District of Minnesota

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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A Russian citizen was sentenced today for his participation in a criminal enterprise that installed and exploited malicious computer software (malware) on tens of thousands of computer servers throughout the world to generate millions of dollars in fraudulent payments.  Acting Assistant Attorney General Kenneth A. Blanco of the Department of Justice’s Criminal Division, Acting 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.

“The defendant and his co-conspirators sought to turn a network of thousands of infected computers in the United States and around the world into their personal cash machines,” said Acting Assistant Attorney General Blanco.  “But cybercriminals like Mr. Senakh should take heed: they are not immune from U.S. prosecution just because they operate from afar or behind a veil of technology.  We have the ability and the determination to identify them, find them, and bring them to justice.”

“Working within a massive criminal enterprise, Maxim Senakh helped create a sophisticated infrastructure that victimized thousands of Internet users across the world,” said Acting U.S. Attorney Brooker.  “As society becomes more reliant on computers, cybercriminals like Senakh pose a serious threat. This Office, along with our law enforcement partners, are committed to detecting and prosecuting cybercriminals no matter where they reside.”

“The sentence handed down today sends a strong message to international cyber criminals who mistakenly believe they can prey on the American people with impunity,” said Special Agent in Charge Thornton.  “The FBI is committed to working closely with our global law enforcement partners to investigate criminal enterprises such as this and hold those responsible to account for their crimes wherever they may be.”

Maxim Senakh, 41, of Veliky Novgorod, Russia, was sentenced to 46 months in prison and will be deported following his release from prison.   Senakh pleaded guilty on March 28, to conspiracy to commit wire fraud and to violate the Computer Fraud and Abuse Act.  He was indicted on Jan. 13, 2015, and was subsequently arrested by Finnish authorities, who extradited him to the U.S. in February 2016.

According to admissions made in connection with the plea agreement, the malware, which is known as Ebury, harvested log-on credentials from infected computer servers, allowing Senakh and his co-conspirators to create and operate a botnet comprising tens of thousands of infected servers throughout the world, including thousands in the U.S.  Senakh and his co-conspirators used the Ebury botnet to generate and redirect internet traffic in furtherance of various click-fraud and spam e-mail schemes, which fraudulently generated millions of dollars in revenue.  As part of his plea, Senakh admitted that he supported the criminal enterprise by creating accounts with domain registrars that helped develop the Ebury botnet infrastructure and personally profited from traffic generated by the Ebury botnet.

The FBI Minneapolis Field Office investigated this case. Senior Counsels Aaron Cooper and Benjamin Fitzpatrick of the Criminal Division’s Computer Crime and Intellectual Property Section and former Assistant U.S. Attorney Kevin Ueland of the District of Minnesota prosecuted the case. The government of Finland, the Bundeskriminalamt (BKA), CERT-Bund and the cyber security firm ESET all provided substantial assistance in this case.  The Criminal Division’s Office of International Affairs also provided substantial assistance.

A Russian citizen was sentenced today for his participation in a criminal enterprise that installed and exploited malicious computer software (“malware”) on tens of thousands of computer servers throughout the world to generate millions of dollars in fraudulent payments. Acting Assistant Attorney General Kenneth A. Blanco of the Department of Justice’s Criminal Division, Acting 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.

U.S. District Judge Patrick J. Schlitz of the District of Minnesota sentenced Maxim Senakh, 41, of Veliky Novgorod, Russia, to 46 months’ imprisonment. Senakh pleaded guilty on March 28, to conspiracy to commit wire fraud and to violate the Computer Fraud and Abuse Act. He was indicted on Jan. 13, 2015, and was subsequently arrested by Finnish authorities, who extradited him to the U.S. in February 2016.

According to admissions made in connection with the plea agreement, the malware, which is known as Ebury, harvested log-on credentials from infected computer servers, allowing Senakh and his co-conspirators to create and operate a botnet comprising tens of thousands of infected servers throughout the world, including thousands in the U.S. Senakh and his co-conspirators used the Ebury botnet to generate and redirect internet traffic in furtherance of various click-fraud and spam e-mail schemes, which fraudulently generated millions of dollars in revenue. As part of his plea, Senakh admitted that he supported the criminal enterprise by creating accounts with domain registrars that helped develop the Ebury botnet infrastructure and personally profited from traffic generated by the Ebury botnet.

“The defendant and his co-conspirators sought to turn a network of thousands of infected computers in the United States and around the world into their personal cash machines,” said Acting Assistant Attorney General Blanco. “But cybercriminals like Mr. Senakh should take heed: they are not immune from U.S. prosecution just because they operate from afar or behind a veil of technology. We have the ability and the determination to identify them, find them, and bring them to justice.”

“Working within a massive criminal enterprise, Maxim Senakh helped create a sophisticated infrastructure that victimized thousands of Internet users across the world,” said Acting U.S. Attorney Brooker. “As society becomes more reliant on computers, cybercriminals like Senakh pose a serious threat. This Office, along with our law enforcement partners, are committed to detecting and prosecuting cybercriminals no matter where they reside.”

“The sentence handed down today sends a strong message to international cyber criminals who mistakenly believe they can prey on the American people with impunity,” said Special Agent in Charge Thornton. “The FBI is committed to working closely with our global law enforcement partners to investigate criminal enterprises such as this and hold those responsible to account for their crimes wherever they may be.”

The FBI Minneapolis Field Office investigated this case. Former Assistant U.S. Attorney Kevin Ueland of the District of Minnesota and Senior Counsels Aaron Cooper and Benjamin Fitzpatrick of the Criminal Division’s Computer Crime and Intellectual Property Section prosecuted the case. The government of Finland, the Bundeskriminalamt (BKA), CERT-Bund and the cyber security firm ESET all provided substantial assistance in this case. The Criminal Division’s Office of International Affairs also provided substantial assistance.

Defendant Information:

MAXIM SENAKH, 41

Veliky Novgorod, Russia

Convicted:

• Conspiracy to Violate the Computer Fraud and Abuse Act, and to Commit Wire Fraud, 1 count

Sentenced:

• 46 months in prison

   

   

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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 guilty plea of LUIS MANUEL SANCHEZ-LOPEZ for conspiracy to possess with intent to distribute more than 100 pounds of methamphetamine. SANCHEZ-LOPEZ entered his guilty plea today before U.S. District Judge Ann D. Montgomery in Minneapolis, Minn.

SANCHEZ-LOPEZ is the last of three defendants to plead guilty to a March 2017 indictment. Co-defendants ABRAHAM SUAZO and ARTURO JUAREZ MADRIGAL entered their guilty pleas in U.S. District Court on May 15, 2017, and June 15, 2017, respectively.

“To the best of our knowledge, this was the largest single seizure of methamphetamine destined for Minnesota this year,” said Assistant U.S. Attorney Bradley Endicott. “One-hundred pounds of methamphetamine represents an indescribable harm to the community. The Department of Homeland Security and our local law enforcement partners deserve great credit for their investigative efforts and success in taking these dangerous drugs off the street.”

According to the defendants’ guilty pleas and documents filed in court, on February 8, 2017, the South Dakota State Patrol stopped a vehicle that contained approximately 92 pounds of methamphetamine. The driver, SUAZO, was transporting the methamphetamine from California to JUAREZ-MADRIGAL’S house in Eagan, Minn. Following a controlled delivery, law enforcement agents executed a search warrant at the house and were able to recover an additional 9.6 pounds of methamphetamine and $118,500 in U.S. currency. At the time of the search, SANCHEZ-LOPEZ was also in the house and had used various chemicals, including acetone, to “wash” the methamphetamine to make it clear or white.

All three defendants face a 10-year mandatory minimum prison sentence.

This case is the result of an investigation conducted by Homeland Security Investigations, the Drug Enforcement Administration, the South Dakota Division of Criminal Investigation, the Pennington County Sheriff’s Department, the Rapid City Police Department, the St. Paul Police Department, the Minneapolis Police Department, and the South Dakota State Patrol.

This case is being prosecuted by Assistant United States Attorney Bradley M. Endicott.

Defendant Information:

ABRAHAM SUAZO, 36

Unknown

Convicted:

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

ARTURO JUAREZ MADRIGAL, D.O.B. unknown

Eagan, Minn.

Convicted:

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

LUIS MANUEL SANCHEZ-LOPEZ, D.O.B. unknown

Eagan, Minn.

Convicted:

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

   

   

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Acting United States Attorney Gregory G. Brooker announced the sentencing of JAMES LESTER PARAMORE, 45, for distribution of child pornography. PARAMORE pleaded guilty on February 9, 2017, to one count of distribution of child pornography. On July 27, 2017, United States District Judge Donovan W. Frank sentenced PARAMORE to 136 months in federal prison and 25 years of supervised release.

According to the defendant’s guilty plea and documents filed in court, in June 2016, the Minnesota Bureau of Criminal Apprehension (BCA) received a cybertip from the National Center for Missing and Exploited Children (NCMEC) in reference to a Flickr account containing child pornography. After further investigation, the BCA was able to determine that PARAMORE was the account holder of the reported Flickr account and a search warrant was executed on the defendant’s home in Lake Bronson, Minn.

According to the defendant’s guilty plea and documents filed in court, PARAMORE admitted to being the Flickr account holder and to possessing, viewing and uploading child pornography using a VPN encryption in an attempt to prevent law enforcement from detecting his illegal activities. As a result of the search warrant, law enforcement agents found in PARAMORE’S home and on his computer and cell phone hundreds of images and video files containing child pornography, extensive Facebook conversations about child pornography websites, and electronic bookmarks and handwritten logs of child pornography websites. PARAMORE also kept detailed notes on how to prevent law enforcement from detecting his child pornography activities through the use of VPN, proxy servers, and encryption tools.

This case was brought as 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 federal, state, and local resources to locate, apprehend, and prosecute individuals who sexually exploit children and identify and rescue 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.”

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

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

Defendant Information:

JAMES LESTER PARAMORE, 45

Lake Bronson, Minn.

Convicted:

• Distribution of Child Pornography, 1 count

Sentenced:

• 136 months in prison

• 25 years supervised release

   

   

   

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of WILLIAM LEONARD HELKER, 47, for distribution of child pornography. HELKER pleaded guilty on March 3, 2017, to one count of distribution of child pornography. On July 27, 2017, United States District Judge Patrick J. Schiltz sentenced HELKER to 150 months in federal prison and 15 years of supervised release.

“Helker is a dangerous child predator who disguised himself as a youth pastor. Instead of providing guidance to young people, he used his position as a trusted leader to prey upon them,” said Assistant United States Attorney Katharine Buzicky. “This sentence recognizes the disturbing nature of Helker’s actions and his appalling betrayal of community trust.”

“This child sexual exploitation case originated in Finland with the arrest there of another child predator,” said J. Alex Khu, special agent in charge of HSI St. Paul. “In addition to our nationwide offices, Homeland Security Investigations operates 62 offices in 46 countries to work with our international law enforcement partners to identify and investigate cases like this. There is no anonymity on the internet, and there’s no place on the planet where child predators can hide.”

“The Bureau of Criminal Apprehension will not tolerate those who betray the trust of a child through abhorrent crimes like those committed by Mr. Helker,” said BCA Superintendent Drew Evans. “Holding him accountable for his actions in no way undoes he harm he’s done, but will prevent him from hurting even more children.”

According to the defendant’s guilty plea and documents filed in court, on October 22, 2016, Homeland Security Investigations (HSI) and the Minnesota Bureau of Criminal Apprehension (BCA) received a cybertip from the National Center for Missing and Exploited Children (NCMEC) indicating that a Minnesota man exchanged child pornography with and individual in Finland. The cybertip was listed as “Priority 1” because NCMEC assessed that children were currently in danger. Through a joint investigation, BCA and HSI agents were able to identify the Minnesota man as WILLIAM HELKER, a youth pastor in Cottage Grove, Minn.

According to the defendant’s guilty plea and documents filed in court, HELKER admitted to sending sexually explicit images of prepubescent children to individuals using social media. HELKER also admitted to engaging in sexually explicit online chat conversations with someone who described herself as a 14-year-old as well as possessing thousands of image and video files containing child pornography. Additionally, HELKER admitted to creating sexually explicit collages using ordinary snapshots of real minors and superimposing the photographs onto pornographic images.

This case was prosecuted by Assistant United States Attorney Katharine T. Buzicky

This case is the result of an investigation conducted by the Homeland Security Investigations-St. Paul, the Minnesota Bureau of Criminal Apprehension and originated with a cybertip from the European Police Office and the National Center to Missing and Exploited Children.

This case was brought as 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 federal, state, and local resources to locate, apprehend, and prosecute individuals who sexually exploit children and identify and rescue 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:

WILLIAM LEONARD HELKER, 47

Pine City, MN

Convicted:

• Distribution of Child Pornography, 1 count

Sentenced:

• 150 months in prison

• 15 years supervised release

   

   

   

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of JEREMY DAVID MOUNT, 41, for producing and receiving child pornography. MOUNT, who pleaded guilty on February 9, 2017, was sentenced on July 27, 2017, before U.S. District Judge Susan Richard Nelson in U.S. District Court in St. Paul, Minn.

“This case exemplifies what can be achieved when law enforcement agencies- nationally and internationally- work together to stop a predator,” said Assistant United States Attorney Katharine Buzicky. “These are some of the most difficult types of cases to work, but seeing defendants, like Jeremy Mount, receive just sentences and knowing that one more child is safe from harm makes it all worthwhile.”

“Homeland Security Investigations is committed to bringing to justice those who sexually exploit children,” said Alex Khu, special agent in charge of HSI St. Paul. “Jeremy Mount will be incarcerated for nearly 22 years for his heinous acts. This case exemplifies the long reach of HSI, and its ability to coordinate and pursue investigative efforts with our international law enforcement partners.”

According to the defendant’s guilty plea and documents filed in court, in February 2016, Homeland Security Investigations received a lead from an undercover officer with the Kent Police Department in the United Kingdom regarding an individual who was sharing child pornography images online. After obtaining a search warrant, HSI identified the individual as MOUNT and executed a search warrant of his apartment in Hutchinson. Law enforcement agents identified dozens of child pornography images MOUNT traded and possessed using a computer and email account, as well as a cell phone containing several dozen images of a preschool-age child to whom he had access.

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and CEOS, 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.justice.gov/psc.

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 led by Homeland Security Investigations, with assistance from the Hutchinson Police Department, McLeod County Attorney’s Office, and the Kent Police Department in the United Kingdom.

This case was prosecuted by Assistant U.S. Attorney Katharine T. Buzicky.

Defendant Information:

JEREMY DAVID MOUNT, 41

Hutchinson, Minn.

Convicted:

• Receipt of child pornography, 1 count
• Production and attempted production of child pornography, 1 count

Sentenced:

• 262 months in prison
• 20 years of supervised release

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Acting United States Attorney Gregory G. Brooker announced the sentencing of GREGORY VERNELL BENTLEY, 32, CRAIG VERNARD BENTLEY, 29, and VANESSA LYNNE BROWN, 24, for their roles in a violent heroin distribution ring. All three defendants entered guilty pleas and were sentenced before Senior Judge Michael J. Davis in U.S. District Court.

According to their guilty pleas and documents filed in court, between August 26, 2015 and August 14, 2016, BROWN and CRAIG BENTLEY conspired with others to possess and distribute heroin on the Red Lake Indian Reservation. On August 14, 2016, CRAIG BENTLEY met with BROWN at the Red Lake Casino and dropped off 350 grams of heroin, which BROWN intended to sell. As part of the heroin distribution conspiracy, CRAIG BENTLEY and BROWN made regular trips between the Twin Cities and the Red Lake Indian Reservation to pick up and drop off heroin and cash.

According to his guilty plea and documents filed in court, on August 14, 2016, during an attempt to collect a drug debt in relation to the heroin distribution conspiracy, GREGORY BENTLEY shot an adult male with a 9 mm Smith & Wesson pistol, causing serious bodily harm.

To learn more about the Justice Department’s Tribal Safety program, visit http://www.justice.gov/tribal/.

This case resulted from an investigation conducted by the Red Lake Tribal Police Department and the FBI Headwaters Safe Trails Task Force.

The case was prosecuted by Assistant U.S. Attorney Clifford B. Wardlaw.

Defendant Information:

GREGORY VERNELL BENTLEY, 32

St. Paul, Minn.

Convicted:

• Assault with a dangerous weapon, 1 count

Sentenced:

• 77 months in prison
• Three years of supervised release

CRAIG VERNARD BENTLEY, 29

St. Paul, Minn.

Convicted:

• Conspiracy to distribute and possess with intent to distribute heroin, 1 count

Sentenced:

• 120 months in prison
• Five years of supervised release

VANESSA LYNNE BROWN, 24

Red Lake, Minn.

Convicted:

• Conspiracy to distribute and possess with intent to distribute heroin, 1 count

Sentenced:

• 40 months in prison
• Four years of supervised release

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of MICHAEL TOBAK, 55, to two years in prison for filing a false tax return. TOBAK pleaded guilty on November 7, 2016, and was sentenced on June 29, 2017, before U.S. District Judge Joan N. Ericksen in U.S. District Court in Minneapolis, Minn.

According to the defendant’s guilty plea and documents filed in court, TOBAK operated International Health Care Services (“IHCS”), a non-profit home health care company. TOBAK maintained two business bank accounts that were used to receive payments for services that IHCS provided to Medicaid beneficiaries. TOBAK purposefully omitted from IHCS’s accounting records the activity in one of those bank accounts. TOBAK then used the business income received in that bank account to make payments on his home mortgage, to pay off personal credit cards, and to transfer money to other accounts he controlled, including large transfers to personal investment accounts. In total, between 2006 and 2013, TOBAK obtained approximately $3.3 million in income from IHCS that he did not report on his individual income tax returns. In pleading guilty, TOBAK admitted to willfully filing false income tax returns from 2006 through 2013, causing a total tax loss for all eight years of $1,356,525.

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

Assistant U.S. Attorney John E. Kokkinen prosecuted the case.

Defendant Information:

MICHAEL TOBAK, 55

Wayzata, Minn.

Convicted:

• Filing a false tax return, 1 count

Sentenced:

• 24 months in prison

• One year of supervised release

   

   

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Assistant United States Attorney Gregory G. Brooker today announced the sentencing of BRYAN REICHEL, 62, founder and former President and Chief Executive Officer of PureChoice, Inc. (PureChoice), to 22 years in prison for orchestrating a multi-million-dollar investment fraud scheme. On November 3, 2016, REICHEL, who was charged in a 12-count superseding indictment, was found guilty by a federal jury on 11 of the 12 counts. REICHEL was sentenced earlier today before Judge Wilhelmina M. Wright in U.S. District Court in St. Paul, Minn

“Reichel operated PureChoice solely for his own benefit,” said Acting U.S. Attorney Brooker. “For 18 years straight, through lies, misrepresentations and schemes, Reichel defrauded investors out of millions of dollars simply to enrich himself. Today’s 22 year sentence appropriately underscores Reichel’s momentous and multifaceted criminal conduct.”

“Not only did Bryan Reichel, as a business owner and CEO, take advantage of his investors and steal their hard-earned money, he also engaged in bankruptcy fraud. Concealing assets from the Court was a gross violation of Reichel’s civic duty and undermined the integrity of these important proceedings,” stated Acting Special Agent in Charge Hubbard Burgess of the IRS Criminal Investigation, St. Paul Field Office. “Mr. Reichel deserves the punishment handed down today.”

“Today’s stiff sentence sends a clear message as to how critical a role the U.S. Postal Inspection Service and its law enforcement partners play in protecting the American consumer from these types of fraud schemes,” said Postal Inspector in Charge, Craig Goldberg. “We will continue to protect and ensure the nation’s mail stream is not used by criminals to prey upon our citizens.”

“The sentence handed down today reflects the seriousness of the defendant's crime of defrauding investors,” said Richard T. Thornton, Special Agent in Charge of the FBI Minneapolis Field Office. “The FBI along with our law enforcement partners are committed to ferreting out these types of fraud schemes and holding crooks responsible for their crimes.”

As proven at trial, beginning in 2003 until 2011, REICHEL solicited investments in PureChoice by falsely representing to investors that the money would be used to fund the operations of PureChoice, a Burnsville-based company that sold air quality monitors. As part of the scheme, REICHEL stole millions of dollars from investors by lying about the success of the company and concealing the fact that PureChoice faced defaulted debt that it had no ability to pay.

For example, as proven at trial, in October 2004, REICHEL solicited a $500,000 loan to PureChoice from Victim PH purportedly to fund PureChoice operations until the completion of a private stock offering in early 2005. Rather than using the money to fund PureChoice operations, REICHEL used Victim PH’s funds to pay defaulted PureChoice debt, which REICHEL had personally guaranteed.

As proven at trial, in September 2005, REICHEL solicited a short-term $500,000 “bridge loan” from Victim RB to PureChoice by falsely representing that the money would be used to fund operations until the company received additional financing and investments. Immediately after receiving the loan, REICHEL paid $70,000 to himself and made more than $200,000 in payments toward earlier unpaid loans. In March 2006, REICHEL again asked Victim RB to provide money to fund PureChoice operations, this time in the form of a $3 million line of credit which PureChoice could access through a series of $500,000 loans. Several times between 2006 and 2009, REICHEL several times requested Victim RB to increase the amount, ultimately obtaining more than $5 million in loans for PureChoice from Victim RB. REICHEL used a significant portion of the money to pay off earlier investors, make interest payments to Victim RB, and to make preferential payments to himself.

As proven at trial, between April 2007 and August 2007, REICHEL sold Victim GA $900,000 worth of PureChoice stock, falsely representing that the funds would be used to purchase manufacturing components and to pay for operational expenses. Instead, REICHEL used the funds to purchase stock in other companies and pay personal credit card debt. In May 2008 and July 2008, REICHEL asked Victim GA to provide PureChoice with loans in the amount of $800,000 and $200,000, respectively, stating that the funds were needed to “bridge the gap” until the next round of funding was complete. Again, REICHEL used the majority of the funds for personal use, including the purchase of stock in other companies and paying off thousands of dollars in credit card debt.

As proven at trial, on November 14, 2008, REICHEL sent a sales and marketing update to PureChoice investors and prospective investors in which he made false statements about the company’s corporate agreement with 3M. In the update, REICHEL stated that PureChoice was “currently working to expand [its] existing relationship” with 3M, when, in reality, REICHEL had received notice from 3M of its intent to allow its agreements with PureChoice to expire.

As proven at trial, in September 2009, REICHEL asked Victim GA and Victim DA to provide a $1.5 million loan to PureChoice to purchase manufacturing materials so the company could meet projected sales goals and hire additional staff. In order to secure the loan, REICHEL again misrepresented the company’s relationship with 3M and expressly stated that the funds would be used to purchase products from suppliers. Over the course of four transactions, REICHEL obtained a $1.5 million loan from Victim GA, of which a significant portion was used to pay off earlier investors in PureChoice and to transfer more than $600,000 to himself.

As proven at trial, by June 2010, several of REICHEL’s victims had demanded immediate payment of millions of dollars they had “invested”. To avoid repayment and protect his assets, in April 2011, REICHEL filed for bankruptcy in the District of Minnesota, giving rise to an automatic stay and thereby preventing lawsuits and judgments from being entered by the victims. As part of the scheme, REICHEL made false statements in his bankruptcy case in order to conceal numerous items of personal property and thousands of dollars in personal accounts.

This case was prosecuted by Assistant U.S. Attorneys David J. MacLaughlin and Joseph H. Thompson.

This case was the result of an investigation conducted by the United States Postal Inspection Service, the Internal Revenue Service-Criminal Investigations, and the Federal Bureau of Investigation.

Defendant Information:

BRYAN REICHEL, 62

Prior Lake, MN

Convicted:

• Wire Fraud, 7 counts

• Bankruptcy Fraud, 3 counts

• False Statement Under Penalty of Perjury, 1 count

Sentenced:

• 264 months in prison

• Three years supervised release

• $22,346,066 in restitution to victims

• $7,669,731 forfeiture judgment

   

   

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of four individuals for their roles in a methamphetamine distribution conspiracy. MIGUEL RIOS-QUINTERO, 26, HERNESTO JESUS MONTES, 22, ERIVAN ARGENIX GOMEZ, 21, and HANNAH LEE DALTON, 26, all pleaded guilty to one count of conspiracy to distribute methamphetamine and have been sentenced before Senior Judge Michael J. Davis in U.S. District Court in Minneapolis, Minn.

According to the defendants’ guilty pleas and documents filed in court, in March 2016, the four defendants conspired to distribute methamphetamine throughout the Leech Lake Indian Reservation and surrounding areas. On March 8, 2016, law enforcement officers conducted two simultaneous traffic stops of two vehicles traveling together from the Leech Lake Indian Reservation. As a result of the traffic stops on the two vehicles - occupied by RIOS-QUINTERO, MONTES, and GOMEZ - law enforcement officers seized more than 1,400 grams of methamphetamine that had been thrown into a wooded area, approximately 3.5 pounds of marijuana, and more than $5,000 in cash. That same day, upon execution of a search warrant of co-defendant DALTON’S residence, law enforcement officers recovered an additional 452 grams of methamphetamine.

This case is the result of an investigation conducted by the Red Lake Tribal Police Department, FBI Headwaters Safe Trails Task Force, Paul Bunyan Drug Task Force, Leech Lake Police Department, Minnesota Bureau of Criminal Apprehension, and the Bureau of Indian Affairs.

Assistant U.S. Attorney Deidre Y. Aanstad prosecuted this case.

Defendant Information:

MIGUEL RIOS-QUINTERO, 26

Minneapolis, MN

Convicted:

• Conspiracy to distribute methamphetamine, 1 count

Sentenced:

• 108 months in prison

• Three years of supervised release

HERNESTO JESUS MONTES, 22

Brooklyn Park, Minn.

Convicted:

• Conspiracy to distribute methamphetamine, 1 count

Sentenced:

• 60 months in prison

• Three years of supervised release

ERIVAN ARGENIX GOMEZ, 21

Minneapolis, Minn.

Convicted:

• Conspiracy to distribute methamphetamine, 1 count

Sentenced:

• 78 months in prison

• Three years of supervised release

HANNAH LEE DALTON, 26

Cass Lake, Minn.

Convicted:

• Conspiracy to distribute methamphetamine, 1 count

Sentenced:

• 78 months in prison

• Three years of supervised release

###

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Acting United States Attorney Gregory G. Brooker announced the sentencing of OMAR ZIAD WAZWAZ, 35, and VLADIMIR VLADIMIROVIC BRIK, 27, for conspiring to distribute synthetic cannabinoids. WAZWAZ and BRIK, who were charged in a superseding indictment on September 15, 2015, both pleaded guilty to one count of conspiracy to distribute and possession with intent to distribute controlled substance analogues. BRIK also pleaded guilty to one count of conspiracy to commit money laundering. WAZWAZ and BRIK were sentenced on May 24, 2017, and June 23, 2017, respectively, before Judge Susan Richard Nelson in U.S. District Court in St. Paul, Minn. Six additional defendants were also charged in this case as part of the same synthetic drug trafficking conspiracy, pleaded guilty, and have been sentenced by the Court.

“It is important for the public to know that all synthetic drugs, including the synthetic cannabinoids involved in this case, are illegal and extremely dangerous,” said Acting U.S. Attorney Brooker. “I want to thank the investigators and prosecutors who have worked diligently to keep Minnesotans safe by shutting this down.”

“Smokable synthetic drugs known more commonly as “Spice” and “K2” have plagued Minnesota and the nation for years,” said DEA Minneapolis-St. Paul Division Assistant Special Agent in Charge Kenneth Solek. “The brand developed and marketed by the Wazwaz/Brik drug trafficking organization, known as ‘Kryptonite’ was marketed as a safe and harmless substance. In reality, these drugs contain dangerous chemicals that put users at an extreme risk of suffering adverse health consequences, including death. These drugs have no place in our society. The DEA is committed to protecting society from dangerous drugs and will continue to pursue peddlers of synthetic drugs and hold them accountable for the harms they cause.”

“This investigation could not have been accomplished without the law enforcement community working together to dismantle this organization. IRS Criminal Investigation, along with its law enforcement partners and the U.S. Attorney’s Office, worked tirelessly to stop this massive synthetic drug ring from making and selling more illicit drugs”, stated Acting Special Agent in Charge Hubbard Burgess of the IRS Criminal Investigation St. Paul Field Office. Hopefully, the lengthy sentences these defendants received will deter others from committing similar crimes.”

According to the defendants’ guilty pleas and documents filed in court, WAZWAZ, BRIK and their coconspirators imported pure synthetic cannabinoids from overseas using intentionally false U.S. Customs declarations forms, manufactured Smokable Synthetic Cannabinoids (“SSCs”) by combining those chemicals with herbal material, and then marketed the SSCs in misbranded packages that falsely claimed the drugs were “not for human consumption.” The conspiracy’s “Kryptonite” brand of SSCs retailed through Wazwaz’s smoke shops in Minnesota and elsewhere, and online through websites such as www.herbz4less.com, wholesaled by phone and mail order to retailers throughout the United States. Additionally, as part of the conspiracy, BRIK and others transferred by wire transfers, credit card transactions, and PayPal payments tens of thousands of dollars to locations outside the United States to pay for the synthetic cannabinoids and other supplies. The conspiracy manufactured and distributed approximately 2,408 kilograms of SSCs, yielding approximately $9,720,032 in gross sales revenue for the coconspirators.

To date, all eight members of the conspiracy have pleaded guilty and have been sentenced.

This case is the result of an investigation conducted by the Minnesota River Valley Drug Task Force, the U.S. Drug Enforcement Administration, the Internal Revenue Service – Criminal Investigation Division, the U.S. Food and Drug Administration, U.S. Customs and Border Protection, and Homeland Security Investigations.

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

Defendant Information:

OMAR ZIAD WAZWAZ, 35

New Brighton, Minn.

Charges:

• Conspiracy to Distribute and Possession with Intent to Distribute Controlled Substance Analogues, 1 count

Sentenced:

• 118 months in prison

• Three years of supervised release

VLADIMIR VLADIMIROVIC BRIK, 27

Duluth, Minn.

Charges:

• Conspiracy to Distribute and Possession with Intent to Distribute Controlled Substance Analogues, 1 count

• Money Laundering Conspiracy, 1 count

Sentenced:

• 118 months in prison

• Three years of supervised release

   

   

   

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of three members of the Mustafa family crime organization for their roles in a multi-million dollar conspiracy to traffic stolen cellular phones and other electronic devices. KANAN T. MUSTAFA, 40, JAMAL MUSTAFA, 45, and NIZAR MOHAMAD MUSTAFA, 26, were sentenced this week before Chief Judge John R. Tunheim in U.S. District Court in Minneapolis, Minn.

“These three brothers were high-level members of the Mustafa Organization,” said Acting United States Attorney Gregory Brooker. “The Twin Cities was the hub for their criminal operations, but the organization trafficked in millions of dollars in stolen cell phones and electronics across the nation and overseas. The strategic cooperation and collaborative work of our law enforcement partners, has dismantled this crime ring, and these three defendants, among other co-defendants, will serve lengthy prison sentences.”

“Not only did these individuals commit crimes related to the purchase and sale of stolen cellular telephones, they also committed several tax fraud crimes, such as failure to file tax returns, preparation of false W-2s, and filing of false claims for tax refunds. This investigation was truly a coordinated effort by several members of law enforcement and the U.S. Attorney’s Office to bring this criminal organization down,” stated Acting Special Agent in Charge Hubbard Burgess of the IRS Criminal Investigation, St. Paul Field Office.

"This case is about more than cell phones being stolen. It is about a complex crime ring stealing identities and people's good names for criminal gain,” said Saint Paul Police Chief Todd Axtell. “The collaborative work that went into investigating, indicting and bringing these individuals to justice is impressive and will likely prevent much more crime in the future, which will protect others from becoming victims.”

According to the defendants’ guilty pleas and documents filed in court, from at least 2006 through 2014, KANAN, JAMAL, NIZAR, and other members of the Mustafa family and their associates used stolen identity information and other criminal means to obtain at least $20 million of cellular telephones and other mobile devices for the purpose of trafficking them throughout the United States and overseas. KANAN, JAMAL, NIZAR, and three other Mustafa brothers owned and operated 13 mobile device stores in the Twin Cities metropolitan area, which were used to buy illegally obtained mobile devices. Members of the Mustafa Organization paid runners to steal mobile devices or obtain them fraudulently using stolen identification documents. They re-sold the stolen phones and tablets for substantial profits that were then distributed among themselves and used to pay for rent, utilities, payroll and other expenses to keep their stores in business and promote the criminal activity.

According to the defendants’ guilty pleas and documents filed in court, KANAN, JAMAL, NIZAR, and other members of the Mustafa Organization falsified loan applications and provided false documentation to get loans for vehicles that they used to transport stolen devices and the proceeds of their criminal activity. KANAN, JAMAL, NIZAR, and other members of the Mustafa Organization also made fraudulent credit card transactions to steal from credit card processing companies and used the proceeds to buy more cell phones, to pay operating expenses for the wireless stores, and to fund their personal expenses.

According to the defendants’ guilty pleas and documents filed in court, from at least 2010 through 2014, KANAN, JAMAL, NIZAR, and other members of the Mustafa Organization also conspired to defraud the IRS through numerous fraud schemes. For example, the defendants regularly paid themselves in cash, failed to file tax returns, filed false claims for tax refunds, failed to maintain financial business records, and prepared false W-2s or did not prepare W-2s at all.

To date, all 21 members of the conspiracy have entered guilty pleas before Chief Judge John R. Tunheim. Twenty of the 21 defendants have been sentenced.

Assistant U.S. Attorney Karen Schommer and former Assistant U.S. Attorney Steve Schleicher prosecuted this case.

This case is the result of an investigation conducted by the St. Paul Police Department, United States Secret Service, University of Minnesota Police Department, Minnesota Department of Public Safety and Bureau of Criminal Apprehension, Minnesota Financial Crimes Task Force, United States Postal Inspection Service, Internal Revenue Service Criminal Investigations, Homeland Security Investigations, Edina Police Department, Minneapolis Police Department, Plymouth Police Department, Federal Bureau of Investigation, and the United States Marshal’s Service.

Defendant Information:

KANAN T. MUSTAFA a/k/a “Kenny,” 40

Rosemount, MN

Convicted:

• Conspiracy to Engage in Interstate Transportation of Stolen Goods, 1 count
• Conspiracy to Defraud the Government With Respect to Claims, 1 count

Sentenced:

• 130 months in prison

• Three years of supervised release

• $1,015,901.33 in restitution

JAMAL TALAL MUSTAFA, a/k/a “Jimmy,” 43

Apple Valley, Minn.

Convicted:

• Conspiracy to Engage in Interstate Transportation of Stolen Goods, 1 count
• Conspiracy to Defraud the Government With Respect to Claims, 1 count

Sentenced:

• 87 months in prison

• Three years of supervised release

• $1,015,901.33 in restitution, $11,482.00 to the IRS

NIZER M MUSTAFA, a/k/a “Shaggy,” a/k/a “Mike,” 29

Savage, Minn.

Convicted:

• Conspiracy to Engage in Interstate Transportation of Stolen Goods, 1 count
• Conspiracy to Defraud the Government With Respect to Claims, 1 count

Sentenced:

• 87 months in prison

• Three years of supervised release

• $1,015,901.33 in restitution, $32,323.00 to the IRS

   

   

   

   

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of a former United States Tax Court judge and her husband for conspiring to defraud the United States. DIANE L. KROUPA, 61, was sentenced to 34 months in prison and ROBERT E. FACKLER, 63, was sentenced to 24 months in prison. Both defendants entered guilty pleas and were sentenced earlier today before Judge Wilhelmina M. Wright in U.S. District Court in St. Paul, Minn. In addressing KROUPA’S extensive tax fraud committed while a sitting US Tax Court Judge, Judge Wright stated, “When a person in a position of trust violates that trust, the public is a victim,” and further noted that KROUPA’S fraud undermined the trust in the justice system.

“Over a nearly ten-year period, the defendants engaged in a deliberate and brazen tax fraud scheme,” said Acting United States Attorney Gregory Brooker. “Considering Ms. Kroupa’s position of public trust as a US Tax Court Judge, her crime is particularly egregious. Ms. Kroupa used her knowledge of the tax laws to further their fraud scheme, conceal their criminal conduct and maintain their acquisitive lifestyle. The sentences handed down today show that no one is above the law.”

“Diane Kroupa held a position of public trust as a federal tax court judge and made rulings based on the very tax laws she broke. She broke that trust when she thought she was above the law and committed the same crimes as those who appeared before her in court over the past decade,” said Hubbard Burgess, Acting Special Agent in Charge, IRS-Criminal Investigation. “Everyone in society must play by the same rules and IRS-CI will protect the integrity of the tax system by ensuring everyone pays their fair share, including federal officials.”

“The Postal Inspection Service will aggressively investigate all individuals, regardless of your job title, who chose to commit fraud. Today’s sentencing of Ms. Kroupa, a former U.S. Tax Court Judge, should send a clear message to those individuals contemplating committing fraud by using the US Mails. Don’t do it,” said Craig Goldberg, Postal Inspector in Charge of the Denver Division which covers the Twin Cities.

According to the plea agreement and documents filed in court, KROUPA was a former judge who was appointed to the United States Tax Court on June 13, 2003 for a term of 15 years. During the same period, KROUPA was married to FACKLER, a self-employed lobbyist and political consultant who owned and operated a business known as Grassroots Consulting. From 2004 to 2013, KROUPA and FACKLER owned a home in Plymouth, Minnesota. From 2007 to 2013, they also leased a second residence in Easton, Maryland, where KROUPA lived while fulfilling her duties as a Tax Court Judge in Washington DC.

According to the plea agreement and documents filed in court, between 2002 and 2012, KROUPA and FACKLER conspired to obstruct the Internal Revenue Service (IRS) from accurately determining their joint income taxes. As part of the conspiracy, KROUPA and FACKLER worked together each year to compile numerous personal expenses for inclusion as supposed “business expenses” for Grassroots Consulting in their joint tax return. Those expenses included: rent and utilities for the Maryland home; utilities, upkeep and renovation expenses of the Minnesota home; pilates classes; spa and massage fees; jewelry and personal clothing; wine club fees; Chinese language tutoring; music lessons; personal computers; and expenses for vacations to Alaska, Australia, the Bahamas, China, England, Greece, Hawaii, Mexico and Thailand. In total, from 2004 through 2010, the defendants fraudulently deducted at least $500,000 of personal expenses as purported Schedule C business expenses. At times, KROUPA prepared and provided to FACKLER summaries of personal expenses falsely described according to business expense categories. On other occasions, KROUPA herself compiled and provided to their tax preparer the fraudulent personal expenses.

According to the plea agreement and documents filed in court, as part of the conspiracy, FACKLER also caused Grassroots Consulting business receipts to be understated by approximately $450,000 by fraudulently deducting purported business expenses which had previously been reimbursed. As a result, the defendants caused the amount of adjusted gross income, taxable income, and total tax shown on their income tax returns to be falsely understated.

According to the plea agreement and documents filed in court, KROUPA and FACKLER made a series of other false claims on their tax returns, including failing to report approximately $44,520 that she received from a 2010 land sale in South Dakota. The defendants also falsely claimed financial insolvency to avoid paying tax on $33,031 on cancellation of indebtedness income.

According to the plea agreement and documents filed in court, KROUPA and FACKLER purposely concealed documents from their tax preparer and an IRS Tax Compliance Officer during an audit for their 2004 and 2005 tax returns. During a second audit in 2012, KROUPA and FACKLER caused false and misleading documents to be delivered to an IRS employee in order to convince the IRS employee that certain personal expenses were actually business expenses of Grassroots Consulting. After the IRS requested documents pertaining to their tax returns, KROUPA and FACKLER removed certain items from their personal tax files before giving them to their tax preparer because the documents could reveal they had illegally deducted numerous personal expenses. During the audit, KROUPA also falsely denied receiving money from the 2010 land sale. Later, when they learned the 2012 audit might progress into a criminal investigation, KROUPA instructed FACKLER to lie to the IRS about her involvement in preparing the portion of their tax returns related to Grassroots Consulting.

According to the plea agreement and documents filed in court, between 2004 and 2010, KROUPA and FACKLER purposely understated their taxable income by approximately $1,000,000 and purposely understated the amount of tax they owed by at least $450,000.

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

Assistant U.S. Attorneys Benjamin Langner and Timothy Rank prosecuted the case.

Defendant Information:

DIANE L. KROUPA, 61

Minnetonka, Minn.

Convicted:

• Conspiracy to Defraud the United States, 1 count

Sentenced:

• 34 months in prison

• Three years of supervised release

• $457,104 joint restitution

ROBERT E. FACKLER, 63

Minnetonka, Minn.

Convicted:

• Obstruction of an IRS audit, 1 count

Sentenced:

• 24 months in prison

• One year of supervised release

• $457,104 joint restitution

###

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Acting United States Attorney Gregory G. Brooker today announced the conviction of RONALD DAVID JOHNSON, 51, for stealing more than $2.1 million from victims who were hoping to invest successfully in the North Dakota oil boom. JOHNSON, who was charged in a superseding indictment with nine counts of wire fraud and one count of money laundering, was found guilty on all counts by a federal jury in St. Paul, Minn.

Assistant U.S. Attorney Joseph H. Thompson wrote: “Ron Johnson saw the North Dakota oil boom as an opportunity to steal from people looking to invest in the Bakken. Under the guise of a fake company, Johnson defrauded investors, including a former girlfriend and his own church pastor, out of more than $2 million. Fortunately, after just two hours of deliberation, the jury recognized Johnson for the selfish fraud he committed and convicted him on all counts.”

FBI Minneapolis Division Special Agent in Charge, Richard T. Thornton said, “Mr. Johnson is a classic con-man who lured investors with empty promises of financial gain and false assurances to provide housing to hard working oil workers. In reality, Mr. Johnson stole millions to support his expensive hobbies and line his pockets. The FBI is committed to identifying these types of fraudsters, bringing them to justice, and getting restitution for the victims.” Thornton added that, “The FBI is pleased with the jury’s decision and grateful for their service.”

“The guilty verdict of Ronald Johnson again emphasizes that we and our law enforcement partners will continue our aggressive pursuit of those who defraud and harm investors,” said Hubbard Burgess, IRS Criminal Investigation Special Agent in Charge, St. Paul Field Office. “We are proud to work with the U.S. Attorney’s Office to investigate and prosecute individuals who attempt to enrich themselves by fraudulent means, and to help put a stop to investment schemes and other types of white collar crime.”

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 is being 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

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From the outset, this case has been closely monitored by the Department of Justice. An experienced career prosecutor with the United States Attorney's Office for the District of Minnesota was cross designated to assist the state prosecution team. We determined that this course of action was the strongest available avenue for a prosecution, given the higher level of intent required under the applicable federal criminal civil rights law. In the wake of today’s verdict, we are assessing whether any additional federal review is justified.

Acting United States Attorney Gregory G. Brooker today announced the sentencing of DEUVONTAY SHELBY CHARLES, 22, to 36 years in prison for sex trafficking three minor girls and for producing and receiving child pornography of two minor girls. CHARLES was indicted on March 7, 2016, and on December 14, 2016, was convicted by a federal jury on 20 of 23 counts.

“Deuvontay Charles repeatedly victimized and abused vulnerable young girls with no remorse or acceptance of responsibility for his crimes,” said Acting United States Attorney Gregory G. Brooker. “Today, the court sentenced Charles to thirty-six years in prison and justice has been served for the victims, their families and the community. Importantly, through the dedicated efforts of law enforcement, he cannot harm another girl.”

“This case represents another successful collaborative effort by law enforcement to help victims and lock up bad guys,” said James Stuart, Anoka County Sheriff. “The trafficker’s evil actions are motivated by greed and show his willingness to destroy the lives of others for profit. This crime must continue to be brought into the open, pursued aggressively and prosecuted to the fullest extent of the law. We are very happy to continue being a part of that process!”

As proven at trial, a concerned mother reached out to the Anoka County Sheriff’s Office in July 2015 to report that CHARLES was recruiting her 17-year-old daughter to engage in prostitution. In the defendant’s private messages, he described how her daughter could “make money” and promised travel to Las Vegas and that “life will be smooth sailing.” He told her that he would provide condoms and protect her from the “clients.” CHARLES also instructed her to call him “Daddy.”

That initial report led to law enforcement identifying additional juvenile victims. A 14-year-old girl identified that CHARLES had requested sexually-explicit images of her. Between July 2 and July 4, 2015, eight images displaying the child’s genitals were sent online to CHARLES. As proven at trial, CHARLES also sent two pornographic images of an adult female and instructed the 14-year-old victim to send pictures of herself in those similar sexual poses.

Another 14-year-old victim was identified who was trafficked by CHARLES and who CHARLES used to produce sexually-explicit images in July 2015. CHARLES asked the victim to make a video of herself engaged in sexual acts. CHARLES also recruited that victim to engage in prostitution activity for him, asking if she wanted “to make money.” When asked what he meant, CHARLES replied “sex.” Knowing she was only 14 years old, CHARLES responded that while she is “kinda young,” there would be a lot of money to make.

As proven at trial, CHARLES also sent messages to another 17-year-old victim about making “quick money.” On August 21, 2015, CHARLES picked up the victim in Blaine, Minnesota, posted her as an “escort” on backpage.com, and trafficked her through August 26, 2015. CHARLES made her available for commercial sex acts at a hotel in Bloomington, Minnesota, in a room he paid for in cash and registered for under a different name. As proven at trial, CHARLES received money from the victim as a result of the sex acts that he arranged for her.

As proven at trial, when he committed these offenses, CHARLES was a registered sex offender based on a 2014 conviction in Dakota County for soliciting a child to engage in sexual conduct.

This case is the result of an investigation conducted by Homeland Security Investigations, the Minnesota Bureau of Criminal Apprehension, the Anoka County Sheriff’s Office, the Dakota County Community Corrections, the St. Paul Police Department, and the Apple Valley Police Department.

This case was prosecuted by Assistant U.S. Attorney Laura M. Provinzino.

Defendant Information:

DEUVONTAY SHELBY CHARLES, 22

Minneapolis, Minn.

Convicted:

• Sex trafficking of a minor, 3 counts
• Sex trafficking by use of force, fraud and coercion, 2 counts
• Production of child pornography, 12 counts
• Receipt of child pornography, 2 counts
• Commission of felony offense involving a minor when required to register as a sex offender, 1 count

Sentenced:

• 432 months in prison

• 20 years supervised release

• Restitution ordered

   

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Acting United States Attorney Gregory G. Brooker announced the conviction of ELFRED WILLIAM PETRUK, 38, for methamphetamine trafficking-related offenses. After a four-day trial before U.S. District Judge Ann D. Montgomery in Duluth, Minn., the jury found PETRUK guilty of one count of conspiracy to distribute methamphetamine and one count of possession with intent to distribute methamphetamine. A sentencing hearing has been set for October 18, 2017.

“We've had Elfred Petruk on our radar for a number of years, and now after this third federal indictment and conviction, we couldn't be more satisfied with the jury's decision yesterday,” said Special Agent in Charge James Modzelewski of ATF's Saint Paul Field Division. “We target Minnesota's most violent offenders and through the shared perseverance of ATF and our partners on the Lake Superior Drug and Violent Crime Task Force, we can finally put this incredibly violent man behind bars.”

According to the evidence presented at trial, in July 2016, law enforcement agents received information that PETRUK, who had just been placed on federal supervised release at the time, was trafficking large quantities of methamphetamine from the Twin Cities area to the Twin Ports area. In September 2016, on multiple occasions, law enforcement agents observed PETRUK traveling from Twin Ports 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 methamphetamine hidden in a compartment under the hood of PETRUK’S vehicle.

According to the evidence presented at trial and documents filed in court, following PETRUK’S arrest, law enforcement agents executed search warrants at several of the locations in Duluth, Minn. and Superior, Wisc. suspected to be involved with PETRUK’S drug-trafficking activities. During the course of the searches, law enforcement agents seized a loaded 9mm handgun, methamphetamine, cash, digital scales, packaging materials, and other drug-trafficking paraphernalia.

The defendant has multiple prior state court convictions and two prior federal convictions. 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, 38

Duluth, Minn.

Convicted:

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

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WASHINGTON – A Latvian man made his initial appearance today in Minneapolis following extradition from Poland for his involvement in a “scareware” hacking scheme that targeted the Minneapolis Star Tribune’s website and caused millions of dollars in losses to Internet users. Acting Assistant Attorney General Kenneth A. Blanco of the Department of Justice’s Criminal Division; Acting 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.

PETERIS SAHUROVS, 28, a/k/a “Piotrek,” a/k/a “Sagade,” was indicted in 2011 in the District of Minnesota on charges of wire fraud, computer fraud and conspiracy. SAHUROVS was arrested on the indictment in Latvia in June of 2011. He was released by a Latvian court and later fled. In November of 2016, SAHUROVS was located in Poland and apprehended by Polish law enforcement, after which the U.S. began extradition proceedings. SAHUROVS was at one time the FBI’s fifth most wanted cybercriminal and a reward of up to $50,000 had been offered for information leading to his arrest and conviction.

Scareware is a type of malicious software, or malware, that poses as legitimate computer security software and purports to detect a variety of threats on the affected computer that do not actually exist. Computer users are informed they must purchase what they are told is anti-virus software in order to repair their computers. The users are then barraged with aggressive and disruptive notifications – and sometimes prevented from using their computer – until they supply their credit card number and pay for a fraudulent “anti-virus” product.

According to the indictment, SAHUROVS and members of the conspiracy relied on fraudulent online advertising to spread their malware. The defendants created a phony advertising agency and claimed that they represented an American hotel chain that wanted to purchase online advertising space on the Minneapolis Star Tribune’s news website, startribune.com. After their advertisement began running on the website, the defendants changed the computer code in the ad so that the computers of visitors to the startribune.com were infected with malware.

The indictment alleges that the malware caused users’ computers to “freeze up” and then generate a series of pop-up warnings in an attempt to trick users into purchasing purported “antivirus” software to fix the problems created by the malware. The “antivirus” software, if purchased, “unfroze” victim computers and stopped the pop-ups and security notifications, but the malware remained hidden on their computers. Users who failed to purchase the “antivirus” software found that all information, data and files stored on the computer became inaccessible. The scheme generated more than $2 million in proceeds.

This case is being investigated by the FBI-Minneapolis Field Office.

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. The Department’s Office of International Affairs provided substantial assistance in this matter. The Department thanks the Latvian State Police, Polish National Police, the National Prosecutor’s Office, and the Ministry of Justice for their assistance and cooperation.

Defendant Information:

PETERIS SAHUROVS, 28

Rezekne, Latvia

Charges:

• Wire fraud, 2 counts
• Conspiracy to commit wire fraud, 1 count
• Unauthorized access to a protected computer, 1 count

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

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

A Latvian man made his initial appearance today in Minneapolis following extradition from Poland for his involvement in a “scareware” hacking scheme that targeted the Minneapolis Star Tribune’s website and caused millions of dollars in losses to Internet users. Acting Assistant Attorney General Kenneth A. Blanco of the Department of Justice’s Criminal Division; Acting 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.

Peteris Sahurovs aka “Piotrek” aka “Sagade,” was indicted in 2011 in the District of Minnesota on charges of wire fraud, computer fraud and conspiracy. Sahurovs was arrested on the indictment in Latvia in June of 2011. He was released by a Latvian court and later fled. In November of 2016, Sahurovs was located in Poland and apprehended by Polish law enforcement, after which the U.S. began extradition proceedings. Sahurovs was at one time the FBI’s fifth most wanted cybercriminal and a reward of up to $50,000 had been offered for information leading to his arrest and conviction.

Scareware is a type of malicious software, or malware, that poses as legitimate computer security software and purports to detect a variety of threats on the affected computer that do not actually exist. Computer users are informed they must purchase what they are told is anti-virus software in order to repair their computers. The users are then barraged with aggressive and disruptive notifications – and sometimes prevented from using their computer – until they supply their credit card number and pay for a fraudulent “anti-virus” product.

According to the indictment, Sahurovs and members of the conspiracy relied on fraudulent online advertising to spread their malware. The defendants created a phony advertising agency and claimed that they represented an American hotel chain that wanted to purchase online advertising space on the Minneapolis Star Tribune’s news website, startribune.com. After their advertisement began running on the website, the defendants changed the computer code in the ad so that the computers of visitors to the startribune.com were infected with malware.

The indictment alleges that the malware caused users’ computers to “freeze up” and then generate a series of pop-up warnings in an attempt to trick users into purchasing purported “antivirus” software to fix the problems created by the malware. The “antivirus” software, if purchased, “unfroze” victim computers and stopped the pop-ups and security notifications, but the malware remained hidden on their computers. Users who failed to purchase the “antivirus” software found that all information, data and files stored on the computer became inaccessible. The scheme generated more than $2 million in proceeds.

An indictment is merely an allegation and defendants are presumed innocent until proven guilty.

This case is being 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 Department’s Office of International Affairs provided substantial assistance in this matter. The Latvian State Police; and the Polish National Police, the National Prosecutor’s Office, and the Ministry of Justice also provided significant assistance and cooperation.

Acting United States Attorney Gregory G. Brooker announced a federal indictment charging ROSA MARGARITA MALDONADO with two counts of filing a false claim for tax refund, one count of theft of public money, and two counts of aggravated identity theft. MALDONADO will make her initial appearance in United States District Court on June 21, 2017.

According to the indictment, MALDONADO filed false U.S. Individual Income Tax Returns in her name for tax years 2011 and 2012 in which she reported false dependents, claimed fraudulent Earned Income Tax Credits and Additional Child Tax Credits, and claimed tax refunds to which she was not entitled.

According to the indictment, MALDONADO stole a $7,712 tax refund from the U.S. Treasury for tax year 2012 and unlawfully used the names, Social Security numbers, and birth dates of two minor children in the course of that theft of public money.

This case is part of an investigation conducted by the Internal Revenue Service-Criminal Investigation, United States Postal Inspection Service, Homeland Security Investigations, Federal Bureau of Investigation, United States Secret Service, and the Department of Treasury, Office of Inspector General.

This case is being prosecuted by Assistant United States Attorney Allen A. Slaughter and U.S. Department of Justice Trial Attorney Christopher S. Strauss.

Defendant Information:

ROSA MARGARITA MALDONADO

Rochester, Minn.

Charges:

• False, fictitious or fraudulent claims, 2 counts

• Theft of public money, 1 count

• Aggravated identity theft, 2 counts

   

   

   

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

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 announced the sentencing of RANDY MILAND, 63, to 90 months in federal prison for operating a Ponzi scheme through which he stole or attempted to steal more than $500,000 from purported investors. MILAND was indicted on June 7, 2016, and pleaded guilty on September 9, 2016. MILAND was sentenced on June 6, 2017, before United States District Judge Wilhelmina M. Wright in U.S. District Court in St. Paul, Minn.

“Randy Miland is a serial scam artist whose trail of swindles has now led him straight to a lengthy prison sentence,” said Minnesota Commerce Commissioner Mike Rothman, whose agency regulates investment securities at the state level. “Over and over again, he stole people’s life savings with his fraudulent schemes. By stopping these scams, we are protecting Minnesotans in the financial marketplace.”

“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 Special Agent in Charge Shea Jones of St. Paul Field Office IRS Criminal Investigation. “Today’s 90 month sentencing of Randy Miland shows that committing investment fraud will result in severe consequences.”

“Randy Miland is a conman and serial fraudster who lied to and stole hundreds of thousands of dollars from his friends and chiropractic patients,” said Assistant United States Attorney Joseph H. Thompson. “Thanks to the collaborative work of the Minnesota Department of Commerce and Criminal Investigation Division of the IRS, Mr. Miland will now pay for his many years of criminal conduct.”

According to the defendant’s guilty plea and documents filed in court, MILAND, who was a licensed chiropractor in the state of Minnesota, had prior convictions in state and federal court for various financial fraud schemes. In 1999, MILAND was convicted in state court of theft by swindle, sentenced to 55 months in prison, and ordered to pay more than $1.5 million in restitution to the victims. As of May 2016, MILAND still owed those victims nearly the entire amount of restitution ordered. In 2006, MILAND was convicted in federal court of fraud, sentenced to 41 months in prison, and ordered to pay more than $250,000 in restitution to the victims. MILAND currently still owes approximately $124,000 in restitution to the victims of his 2006 federal case.

According to the defendant’s guilty plea and documents filed in court, from 2010 through 2014, MILAND fraudulently solicited more than $500,000 from ten investors, telling them that he would use their money to invest in futures and other legitimate investments. In reality, he used their money to pay personal expenses, including court-ordered restitution payments to victims of his prior scams, and to make Ponzi-type payments of purported investment returns to other investors.

MILAND concealed material facts from his new victims, including the fact that he had been twice convicted of fraudulent conduct, that the Minnesota Board of Chiropractic Examiners suspended his license, that he was forbidden by the Minnesota Department of Commerce from offering or selling securities, and that he still owed more than $1.5 million in restitution to victims of prior schemes.

The case is being prosecuted by Assistant United States Attorney Joseph H. Thompson.

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

Defendant Information:

RANDY MILAND, 63

White Bear Lake, Minn.

Convicted:

• Mail fraud, 1 count
• Money laundering, 1 count

Sentenced:

• 90 months in prison

• $214,517 in restitution

• Three years of supervised release

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Acting United States Attorney Gregory G. Brooker today announced the guilty plea of LILI HUANG, 36, for withholding the victim’s documents in furtherance of forced labor. HUANG, who was indicted on October 4, 2016, entered her guilty plea today before U.S. District Senior Judge David S. Doty in Minneapolis, Minn.

“It is critical for law enforcement to be able to recognize the indicators of human trafficking because these types of crimes can exist right in our own communities,” said Acting U.S. Attorney Gregory Brooker. “The collaborative work of the ACTeam and our local law enforcement partners brought forth this successful prosecution and provided the victim with a sense of safety and closure.”

“Forced labor is nothing short of modern-day slavery,” said Special Agent in Charge Alex Khu of HSI St. Paul. “On behalf of HSI I would like to gratefully acknowledge the Woodbury Police Department’s cooperation in this matter and their support in having their officers specifically trained to identify victims 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. 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 has also been charged in Washington County with five felony counts and will be pleading guilty to third-degree assault.

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 Office of the Inspector General, and the Washington County Attorney’s Office.

This case is being prosecuted by Assistant United States Attorneys Laura M. Provinzino and Manda M. Sertich.

Defendant Information:

LILI HUANG, 36

Woodbury, Minn.

Convicted:

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

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Acting United States Attorney Gregory G. Brooker announced a federal criminal complaint charging BRANDON MARK BJERKNES, 34, with production and distribution of child pornography and attempted coercion and enticement of a minor. BJERKNES, who was taken into custody on May 30, 2017, made his initial appearance earlier today in U.S. District Court in St. Paul, Minn.

According to the criminal complaint and documents filed in court, since 2006, BJERKNES was employed by the Bemidji Area Schools and, for the past three years, 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 criminal complaint 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. The forensic review is ongoing. To date, law enforcement has 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.

Based on the evidence obtained in this case, authorities believe there may be additional victims of this alleged conduct. Anyone with information about this matter is encouraged to call the Beltrami County Sheriff’s Office at 218-333-9111. Callers may remain anonymous.

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

Defendant Information:

BRANDON MARK BJERKNES, 34

Bemidji, Minn.

Charges:

• Production of child pornography, 2 counts
• Distribution of child pornography, 1 count
• Attempted coercion and enticement of a minor, 1 count

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

Acting United States Attorney Gregory G. Brooker and Minnesota Attorney General Lori Swanson today announced that Complementary Support Services and its related entities (collectively “CSS”), TERI DIMOND and HERBERT STOCKLEY have agreed to pay a total of $4.52 million to resolve allegations that they violated the False Claims Act (FCA) and Minnesota False Claims Act by defrauding Medicaid, a program jointly funded by the federal government and State of Minnesota to provide health care to low-income Minnesotans. CSS will pay the government $4 million, DIMOND agreed to pay $400,000, and STOCKLEY agreed to pay $120,000.

According to the allegations in the complaint, CSS, led by DIMOND and STOCKLEY, provided in-home mental health services to children and adults through two programs funded by the Medicaid program: Adult Rehabilitative Mental Health Services (“ARMHS”) and Children’s Therapeutic Services and Supports (“CTSS”). Both programs restrict reimbursement to time spent providing face-to-face services with the patient, and prohibit reimbursement for a therapist’s time completing paperwork. In addition, both programs require patient care to be clinically supervised by a licensed therapist, like a social worker or psychologist, to ensure that the services being paid for by taxpayers are appropriate and medically necessary.

According to the allegations, between January 1, 2007 and April 8, 2016, CSS billed Medicaid for claims while knowingly violating clinical supervision requirements. During most or all of this time period, CSS did not engage licensed professionals who agreed to accept full professional responsibility for the actions and decisions of unlicensed direct service providers. Rather than submitting claims that reflected signature by licensed professionals serving as clinical supervisors, DIMOND “batch signed” CSS progress notes that formed the basis for billing Medicaid over the years. Since January 1, 2007, CSS submitted to Medicaid more than 85,000 claims for payment. These claims represent hundreds of clients serviced by unlicensed staff members across multiple regions within the State of Minnesota. These client files could not have been, and were not, reviewed and supervised as required by law.

According to the allegations, CSS also impermissibly billed Medicaid for time completing paperwork since January 1, 2007. Specifically, CSS employees, at the direction of DIMOND and STOCKLEY, routinely added an extra billable unit for paperwork time for each client visit, fraudulently representing the added unit as face-to-face time. This practice resulted in thousands of additional billable units paid for by Medicaid in direct violation of state law.

Assistant U.S. Attorney David Fuller said, “These settlements reflect our Office’s commitment to take decisive action against health care providers who seek financial enrichment by taking advantage of federal health care programs. We thank our law enforcement partners, the whistleblower, and our colleagues at the Minnesota Attorney General’s Office for their assistance in recovering these Medicaid funds.”

“Providers of mental health services have an obligation to ensure that patients receive treatment that is necessary, appropriate and is administered with proper clinical supervision,” said Lamont Pugh III, Special Agent in Charge, U.S. Department of Health & Human Services, Office of Inspector General – Chicago Region. “To deviate from legal requirements in order to maximize profits and potentially jeopardize patient safety and well-being is completely unacceptable. The OIG will continue to work with our law enforcement partners, prosecutorial authorities and the public to identify, investigate and hold accountable those who seek to wrongfully obtain vital taxpayer dollars.”

The government’s investigation also revealed that DIMOND transferred $2 million in Medicaid funds from CSS to a nonprofit entity she started in Wisconsin. The government seized the $2 million in allegedly ill-gotten gains in June of 2016. In a negotiated civil forfeiture resolution, the government will retain $1.75 million of these alleged proceeds of the healthcare fraud scheme, bringing the government’s total recovery to $6.27 million in alleged proceeds of Medicaid fraud.

As a part of the settlements, CSS is permanently excluded from participating in federal and state health care programs. CSS’s patients were transferred to other providers of CTSS and ARMHS services. DIMOND agreed to an exclusion from federal and state health care programs for a period of not less than 8 years, and STOCKLEY agreed to an exclusion from state health care programs only for a period of not less than 5 years. Excluded providers or entities cannot participate in any way in the submission of claims to government health care programs.

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.

In these civil settlements, Defendants CSS, DIMOND, and STOCKLEY have denied allegations of wrongdoing.

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

The case is United States of America and the State of Minnesota ex rel. William L. Schwandt v. Complementary Support Services, CSS South, LLC, CSS Central, LLC, CSS North, LLC, CSS Metro, LLC, Clinical Support Services, LLC, Teri Dimond, and Herbert Stockley, Civil No. 13-CV-1018 (PJS/SER). The claims resolved by these settlements are allegations only; there has been no determination of liability.

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Tens of millions of dollars in illicit sex trafficking proceeds laundered and smuggled by criminal organization

Coordinated takedown results in 20 arrests, recovery of victims from active houses of prostitution, seizures of hundreds of thousands of dollars in cash and numerous weapons

SAINT PAUL – A superseding indictment unsealed earlier today in Saint Paul, Minn., charges twenty-one members of an international sex trafficking ring for their roles in the organization. The eight count superseding indictment outlines sex trafficking and money laundering offenses stemming from a criminal enterprise that, through the use of overwhelming bondage debt, force, threats of force, fraud, and coercion, trafficked women from Thailand to cities across the United States.

All of the charged defendants acted at high levels in the sophisticated criminal enterprise, which include 10 Thai nationals and 11 U.S. citizens. Twenty of the twenty-one charged defendants were arrested yesterday at various locations in Los Angeles, San Diego, Dallas, Austin, Houston, and Chicago. One defendant remains at large. During the coordinated takedown, law enforcement seized hundreds of thousands of dollars in cash, cell phones and condoms as well as multiple weapons.

The announcement was made by Acting U.S. Attorney Gregory G. Brooker of the District of Minnesota, Special Agent in Charge Alex Khu of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) St. Paul Division, Special Agent in Charge Shea Jones of the Internal Revenue Service (IRS) Criminal Investigation Division’s St. Paul Field Office, and Cook County (Illinois) Sheriff Thomas J. Dart.

“This indictment outlines charges against twenty-one members of a multi-million dollar, modern day organized crime operation. This is a highly complex case that required years of hard work, steadfast determination and dedication to bring these defendants to justice and provide hope to the hundreds of victims,” said Acting United States Attorney Gregory Brooker. “With the cooperation and coordination of our law enforcement partners and the various resources they all bring to bear, we were able to significantly disrupt and dismantle this criminal organization from all angles.”

“HSI fully utilizes our authorities and resources to address the immediate needs of victims, as well as targeting the organizations victimizing them,” said Special Agent in Charge Alex Khu of HSI St. Paul. “These arrests, achieved through interagency cooperation, are a testament to our combined resolve to dismantling this organization and preventing future harm to potential victims of this heinous crime.”

“I’m proud of the comprehensive efforts that went into this investigation by my office and each of the agencies that participated,” said Cook County Sheriff Thomas J. Dart. “The complexities of this organization represent the lengths to which criminals will go to profit off of human beings. This is an important reminder that sex trafficking and the associated buying, are not victimless crimes – this organization preyed and profited on vulnerable women. I am grateful that justice will be served.”

St. Paul Police Chief Todd Axtell said, “This operation sends a strong message to those who benefit financially from the exploitation of women. Your operations are not welcome here. If you engage in human trafficking, we will combine the public’s resources to find you, arrest you and ensure that you are not be allowed to retain your ill-gotten financial gains.”

“The special agents of IRS Criminal Investigation are committed to taking the profit away from these human traffickers,” stated Special Agent in Charge Shea Jones of the St. Paul Field Office IRS Criminal Investigation. “Today’s indictment sends a clear message that this activity will not be tolerated in our communities. As all financial transactions leave a trail, IRS Criminal Investigation special agents used their accounting expertise to analyze the complex financial transactions made by these criminals. Today’s indictment is a reminder that IRS Criminal Investigation is committed to following the money trail across the globe.”

According to the superseding indictment, which was returned under seal on May 16, 2017, from January 2009 through May 2017, the sophisticated criminal organization trafficked hundreds of women from Bangkok, Thailand, to various cities across the United States, including Minneapolis, Los Angeles, Chicago, Atlanta, Phoenix, Washington, D.C., Las Vegas, Houston, Dallas, Seattle, and Austin. Once in the United States, the victims were placed in houses of prostitution where they were forced to work long hours – often all day, every day – having sex with strangers. The victims were isolated from the outside world; they often had no freedom of movement and were not allowed to leave the prostitution houses unless accompanied by a member of the criminal organization.

According to the superseding indictment, the victims, who were often from impoverished backgrounds and spoke little English, were promised access to a better life in the United States, in exchange for an exorbitant “bondage debt” of between $40,000 and $60,000. Before being transported to the United States, the organization would typically arrange to have professional-quality escort-style photographs taken of the victims, which would ultimately be sent to traffickers in the United States and used to advertise the victims for sex on websites like backpage.com and eros.com. The organization also encouraged victims to have breast implants in Thailand to make the victims “more appealing” to potential sex buyers in the United States. The cost of the cosmetic surgery was added to the victims’ already significant bondage debts.

According to the superseding indictment, the organization engaged in widespread visa fraud to facilitate the international transportation of the victims. Traffickers assisted the victims in obtaining fraudulent visas and travel documents by funding false bank accounts, creating fictitious backgrounds and occupations, and instructing the victims to enter into fraudulent marriages to increase the likelihood that their visa applications would be approved. Traffickers also coached the victims as to what to say during their visa interviews. While working to obtain visa documents, traffickers gathered personal information from the victims, including the location of the victims’ families in Thailand. This information was later used to threaten victims who became non-compliant or tried to flee the organization in the United States.

According to the superseding indictment, the defendants held various roles in the organization including traffickers, house bosses, money launderers, and facilitators. It was common for a member of the conspiracy to hold more than one role, over time or simultaneously, in order to maximize profits. The traffickers were the individuals who held the bondage debt of a victim until it was fully repaid or, in some instances, a victim’s bondage debt would be sold from one trafficker to another. The house bosses were the individuals who “owned” the houses of prostitution and ran the day-to-day operations at the house. The money launderers were responsible for the successful and continued operation of the enterprise by making bank accounts available, coordinating deposits and withdrawals of cash as well as the movement of money in and back to Thailand. The organization’s facilitators assisted with all manner of needs including renting prostitution houses, facilitating the transport of victims, assisting with money laundering and entering into fraudulent marriages with members of the conspiracy so those members could gain immigration status in the United States.

According to the superseding indictment, the organization dealt primarily in cash and engaged in rampant and sophisticated money laundering in order to promote, redistribute and conceal illegal profits. The organization used “funnel accounts” to launder and route cash from cities across the U.S. to the money launderers in Los Angeles. Upon entry to the U.S., victims were often escorted by a member of the organization to a bank and instructed to open an account in her own name; once the account was open a member of the organization took control of the account and then provide the account information to other co-conspirators to coordinate deposits throughout the United States.

According to the superseding indictment, the organization also engaged in bulk cash smuggling by physically transporting and mailing illegal sex trafficking proceeds to Thailand. The money launderers recruited other individuals to carry large volumes of cash on their person when traveling to Thailand as well as hide cash in items such as clothing and dolls. The organization used a hawala system, a method in which financial transactions are based on trust and family association, to transfer money to Thailand and elsewhere outside the United States. The result is the movement of funds from one location to another without the need to actually transfer or wire the funds. The criminal organization moved tens of millions of dollars in illegal proceeds from the United States to Thailand and elsewhere using this hawala-based system.

This indictment relates to the case United States v. Intarathong, et al., 16-cr-257 (DWF/TNL). To date, three of seventeen defendants in that matter have pleaded guilty.

This case is the result of an investigation conducted by Homeland Security Investigations, Criminal Investigation Division of the IRS, Diplomatic Security Service, International Organized Crime Intelligence and Operations Center, St. Paul Police Department, and the Anoka County Sheriff’s Office, with assistance from the Cook County (Illinois) Sheriff’s Office and the Cook County Human Trafficking Task Force. We also want to acknowledge the support and assistance of United States Attorney’s Offices and law enforcement from across the country who came together to assist in executing a one-day, nationwide takedown of this international criminal organization.

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. Today’s charges represent our continued ACTeam mission—to take on and take down the most entrenched and sophisticated human trafficking organizations that would attempt to profit from human misery.

Assistant U.S. Attorneys Laura M. Provinzino, Melinda A. Williams and Julie E. Allyn are prosecuting the case with the assistance of the Money Laundering and Asset Recovery section of the Criminal Division of the Department of Justice, the DOJ Office of International Affairs, and the DOJ Civil Rights Division’s Human Trafficking Prosecution Unit.

Defendant Information:

MICHAEL MORRIS, 63

Seal Beach, Calif.

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Sex trafficking by use of force, fraud, and coercion, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

CHATARAK TAUFFLIEB, 51

San Jose, Calif.

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Sex trafficking by use of force, fraud, and coercion, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

PEERACHET THIPBOONNGAM, 57

Los Angeles, Calif.

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count
• Unlicensed money transmitting business, 1 count

PAWINEE UNPRADIT, 44

Dallas, Texas

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

SAOWAPHA THINRAM, 43

Hutto, Texas

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

GREGORY ALLEN KIMMY, 36

Hutto, Texas

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

WILAIWAN PHIMKHALEE, 38

Chicago, Ill.

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

KANYARAT CHAIWIRAT, 50

Chicago, Ill.

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

PORNTHEP SUKPRASERT, 40

Huntington Beach, Calif.

Charges:

• Conspiracy to engage in money laundering, 1 count
• Unlicensed money transmitting business, 1 count

MULCHULEE CHALERMSAKULRAT, 39

Huntington Beach, Calif.

Charges:

• Conspiracy to engage in money laundering, 1 count

BHUNNA WIN, 49

San Diego, Calif.

Charges:

• Conspiracy to engage in money laundering, 1 count

NATCHANOK YUVASUTA, 50

Los Angeles, Calif.

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Unlicensed money transmitting business, 1 count

NATTAYA LEELARUNGRAYAB, 45

Los Angeles, Calif.

Charges:

• Conspiracy to engage in money laundering, 1 count

VEERAPON GHETTALAE, 55

Lake Elsinore, Calif.

Charges:

• Conspiracy to engage in money laundering, 1 count

THOUCHARIN RUTTANAMONGKONGUL, 34

Chicago, Ill.

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

MATTHEW MINTZ, 25

Chicago, Ill.

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

MOHIT TANDON, 37

Burr Ridge, Ill.

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

RICHARD ALEXANDER, 52

DeKalb, Ill.

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

WARALEE WANLESS, 38

The Colony, Texas

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

TANAKRON PATRATH, 58

Houston, Texas

Charges:

• Conspiracy to commit sex trafficking, 1 count
• Conspiracy to commit transportation to engage in prostitution, 1 count
• Conspiracy to engage in money laundering, 1 count
• Conspiracy to use a communication facility to promote prostitution, 1 count

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

The charges contained in the superseding indictment are merely accusations, and the defendants are presumed not guilty unless and until proven guilty.

Acting United States Attorney Gregory G. Brooker today announced the sentencing of JOSEPH LEON EDMINSTER, 70, for stealing thousands of black spruce tree tops from the Chippewa National Forest. EDMINSTER, who pleaded guilty on January 13, 2017, to one count of theft of government property, was sentenced today before U.S. District Judge Wilhelmina M. Wright in St. Paul, Minn.

“People need to understand that taking plants or animals from federal lands is a serious crime punishable by substantial fines and even time in federal prison,” Assistant U.S. Attorney Laura Provinzino notes. “Mr. Edminster took responsibility for his actions. Had he not, his punishment could have been even more severe. But make no mistake, those who steal from our public lands for personal profit will be held accountable as today’s sentence shows.”

“The successful outcome of this case is the result of federal agencies working together to protect the resources of our national forests,” said Mary King, special agent in charge for the U.S. Forest Service Eastern Region. “The penalties reflect the seriousness of the crimes committed against our nation’s natural resources, and we hope they will act as a deterrent in the future. Our goal is to dissuade illegal activities from taking place in our forests and serve notice to everyone that Forest Service law enforcement officers are ever vigilant in the service of conservation and public safety.”

According to the defendant’s guilty plea and documents filed in court, between October 2008 and October 2014, EDMINSTER illegally cut and stole more than 12,000 black spruce tree tops from the Chippewa National Forest. After stealing the tree tops, EDMINSTER sold them to wholesalers and retailers for use as Christmas decorations for approximately $1.50 each. Retailers would then sell the tops to various retail outlets in Minnesota, Iowa and Illinois for up to $6 each. Since 2008, EDMINSTER stole more than $24,000 worth of spruce tops from federal land.

Black spruce is a North American pine species. It is widespread across Canada and the northern United States, including the Great Lakes region. Black Spruce is found in northern and northeastern parts of Minnesota, extending as far south as northern Anoka County.

The popularity of black spruce tops and other forest products that are used in the seasonal holiday decorative market has surged over the last 20 years. The spruce tops are sold at landscape retailers and some grocery and home improvement stores nationwide.

The cutting or otherwise damaging of any timber, tree or other forest product, to include black spruce is prohibited on National Forest land except as authorized by a special use authorization, timber sale, contract or other federal law or regulation.

This case is the result of an investigation conducted by the U.S. Forest Service’s Law Enforcement and Investigations division.

This case was prosecuted by Assistant United States Attorney Laura Provinzino.

Defendant Information:

JOSEPH LEON EDMINSTER, 70

Grand Rapids, Minn.

Convicted:

• Theft of government property, 1 count

Sentenced:

• Three years’ probation

• $ 24,199.50 in restitution paid to the U.S. Forest Service

• 200 hours community service

Acting United States Attorney Gregory G. Brooker announced the sentencing of DREW WILLIAM GRAVES, 29, to 41 months in federal prison for a violent assault committed on the Red Lake Indian Reservation. GRAVES, who pleaded guilty on December 29, 2016, was sentenced on May 17, 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, on March 25, 2016, GRAVES violently assaulted a female victim within the exterior boundaries of the Red Lake Indian Reservation. GRAVES broke the victim’s arm by slamming a car door on it, threw her to the ground and kicked her several times.

To learn more about the Justice Department’s Tribal Safety program, visit http://www.justice.gov/tribal/.

This case resulted from an investigation conducted by the Red Lake Tribal Police Department and the FBI Headwaters Safe Trails Task Force.

The case was prosecuted by Assistant U.S. Attorney Clifford B. Wardlaw.

Defendant Information:

DREW WILLIAM GRAVES, 29

Red Lake, Minn.

Convicted:

• Assault resulting in serious bodily injury, 1 count

Sentenced:

• 41 months in prison

• Three years of supervised release

   

   

   

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Acting United States Attorney Gregory G. Brooker announced the sentencing of STEPHON TREAVON REGGS, 22, to 197 months in prison and JOSHUA REGGS, 20, to 120 months in prison for the armed robbery of a convenience store in south Minneapolis. Both defendants entered guilty pleas and were sentenced on May 16, 2017, before Senior Judge Michael J. Davis in U.S. District Court in Minneapolis, Minn. A third defendant, JERROD NAJEE WILLIAMS, 29, was also charged in connection with the robbery. WILLIAMS pleaded guilty on June 6, 2016, and is awaiting sentencing.

According to the defendant’s guilty plea and documents filed in court, on January 6, 2016, STEPHON REGGS, JOSHUA REGGS and JERROD WILLIAMS entered a convenience store in south Minneapolis, Minn. STEPHON REGGS and WILLIAMS were armed with semi-automatic pistols. WILLIAMS demanded from the store employee money from the cash register, to which the store employee complied, giving the defendants approximately $2,000. During the robbery, STEPHON REGGS pistol-whipped the employee, causing a serious injury that required stitches. When the employee fled the store on foot, STEPHON REGGS followed the employee and discharged the semi-automatic pistol he was carrying. All three defendants then fled the scene in a stolen vehicle and WILLIAMS crashed it into a parked car. When police tried to arrest them, all three defendants attempted to flee on foot and had to be physically subdued by police officers.

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

Assistant United States Attorney David Steinkamp prosecuted this case.

Defendant Information:

STEPHON TREAVON REGGS, 22

St. Paul, Minn.

Convicted:

• Hobbs Act robbery, 1 count

• Discharging a firearm during and in relation to a crime of violence, 1 count

Sentenced:

• 197 months in federal prison

• Five years supervised release

JOSHUA REGGS, 20

Minneapolis, Minn.

Convicted:

• Hobbs Act robbery, 1 count

• Using, carrying and discharging a firearm during and in relation to a crime of violence, 1 count

Sentenced:

• 120 months in federal prison

• Five years supervised release

JERROD NAJEE WILLIAMS, 29

Minneapolis, Minn.

Convicted:

• Hobbs Act robbery, 1 count

• Using, carrying and discharging a firearm during and in relation to a crime of violence, 1 count

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of WILLIAM JAMES DAVIS, 66, for stealing more than $380,000 from Community Action of Minneapolis. DAVIS, who pleaded guilty on June 16, 2016, to all 16 counts of the indictment, was sentenced today before U.S. District Judge Patrick J. Schiltz in U.S. District Court in Minneapolis, Minn.

“William Davis abused his position of trust to steal hundreds of thousands of dollars that were intended to help the most needy people in Minneapolis,” said Acting U.S. Attorney Gregory Brooker. “The sentence imposed today appropriately recognizes this defendant’s crimes.”

“The sentence handed down to day underscores the seriousness of the defendant’s crimes in using his leadership position to divert taxpayer funds for his personal use and that of his family and friends.” said FBI Special Agent in Charge for the Minneapolis Division Richard T. Thornton. “The FBI together with our law enforcement partners remain committed to ferreting out these types of crimes and bringing those responsible to justice.”

According to the defendant’s guilty plea and documents filed in court, for 24 years DAVIS served as CEO of Community Action of Minneapolis (“CAM”), a non-profit organization with a mission to help people who were living in poverty in the City of Minneapolis. CAM’s primary funding sources included federal grants administered by the Minnesota Department of Commerce and Minnesota Department of Human Services. CAM also received funding from CenterPoint Energy and Xcel Energy in exchange for providing certain conservation and weatherization services to qualifying homeowners.

According to the defendant’s guilty plea and documents filed in court, between March 2007 and October 2014, DAVIS diverted CAM funds for his own personal use and the use of his family and friends, including a no-show job for his son, JORDAN DAVIS, who was convicted on June 28, 2016, for his role in the fraud scheme. DAVIS used CAM funds for personal expenses, including airline tickets, hotel stays, rental cars and a Caribbean cruise.

According to the defendant’s guilty plea and documents filed in court, DAVIS concealed his theft from CAM’s Board of Directors by charging the majority of his CAM-paid personal expenses to a slush fund on CAM’s books that was not subject to the same oversight as CAM’s state and federal grant proceeds. DAVIS could therefore instruct CAM’s fiscal staff to charge personal expenses to this slush fund with less risk of detection.

In October 2013, the Minnesota Department of Human Services (DHS) began an audit intended to determine whether CAM was using the federal and state grant funds that it received through DHS in accordance with the applicable contracts. DHS personnel sought documents and information about the purposes of various CAM expenditures. On June 3, 2014, DAVIS sent correspondence to the Commissioner of DHS containing false material representations about his personal travel. On October 13, 2014, DAVIS was suspended from his position as CEO without pay. In total, DAVIS stole more than $387,063.67 from the agency.

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

This case was prosecuted by Assistant United States Attorneys Kimberly A. Svendsen and Amber M. Brennan.

Defendant Information:

WILLIAM JAMES DAVIS, 66

Brooklyn Park, Minn.

Convicted:

• Conspiracy to commit theft concerning programs receiving federal funds, 1 count

• Mail fraud, 10 counts

• Wire fraud, 1 count

• Theft concerning programs receiving federal funds, 4 counts

Sentenced:

• 48 months in prison

• Two years of supervised release

• $387,063.67 in restitution

   

   

   

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Acting United States Attorney Gregory G. Brooker announced the sentencing HAROLD JAMES JOHNSON, JR., 24, an enrolled member of the Red Lake Band of Chippewa Indians, to 37 months in federal prison for a violent assault committed on the Red Lake Indian Reservation. JOHNSON, who pleaded guilty on December 22, 2016, was sentenced on May 10, 2017, before Senior Judge Michael J. Davis in U.S. District Court in Minneapolis, Minn.

According to the defendant’s guilty plea and documents filed in court, on July 10, 2016, JOHNSON assaulted a male victim at a private residence within the exterior boundaries of the Red Lake Indian Reservation. JOHNSON used a knife to stab the victim several times in the face and torso. As a result of the attack, the victim suffered nearly fatal stab wounds and internal bleeding as well as surgery and extended hospitalization.

To learn more about the Justice Department’s Tribal Safety program, visit http://www.justice.gov/tribal/.

This case resulted from an investigation conducted by the Red Lake Tribal Police Department and the FBI Headwaters Safe Trails Task Force.

The case was prosecuted by Assistant U.S. Attorney Clifford B. Wardlaw.

Defendant Information:

HAROLD JAMES JOHNSON, JR., 24

Red Lake, Minn.

Convicted:

• Assault resulting in serious bodily injury, 1 count

Sentenced:

• 37 months in prison

• Three years of 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 sentencing of OMAR SHARIF BEASLEY, 39, for leading a multi-state heroin trafficking conspiracy. BEASLEY, who was charged along with 40 other co-defendants on May 20, 2015, pleaded guilty to Count 1 of the indictment. The defendant was sentenced today before Chief Judge John R. Tunheim in United States District Court in Minneapolis, Minn.

“Omar Beasley led a drug trafficking organization that flooded the Red Lake and White Earth Indian Reservations with heroin and other deadly drugs,” said Acting U.S. Attorney Gregory Brooker. “I would like to thank the dedicated prosecutors and law enforcement partners who worked tirelessly to shut down this organization and bring this dangerous drug trafficker to justice.”

DEA Supervisory Special Agent Kent Bailey said: “This defendant is a career criminal who preyed on the citizens of Minnesota and the surrounding area with complete disregard for the community’s health and welfare. Our communities will be much safer with him behind bars for a long period of time.”

Red Lake Police Department’s Public Safety Director William Brunelle said: “The successful cooperation and outstanding partnership of both tribal and federal agencies has clearly demonstrated a precise and orchestrated strike against drug dealers in Indian Country. Today’s sentence sends a strong message that tribal lands are no place to sell your drugs.”

“Justice was served today,” stated ATF Special Agent in Charge James Modzelewski. “Although we were able to remove one trafficker from the drug ring, we all need to remain vigilant. Others will likely follow. I am confident that with the strong partnerships we have built throughout this investigation anyone willing to put themselves in a similar position as Omar Beasley will see the same fate. I want to thank all of our partners for the tremendous job on this investigation. ATF is proud to be a part of this collective investigative effort.”

Special Agent in Charge of the Federal Bureau of Investigation Minneapolis Division Richard Thornton said: “The sentence handed down today reflects the seriousness of the major drug trafficking crimes committed by the defendant. Our communities are much safer when drug traffickers such as this are held accountable for the havoc they have caused and lives they have ruined. This case sends a strong message that together with our law enforcement partners we will arrest those who sell drugs for a living and argue for substantial prison terms.”

Minnesota Bureau of Criminal Apprehension Superintendent Drew Evans said: “Heroin and prescription opioids have a devastating effect on people in our communities and the loved ones of those afflicted with this addiction. Holding Mr. Beasley accountable for the harm he inflicted demonstrates that we will pursue anyone supplying these dangerous drugs in our state.”

According to the defendant’s guilty plea and documents filed in court, from April 2014 through April 2015, OMAR SHARIF BEASLEY led a drug trafficking conspiracy in which he recruited drug sources, managers, distributors, facilitators, couriers and drivers to bring heroin and other drugs to the Red Lake and White Earth Indian Reservations in Minnesota and Native American communities in North Dakota. BEASLEY would travel from Minneapolis, Minn. to Red Lake, Minn., White Earth, Minn., and to North Dakota to provide drugs to co-conspirators for distribution on the Indian Reservations. BEASLEY would then return to major cities in Minnesota, Wisconsin, Illinois, and Michigan to replenish the supply of drugs to bring into Indian Country. BEASLEY and his co-conspirators also maintained drug stash houses on the reservations and gave the proceeds of the drug sales to co-conspirators.

To date, 39 co-defendants have pleaded guilty for their respective roles in the conspiracy. One defendant remains at large:

1. WILLIAM DAVID ALONZO, 25, was sentenced on March 2, 2017, to 120 months in prison and four years of supervised release on Counts 8 and 10 of the indictment.

    

2. TRAVIS JAMES BAKER, 27, was sentenced on April 14, 2016, to time served and three years of supervised release on Count 2 of the indictment.

    

3. ROSE LYNN BARRETT, 29, was sentenced on April 28, 2016, to 39 months in prison and three years of supervised release on Count 1 of the indictment.

    

4. SONNIE MARIE BARRETT, 28, was sentenced on December 2, 2015, to 60 months in prison and four years of supervised release on Count 1 of a felony Information.

    

5. CALVIN BEASLEY, 60, will be sentenced on June 29, 2017

6. TIMOTHY JOSEPH BEAULIEU, JR., 35, was sentenced on January 18, 2017, to 60 months in prison and five years of supervised release on Count 8 of the indictment.

    

7. WILLIE BELLAMY, JR., 69, will be sentenced on May 18, 2017.

    

8. LAMARCUS ANTONIO BROCK, 39, was sentenced on January 18, 2017, to 60 months in prison and five years of supervised release on Count 1 of a felony Information.

    

9. MICHAEL TRAVELL COLLINS, 40, will be sentenced on August 24, 2017.

    

10. MICHAEL JOSEPH DOMINGUEZ, 31, was sentenced on April 14, 2016, to 72 months in prison and four years of supervised release on Count 1 of a felony Information.

     

11. STACEY RAE DUCHAINE, 26, was sentenced on August 3, 2016, to time served and three years of supervised release on Count 1 of the indictment.

     

12. ERNESTINE DUKES, 46, was sentenced on May 10, 2016, to 60 months in prison and four years of supervised release on Count 1 of the indictment.

     

13. MICHAEL LENIOR DUKES, 49, was sentenced on February 24, 2017, to 120 months in prison and five years of supervised release on Count 1 of the indictment.

     

14. BRENDA ANN FAGAN, 69, will be sentenced on May 18, 2017.

     

15. WILLIAM JAMES FASTHORSE, 27, was sentenced on May 8, 2017, to time served and three years of supervised release on Count 1 of the indictment.

     

16. APRIL MARIE GRAVES, 33, was sentenced on October 26, 2016, to 20 months in prison and four years of supervised release on Count 1 of the indictment.

     

17. STEPHEN MARTIN HOLLIS, 39, was sentenced on April 19, 2016, to 60 months in prison and four years of supervised release on Count 12 of the indictment.

     

18. YALONZO RAMON HULL, 52, will be sentenced on June 29, 2017.

     

19. DURIAL JOHN JACKSON, 31, was sentenced on December 16, 2016, to 12 months and 1 day in prison and three years of supervised release on Count 1 of the indictment.

     

20. JUSTIN LEE JOHNSON, 26, was sentenced on December 14, 2016, to 65 months in prison and three years of supervised release on Count 1 of the indictment.

     

21. VELVET ILENE JOHNSON, 46, was sentenced on August 23, 2016, to 22 months in prison and three years of supervised release on Count 1 of the indictment.

     

22. GENE MICHAEL KEEZER, 39, was sentenced on January 25, 2017, to 96 months in prison and three years of supervised release on Count 1 of a felony Information.

     

23. NAKOYA HARRIS KEEZER, 39, was sentenced on February 16, 2017, to 30 months in prison and three years of supervised release on Count 1 of the indictment.

     

24. RODNEY LEE KEEZER, 38, was sentenced on April 26, 2017, to 60 months in prison and five years of supervised release on Count 1 of the indictment.

     

25. JARVIS ALLEN KING, 25, was sentenced on December 16, 2016, to 30 months in prison and three years of supervised release on Count 1 of the indictment.

     

26. JODI LYNN KJOLBERG, 46, was sentenced on September 23, 2016, to 18 months in prison and three years of supervised release on Count 4 of the indictment.

     

27. YVETTE KOUAYARA, 55, was sentenced on March 2, 2017, to time served and three years of supervised release on Count 1 of the indictment.

     

28. JENNIFER LYNN OPPEGARD, 29, was sentenced on April 14, 2016, to 30 months in prison and three years of supervised release on Count 1 of the indictment.

     

29. JESSICA RAE OPPEGARD, 38, was sentenced on February 24, 2017, to a three year term of probation on Count 1 of a felony Information.

     

30. LEE ALLEN OPPEGARD, 41, was sentenced on January 18, 2017, to 40 months in prison and three years of supervised release on Count 1 of the indictment.

     

31. BURNEY ABDULAH PEOPLES, 29, remains at large.

     

32. CHRISTOPHER ERVING PEOPLES, 35, was sentenced on July 11, 2016, to 8 months in prison and three years of supervised release on Count 1 of the indictment.

     

33. RAVONNA RAYE PEOPLES, 45, was sentenced on September 7, 2016, to time served and three years of supervised release on Count 1 of the indictment.

     

34. LUCAS JOHN PETERSON, 28, was sentenced on April 28, 2017, to 120 months in prison and five years of supervised release on Count 1 of the indictment.

     

35. DOERON EARL RAYFORD, 43, was sentenced on December 22, 2016, to 110 months in prison and five years of supervised release on Count 1 of the indictment.

     

36. SHERRLENE ROSE ROBERTS, 69, was sentenced on January 19, 2017, to a two year term of probation on Count 1 of a felony Information.

     

37. MAISIE ANN SARGENT, 27, was sentenced on August 26, 2016, to 30 months in prison and three years of supervised release on Count 1 of the indictment.

     

38. DALE ANDREW SIGANA, 34, was sentenced on July 5, 2016, to 120 months in prison and five years of supervised release on Count 1 of the indictment.

     

39. SARAH ELIZABETH THOMPSON, 32, was sentenced on December 22, 2016, to 110 months in prison and five years of supervised release on Count 1 of the indictment.

     

40. ROBYN JOANNE WIPF, 35, was sentenced on April 27, 2017, to a three year term of probation on Count 1 of the indictment.

     

    This case is the result of a cooperative investigation conducted by the Red Lake Police Department, the White Earth Police Department, the Paul Bunyan Drug Task Force, the FBI Safe Trails Task Force, the West Central Minnesota Drug and Violent Crimes Task Force, the Drug Enforcement Administration, Bureau of Alcohol, Tobacco, Firearms, and Explosives, the Federal Bureau of Investigation, and the Minnesota Bureau of Criminal Apprehension, assisted by the following law enforcement agencies and task forces, Becker County Sheriff’s Office, Beltrami County Sheriff’s Office, Bemidji Police Department, Bloomington Police Department, Bureau of Indian Affairs, Clearwater County Sheriff’s Office, Customs and Border Protection, Detroit Lakes Police Department, Frazee Police Department, Hubbard County Sheriff’s Office, Mahnomen County Sheriff’s Office, Minnesota Department of Correction, Minnesota State Highway Patrol, Lakes to River Drug Task Force, North Dakota Bureau of Criminal Investigation, Pine to Prairie Drug Task Force, and Wisconsin Department of Criminal Investigation.

     

    This case was prosecuted by Assistant U.S. Attorneys Deidre Y. Aanstad and Melinda A. Williams.

Defendant Information:

OMAR SHARIF BEASLEY, 39

Anoka County Jail

Convicted:

• Conspiracy to Distribute Heroin, Methamphetamine, Oxycodone, Hydromorphone, Hydrocodone, and Methadone, 1 count

Sentenced:

• 300 months in prison

• 10 years of supervised release

   

   

   

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Acting United States Attorney Gregory G. Brooker today announced the guilty plea of CHRISTOPHER BARRY, 46, for stealing trade secrets from his former employer, Lutonix, Inc. BARRY, who was charged by felony information on April 5, 2017, pleaded guilty before U.S. District Judge Richard H. Kyle in St. Paul, Minn.

According to the defendant’s guilty plea, 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, 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 is the result of an investigation conducted by the FBI, the Criminal Investigation Division of the IRS, and the United States Postal Inspection Service.

This case is being prosecuted by Assistant United States Attorney Benjamin Langner.

Defendant Information:

CHRISTOPHER BARRY, 46

Medina, Minn.

Convicted:

• Theft of Trade Secrets, 1 count

   

   

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Acting United States Attorney Gregory G. Brooker announced the sentencing of JOHN WILLIAM ROWAN, 65, to 41 months in prison for stealing more than $1.2 million from the insurance company where he was employed for more than 20 years. ROWAN, who pleaded guilty on January 19, 2017, to one count of wire fraud, was sentenced on May 5, 2017, before U.S. District Judge Susan R. Nelson in U.S. District Court in St. Paul, Minn.

“Over the course of nearly two decades, this defendant systematically abused the trust of his employer to steal more than $1.2 million,” said Acting United States Attorney Gregory G. Brooker. “This case exemplifies the seriousness of embezzlement and the damage it causes to small business owners. Criminals who engage in this type of conduct will be brought to justice.”

“Rowan abused his position of trust as he stole more than $1.2 million from the insurance business that employed him for many years,” said Minnesota Commerce Commissioner Mike Rothman. “He diverted business funds to his own personal use while concealing his fraudulent activity. The case was the result of close cooperation involving the Minnesota Commerce Fraud Bureau with local and federal law enforcement.”

According to his guilty plea and documents filed in court, from at least October 1995 until July 2015, ROWAN, as the accountant and controller of his company, exploited his access to his employer’s financial accounts and stole more than $1.2 million. Using his insider knowledge of how the company managed its financial transactions, ROWAN issued a total of 150 unauthorized checks to himself from the company’s bank accounts causing a total loss of $1,216,218.64.

This case is the result of an investigation conducted by the FBI, Minnesota Department of Commerce Fraud Bureau, and the North St. Paul Police Department.

This case was prosecuted by Assistant U.S. Attorney Michelle E. Jones.

Defendant Information:

JOHN WILLIAM ROWAN, 65

St. Paul, Minn.

Convicted:

• Wire fraud, 1 count

Sentenced:

• 41 months in prison

• Three years of supervised release

• $ 1,216,218.64 in restitution

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Acting United States Attorney Gregory G. Brooker announced the sentencing of BRADLEY THOMAS SMEGAL, 63, to 72 months in prison for stealing more than $5.1 million from several of his investment advisory clients. SMEGAL, who pleaded guilty on August 11, 2016, to two counts of securities fraud, was sentenced today before U.S. District Judge David S. Doty in Minneapolis, Minn.

“The defendant stole from clients who trusted his professional investment advice,” said Special Agent in Charge Richard T. Thornton of the FBI’s Minneapolis Field Office. “The sentence handed down today sends a clear message that those who abuse their positions of trust for personal gain will be brought to justice and held accountable for their crimes.”

According to his guilty plea and documents filed in court, SMEGAL was a registered broker and investment advisor from 1980 until May 2012 when the Financial Industry Regulatory Authority (FINRA) barred him from the securities industry.

According to his guilty plea and documents filed in court, between August 2007 and January 2013, SMEGAL convinced several investment advisory clients to invest in entities in which SMEGAL had an undisclosed ownership or management role, or otherwise controlled the bank accounts. SMEGAL told investors that these entities were involved in international infrastructure and mining projects, among other things. SMEGAL, without disclosing his personal stake, often described the investments as conservative and guaranteed specific rates of return to the clients.

According to his guilty plea and documents filed in court, SMEGAL fraudulently convinced his clients to invest approximately $5.14 million into these entities. He diverted $825,900 of those funds to his personal bank account. As part of an effort to hide this theft, SMEGAL often routed the money through multiple bank accounts before depositing it into his personal account. In order to keep the scheme going, SMEGAL sometimes made Ponzi-type payments to investors.

According to his guilty plea and documents filed in court, just prior to being barred by FINRA, in November 2011, Wells Fargo, where SMEGAL had been working, terminated his employment. SMEGAL had not disclosed to his employer that he had a financial interest in all of the entities to which he steered his investment advisory clients. After he was terminated, SMEGAL led certain clients to believe that he was still employed by Wells Fargo.

This case is the result of an investigation conducted by the FBI and the United States Postal Inspection Service.

This case is being prosecuted by Assistant U.S. Attorney David M. Maria.

Defendant Information:

BRADLEY THOMAS SMEGAL, 63

Minneapolis, Minn.

Convicted:

• Securities fraud, 2 counts

Sentenced:

• 72 months in prison

• Two years of supervised release

• $4,978,195.35 in restitution

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Acting United States Attorney Gregory G. Brooker announced the guilty plea of JEFFREY LEE LONGTAIN, 58, for filing a false tax return. LONGTAIN, who was charged on March 1, 2017, by felony information, pleaded guilty before U.S. District Chief Judge John R. Tunheim in Minneapolis, Minn.

According to the defendant’s guilty plea, from 2006 until his termination in 2015, LONGTAIN was the Chief Operating Officer and President of Northland Hearing Centers, Inc. (“Northland”), a subsidiary of Starkey Laboratories (“Starkey”) that was responsible for acquiring and managing retail hearing aid facilities. During this time, LONGTAIN reported to Starkey’s President, Jerome Ruzicka, and worked closely with Starkey’s Chief Financial Officer, Scott Nelson.

According to the defendant’s guilty plea and documents filed in court, in 2002, Starkey’s principal owner, William Austin, created Northland US, LLC for the purpose of acquiring and operating retail hearing aid establishments. In 2006, without Austin’s knowledge, Ruzicka and Nelson surreptitiously transferred Northland LLC’s assets to a new entity they controlled, Northland Hearing Centers, Inc. They forged Austin’s signature to complete the transfer of assets, later awarded themselves restricted stock, and ultimately paid themselves and LONGTAIN approximately $15 million in exchange for terminating the restricted stock grants.

According to the defendant’s guilty plea and documents filed in court, in 2014, when Ruzicka, Nelson and LONGTAIN realized they had not taken enough money to cover their entire tax obligations, took additional money from the company. LONGTAIN told Nelson that he needed $115,000 to cover his additional tax payments. In reality, LONGTAIN only needed $85,000 but asked for the higher amount so he could keep $30,000 for himself. Nelson and LONGTAIN disguised the $115,000 payment as a loan but, as LONGTAIN knew, the payment was income that should have been reported on his 2014 tax returns.

According to the defendant’s guilty plea and documents filed in court, between 2010 and 2015, LONGTAIN purposely failed to report money that he received from Starkey and Northland, as well as several companies that provided services to Starkey and Northland, as income on his tax returns. For example, Audiometrix, LLC and Socio, LLC, two companies that provided services to Starkey and/or Northland, made payments totaling approximately $182,915 to or on behalf of LONGTAIN. Approximately $77,315 of the total amount was paid directly to LONGTAIN and $105,600 was paid to Oregon Golf Club to offset LONGTAIN’S golf club dues and fees. LONGTAIN knew that receipt of these payments was a conflict of interest given his position at Northland. To avoid paying additional taxes, LONGTAIN purposely concealed the golf club payments from his tax preparer.

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

This case is being prosecuted by Assistant United States Attorneys Lola Velazquez-Aguilu and Benjamin Langner.

Defendant Information:

JEFFREY LEE LONGTAIN, 58

West Linn, Ore.

Convicted:

• Making and Subscribing a False Return, 1 count

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of DONALD GIBSON, 61, to 33 months in prison for tax evasion and for presenting a fake financial instrument to the U.S. Department of Treasury. GIBSON was convicted on December 2, 2016, following a five-day jury trial before U.S. District Judge Patrick J. Schiltz in U.S. District Court in Minneapolis, Minn.

As proven at trial, GIBSON failed to file his 2004 through 2014 individual income tax returns and attempted to evade his income tax liabilities for these years by diverting money to a warehouse bank called MYICIS, cashing over $800,000 in business checks at a check-cashing facility, and submitting fake money orders and bogus financial instruments to the Internal Revenue Service (IRS). GIBSON also formed Sovereign Christian Mission (SCM), a purported religious organization, as a way to further hide his chiropractic income and pay for his personal expenses. GIBSON used SCM to pay for his groceries, entertainment, dinners, and car repairs. Evidence presented at trial established that while the IRS was auditing his tax returns, and later during the criminal investigation, GIBSON presented a fake financial instrument purporting to be worth $300 million to the IRS and claimed that it paid off his income tax liabilities.

This case is the result of an investigation conducted by the Internal Revenue Service – Criminal Investigation Division.

This case was prosecuted by Assistant United States Attorney Joseph Thompson and Trial Attorney Ryan Raybould of the Tax Division.

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

Defendant Information:

DONALD GIBSON, 61

Lindstrom, Minn.

Convicted:

• Tax evasion, 5 counts

• Fictitious obligation, 1 count

   

  Sentenced:

• 33 months in prison

• Two years of supervised release

   

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Acting United States Attorney Gregory G. Brooker today announced a federal indictment charging SCOTT FRANCIS FORTIER, 38, with production and possession of child pornography. FORTIER was indicted on April 12, 2017, and will make his initial appearance in United States District Court later this week.

According to the indictment and documents filed in court, FORTIER was associated for many years with Circle R Ranch (“the Camp”), a co-ed horseback riding camp located in Todd County, Minn. Through his involvement with the Camp, FORTIER met a 17-year-old minor (“Minor Victim #1). On September 9, 2016, FORTIER invited Minor Victim #1 and her 15-year-old friend (Minor Victim #2) to his house in Blaine, Minn., where he gave them both alcohol and induced the two minors to engage with him in sexually explicit conduct. FORTIER used his cell phone to produce multiple videos of Minor Victim #1 and Minor Victim #2 engaged in that activity. In addition, FORTIER also possessed on his computer videos of prepubescent minors engaging is sexually explicit conduct.

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorney’s Offices and CEOS, 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.justice.gov/psc.

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

This case is being prosecuted by Assistant U.S. Attorney Carol M. Kayser.

Defendant Information:

SCOTT FRANCIS FORTIER, 38

Blaine, Minn.

Charged:

• Production of child pornography, 4 counts
• Possession of child pornography, 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 a federal indictment charging SHAWN ROBERT DOOLING, 50, founder of a renewable energy company, with three counts of mail fraud, one count of wire fraud, and one count of engaging in a monetary transaction in criminally derived property.

As alleged in the indictment, in 2009, DOOLING founded Renewable Energy SD, LLC (“RESD”), a wind energy company headquartered in Excelsior, Minn. From 2010 through 2013, DOOLING executed a scheme to defraud RESD customers by falsely representing that for an agreed-upon contract price, his company would build and maintain wind energy turbines on customers’ land. DOOLING marketed the electricity-generating wind turbines as a way for customers to save money by generating enough electricity to supply their needs and eventually sell excess electricity to utility companies.

As alleged in the indictment, DOOLING told customers that he would send a portion of their money to a third-party manufacturer as a down payment to reserve a specific wind turbine. Then, when the wind turbine was completed and ready to be shipped, he would send the remaining portion of the money to the manufacturer to complete the wind turbine purchase In reality, instead of reserving and purchasing wind turbines for his customers, DOOLING often took customers’ money out of RESD bank accounts for his own personal use and benefit. As part of the scheme, DOOLING also used some customers’ money to pay for other customers’ wind turbine projects.

As alleged in the indictment, DOOLING furthered his scheme by lying to customers about the status of their orders and told customers that RESD’s failure to deliver the wind turbines was due to manufacturer delays. As a result of this scheme, more than 60 customers paid a combined total of more than $13 million to DOOLING and his company and never received the promised wind turbines or a refund of their money. In total, DOOLING used approximately $2 million from RESD’s bank accounts for his own personal benefit.

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

Assistant U.S. Attorneys Surya Saxena and John Kokkinen are prosecuting the case.

Defendant Information:

SHAWN ROBERT DOOLING, 50

Excelsior, Minn.

Charges:

• Mail fraud, 3 counts
• Wire fraud, 1 count
• Engaging in a monetary transaction in criminally derived property, 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 announced an indictment charging JAYSEN LANE HEYER, 38, with one count of possession with intent to distribute methamphetamine and two counts of being a felon in possession of a firearm. On April 13, 2017, HEYER made his initial appearance in U.S. District Court in Duluth, Minn.

According to the indictment, on December 28, 2016, HEYER was found to be in possession of approximately 210 grams of methamphetamine, a Smith and Wesson M&P 40 pistol and a Luger 9mm Tech 9 pistol. Because he is a felon, HEYER is prohibited under federal law from possessing a firearm at any time.

If convicted, HEYER faces a potential maximum penalty of 40 years in prison for drug possession and up to 10 years for being a felon in possession of a firearm. All sentences will be determined by a federal district court judge.

This case is the result of an investigation conducted by the Itasca County Sheriff’s Office, Minnesota Bureau of Criminal Apprehension, Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), and the U.S. Marshall’s Service.

This case is being prosecuted by Assistant United States Attorney Deidre Y. Aanstad.

Defendant Information:

JAYSEN LANE HEYER, 38

Squaw Lake, Minn.

Charges:

• Possession with Intent to Distribute Methamphetamine, 1 count
• Felon in Possession of a Firearm, 2 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.

A Russian citizen pleaded guilty today for his participation in a criminal enterprise that installed and exploited malicious computer software (malware) on tens of thousands of computer servers throughout the world to generate millions of dollars in fraudulent payments.  

Acting Assistant Attorney General Kenneth A. Blanco of the Department of Justice’s Criminal Division, Acting U.S. Attorney Gregory G. Brooker of the District of Minnesota and Assistant Director Scott Smith of the FBI’s Cyber Division made the announcement.

Maxim Senakh, 41, of Velikii Novgorod, Russia, pleaded guilty today to conspiracy to violate the Computer Fraud and Abuse Act and to commit wire fraud before U.S. District Judge Patrick J. Schlitz of the District of Minnesota.  Sentencing is set for Aug. 3, 2017.  Senakh was indicted on Jan. 13, 2015, and was subsequently arrested by Finnish authorities, who extradited him to the United States. 

According to admissions made in connection with the plea agreement, the malware, which is known as Ebury, harvested log-on credentials from infected computer servers, allowing Senakh and his co-conspirators to create and operate a botnet comprising tens of thousands of infected servers throughout the world, including thousands in the United States.  Senakh and his co-conspirators used the Ebury botnet to generate and redirect internet traffic in furtherance of various click-fraud and spam e-mail schemes, which fraudulently generated millions of dollars in revenue.  As part of the plea, Senakh admitted that he supported the criminal enterprise by creating accounts with domain registrars which helped build the Ebury botnet infrastructure and personally profited from traffic generated by the Ebury botnet. 

The FBI Minneapolis Field Office is investigating the case.  Senior Counsels Aaron Cooper and Benjamin Fitzpatrick of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Kevin Ueland of the District of Minnesota are prosecuting this case.  The Department of Justice extends its thanks to the government of Finland, the Bundeskriminalamt (BKA), CERT-Bund and the cyber security firm ESET.  The Criminal Division’s Office of International Affairs also provided substantial assistance.

WASHINGTON – A Russian citizen pleaded guilty today for his participation in a criminal enterprise that installed and exploited malicious computer software (malware) on tens of thousands of computer servers throughout the world to generate millions of dollars in fraudulent payments.

Acting Assistant Attorney General Kenneth A. Blanco of the Department of Justice’s Criminal Division, Acting U.S. Attorney Gregory G. Brooker of the District of Minnesota and Assistant Director Scott Smith of the FBI’s Cyber Division made the announcement.

MAXIM SENAKH, 41, of Velikii Novgorod, Russia, pleaded guilty today to conspiracy to violate the Computer Fraud and Abuse Act and to commit wire fraud before U.S. District Judge Patrick J. Schlitz of the District of Minnesota. Sentencing is set for August 3, 2017. SENAKH was indicted on January 13, 2015, and was subsequently arrested by Finnish authorities, who extradited him to the United States.

According to admissions made in connection with the plea agreement, the malware, which is known as Ebury, harvested log-on credentials from infected computer servers, allowing SENAKH and his co-conspirators to create and operate a botnet comprising tens of thousands of infected servers throughout the world, including thousands in the United States. SENAKH and his co-conspirators used the Ebury botnet to generate and redirect internet traffic in furtherance of various click-fraud and spam e-mail schemes, which fraudulently generated millions of dollars in revenue. As part of the plea, SENAKH admitted that he supported the criminal enterprise by creating accounts with domain registrars which helped build the Ebury botnet infrastructure and personally profited from traffic generated by the Ebury botnet.

The FBI Minneapolis Field Office is investigating the case. Senior Counsels Aaron Cooper and Benjamin Fitzpatrick of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Kevin Ueland of the District of Minnesota are prosecuting this case. The Department of Justice extends its thanks to the government of Finland, the Bundeskriminalamt (BKA), CERT-Bund and the cyber security firm ESET. The Criminal Division’s Office of International Affairs also provided substantial assistance.

Defendant Information:

Maxim Senakh, 41

Velikii Novgorod, Russia

Convicted:

• Conspiracy to Violate the Computer Fraud and Abuse Act, and to Commit Wire Fraud, 1 count

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Acting United States Attorney Gregory G. Brooker today announced the sentencing of STERLING KYLE ANDERSEN, 24, to 30 years in prison for second degree murder. ANDERSON, who was indicted on February 1, 2016, pleaded guilty on November 9, 2016, before U.S. District Judge Ann D. Montgomery in Minneapolis, Minn.

According to the defendant’s guilty plea and documents filed in court, on October 7, 2015, while babysitting his girlfriend’s three-year-old son (identified as S.W.W.), ANDERSEN became agitated when he was not able to stop S.W.W. from crying. As a result of his frustration, ANDERSEN brutally assaulted S.W.W. with his fists and knees causing traumatic internal and external injuries. When emergency personnel and law enforcement arrived, ANDERSEN said that S.W.W. had fallen in the woods while running and hit his head, but ultimately confessed to the brutal assault. The victim was transported to the hospital via helicopter but was pronounced dead shortly after arriving.

This case is the result of an investigation conducted by the Minnesota Bureau of Criminal Apprehension, White Earth Police Department, Becker County Sheriff’s Office, and the FBI.

Assistant U.S. Attorney Deidre Y. Aanstad prosecuted the case.

Defendant Information:

STERLING KYLE ANDERSEN, 24

Duluth, Minn.

Convicted:

• Murder in the second degree, 1 count

Sentenced:

• 360 months in prison

• Five years supervised release

   

   

   

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Acting United States Attorney Gregory G. Brooker today announced a federal indictment charging TIMOTHY WAYNE GUTHMAN, 43, a licensed chiropractor, with one count of conspiracy to commit health care fraud and one count of mail fraud. GUTHMAN made his initial appearance last week in U.S. District Court in Minneapolis.

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 indictment, from 2012 through 2015, GUTHMAN engaged in a scheme to defraud automobile insurance companies by submitting fraudulent no-fault insurance claims and receiving reimbursements through his chiropractic clinics. These claims were for services that either were not medically necessary or were never rendered. GUTHMAN prescribed and purportedly provided services that were not determined medically necessary by the physical condition of each patient, but were instead designed to fraudulently maximize reimbursement from the patients’ automobile insurance companies.

According to the indictment, in order to get more patients to come to chiropractic appointments for treatment they did not need, GUTHMAN would make illegal kickback payments to patient recruiters, known as “runners.” The kickback payments typically ranged between $500 and $1,500 per automobile accident patient that the runner brought to GUTHMAN’S clinics. GUTHMAN would often require a refund of the kickback payment if the patient failed to attend a minimum 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.

This case is the result of an investigation conducted by the Minnesota Department of Commerce Fraud Bureau and the FBI.

Assistant U.S. Attorneys John E. Kokkinen and David M. Maria are prosecuting the case.

Defendant Information:

TIMOTHY WAYNE GUTHMAN, 43

Inver Grove Heights, Minn.

Charges:

• Conspiracy to commit health care fraud, 1 count
• 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 a federal indictment charging EDWARD S. ADAMS, an attorney and university law professor, with orchestrating an elaborate fraud scheme to embezzle millions of dollars of investors’ funds. ADAMS is expected to make his initial appearance in U.S. District Court in Minneapolis later this week.

“The defendant’s brazen theft of millions of dollars of investor’s funds over the course of several years is compounded by the fact that he holds positions of public trust as an attorney and law school faculty member,” said FBI Special Agent in Charge for the Minneapolis Division Richard T. Thornton. “The FBI remains committed to working with our law enforcement partners to detect corporate crime in all its forms and bring those responsible to justice.”

“The U.S. Postal Inspection Service vigorously pursues prosecution of criminals who callously defraud our citizens using the U.S. Mail. Postal Inspectors are committed to ensuring public confidence in the U.S. Mail. Fraud of this magnitude is not a victimless crime. Honest, hardworking Americans pay the price when fraudsters wrongfully steal their hard-earned money.” said Postal Inspector in Charge, Craig Goldberg.

“IRS Criminal Investigation Special Agents are proud to work with our law enforcement partners and the U.S. Attorney’s Office to investigate and prosecute individuals, such as Edward Adams, who attempt to enrich themselves by fraudulent means,” stated Shea Jones, Special Agent in Charge of the St. Paul Field Office. “IRS Criminal Investigation is committed to using our financial investigative expertise to stop investment fraud schemes and other types of white collar crime."

According to the indictment and documents filed in court, Apollo Diamond, Inc. (“Apollo Diamond”) and Apollo Diamond Gemstone Corporation (“Apollo Gemstone”) (collectively, “Apollo”) was a privately held company that produced lab-grown diamonds. ADAMS, a Minneapolis lawyer and law professor, became involved with Apollo through familial relations and held various managerial titles with the company such as CFO, Secretary, EVP, and General Counsel.

According to the indictment, in 2003, at the direction of ADAMS, Apollo retained ADAMS’ financial services firm, Equity Securities, Inc., to provide investment banking services and to raise money for Apollo. Equity Securities raised more than $25 million for Apollo, for which Equity Securities received approximately $4 million in commission. Following the fundraising efforts, ADAMS continued to handle the ongoing financial matters for Apollo with minimal oversight from the Board of Directors.

According to the indictment, from 2006 through 2009, ADAMS opened multiple bank accounts with various titles including “RL Investments,” “DL Investments,” “ADR Investments,” “Apollo Diamond, Inc.,” and “Apollo Diamond Gemstone Corporation,” none of which were authorized by Apollo or its Board of Directors. ADAMS was the sole signatory and the only person with access to the accounts and the account statements, which were mailed to his personal addresses.

According to the indictment, ADAMS told investors that they could purchase shares in Apollo by making their checks payable to the accounts he controlled. He promised that their money would be used for Apollo’s operations, including working capital, funding additional diamond growing equipment, and research and development, when, in reality, ADAMS was embezzling the money. For example, ADAMS deposited approximately $2,400,000 of investors’ funds into the RL Investments account and then surreptitiously diverted more than $1,200,000 for his own personal use, an additional $101,500 to his law firm’s bank account, and distributed the remainder of the funds to various individuals as determined by ADAMS.

According to the indictment, in 2010, due in part to ADAMS’ embezzlement, Apollo could no longer meet its financial obligations and was on the brink of insolvency. To prevent his theft from being uncovered through bankruptcy litigation, ADAMS devised a scheme to appease shareholders by convincing them to convert their worthless Apollo stock into stock in a new company, which ADAMS secretly controlled. In March 2011, ADAMS and his law partner (identified in the indictment as “M.M.”) created a privately held company called Scio Diamond Technology Corporation (“Private Scio”), of which ADAMS and his partner were the sole shareholders and board members. ADAMS and his partner then notified shareholders that Private Scio would acquire the assets of Apollo for approximately $2,000,000 and that shareholders, without expending any additional money, would receive the same number of shares in the new entity. However, Private Scio was not yet capitalized and did not have the funds to complete the asset purchase. To further this scheme, ADAMS orchestrated a “reverse merger” transaction between Private Scio and Krossbow Holding Corporation, a publicly traded shell company, which resulted in a new publicly traded company, also called Scio Diamond Technology Corporation (“Public Scio”).

According to the indictment, ADAMS used Public Scio to raise the $2,000,000 necessary to complete the Apollo asset purchase, leading the former Apollo investors to believe that their investments were safe and that they now held shares in a publicly traded, operational company. However, ADAMS used Public Scio’s acquisition of Apollo as yet another opportunity for personal profit and funneled the majority of the $2,000,000 into bank accounts controlled by ADAMS. In total, from 2006 through 2013, ADAMS stole from investors more than $4.38 million and paid to his own law firm more than $2.54 million.

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

Assistant U.S. Attorneys David M. Maria and John E. Kokkinen are prosecuting the case.

Defendant Information:

EDWARD S. ADAMS, 64,

Minneapolis, Minn.

Charges:

• Mail fraud, 8 counts

• Wire fraud, 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 announced a 13 count indictment charging RYAN RANDALL GILBERTSON, 41, founder of Dakota Plains, Inc., DOUGLAS VAUGHN HOSKINS, 48, and NICHOLAS HARRIS SHERMETA, 49, with wire fraud stemming from a complex stock manipulation scheme that resulted in the company owing more than $30 million in fraudulent bonus payments. The defendants are expected to make their initial appearances in U.S. District Court in Minneapolis within the next week.

“This fraud scheme, like other financial crimes involving the mail, erodes public trust and threatens the integrity of the U.S. Mail," said Craig Goldberg, Inspector in Charge of the U.S. Postal Inspection Service, Denver Division, which includes Minnesota. "It is critical we make every effort to protect shareholders from being cheated. To help protect the public and ensure America's confidence in the U.S. Mail, Postal Inspectors are committed to working with our federal, state and local partners to aggressively investigate any fraud in which the mail is used.”

“IRS Criminal Investigation is committed to unraveling complex financial transactions where individuals, such as Ryan Randall Gilbertson, Douglas Vaughn Hoskins, and Nicholas Harris Shermeta operated a stock scheme to defraud investors,” stated Shea Jones, Special Agent in Charge of IRS-CI’s St. Paul Field Office. “Those individuals who engage in this type of stock manipulation fraud should know they will not go undetected and will be held accountable."

“As alleged, each of the defendants played a key role in this complex fraud scheme,” said Special Agent in Charge Richard T. Thornton of the Minneapolis Division of the FBI. “The FBI will continue to work closely with our law enforcement partners to ensure those who engage in this type of criminal behavior will be brought to justice.”

According to the indictment, in December 2008, GILBERTSON and his business partner (identified in the indictment as “Individual A”) founded Dakota Plains, Inc. (Dakota Plains), a privately held Minnesota corporation that owned and operated a transloading facility in New Town, North Dakota, for loading crude oil onto trains for transport to oil refineries.

According to the indictment, in January 2011, GILBERTSON and his partner caused Dakota Plains to issue a $1.9 million cash dividend to shareholders, from which GILBERTSON and his ex-wife received nearly $450,000 in dividend payments. That same month, GILBERTSON and his partner caused Dakota Plains to issue $3.5 million in promissory notes (the “Senior Notes”) from which GILBERTSON purchased a $1 million promissory note and another $100,000 promissory note in the name of Total Depth Foundation, GILBERTSON’S nonprofit corporation. In April 2011, GILBERTSON and his partner caused Dakota Plains to issue $5.5 million in promissory notes (the “Junior Notes”) in which GILBERTSON instructed the company to include an “additional payment” provision stating that the noteholders would receive bonus payments based on the price of Dakota Plains’ stock at the time of an initial public offering (“IPO”). From the Junior Notes, GILBERTSON purchased a $2 million promissory note and another $250,000 promissory note on behalf of Total Depth Foundation.

According to the indictment, in November 2011, at GILBERTSON’S direction, Dakota Plains combined the Senior Notes and Junior Notes into a series of consolidated promissory notes (the “Consolidated Notes”). GILBERTSON then directed Dakota Plains to alter the “additional payment” provision from the Junior Notes to (a) apply to the new total value of the Consolidated Notes; and (b) apply not only in the event of an IPO but also if Dakota Plains became public via a reverse merger. Specifically, the “additional payment” provision provided that if Dakota Plains’ average stock price exceeded $2.50 per share during the first 20 days of public trading, the noteholders would receive bonus payments which would increase relative to the average stock price.

According to the indictment, as part of the scheme, in late 2011 and early 2012, GILBERTSON arranged for Dakota Plains to become a publicly traded company by entering into a “reverse merger” agreement with MCT Holding Corporation (“MCT”), a public shell company that owned a single defunct tanning salon in Salt Lake City, Utah. At GILBERTSON’S direction, HOSKINS, who was a player and manager for GILBERTSON’S polo team, purchased 50,000 freely trading shares of MCT stock and opened a trading account with a broker in Salt Lake City, Utah, which would allow him to sell the MCT stock. HOSKINS, who had no prior investing experience or assets and a significant amount of debt, received $30,000 from GILBERTSON to purchase the stock. On March 23, 2012, following the merger of Dakota Plains with MCT, Dakota Plains Holdings became a publicly traded company.

According to the indictment, on the first day of public trading, HOSKINS offered to sell his newly acquired shares for an inflated price of approximately $12 per share at GILBERTSON’S direction, and continued to do so throughout the first 20 days of trading following the reverse merger. During this same time period, SHERMETA, who had a series of bogus consulting agreements with GILBERTSON, began purchasing shares of Dakota Plains stock on behalf of both himself and his clients at inflated prices without their knowledge. Throughout the 20-day period following the reverse merger, GILBERTSON, with the help of SHERMETA and HOSKINS, manipulated the price of Dakota Plains stock to increase the average trading price to $11.30 per share which, as stated in the “additional payment” provision in the Consolidated Notes, triggered a bonus payment of approximately $32,851,800 to GILBERTSON and the other noteholders. GILBERTSON, who controlled 40 percent of the Consolidated Notes, was entitled to more than $12 million in bonus payments.

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

This case is being prosecuted by Assistant United States Attorneys Joseph H. Thompson and Kimberly A. Svendsen.

Defendant Information:

RYAN RANDALL GILBERTSON, 41

Delano, Minn.

Charges:

• Wire Fraud, 13 counts

DOUGLAS VAUGHN HOSKINS, 48,

Wayzata, Minn.

Charges:

• Wire Fraud, 7 counts

NICHOLAS HARRIS SHERMETA, 49

Minnetonka, Minn.

Charges:

• Wire Fraud, 5 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 announced an indictment charging JEFFREY MARCUS LUCAS, 62, with one count of conspiracy to distribute methamphetamine, one count of possession with intent to distribute methamphetamine, one count of possession of a stolen firearm, and one count of being a felon in possession of a firearm. On March 17, 2017, LUCAS made his initial appearance in U.S. District Court in St. Paul, Minn.

According to the indictment and documents filed in state court, from 2009 through August 2016, LUCAS, operating from his residence in Isanti, Minn., sold and traded methamphetamine for stolen property and firearms.

According to the indictment and documents filed in state court, on August 8, 2016, law enforcement executed a search warrant for the property, which includes a house, two campers and several pole barns. As a result of the search, law enforcement officers recovered several stolen firearms, ammunition and more than $25,000 in stolen property.

This case is the result of an investigation conducted by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and the East Central Drug and Violent Offenders Task Force, with assistance from the Braham Police Department, Cambridge Police Department, Isanti Police Department, Isanti County Sheriff’s Office, and the Anoka Hennepin Drug Task Force.

This case is being prosecuted by Assistant United States Attorney David P. Steinkamp.

Defendant Information:

JEFFREY MARCUS LUCAS, 62

Isanti, Minn.

Charges:

• Conspiracy to Distribute Methamphetamine, 1 count

• Possession with Intent to Distribute Methamphetamine, 1 count

• Possession of Stolen Firearms, 1 count

• 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.

“At the request of the Attorney General of the United States, I have submitted my resignation to the President, effective immediately. Serving the people of Minnesota as their United States Attorney has been the most fulfilling and rewarding experience of my professional life. The Office that I am leaving this evening is comprised of the most talented and motivated professionals I have ever known. The women and men of the United States Attorney’s Office are deeply committed to public service. I was fortunate to work alongside them for the past three years. I also have had the honor of working with federal, state and local law enforcement on some of the most difficult and impactful cases our state has faced. All Minnesotans should know that we are protected by these highly skilled law enforcement officials. I admire them greatly. Finally, I have had the honor of developing close working relationships and deep friendships with diverse communities across Minnesota. I am proud of our accomplishments and encourage the work to continue.”

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The Justice Department announced that Daniel George Fisher, 57, of Minneapolis, Minnesota was sentenced today in the District of Minnesota to 12 months in prison and three years of supervised release for mailing a letter in which he threatened to blow up an Islamic Center.

On Nov. 30, 2016, Fisher pleaded guilty to violating 18 U.S.C. § 247, for obstructing, by threat of force, the free exercise of religious beliefs.  According to his guilty plea, in September 2015, Fisher wrote and mailed an anonymous letter to the Tawfiq Islamic Center (TIC), located in Minneapolis, and threatened to “blow up your building with all you immigrants in it.”  The letter also included slurs and disparaging statements, evincing the Defendant’s strong anti-Muslim animus.

Fisher told investigators that he had been increasingly angry with Muslims since the 9/11 terrorist attacks in New York and DC.  Fisher admitted that he sent the letter to scare and intimidate the TIC's members so they would stop building the Center in his former neighborhood.

“The free exercise of one’s religious beliefs is a fundamental tenet of our Democracy,” said Acting Assistant Attorney General Tom Wheeler.  “This sentence sends a message that anyone who threatens others with violence because of religious intolerance will face significant consequences.”

“My Office takes very seriously any threat of violence against an individual or their place of worship based on race, religion or cultural practices,” said U.S. Attorney Andrew Luger of the District of Minnesota. “We will continue to work closely with the FBI to prosecute these types of crimes, which threaten religious freedoms and violate fundamental civil rights.”

“The sentence handed down today committing the defendant to federal prison reflects the severity of his appalling hate crime,” said Special Agent in Charge Richard T. Thornton of the FBI's Minneapolis Division. “The FBI will continue to prioritize, investigate, and bring to justice those who commit federal hate crimes and other civil rights violations.”

The FBI’s Minneapolis Division investigated the matter.  Assistant U.S. Attorney Angela Munoz-Kaphing of the District of Minnesota and Trial Attorney Olimpia Michel of the Civil Rights Division’s Criminal Section prosecuted the case.

United States Attorney Andrew M. Luger today announced the sentencing of DANIEL GEORGE FISHER, 57, to 12 months in prison for threatening to blow up the Tawfiq Islamic Center in Minneapolis. FISHER pleaded guilty on November 30, 2016, before U.S. District Judge Wilhelmina M. Wright in Saint Paul, Minn.

"My Office takes very seriously any threat of violence against an individual or their place of worship based on race, religion or cultural practices,” said United States Attorney Andrew Luger. "We will continue to work closely with the FBI to prosecute these types of crimes, which threaten religious freedoms and violate fundamental civil rights."

“The free exercise of one’s religious beliefs is a fundamental tenet of our Democracy,” said Acting Assistant Attorney General Tom Wheeler. “This sentence sends a message that anyone who threatens others with violence because of religious intolerance will face significant consequences.”

"The sentence handed down today committing the defendant to federal prison reflects the severity of his appalling hate crime," said Special Agent in Charge Richard T. Thornton of the FBI's Minneapolis Division. "The FBI will continue to prioritize, investigate, and bring to justice those who commit federal hate crimes and other civil rights violations."

According to the defendant’s guilty plea and documents filed in court, on September 30, 2015, the Tawfiq Islamic Center received an anonymous handwritten letter, which threatened to “blow up your building with all you immigrants in it.” The letter also included profanities, racial and ethnic slurs, and other derogatory commentary about the religious and cultural practices of the members of the Tawfiq Islamic Center.

According to the defendant’s guilty plea and documents filed in court, FBI Special Agents interviewed FISHER on June 14, 2016. FISHER reported that he was angry that the Tawfiq Islamic Center selected Minnehaha Avenue for its new location and he wanted the Center to build somewhere else. FISHER further reported that he had become “increasingly angry with Muslims since 9/11.” FISHER confessed to writing the letter and mailing it to Tawfiq Islamic Center with the intent to threaten and scare members of the Tawfiq Islamic Center.

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

Assistant United States Attorney Angela Munoz-Kaphing and Trial Attorney Olimpia Michel of the Civil Rights Division’s Criminal Section prosecuted the case.

Defendant Information:

DANIEL GEORGE FISHER, 57

No known address

Convicted:

• Obstruction of Persons in the Free Exercise of Religious Beliefs, 1 count

Sentenced:

• 12 months in prison

• Supervised release term of three years

• Six months of community confinement

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