submit false claims to the federal government. The claims were false because they were tainted by illegal kickbacks to the physicians, in violation of the Anti-Kickback Statute and the False Claims Act.

 

These settlements resolve allegations filed in a civil lawsuit originally brought by a whistleblower under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government for false claims and to share in any recovery. The government often relies on whistleblowers to bring fraud schemes to light that might otherwise go undetected. The whistleblower in this matter, Kipp Fesenmaier, will receive 19.5 percent of the amounts recovered in connection with the settlement agreements.

 

As part of the FCA Agreement and in exchange for a release of OIG’s permissive exclusion authority, Sightpath has agreed to enter into a 5-year corporate integrity agreement (CIA) with OIG. Although not a signatory to the CIA, TLC is participating in the CIA as a “covered person.”

 

The United States has declined to intervene in the case against the other defendants named in the complaint. The claims resolved by these settlements are allegations only; there has been no determination of liability or wrongdoing.

 

The case was handled by Assistant U.S. Attorney Chad A. Blumenfield of the Civil Frauds Unit of the U.S. Attorney’s Office for the District of Minnesota with assistance from the Office of Inspector General of the U.S. Department of Health and Human Services and the Federal Bureau of Investigation.

 

The case is United States ex rel. Fesenmaier v. Sightpath Medical, Inc. TLC Vision Corporation, The Cameron Ehlen Group, Inc. dba Precision Lens, et al., Civil No. 13-CV-3003 (RHK/FLN).

 

 

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Acting United States Attorney Gregory G. Brooker today announced the guilty plea of JOHN BURWOOD ROBINSON, 50, for stealing more than $1.1 million from his employer. ROBINSON was charged by felony information July 26, 2017, with one count of mail fraud and one count of filing a false tax return. He pleaded guilty yesterday before Judge Paul A. Magnuson in U.S. District Court in Saint Paul, Minn. A sentencing date has not yet been determined.

 

According to the defendant’s guilty plea, from 1991 through 2016, ROBINSON was employed by North Central Stamping & Manufacturing, Inc. (“NCSM”), and in 2003, he became NCSM’s controller. As the controller, ROBINSON managed NCSM’s bank accounts, bookkeeping records, and financial reports.

 

According to the defendant’s guilty plea, ROBINSON devised a fraud scheme to steal money that was paid to NCSM by its clients. ROBINSON opened a bank account in the name of NCSM without the company’s knowledge or authorization. ROBINSON then deposited payments made by NCSM’s customers into the fraudulent bank account he had set up. ROBINSON used the money to pay for his own personal expenses, to fund his hobby of buying and restoring automobiles and automobile parts, and to pay for a storage facility to store the automobiles and parts. In total, ROBINSON stole approximately $1,163,366.97 from NCSM.

 

According to the defendant’s guilty plea, in addition to his theft, ROBINSON admitted to filing false tax returns by understating his total income for the calendar years 2009 through 2015, in order to lower his tax liability and to avoid detection of his fraud scheme. In total, ROBINSON caused a total tax loss of $291,757.31.

 

This case is the result of an investigation conducted by the Criminal Investigation Division of the IRS, the Minnesota Department of Commerce Fraud Bureau, and the Blaine Police Department.

 

This case is being prosecuted by Assistant United States Attorney Surya Saxena.

 

 

Defendant Information:

 

JOHN BURWOOD ROBINSON, 50

Crystal, Minn.

 

Convicted:

• Mail fraud, 1 count
• Filing a false tax return, 1 count

 

 

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of CHRISTOPHER BARRY, 46, to 12 months and 1 day in prison for stealing trade secrets from his former employer, Lutonix, Inc. BARRY pleaded guilty on May 9, 2017, and was sentenced today before U.S. District Judge Paul J. Magnuson in St. Paul, Minn. BARRY was also ordered to pay $533,842 in restitution to his former employer, the victim of his crime, representing the fees incurred by his former employer to detect and investigate his crime.

 

“Christopher Barry stole valuable intellectual property from his former employer in an effort to benefit himself,” said Acting U.S. Attorney Greg Brooker. “The theft of trade secrets is an offense that threatens individuals, businesses and the economy and we are committed to investigating and prosecuting these types of crimes.”

 

“Theft of trade secrets is a serious federal crime which harms businesses and the hard-working people of Minnesota,” said FBI Special Agent in Charge Richard T. Thornton of the Minneapolis Field Office. “The sentence handed down today which includes a prison term underscores the seriousness of this crime. The FBI will continue to work closely with our law enforcement partners and the business community to hold accountable those who steal trade secrets.”

 

According to the defendant’s guilty plea and documents filed in court, from 2007 until May 1, 2015, BARRY was the Vice President of Research & Development for Lutonix, Inc. (“Lutonix”), a company based in New Hope, Minn. that develops, manufactures, and sells drug coated balloon (“DCB”) medical products. In his role, BARRY was responsible for all research and development, quality assurance, and manufacturing activities for the company, among other things. BARRY was also directly involved in the development of Lutonix’s primary product, an extremely valuable proprietary DCB called the Lutonix 035 DCB.

 

According to the defendant’s guilty plea and documents filed in court, in May 2015, BARRY left Lutonix and accepted employment as CEO of Urotronic, a start-up medical device company founded by a former Lutonix employee. As BARRY was planning to leave Lutonix, he stole numerous trade secret files belonging to the company so that he could utilize the proprietary information in connection with his next job. During his employment with Urotronic, BARRY transferred the stolen trade secret files from his portable hard drive onto his Urotronic work computer. Additionally, while BARRY was employed at Urotronic, he shared several procedural documents containing Lutonix trade secrets with other Urotronic employees.

 

This case was the result of an investigation conducted by the FBI, the Criminal Investigation Division of the IRS, and the United States Postal Inspection Service.

 

Assistant United States Attorney Benjamin Langner prosecuted this case.

 

 

Defendant Information:

 

CHRISTOPHER BARRY, 46

Medina, Minn.

 

Convicted:

• Theft of Trade Secrets, 1 count

 

Sentenced:

• 12 months and 1 day in prison

• Three years of supervised release

• $533,842 in restitution

 

 

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Acting United States Attorney Gregory G. Brooker announced the sentencing of COLIN ALEXANDER CHISHOLM, 65, to 48 months in prison for stealing more than $2.1 million from victims by convincing them they were investing in a television network when in fact, CHISHOLM was using the funds for his own personal gain. CHISHOLM pleaded guilty on January 24, 2017, and was sentenced yesterday before U.S. District Chief Judge John R. Tunheim in Minneapolis, Minn.

 

“Colin Chisholm ripped off people with a long trail of lies about himself and his fraudulent investments,” said Minnesota Commerce Commissioner Mike Rothman. “As a result of Chisholm’s lies, dozens of victims lost the money they had entrusted to him for what they believed was a legitimate investment. Stopping this investment scam and bringing this white-collar criminal to justice demonstrate the strong partnership between the Commerce Fraud Bureau and federal authorities.”

 

“Postal Inspectors are committed to protecting the U.S. Mail and postal customers from criminal attack,” said Craig Goldberg, Inspector in Charge of the Denver Division of the U.S. Postal Inspection Service, which includes Minnesota. “This sentence reflects the successful teamwork between the Postal Inspection Service and the Minnesota Department of Commerce who worked together to bring justice to the victims in this case and to help restore the public’s trust in the U.S. mail.”

 

According to the defendant’s guilty plea and documents filed in court, since 2004, CHISHOM used The Caribbean Television Network, Inc., (TCN) an entity he formed purportedly to broadcast satellite television throughout the Caribbean, to solicit funds from investors. Throughout the scheme, CHISHOLM told investors that TCN was on the verge of securing between $20 million and $100 million in funding to begin broadcasting, and that their investment would be used as interim financing for TCN.

 

According to the defendant’s guilty plea and documents filed in court, as part of his scheme to obtain money from potential investors, CHISHOLM lied to them about the progress and viability of the main funding sources for TCN. CHISHOLM also lied to investors about his personal background, telling some investors that he was the grandson of Hugh J. Chisholm, Jr., and the son of William Chisholm, of the Oxford Paper Company. In falsely claiming this family lineage, CHISHOLM gave the impression that he came from considerable family wealth. CHISHOLM also claimed to be a Scottish Chieftain of the Clan Chisholm and claimed to have close personal ties to members of the Bush family, specifically to Prescott S. Bush, Jr., the deceased brother of former President George H.W. Bush.

 

According to his guilty plea and documents filed in court, CHISHOLM also lied about his professional background, most notably by making the claim to potential investors that he had worked as Vice President for Turner Program Services, that he had a relationship with Ted Turner, and that he participated in the development and launch of CNN and CNN Headline News, including writing the business plan for CNN.

 

Over the course of 10 years, CHISOLM stole a total of more than $2.1 million from at least 38 investors and used the money to support a lavish lifestyle consistent with the false persona he created.

 

This case is the result of an investigation conducted by the Minnesota Department of Commerce Fraud Bureau and the United States Postal Inspection Service, with substantial assistance from the Hennepin County Attorney’s Office.

 

Assistant United States Attorney Lola Velazquez-Aguilu prosecuted this case.

 

 

Defendant Information:

 

COLIN ALEXANDER CHISHOLM, 65

Minneapolis, Minn.

 

Convicted:

• Mail fraud, 1 count

   

Sentenced:

• 48 months in prison

• Three years of supervised release

• $2,106,687.98 in restitution

 

 

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Acting United States Attorney Gregory G. Brooker today announced a federal indictment in an ongoing investigation charging PISANU SUKHTIPYAROGE, a/k/a “Pat,” 71, owner of a Thai restaurant in Columbia Heights, Minn., with one count of forced labor.[1] SUKHTIPYAROGE is scheduled to make an initial appearance on August 18, 2017, in U.S. District Court in Minneapolis, Minn.

 

According to the indictment and a law enforcement affidavit, on July 21, 2017, law enforcement received a report from the National Human Trafficking Hotline of a labor and sex trafficking victim. Law enforcement agents made contact with the victim who said he was brought by SUKHTIPYAROGE to the United States from the Dominican Republic with the promise of education opportunities and a better life for the victim and his family. Upon arrival to the United States, the victim reported that the arrangements changed dramatically. SUKHTIPYAROGE did not allow the victim to attend high school classes, he imposed a debt for the victim’s travel expenses, and forced the victim to work in his restaurant as well as engage in sexual acts. The victim lived in a basement storage room of the restaurant and received an hourly wage of approximately $0.78 per hour.

 

According to the indictment and a law enforcement affidavit, from October 15, 2015 through July 23, 2017, SUKHTIPYAROGE used coercion, physical threats, debt bondage, psychological abuse, intimidation and threats of legal process to maintain control of the victim as a forced laborer and as a victim of continued sexual assaults.

 

SUKHTIPYAROGE has also been charged in Anoka County with one felony count of third degree criminal sexual conduct and one felony count of labor trafficking.

 

The District of Minnesota is one of six districts designated through a competitive, nationwide selection process as a Phase II Anti-Trafficking Coordination Team (ACTeam), through the interagency ACTeam Initiative of the Departments of Justice, Homeland Security and Labor. ACTeams focus on developing high-impact human trafficking investigations and prosecutions involving forced labor, international sex trafficking and sex trafficking by force, fraud or coercion through interagency collaboration among federal prosecutors and federal investigative agencies.

 

Homeland Security Investigations and the U.S. Department of Labor Office of the Inspector General are leading the ongoing investigation with assistance from the Anoka County Sheriff’s Office.

 

Assistant U.S. Attorneys Melinda A. Williams and Laura M. Provinzino are prosecuting the case.

 

 

Defendant Information:

 

PISANU SUKHTIPYAROGE, a/k/a “Pat,” 71

Maplewood, Minn.

 

Charges:

• Forced labor, 1 count

 

 

 

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

Acting United States Attorney Gregory G. Brooker today announced additional federal charges in alleged multi-million dollar health care fraud conspiracies. Following the indictments of 12 defendants in December 2016, a federal grand jury added four defendants and additional mail fraud and wire fraud charges in connection with parallel conspiracies that executed schemes to fraudulently bill insurance companies for millions of dollars.

 

Under the Minnesota No-Fault Automobile Insurance Act, auto insurance policies must include a personal injury protection provision (PIP). The PIP provision carries a minimum coverage amount of $40,000 for expenses resulting from injuries sustained in an automobile accident, $20,000 of which may be used for medical expenses.

 

According to the charging documents, at various times between at least 2010 and 2016, chiropractors PRESTON E. FORTHUN, ANGELA A. SCHULZ, HUY NGOC NGUYEN, ADAM J. BURKE, and other Doctors of Chiropractic, engaged in schemes with others to defraud automobile insurance companies. The schemes, which were nearly identical fraud schemes largely carried out independent of one another, involved the submission of fraudulent no-fault insurance claims. The chiropractors involved in the scheme would submit claims and receive reimbursements for chiropractic services that either were not medically necessary or were never rendered, but were instead designed to fraudulently maximize reimbursement from the patients’ automobile insurance companies.

 

According to the charging documents, in order to get more patients to come to chiropractic appointments for treatment they did not need, the chiropractors would make illegal payments to “runners,” who typically made upwards of $1,000 per automobile accident patient, in exchange for bringing the patient into the chiropractor’s office. Runners were often not paid, or paid only in part, until after the patient had attended a minimum threshold number of treatment sessions. In order to keep the patients coming back for medically unnecessary appointments, the runners often paid illegal kickbacks to the patients. In addition to the runners charged in the December 2016 indictments, MIMI DOAN, OKWUCHUKWU JIDEOFOR, QUINCY CHETTUPALLY and MUKHTAR HASSAN have been charged for their roles in the conspiracies.

 

According to the charging documents, some of the charged chiropractors would conceal the kickback payments in various ways. For example, FORTHUN wrote checks to runners and falsely described those checks on the memo lines as payments for services such as “transportation” or “marketing.” Defendant BURKE encouraged runners to form corporate entities such as LLCs with names that sounded like legitimate businesses to which BURKE made kickback payments. Defendant NGUYEN tried to conceal kickback payments by making checks out to “cash” for several thousand dollars. He often wrote multiple such checks each week, falsely characterizing them as having been for “chiropractic supplies” of “office supplies.”

 

This case is the result of an investigation conducted by the Minnesota Commerce Fraud Bureau and the FBI. Additional assistance was provided by the Minneapolis Police Department, Saint Paul Police Department, Minnesota State Patrol, and Homeland Security Investigations.

 

This case is being prosecuted by Assistant U.S. Attorneys David M. Maria and John E. Kokkinen.

 

 

Defendant Information:

 

ANGELA A. SCHULZ, 48

Chaska, Minn.

 

Charges:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 16 counts

 

PRESTON E. FORTHUN, 39

Bloomington, Minn.

 

Charges:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 13 counts

 

HUY NGOC NGUYEN, 42

Brooklyn Park, Minn.

 

Charges:

• Conspiracy to commit mail fraud and wire fraud, 1 count

• Mail fraud, 6 counts
• Wire fraud, 5 counts

 

ADAM JOHN BURKE, 33

Minneapolis, Minn.

 

Charges:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 12 counts

 

QUINCY CHETTUPALLY, 42

Brooklyn Park, Minn.

 

Charges:

• Conspiracy to commit wire fraud, 1 count
• Wire fraud, 2 counts

 

MIMI HUU DOAN, 34

Maple Grove, Minn.

 

Charges:

• Conspiracy to commit mail fraud and wire fraud, 1 count
• Mail fraud, 3 counts
• Wire fraud, 1 count

 

OKWUCHUKWU EMMANUEL JIDEOFOR, 33

Oakdale, Minn.

 

Charges:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 1 count

 

MUKHTAR YUSUF HASSAN, 35

Minneapolis, Minn.

 

Charges:

• Conspiracy to commit mail fraud, 1 count

• Mail fraud, 4 counts

 

ABDISALAN ABDULAHAB HUSSEIN, 48

Minneapolis, Minn.

 

Charges:

• Conspiracy to commit mail fraud and wire fraud, 2 counts
• Mail fraud, 6 counts
• Wire fraud, 2 counts

 

YAHYE MOHAMED HERROW, 45

Minneapolis, Minn.

 

Charges:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 4 counts

 

TEMITAYO IFELOJU OLUSHOLDA DANIEL, 36

Minneapolis, Minn.

 

Charges:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 4 counts

 

ABDIRAHIN KHALIF IBRAHIM, 26

Saint Paul, Minn.

 

Charges:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 3 counts

 

DANA ENOCH KIDD, 36

Elk River, Minn.

 

Charges:

• Conspiracy to commit mail fraud, 1 count

• Mail fraud, 3 counts

CARLOS PATRICIO LUNA, 49

Minneapolis, Minn.

 

Charges:

• Conspiracy to commit mail fraud and wire fraud, 1 count
• Mail fraud, 1 count
• Wire fraud, 1 count

 

JEROME TARLVE DOE, 53

Brooklyn Park, Minn.

 

Charges:

• Conspiracy to commit wire fraud, 1 count
• Wire fraud, 1 count

 

NAPOLEAN TUTEX DEAH, 33

New Brighton, Minn.

 

Charges:

• Conspiracy to commit mail fraud, 1 count
• Mail fraud, 1 count

 

 

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

Acting United States Attorney Gregory G. Brooker today announced the sentencing of ANTONIO JERMAINE SNELL, a/k/a “Fatty” or “Lord,” 36, for leading a heroin distribution conspiracy based in southern Minnesota that resulted in two overdose deaths. ANTONIO SNELL, who was charged along with four additional co-defendants on June 14, 2016, pleaded guilty to Count 1 of the indictment. ANTONIO SNELL was sentenced on August 9, 2017, before Senior Judge Michael J. Davis in United States District Court in Minneapolis, Minn. His half-brother, MELVIN HUNTER, was sentenced on August 10, 2017. Both defendants were sentenced to 168 months in prison.

 

“These defendants brought large amounts of heroin from Chicago to southern Minnesota and sold it for $200 a gram,” said Assistant U.S. Attorney Jeffrey Paulsen. “Even after two of their customers died from heroin overdoses, the defendants continued dealing these dangerous drugs. The imposed sentences appropriately reflect the defendants’ callous disregard for human life.”

 

According to the defendants’ guilty pleas and documents filed in court, from January 2013 through June 2016, ANTONIO SNELL, the leader of the organization, and co-defendants RANDLE SNELL, MELVIN HUNTER, DARRELL SMITH, and ERNEST THOMAS, ran a heroin distribution conspiracy in and around the Rochester, Minnesota area. Members of the conspiracy recruited other individuals to act as sub-distributers or runners and used their houses to process and store drugs. In addition to the organization’s widespread drug dealing activity, heroin sold by the conspiracy was linked to two heroin overdose deaths in Austin, Minnesota. According to testimony at a sentencing hearing held on July 18, 2017, HUNTER supplied the heroin that killed Tyler Burkey, 23, on December 18, 2015, and Jordan Jensen, 20, on March 27, 2016. In sentencing HUNTER, Judge Michael Davis stated, “you were selling poison . . . and it caused death.”

 

This case is the result of an investigation conducted by the Drug Enforcement Administration, the Rochester Police Department, the Austin Police Department, and the Southeast MN Violent Crimes Enforcement Team.

 

This case was prosecuted by Assistant U.S. Attorney Jeffrey S. Paulsen.

 

 

Defendant Information:

 

ANTONIO JERMAINE SNELL, a/k/a “Fatty” or “Lord,” 36

Albert Lea, Minn.

 

Convicted:

• Conspiracy to Distribute Heroin, 1 count

 

Sentenced:

• 168 months in prison

• Five years of supervised release

 

 

RANDLE SNELL, a/k/a “Pee Wee,” 27

Dolton, Ill.

 

Convicted:

• Conspiracy to Distribute Heroin, 1 count

 

Sentenced:

• 92 months in prison

• Five years of supervised release

 

 

MELVIN HUNTER, a/k/a “Mello,” 23

Chicago, Ill.

 

Convicted:

• Conspiracy to Distribute Heroin, 1 count

 

Sentenced:

• 168 months in prison

• Five years of supervised release

 

 

DARRELL LENARDO SMITH, a/k/a “Duke,” 44

Rochester, Minn.

 

Convicted:

• Conspiracy to Distribute Heroin, 1 count

 

Sentenced:

• 84 months in prison

• Five years of supervised release

 

 

ERNEST JERELLE THOMAS, a/k/a “Rel Rel,” 38

Rochester, Minn.

 

Convicted:

• Conspiracy to Distribute Heroin, 1 count

 

Sentenced:

• 77 months in prison

• Five years of supervised release

   

   

   

   

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Acting United States Attorney Gregory G. Brooker today announced the guilty plea of MICKIAH LATRELL JACKSON, 32, for the January 2017 violent attempted armed robbery of a Super America gas station and convenience store in St. Paul, Minn. In May 2017, a grand jury returned a two-count Indictment, charging JACKSON with one count of interference with commerce by attempted robbery pursuant to the Hobbs Act, and with one count of using, carrying, and discharging a firearm during a crime of violence. JACKSON entered his guilty plea to both counts today before Senior Judge Michael J. Davis in U.S. District Court in Minneapolis, Minn.

 

“This is a perfect example of how intelligence solves crimes,” said ATF Special Agent in Charge James Modzelewski of the St. Paul Field Division. “Partly based on use of the ATF National Integrated Ballistic Information Network we were able to link different crime scenes together, ultimately leading us to Jackson. Getting this career offender behind bars is no doubt going to make the community a safer place. This was a great collaboration on the part of St. Paul Police, Metro Transit Police, the Ramey County Attorney’s Office, the U.S. Attorney’s Office and ATF. Our hats off to these professionals for pulling the pieces of this puzzle together.”

 

According to the defendant’s guilty plea and documents filed in court, on January 7, 2017, JACKSON entered a Super America (“the SA”) gas station in St. Paul, Minn., pulled a semiautomatic firearm from his waistband and pointed it at the cashier while demanding money from the register. The cashier pushed the defendant’s gun away and struggled with the defendant for a few seconds before JACKSON aimed his firearm at the ground and discharged one round. JACKSON again pointed the gun at the cashier’s face and demanded money from the register. Another store employee quickly shut the bulletproof glass door of the cashier station and JACKSON fled the SA on foot empty-handed.

 

According to the defendant’s guilty plea and documents filed in court, on February 25, 2017, JACKSON again entered the SA, and the employee who slammed the glass door shut on the defendant during the attempted robbery recognized the defendant. After the employee notified an off-duty St. Paul Police Officer who was working at the SA, JACKSON was arrested. Upon execution of a search warrant of the defendant’s residence, law enforcement investigators recovered a black stocking cap and other items of clothing consistent with what the defendant was wearing in the SA surveillance video.

 

The case was the result of an investigation conducted by the United States Bureau of Alcohol, Tobacco, Firearms and Explosives, the St. Paul Police Department, and the Metro Transit Police, with assistance from the Ramsey County Attorney’s Office.

 

Assistant U.S. Attorney Benjamin Bejar is prosecuting the case.

 

 

Defendant Information:

 

MICKIAH LATRELL JACKSON, 32

St. Paul, Minn.

 

Convicted:

• Interference with commerce by attempted robbery, 1 count
• Using, carrying, and discharging a firearm during and in relation to a crime of violence, 1 count

 

 

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United States Attorney’s Office, District of Minnesota: (612) 664-5600

 

Acting United States Attorney Gregory G. Brooker today announced the sentencing of WALLACE DAVID GREGERSON, 66, to 42 months in prison for embezzling more than $755,000 from his employees’ pension plans. GREGERSON, who pleaded guilty on March 6, 2017, to one count of mail fraud, was sentenced today before United States District Judge Joan N. Ericksen in Minneapolis, Minn.

 

Acting U.S. Attorney Greg Brooker said, “Over the course of several years, Wallace Gregerson stole from his own hardworking employees, some of whom had decades-long careers with the company. Mr. Gregerson ended his fraud scheme only because there was no more money to steal. We believe that the sentence handed down today is a just punishment for his crimes.”

 

According to his guilty plea and documents filed in court, GREGERSON was the president and sole owner of Lighting Affiliates, Inc. (“Lighting Affiliates”), a Minnesota corporation that sold lighting fixtures and related products. The Lighting Affiliates 401(k) Profit Sharing Plan (the “Plan”) was established as an employee benefit for eligible employees’ retirement savings. The Plan was funded by three types of contributions: voluntary salary reduction 401(k) contributions the Lighting Affiliates’ employees had deducted from their paychecks; 401(k) matching contributions made by Lighting Affiliates; and profit sharing contributions made by Lighting Affiliates.

 

According to his guilty plea and documents filed in court, GREGERSON, who was the sole trustee of the Plan, used his position to withdraw funds from the Plan and deposit those funds into Lighting Affiliates’ bank accounts. In 26 separate transactions over the course of two years between February 2011 and July 2013, GREGERSON drained the profit sharing portion of the Plan by withdrawing a total of approximately $675,233.55. In August 2014, Lighting Affiliates closed. Following the closure, between December 2014 and March 2015, GREGERSON drained his former employees’ individual 401(k) accounts by withdrawing a total of approximately $80,667.23.

 

According to his guilty plea and documents filed in court, as part of the scheme, GREGERSON persuaded the financial institutions holding the Plan’s assets to provide him with funds belonging to the Plan and its participants by making false representations. GREGERSON provided written statements falsely affirming that the funds would be re-invested in another qualified plan or that the withdrawals were made at employee requests.

 

According to his guilty plea and documents filed in court, GREGERSON used the majority of the funds to either pay for Lighting Affiliates’ expenses or for personal expenses such as country club membership dues, tickets for sporting events, clothing purchases, and tuition payments for his daughter.

 

Assistant United States Attorney Kimberly A. Svendsen prosecuted the case.

 

This case was the result of an investigation conducted by the U.S. Department of Labor Employee Benefits Security Administration and the U.S. Department of Labor Office of the Inspector General.

 

 

Defendant Information:

 

WALLACE DAVID GREGERSON, 66

Plymouth, Minn.

 

Convicted:

• Mail fraud, 1 count

 

Sentenced:

• 42 months in prison
• 3 years of supervised release
• $756,062.50 in restitution

 

 

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United States Attorney’s Office, District of Minnesota: (612) 664-5600

PHH Corp. PHH Mortgage Corp. and PHH Home Loans (collectively, PHH) have agreed to pay the United States $74,453,802 to resolve allegations that they violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA), guaranteed by the United States Department of Veterans Affairs (VA), and purchased by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) that did not meet applicable requirements, the Justice Department announced today. PHH is headquartered in Mount Laurel, New Jersey, and PHH Home Loans operates in Edina, Minnesota. PHH has agreed to pay $65 million to resolve the FHA allegations and $9.45 million to resolve the VA and FHFA allegations.

 

“PHH submitted defective loans for government insurance, and homeowners and taxpayers paid the price. This significant resolution helps rectify the misconduct by returning more than $74 million in wrongfully claimed funds to the government,” said Acting U.S. Attorney for the District of Minnesota Gregory Brooker. “I commend the efforts of this Office’s Civil Division in reaching a successful resolution.”

 

“Government mortgage programs designed to assist homeowners — including programs offered by the FHA, VA, Fannie Mae and Freddie Mac — depend on lenders to approve only eligible loans,” said Acting Assistant Attorney General Chad A. Readler, head of the Justice Department’s Civil Division. “The Department has and will continue to hold accountable lenders that knowingly cause the government to guarantee, insure, or purchase loans that are materially deficient and put both the homeowner and the taxpayers at risk.”

 

“This settlement requires PHH to pay back to the taxpayers of the United States millions of dollars in loans that never should have been made,” Acting U.S. Attorney William E. Fitzpatrick for the District of New Jersey said. “By failing to ensure the creditworthiness of borrowers and otherwise failing to make sure the loans met HUD underwriting requirements, loans were insured by FHA that should not have been.”

 

 

“By failing to comply with FHA regulations, PHH put taxpayers and borrowers at risk of sustaining significant financial losses,” stated Acting U.S. Attorney Benjamin G. Greenberg. “This case and the resulting $75 million dollar settlement demonstrate that U.S. Attorney’s Offices and our investigative partners across the country are committed to holding lenders accountable who knowingly submit unqualified loans and compromise needed governmental programs.”

 

“For government mortgage programs to assist homeowners but not take on ill-advised risk, all participants in the mortgage lending process must provide true and complete information,” stated Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York. “Today’s settlement with PHH demonstrates our continuing commitment to requiring such integrity in the process.”

 

The settlements announced today resolve allegations that PHH failed to comply with certain FHA, VA, Fannie Mae and Freddie Mac origination, underwriting, and quality control requirements.

 

Since at least January 2006, PHH has participated as a Direct Endorsement lender (DEL) in the FHA insurance program. A DEL has the authority to originate, underwrite, and endorse mortgages for FHA insurance. If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan. Under the DEL program, the FHA does not review a loan before it is endorsed for FHA insurance for compliance with FHA’s credit and eligibility standards, but instead relies on the efforts of the DEL to verify compliance. DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance.

 

As part of the settlement, PHH admitted to the following facts concerning the FHA loans:

 

Between Jan. 1, 2006, and Dec. 31, 2011, it certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements and did not adhere to FHA’s self-reporting requirements. Examples of loan defects that PHH admitted resulted in loans being ineligible for FHA mortgage insurance included:

 

• Failing to document the borrowers’ creditworthiness, including paystubs, verification of employment, proper credit reports, and verification of the borrowers’ earnest money deposit and funds to close.
• Failing to document the borrower’s claimed net equity in a prior residence or obtain documentation showing that the borrower had paid off significant debts. Including these debts in the borrower’s liabilities resulted in the borrower exceeding HUD’s debt-to-income ratio requirements for FHA-insured loans.
• Insuring a loan for FHA mortgage insurance even though the borrower did not meet HUD’s minimum statutory investment for the loan.

 

In 2007, PHH audited a targeted sample of government loans for closing or pre-insuring requirements and found that its “percent accurate” did not exceed 50 percent during 2007. Since at least 2006, HUD has required self-reporting of material violations of FHA requirements. However, between Jan. 1, 2006, and Dec. 31, 2011, PHH Home Loans did not self-report any loans to HUD; rather, PHH Home Loans did not self-report any loans to HUD until 2013, after the United States commenced its investigation resulting in this settlement.

 

As a result of PHH’s conduct and omissions, PHH admitted, HUD insured loans endorsed by PHH that were not eligible for FHA mortgage insurance under the DEL program, and that HUD would not otherwise have insured. It admitted that HUD subsequently incurred substantial losses when it paid insurance claims on those loans.

 

In addition, from at least 2005 to 2012, PHH was a VA approved lender, originating and underwriting mortgage loans and obtaining VA loan guarantees. The VA helps Servicemembers, Veterans, and eligible surviving spouses become homeowners by guaranteeing a portion of home loans. VA home loans are provided by certain pre-approved private lenders, including banks and mortgage companies. By guaranteeing a portion of the loan, the VA enables the lender to provide Servicemembers, Veterans, and eligible surviving spouses with loan terms that are more favorable than would otherwise be available in the marketplace. In order to qualify for a VA guarantee, borrowers must comply with VA loan requirements. The settlement resolves the United States’ claims and potential claims that PHH originated loans that it submitted for guarantee by the VA that did not meet the VA’s requirements.

 

Also from at least 2009 to 2013, PHH sold mortgage loans to Fannie Mae and Freddie Mac. Congress created the two entities to provide stability and liquidity in the secondary housing market and established the Federal Housing Finance Agency (“FHFA”) to supervise, regulate, and oversee Fannie Mae and Freddie Mac, as well as the Federal Home Loan Bank System. Since 2008, in response to the substantial deterioration in the housing markets that severely damaged Fannie Mae and Freddie Mac’s financial condition, Fannie Mae and Freddie Mac have been operating under a government conservatorship. The settlement resolves the United States’ contentions that PHH originated and sold loans to the Freddie Mac and Fannie Mae that did not meet their requirements.

 

“This case demonstrates HUD’s resolve in protecting the integrity of its mortgage insurance programs for the benefit of all Americans, and in particular, first time homebuyers,” said Dane Narode, HUD’s Associate General Counsel for Program Enforcement. “We are gratified that PHH has accepted responsibility for its actions.”

 

“This settlement resolves allegations of reckless origination and underwriting of VA guaranteed mortgage loans,” said Michael J. Missal, Inspector General, for the Office of Inspector General for the Department of Veterans Affairs (VA OIG). “It sends a clear message that the VA OIG will aggressively protect the integrity of this crucial program which helps so many of our veterans buy, build, or repair their homes. I would also like to thank the U.S. Attorney's Offices for partnering with us to achieve this significant result.”

 

Some of the allegations resolved by these settlements included in a whistleblower lawsuit filed under the False Claims Act by a former employee of PHH, Mary Bozzelli against PHH Corp. and PHH Mortgage Corp. Under the False Claims Act, private citizens can sue on behalf of the government and share in any recovery. Ms. Bozzelli will receive $9,067,377.33 from the settlements.

 

The settlements were the result of joint investigations conducted by HUD, the HUD Office of Inspector General, the Veterans Administration’s Office of Inspector General, the FHFA Office of Inspector General, the Department of Justice’s Civil Division, and the U.S. Attorney’s Offices for the District of Minnesota, District of New Jersey, Southern District of Florida, and Eastern District of New York. The qui tam action is captioned United States ex rel. Mary Bozzelli v. PHH Mortgage Corporation and PHH Corporation, 13-cv-3084 (E.D.N.Y.). The claims asserted against PHH are allegations only, and there has been no determination of liability.

 

 

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United States Attorney’s Office, District of Minnesota: (612) 664-5600