District Not Recorded

LATAM Airlines Group S.A. (LATAM), a commercial airline company based in Chile, has agreed to pay a $12.75 million criminal penalty in connection with a scheme to pay bribes to Argentine union officials via a false consulting contract with a third-party intermediary in violation of the accounting provisions of the Foreign Corrupt Practices Act (FCPA). 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Special Agent in Charge George L. Piro of the FBI’s Miami Field Office made the announcement.

According to admissions made in the resolution documents, executives at LATAM’s predecessor-in-interest, LAN Airlines S.A. (LAN), executed a fictitious $1.15 million consulting agreement with an advisor to the Secretary of Argentina’s Ministry of Transportation in October 2006.  Although the agreement purportedly required the consultant to undertake a study of Argentine airline routes, the consultant never provided any such services.  Instead, the purported consultant funneled the monies he received pursuant to the contract to Argentine labor union officials in exchange for the union agreeing to accept lower wages and  to not enforce what would have been a costly labor rule.  In total, LAN profited by more than $6.7 million as a result of the bribes paid to the union officials.

LATAM entered into a three-year deferred prosecution agreement (DPA) to resolve the case.  As part of the DPA, LATAM agreed to pay a $12.75 million criminal penalty, continue to cooperate with the department’s investigation, enhance its compliance program and retain an independent corporate compliance monitor for a term of at least 27 months.  The department reached this resolution based on a number of factors, including the fact that LATAM did not voluntarily disclose the FCPA violations, but did cooperate with the department’s investigation after the press in Argentina uncovered and reported the conduct approximately four years after it had occurred.  After LATAM began cooperating, it did so fully and provided all relevant facts known to it, including about individuals involved in the misconduct.  LATAM did not, however, remediate adequately.  LATAM failed to discipline in any way the employees responsible for the criminal conduct, including at least one high-level company executive, and thus the ability of the compliance program to be effective in practice is compromised.  As a result, the company paid a penalty within the U.S. Sentencing Guidelines range instead of receiving a discount off the bottom of the range.

In a related matter, LATAM reached a settlement today with the U.S. Securities and Exchange Commission (SEC) under which it agreed to pay $6.74 million in disgorgement and $2.7 million in prejudgment interest.  Thus, the approximately $22.2 million in combined penalty, disgorgement and prejudgment interest far exceeds the $6.7 million in savings the company had received from its improper payments.

The FBI’s Miami Field Office investigated the case.  Senior Trial Attorney Jason Linder of the Criminal Division’s Fraud Section prosecuted the case.  The SEC also provided assistance during the investigation.

A Georgia real estate investor pleaded guilty today for his role in bid-rigging and fraud conspiracies committed at public real estate foreclosure auctions in Georgia, the Department of Justice announced. 

James R. Patterson Jr. admitted that he agreed with other real estate investors to rig auctions of foreclosed homes in Gwinnett County from May 2007 until at least November 2011.  According to court documents filed in the U.S. District Court for the Northern District of Georgia, Patterson and his co-conspirators agreed not to compete for the purchase of selected foreclosed homes so that they could win the auctions for those homes with artificially low bids.  The winning bidders then paid off the conspirators who had refrained from bidding against them.  As a result, conspirators profited from money that otherwise would have gone to mortgage holders and other secured debt holders and in some cases, to the people who owned the foreclosed homes.

Including the individual pleading today, twenty-two defendants have been charged in connection with the Justice Department’s ongoing investigation into bid rigging and fraudulent schemes involving real estate foreclosure auctions in the Atlanta area.  Twenty of those have either pleaded guilty or agreed to plead guilty.

These charges have been filed as a result of the ongoing investigation being conducted by the Antitrust Division’s Washington Criminal II Section, the FBI’s Atlanta Division and the U.S. Attorney’s Office of the Northern District of Georgia, in connection with the president’s Financial Fraud Enforcement Task Force.  The president established the task force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ Offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. 

For more information about the task force, please visit www.StopFraud.gov.  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 888-647-3258, or visit http://www.justice.gov/atr/report-violations.

California-based medical device manufacturer Acclarent Inc., a subsidiary of Johnson & Johnson, has agreed to pay $18 million to resolve allegations that the company caused health care providers to submit false claims to Medicare and other federal health care programs by marketing and distributing its sinus spacer product for use as a drug delivery device without U.S. Food and Drug Administration (FDA) approval of that use, the Justice Department announced today.  

“The FDA approval process serves an important role in ensuring that federal health care participants receive devices that are safe, effective and medically appropriate,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will not permit companies to circumvent that process and put profits over patient safety.”     

“The FDA plays a fundamental role in ensuring the safety and efficacy of medical devices and drugs in this country,” said U.S. Attorney Carmen M. Ortiz.  “Every time that patients receive a medical device or fill a prescription they should be able to take for granted that the FDA’s requirements have been met.  We will vigorously pursue those who ignore or seek to circumvent these important patient protections.”

“It is imperative that medical device companies adhere to FDA approval requirements so that patients are not subject to questionable medical treatments at taxpayer expense,” said Special Agent in Charge Phillip M. Coyne of the Department of Health and Human Services Office of Inspector General.  “Our investigators, working closely with our law enforcement partners, will continue to pursue allegations of such misconduct to hold fraudsters accountable and deter those tempted to launch such illegal scams.”

Acclarent sold a variety of medical devices used in sinus surgeries, including a device known as the Relieva Stratus MicroFlow Spacer (Stratus).  In 2006, Acclarent received FDA clearance to market the Stratus as a spacer to be used only with saline to maintain sinus openings following surgery.  The government alleged that Acclarent intended for the Stratus to be used instead as a drug-delivery device for prescription corticosteroids, including Kenalog-40, and that the device was specifically designed and engineered for this use.     

The government further alleged that Acclarent marketed the Stratus as a drug delivery device even after the FDA rejected the company’s 2007 request to expand the approved uses for the Stratus.  For example, Acclarent employees trained physicians using a video that demonstrated the Stratus being used with prescription corticosteroid Kenalog-40 and also used a white, milky substance resembling Kenalog-40 when demonstrating the Stratus.   

In 2010, Acclarent added a warning to its label regarding use of active drug substances in the Stratus; however, the government alleged that Acclarent nonetheless continued to market the Stratus for drug delivery.  By May 2013, Acclarent discontinued all sales of the Stratus and the company agreed to withdraw all FDA marketing clearances for the device, which is no longer commercially available in the United States.   

On Wednesday, July 20th, Acclarent’s former Chief Executive Officer, William Facteau, 47, of Atherton, California and former Vice President of Sales, Patrick Fabian, 49, of Lake Elmo, Minnesota were convicted following a six-week jury trial of 10 misdemeanor counts of introducing adulterated and misbranded medical devices into interstate commerce. 

The civil settlement with Acclarent resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery.  The civil lawsuit was filed in the District of Massachusetts and is captioned United States ex rel. Melayna Lokosky v. Acclarent, Inc.  As part of today’s resolution, Lokosky will receive approximately $3.5 million from the settlement.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $30 billion through False Claims Act cases, with more than $18.3 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with Acclarent was the result of a coordinated effort among the U.S. Attorney’s Office for the District of Massachusetts and the Civil Division’s Commercial Litigation Branch, with assistance from the FDA’s Office of Chief Counsel and HHS’ Office of Counsel to the Inspector General.  The investigation was conducted by the FBI’s Boston Field Office, HHS-OIG, the Defense Health Agency, FDA’s Office of Criminal Investigations, the Department of Veterans Affairs Office of Inspector General and the U.S. Department of Defense, Office of Inspector General, Defense Criminal Investigative Service. 

The claims resolved by this settlement are allegations only, and there has been no determination of liability.  

A Dallas-area tax return preparer continually and repeatedly prepared federal income tax returns that contained false or inflated deductions and credits, according to a 2015 lawsuit filed by the Justice Department.  Now a federal court has permanently barred the defendants in that case from preparing federal tax returns for others.

According to the 2015 complaint, Allan Ukiru Kadagi, Akay Tax Services, Akay Express Tax Services, Akay Express Tax Services Inc. and Cleanshine Tax Services prepared returns for their customers that claimed false, improper, or inflated business expense deductions and false, improper, or inflated education expenses and credits.  As a result, their customers repeatedly reported and paid less tax than they owed, according to the complaint.  The returns also claimed the earned income tax credit beyond what the customers were eligible to receive, the complaint alleged.  The complaint further alleges that Kadagi and the companies misused Preparer Tax Identification Numbers and Kadagi did not provide true copies of tax returns filed with the Internal Revenue Service (IRS) to his clients.

The court order requires the defendants to turn over to the United States a list of all persons for whom they prepared federal tax returns since Jan. 1, 2014.  It also authorizes the United States to monitor the defendants’ compliance with the terms of the injunction.

Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2016.  The IRS has some tips on their website for choosing a tax preparer, and has launched a free directory of federal tax preparers.  In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers.  Information about these cases is available on the Justice Department’s website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

The owner of two Arkansas mental health companies that provide inpatient and outpatient mental health services to juveniles was found guilty yesterday of engaging in a scheme to bribe a former deputy director of the Arkansas Department of Human Services (ADHS), announced Assistant Attorney General Leslie R. Caldwell of the Department of Justice’s Criminal Division.

Theodore E. Suhl, 50, of Warm Springs, Arkansas, was convicted by a federal jury of two counts of honest services fraud, one count of federal funds bribery and one count of interstate travel in aid of bribery.  

The evidence presented at trial showed that Suhl bribed former deputy director of ADHS, Steven B. Jones, using intermediaries Phillip W. Carter and a local pastor.  Trial evidence demonstrated that beginning in approximately April 2007, Suhl, Jones and Carter periodically met at restaurants in Memphis, Tennessee, or in rural Arkansas in order for Suhl to request assistance for his companies from Jones in his capacity as deputy director of ADHS.  Jones agreed to perform official acts that benefitted Suhl and Suhl’s businesses and provided internal ADHS information to Suhl, according to evidence presented at trial.  The trial evidence also showed that, in exchange for Jones’s agreement to perform official acts, Suhl paid Jones by funneling cash payments through the pastor’s church and providing the bribe payments to Jones in cash so that the transactions would not be easily traceable.    

Jones pleaded guilty to federal funds bribery and conspiracy for his involvement in the scheme and was sentenced to 30 months in prison.  Carter pleaded guilty to conspiracy to commit federal funds bribery and honest services wire fraud and was sentenced to 24 months in prison.

The FBI’s Little Rock Field Office investigated the case.  Trial Attorneys Lauren Bell, John D. Keller and Amanda R. Vaughn of the Criminal Division’s Public Integrity Section are prosecuting the case.

A Montgomery County, Alabama, resident was sentenced to 48 months in prison for her role in a stolen identity refund fraud scheme, announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama.

Wendy Huff, 32, admitted that between January 2013 and August 2015, she worked at two loan companies in Montgomery, Alabama, and had access to the personal identifying information of customers.  Huff agreed to steal information from her employers and provide it to her co-conspirator James Vernon Battle, 31.  Battle used that information to file over 335 returns claiming more than $400,000 in fraudulent refunds and directed the requested tax refunds to prepaid debit cards and U.S. Treasury checks, which were mailed to addresses in Montgomery, including Huff’s residence.  Battle also brought several U.S. Treasury tax refund checks to Huff’s workplace where she used her position to cash them.  Huff returned half of the proceeds to Battle and kept the balance for herself. 

Huff pleaded guilty in March to one count of conspiracy to commit mail fraud and one count of aggravated identity theft.  In addition to the prison term, U.S. District Judge Joel Dubina for the Middle District of Alabama sentenced Huff to three years of supervised release and ordered her to pay $102,322 in restitution to the Internal Revenue Service (IRS).  Battle is scheduled to be sentenced on Aug. 31. 

Principal Deputy Assistant Attorney General Ciraolo and U.S. Attorney Beck commended special agents of IRS-Criminal Investigation and the U.S. Secret Service, who investigated the case and Trial Attorneys Michael C. Boteler and Robert J. Boudreau of the Tax Division and Assistant U.S. Attorney Jonathan Ross of the Middle District of Alabama, who are prosecuting this case.

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

Lawsuits Challenge Unprecedented Consolidation in the Health Insurance Industry

The U.S. Department of Justice and attorneys general from multiple states and the District of Columbia sued today to block Anthem’s proposed acquisition of Cigna and Aetna’s proposed acquisition of Humana, alleging that the transactions would increase concentration and harm competition across the country, reducing from five to three the number of large, national health insurers in the nation.

The department and state attorneys general filed these two merger challenges in the U.S. District Court for the District of Columbia.  The complaints allege that the two mergers – valued at $54 billion and $37 billion – would harm seniors, working families and individuals, employers and doctors and other healthcare providers by limiting price competition, reducing benefits, decreasing incentives to provide innovative wellness programs and lowering the quality of care.

“Competitive insurance markets are essential to providing Americans the affordable and high-quality healthcare they deserve,” said Attorney General Loretta E. Lynch.  “These mergers would restrict competition for health insurance products sold in markets across the country and would give tremendous power over the nation’s health insurance industry to just three large companies.  Our actions seek to preserve competition that keeps premiums down and drives insurers to collaborate with doctors and hospitals to provide better healthcare for all Americans.”

“We all, including seniors, everyday workers and the previously uninsured and underinsured deserve affordable health insurance options,” said Principal Deputy Associate Attorney General Bill Baer.  “Competition today drives these four successful firms to fight to give us affordable options.  There is no reason to put that dynamic at risk and that is why we are asking the court to stop these mergers and keep competition working for the benefit of the American consumer.”

“The proposed mergers would eliminate two innovative competitors – Cigna and Humana – at a time when competition has been pressuring insurers to develop new models of care designed to keep Americans healthier, to deliver healthcare more efficiently and to control the costs of providing care,” said Deputy Assistant Attorney General Sonia Pfaffenroth of the Justice Department’s Antitrust Division.  “The department will continue to work with our state colleagues to protect competition and innovation in this vitally important industry.”

Eleven states – California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee and Virginia – and the District of Columbia joined the department’s challenge of Anthem’s $54 billion acquisition of Cigna.  Eight states –Delaware, Florida, Georgia, Iowa, Illinois, Ohio, Pennsylvania and Virginia – and the District of Columbia joined the department’s challenge of Aetna’s $37 billion acquisition of Humana.

The suit against Anthem and Cigna alleges that their merger would substantially reduce competition for millions of consumers who receive commercial health insurance coverage from national employers throughout the United States; from large-group employers in at least 35 metropolitan areas, including New York, Los Angeles, San Francisco, Denver and Indianapolis; and from public exchanges created by the Affordable Care Act in St. Louis and Denver.  The complaint also alleges that the elimination of Cigna threatens competition among commercial insurers for the purchase of healthcare services from hospitals, physicians and other healthcare providers.  The merger would eliminate substantial head-to-head competition in all these markets, and it would remove the independent competitive force of Cigna, which has been a leader in the industry’s transition to value-based care.

The lawsuit against Aetna and Humana alleges that their merger would substantially reduce Medicare Advantage competition in more than 350 counties in 21 states, affecting more than 1.5 million Medicare Advantage customers in those counties.  Before seeking to acquire Humana, Aetna had pursued aggressive expansion in Medicare Advantage.  Aetna, the nation’s fourth-largest Medicare Advantage insurer by membership, has nearly doubled its Medicare Advantage footprint over the past four years.  Humana is the nation’s second-largest Medicare Advantage insurer by membership.  The lawsuit also alleges that Aetna’s purchase of Humana would substantially reduce competition to sell commercial health insurance to individuals and families on the public exchanges in 17 counties in Florida, Georgia and Missouri, affecting more than 700,000 people in those counties.  The lawsuit alleges that by buying Humana, Aetna would eliminate one of its strongest and most capable competitors in these markets.

Anthem, Inc. is headquartered in Indianapolis, Indiana.  It is the nation’s second-largest health insurer and the largest member of the Blue Cross and Blue Shield Association.  It holds the Blue Cross license in 14 states and provides health insurance to 39 million people.  In 2015, Anthem reported over $79 billion in revenues.

Cigna Corp. is headquartered in Hartford, Connecticut.  It is the nation’s fourth-largest health insurer.  It operates in every state and the District of Columbia and provides health insurance to 15 million people.  In 2015, Cigna reported $38 billion in revenues.

Aetna Inc. is headquartered in Hartford, Connecticut.  It is the nation’s third-largest health insurer.  It operates in every state and the District of Columbiaand provides health insurance to 23 million people.  In 2015, Aetna reported $60 billion in revenues.

Humana Inc. is headquartered in Louisville, Kentucky.  It is the nation’s fifth-largest health insurer, operates in every state and the District of Columbia and provides health insurance to 14 million people.  In 2015, Humana reported $54 billion in revenues.

Aetna-Humana Complaint

Anthem-Cigna Complaint

The Justice Department announced today that it has filed a lawsuit against Bensalem Township, Pennsylvania, alleging that the township violated the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA) when it denied zoning approval to allow the Bensalem Masjid to build a mosque on three adjoining parcels of land in the township.

The complaint, filed in the Eastern District of Pennsylvania, alleges that Bensalem Township’s denial of a variance imposed a substantial burden on the Bensalem Masjid’s religious exercise, treated the Bensalem Masjid less favorably than the township treats nonreligious assemblies and discriminated against the Bensalem Masjid on the basis of religion.  According to allegations in the complaint, the township placed unreasonable limitations on religious assemblies through its land use regulations.  The complaint also alleges that the township only permits places of worship in one district without a variance or rezoning by the township and that no properties were available in that district when the Bensalem Masjid acquired the property.

“Our Constitution protects the rights of religious communities to build places of worship free from unlawful interference and unnecessary barriers,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “The Department of Justice will continue to challenge unjustified local zoning actions around the country when they encroach upon this important civil right.”

RLUIPA contains multiple provisions prohibiting religious discrimination and protecting against unjustified burdens on religious exercise.  Persons who believe that they have been subjected to religious discrimination in land use or zoning may contact the Civil Rights Division’s Housing and Civil Enforcement Section at (800) 896-7743.

More information about RLUIPA, including questions and answers about the law and other documents, may be found at http://www.justice.gov/crt/about/hce/rluipaexplain.php.

Bensalem Township Complaint

Attorney General Loretta E. Lynch today announced that she has chosen Rupa Bhattacharyya to head the September 11th Victim Compensation Fund (VCF) after current VCF Special Master Sheila L. Birnbaum steps down later this month.

Special Master Birnbaum will continue to the full-time practice of law at Quinn Emanuel, LLP, where she is a partner. Bhattacharyya, who currently serves as Director of the Justice Department’s Constitutional and Specialized Tort Litigation Section in the Civil Division’s Torts Branch, will assume her new position on July 21.

“Rupa Bhattacharyya is an exceptional administrator and a devoted public servant, and I am delighted to name her as the new Special Master of the VCF,” said Attorney General Lynch. “Throughout her career at the Treasury and Justice Departments, she has earned a reputation for fairness, efficiency and integrity.  I am confident that under her leadership, the VCF will continue to guarantee that those whose lives were forever changed by the events of September 11th, 2001, can receive the compensation they deserve.  I thank outgoing Special Master Sheila Birnbaum for her outstanding leadership of the VCF over the last five years and I welcome Ms. Bhattacharyya to her new post.”

“As a life-long New Yorker, serving as Special Master of the VCF has been perhaps the most personally rewarding work of my career,” said Special Master Birnbaum.  “My goal from the beginning was to establish a program that is fair, transparent and easy to navigate and I believe we have accomplished this and more over the past five years.  It has been a true privilege to work on behalf of the victims of 9/11 and their resilience is inspiring.  As the VCF moves into a new chapter following the reauthorization, I know the team is well poised to continue to succeed in compensating those most impacted by the events of Sept. 11, 2001.”  

Birnbaum has served as VCF Special Master since May 2011, after the fund created under the James Zadroga 9/11 Health & Compensation Act (Zadroga Act) was signed into law by President Obama on Jan. 2, 2011.  The VCF was reauthorized in December 2015 and under Birnbaum’s leadership has rendered award decisions on more than 10,000 claims and paid over $1.8 billion to first responders, recovery workers and residents who suffered physical harm or were killed as a result of the terrorist-related aircraft crashes of Sept. 11, 2001, or the debris removal efforts that took place in the immediate aftermath. 

The VCF accomplishments under Birnbaum’s leadership include:

• Drafting and issuing the final rule to reflect the Zadroga Act when the VCF first re-opened in 2011 and then issuing the revised rule to reflect the December 2015 Reauthorization statute;
• Establishing collaborative, ongoing working relationships with “partner” entities such as the WTC Health Program (NIOSH), local, state and federal agencies, key employers such as FDNY and NYPD and advocacy groups focused on 9/11 issues, all in an effort to ease the burden on claimants and ensure efficient claims processing;
• Establishing an ongoing focus on outreach and communications with claimants, including the VCF website (available in four languages), a toll-free Helpline, town hall meetings and pro bono legal clinics in coordination with the New York City Bar;
• Developing productive working relationships with law firms representing VCF claimants, including frequent conference calls and meetings to keep attorneys updated on VCF progress and activity;
• Design and implementation of the initial claim form and redesign of a simpler form to meet the reauthorization mandate, as well as enhancements to the online system;
• Continuous efforts to improve the quality of claim submissions to support faster review and decision-making and simplify and streamline the claim review process as it evolved;
• Conducting extensive outreach for the Oct. 3, 2013, filing deadline to ensure all potential claimants knew of the deadline and had an easy way to register to preserve their right to file a future claim;
• Hiring of VCF staff and expansion of team to meet claimants’ needs, including identifying and personally training hearing officers to conduct hearings; and
• Improving transparency by providing various public reports on a weekly, quarterly and annual basis, along with frequent “Messages from the Special Master” providing updates on the VCF.

“I am honored to be selected by the Attorney General for this important service,” Bhattacharyya said.  “I look forward to working alongside the dedicated VCF staff to ensure that 9/11 claimants promptly receive the payments to which they are entitled.”

Prior to Bhattacharyya’s selection to run the 9/11 VCF, she has served as the Justice Department’s Constitutional and Specialized Torts Branch Director since April 2012.  As Director, Bhattacharyya oversees separate groups of attorneys and professional staff for the Vaccine Injury Compensation Program, which has paid in excess of $3.4 billion to more than 4,700 people since the Program’s 1988 inception under the National Childhood Vaccine Injury Act; the Radiation Exposure Compensation Act program, which has awarded more than $2 billion in compassionate compensation to eligible claimants under the Radiation Exposure Compensation Act; and the Constitutional Torts staff, which defends constitutional tort claims brought against federal officials sued in their individual capacities in federal district courts and reviews and makes determinations on requests for individual capacity representation from federal employees.  Bhattacharrya has also served informally as an advisor to the Civil Division on matters related to the 9/11 VCF, including implementation of the reauthorizing legislation and promulgation of the associated regulations.  She additionally serves as an advisor to other government components on compensation and representation programs, including the newly created U.S. Victims of State Sponsored Terrorism Fund, administered by the Department’s Criminal Division.

Bhattacharyya also served for nearly four years as the Deputy Assistant General Counsel for International Affairs at the U.S. Department of the Treasury, providing legal and legislative advice on a broad range of international economic and financial matters as well as administrative matters including hiring and budget.  In 2012, she received an Exceptional Service Award from the Secretary of the Treasury for playing a critical role in framing the legal contours of key national security objectives of the Treasury Department, for contributing significantly to the implementation of the Dodd-Frank Act, particularly with respect to its international implications and for deploying information technology resources to enhance information sharing and streamlining procedures for processing Freedom of Information Act requests.

She previously worked for nearly 12 years as an attorney in the Justice Department’s Civil Division, mostly in the Federal Programs Branch.  She was awarded the Attorney General’s John Marshall Award for Outstanding Legal Achievement for Trial Litigation, as well as three Special Commendations from the Assistant Attorney General of the Civil Division for Outstanding Service.  Before coming to the Justice Department, Bhattacharyya clerked for then Chief Judge Julia Smith Gibbons of the U.S. District Court for the Western District of Tennessee.

Bhattacharyya received her J.D. from Harvard Law School, a Masters of Arts in Law and Diplomacy (M.A.L.D.) from the Fletcher School of Law and Diplomacy at Tufts University and her B.A. from Tulane University.

For additional information on the Victim Compensation Fund, please visit: www.vcf.gov.

The Department of Justice and the U.S. Environmental Protection Agency today announced a settlement with Enbridge Energy Limited Partnership and several related Enbridge companies to resolve claims stemming from its 2010 oil spills in Marshall, Michigan, and Romeoville, Illinois.  Enbridge has agreed to spend at least $110 million on a series of measures to prevent spills and improve operations across nearly 2,000 miles of its pipeline system in the Great Lakes region.  Enbridge will also pay civil penalties totaling $62 million for Clean Water Act violations -- $61 million for discharging at least 20,082 barrels of oil in Marshall and $1 million for discharging at least 6,427 barrels of oil in Romeoville.

In addition, the proposed settlement will resolve Enbridge’s liability under the Oil Pollution Act, based on Enbridge’s commitment to pay over $5.4 million in unreimbursed costs incurred by the government in connection with cleanup of the Marshall spill, as well as all future removal costs incurred by the government in connection with that spill.  Today’s settlement includes an extensive set of specific requirements to prevent spills and enhance leak detection capabilities throughout Enbridge’s Lakehead pipeline system - a network of 14 pipelines spanning nearly 2,000 miles across seven states.  Enbridge must also take major actions to improve its spill preparedness and emergency response programs.  Under the settlement, Enbridge is also required to replace close to 300 miles of one of its pipelines, after obtaining all necessary approvals. Enbridge’s Lakehead System delivers approximately 1.7 million barrels of oil in the United States each day.

“This settlement will make the delivery of our nation’s energy resources safer and more environmentally responsible,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “It requires Enbridge to take robust measures to improve the maintenance and monitoring of its Lakehead pipeline system, protecting lakes, rivers, land and communities across the upper midwest, as well as pay a significant penalty.”

In addition to payments required under the proposed settlement, Enbridge has already reimbursed the government for $57.8 million in cleanup costs from the Marshall spill and $650,000 for cleanup costs from the Romeoville spill and Enbridge reportedly incurred costs in excess of $1 billion for required cleanup activities relating to the Marshall and Romeoville spills.

“This agreement puts in place advanced leak detection and monitoring requirements to make sure a disaster like this one doesn’t happen again,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance. “This comprehensive program – including an independent third party to audit compliance – will protect our waterways and the people who depend on them.”

“My office is pleased with this settlement, which not only provides financial accountability for the environmental harm caused by the oil spill in Marshall but also puts in place significant measures to protect the people and vital natural resources of this district going forward,” said U.S. Attorney Patrick Miles Jr. for the Western District of Michigan.  “Prevention of future pipeline leaks and immediate detection and repair of problem areas are critical when protecting health and the environment.  With the EPA and our other federal partners, the U.S. Attorney’s Office will vigorously enforce the Clean Water Act and other federal environmental laws in this district.” 

“This was one of the largest inland oil spills in U.S. history when Enbridge discharged one million gallons of oil to Talmadge Creek near Marshall,” said Acting EPA Regional Administrator Robert Kaplan.  “Together with our state and local emergency responders, EPA was able to contain the spill before it reached the Great Lakes.  After 22 months of arduous cleanup work, the Kalamazoo River finally reopened for recreational activities.”     

Under the settlement, Enbridge is committing to the following measures, which it estimates will cost at least $110 million:

• Implement an enhanced pipeline inspection and spill prevention program;
   
• Implement enhanced measures to improve leak detection and control room operations;
   
• Commit to additional leak detection and spill prevention requirements for a portion of Enbridge’s Line 5 that crosses the Straits of Mackinac in Michigan; 
   
• Create and maintain an integrated database for its Lakehead Pipeline System;
   
• Enhance its emergency spill response preparedness programs by conducting four emergency spill response exercises to test and practice Enbridge’s response to a major inland oil spill;
   
• Improve training and coordination with state and local emergency responders by requiring incident command system training for employees, provide training to local responders, participate in area response planning and organize response exercises;
   
• Hire an independent third party to assist with review of implementation of the requirements in the settlement agreement;

The government’s complaint alleges that Enbridge owned or operated a 30 inch-pipeline, known as Line 6B, that ruptured near Marshall on July 25, 2010, discharging oil into the environment.  Although the Line 6B rupture triggered numerous alarms in Enbridge’s control room, Enbridge failed to recognize a pipeline had ruptured until at least 17 hours later.  In the meantime, Enbridge had restarted Line 6B on two separate occasions on July 26, 2010, pumping additional oil into the ruptured pipeline causing additional discharges of oil into the environment.  Ultimately, Line 6B discharged at least 20,082 barrels of crude oil, much of which entered Talmadge Creek and flowed into the Kalamazoo River which flows to Lake Michigan.  Flooding caused by heavy rains pushed the discharged oil over the river's banks into its flood plains and accelerated its migration over 35 miles downstream before it was contained.  Enbridge later replaced Line 6B, which originates in Griffith, Ind., crosses the lower peninsula of Michigan and ends in Sarnia, Canada, with a new, larger pipeline, also known as Line 6B.  The rupture and discharges were caused by stress corrosion cracking on the pipeline, control room misinterpretations and other problems and pervasive organization failures at Enbridge.

The complaint also alleges that on Sept. 9, 2010, another Enbridge pipeline, known as Line 6A, discharged at least 6,427 barrels of oil which Romeoville, much of which flowed through a drainage ditch into a retention pond in Romeoville.

There will be a 30 day public comment period on the consent decree lodged today.  Information on how to comment on the consent decree will be available in the Federal Register and on the Department of Justice’s website: www.justice.gov/enrd/consent-decrees.

Attorney General Loretta E. Lynch announced today the filing of civil forfeiture complaints seeking the forfeiture and recovery of more than $1 billion in assets associated with an international conspiracy to launder funds misappropriated from a Malaysian sovereign wealth fund.  Today’s complaints represent the largest single action ever brought under the Kleptocracy Asset Recovery Initiative.

Attorney General Lynch was joined in the announcement by Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, FBI Deputy Director Andrew G. McCabe and Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI).

According to the complaints, from 2009 through 2015, more than $3.5 billion in funds belonging to 1Malaysia Development Berhad (1MDB) was allegedly misappropriated by high-level officials of 1MDB and their associates.  With today’s complaints, the United States seeks to recover more than $1 billion laundered through the United States and traceable to the conspiracy.  1MDB was created by the government of Malaysia to promote economic development in Malaysia through global partnerships and foreign direct investment, and its funds were intended to be used for improving the well-being of the Malaysian people.  Instead, as detailed in the complaints, 1MDB officials and their associates allegedly misappropriated more than $3 billion. 

“The Department of Justice will not allow the American financial system to be used as a conduit for corruption,” said Attorney General Lynch.  “With this action, we are seeking to forfeit and recover funds that were intended to grow the Malaysian economy and support the Malaysian people.  Instead, they were stolen, laundered through American financial institutions and used to enrich a few officials and their associates.  Corrupt officials around the world should make no mistake that we will be relentless in our efforts to deny them the proceeds of their crimes. ”

“According to the allegations in the complaints, this is a case where life imitated art,” said Assistant Attorney General Caldwell.  “The associates of these corrupt 1MDB officials are alleged to have used some of the illicit proceeds of their fraud scheme to fund the production of The Wolf of Wall Street, a movie about a corrupt stockbroker who tried to hide his own illicit profits in a perceived foreign safe haven.  But whether corrupt officials try to hide stolen assets across international borders – or behind the silver screen – the Department of Justice is committed to ensuring that there is no safe haven.”

“Stolen money that is subsequently used to purchase interests in music companies, artwork or high-end real estate is subject to forfeiture under U.S. law,” said U.S. Attorney Decker.  “Today’s actions are the result of the tremendous dedication of attorneys in my office and the Department of Justice, as well as law enforcement agents across the country.  All of us are committed to sending a message that we will not allow the United States to become a playground for the corrupt, a platform for money laundering or a place to hide and invest stolen riches.”

“The United States will not be a safe haven for assets stolen by corrupt foreign officials,” said Deputy Director McCabe.  “Public corruption, no matter where it occurs, is a threat to a fair and competitive global economy.  The FBI is committed to working with our foreign and domestic partners to identify and return these stolen assets to their legitimate owners, the Malaysian people.  I want to thank the FBI and IRS investigative team who worked with the prosecutors and our international partners on this case.”

“Today’s announcement underscores the breadth of the alleged corruption and money laundering related to the 1MDB fund,” said Chief Weber.  “We cannot allow the massive, brazen and blatant diversion of billions of dollars to be laundered through U.S. financial institutions without consequences.”

As alleged in the complaints, the members of the conspiracy – which included officials at 1MDB, their relatives and other associates – allegedly diverted more than $3.5 billion in 1MDB funds.  Using fraudulent documents and representations, the co-conspirators allegedly laundered the funds through a series of complex transactions and fraudulent shell companies with bank accounts located in the Singapore, Switzerland, Luxembourg and the United States.  These transactions were allegedly intended to conceal the origin, source and ownership of the funds, and were ultimately processed through U.S. financial institutions and were used to acquire and invest in assets located in the United States.

In seeking recovery of more than $1 billion, the complaints detail the alleged misappropriation of 1MDB’s assets as it occurred over the course of at least three schemes.  In 2009, the complaints allege that 1MDB officials and their associates embezzled approximately $1 billion that was intended to be invested to exploit energy concessions purportedly owned by a foreign partner.  Instead, the funds were transferred through shell companies and were used to acquire a number of assets, as set forth in the complaints.  The complaints also allege that the co-conspirators misappropriated more than $1.3 billion in funds raised through two bond offerings in 2012 and $1.2 billion following another bond offering in 2013.  As further detailed in the complaints, the stolen funds were laundered into the United States and used by the co-conspirators to acquire and invest in various assets.  These assets allegedly included high-end real estate and hotel properties in New York and Los Angeles, a $35 million jet aircraft, works of art by Vincent Van Gogh and Claude Monet, an interest in the music publishing rights of EMI Music and the production of the 2013 film The Wolf of Wall Street.

The FBI’s International Corruption Unit and the IRS-CI investigated the case.  Deputy Chief Woo S. Lee and Trial Attorney Kyle R. Freeny of the Criminal Division’s Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorneys John Kucera and Christen Sproule of the Central District of California prosecuted the case.  The Criminal Division’s Office of International Affairs provided additional assistance. 

The Kleptocracy Asset Recovery Initiative is led by a team of dedicated prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section, in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered asset to benefit the people harmed by these acts of corruption and abuse of office.  Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov or https://tips.fbi.gov/.

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Documents: Documents and Resources from the July 20, 2016 Press Conference Announcing Significant Kleptocracy Enforcement Action to Recover More Than $1 Billion Obtained from Corruption Involving Malaysian Sovereign Wealth Fund

Video: Attorney General Lynch Announces a Kleptocracy Enforcement Action to Recover More Than $1 Billion Obtained from Corruption Involving Malaysian Sovereign Wealth Fund

A Greenville, Texas, resident was indicted today on 21 counts of aiding and assisting in the preparation of false tax returns, one count of mail fraud and one count of aggravated identity theft, announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

According to the indictment, Lourdes Ramirez assisted in the preparation of fraudulent federal income tax returns for years 2011 through 2013 containing false material matters such as false education credits and Schedule C expenses.  Ramirez is also charged with using the U.S. Postal Service to submit her own fraudulent 2011 federal income tax return to the Internal Revenue Service (IRS) which falsely claimed an individual as Ramirez’s dependent without that individual’s knowledge.

If convicted, Ramirez faces a statutory maximum sentence of three years in prison for each count of aiding and assisting in the preparation of a false tax return, a statutory maximum sentence of 20 years in prison for the mail fraud charge and a mandatory term of two years in prison for the aggravated identity theft charge.  She also faces monetary penalties, supervised release and restitution.

An indictment merely alleges that crimes have been committed.  The defendant is presumed innocent until proven guilty beyond a reasonable doubt.

Principal Deputy Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Alexander Effendi and Melanie Smith of the Tax Division, who are prosecuting this case with assistance from the U.S. Attorney’s Office of the Northern District of Texas.

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

Nishikawa Rubber Co. Ltd. (Nishikawa) has agreed to plead guilty and pay a $130 million criminal fine for its role in a conspiracy to fix the prices of and rig the bids for automotive body sealing products installed in cars sold to U.S. consumers, the Justice Department announced today. 

According to charges filed today in U.S. District Court for the Eastern District of Kentucky, Nishikawa conspired from at least as early as January 2000 until at least September 2012 to fix the prices and rig bids of automotive body sealing products sold to Honda Motor Company Ltd., Toyota Motor Corporation, Fuji Heavy Industries Ltd. (Subaru) and certain of their subsidiaries and affiliates in the United States and elsewhere.  Automotive body sealing products consist of body-side opening seals, door-side weather-stripping, glass-run channels, trunk lids and other smaller seals, which are installed into automobiles to keep the interior dry from rain and free from wind and exterior noises.  Nishikawa agreed to cooperate in the department’s ongoing investigation.  The plea agreement will be subject to court approval. 

“Nishikawa has agreed to pay a steep price for its participation in a conspiracy that victimized consumers in both the United States and Canada,” said Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division.  “However, Nishikawa deserves credit for acknowledging their conduct, accepting responsibility and charting a new path toward compliance and remediation.”

“The FBI is committed to aggressively investigating companies and individuals who engage in criminal conduct that corrupts the global marketplace,” said Special Agent in Charge Howard S. Marshall of the FBI’s Louisville office.  “We will continue our work with the Department of Justice Antitrust Division to uncover schemes aimed at creating an unfair competitive advantage by way of price fixing, bid rigging or other illegal means.”

The division worked closely with the Competition Bureau of Canada throughout this investigation pursuant to the Agreement Between the Government of Canada and the Government of the United States of America Regarding the Application of their Competition and Deceptive Marketing Practices Laws.  In part through that cooperation, the Antitrust Division and the Canadian Competition Bureau were able to identify affected sales of automotive body sealing products manufactured in the United States and then shipped to Canada for assembly into automobiles that were imported into the United States.  These sales were included as affected commerce for purposes of calculating Nishikawa’s fine.  Because of the particular facts of this case, including that Nishikawa’s conduct primarily targeted the United States and because the fine imposed today is an effective remedy in the United States and Canada, once final judgment is entered in this case, the Commissioner of the Competition Bureau of Canada will exercise his discretion to not pursue further enforcement action against Nishikawa in Canada for this conduct.

“Today’s resolution is only the most recent and visible example of cooperation that routinely occurs between the Competition Bureau and U.S. Department of Justice,” said Deputy Assistant Attorney General Snyder.  “We greatly appreciate and value the working relationship our two agencies have developed over many years of pursuing a shared mission to protect competition in our markets and the consumers who benefit from it.”

“Strong cooperation among law enforcers is crucial to detect and deter cartel activities that span beyond our borders,” said Senior Deputy Commissioner Matthew Boswellof the Cartels and Deceptive Marketing Practices Branch of the Competition Bureau of Canada.  “We achieved great results through cooperation with our US partners in this international investigation into bid-rigging in the auto parts industry. The Bureau continues to work closely with partners, in the US and elsewhere, to crack down on cartels.”

Today’s charge is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by the Antitrust Division’s criminal enforcement sections and the FBI.  Including Nishikawa, 45 companies and 64 executives have been charged in the division’s ongoing investigation and have agreed to pay a total of more than $2.8 billion in criminal fines.  Nishikawa is being prosecuted by the Antitrust Division’s Chicago Office and the FBI’s Louisville Field Office, Covington Resident Agency, with assistance from the U.S. Attorney’s Office of the Eastern District of Kentucky.  Anyone with information on market allocation, price fixing, bid rigging and other anticompetitive conduct related to other products in the automotive parts industry should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Louisville Field Office at 502-263-6000.

Settlement Maintains Competition between Bud and Miller Beers, Prohibits ABI from Disadvantaging Rivals with Distributors and Provides for Review of Future ABI Craft Beer Acquisitions  

The Department of Justice announced today that it has agreed to a settlement with Anheuser-Busch InBev (ABI) that will permit ABI to proceed with its acquisition of SABMiller.  The settlement requires ABI to divest SABMiller’s entire U.S. business – including SABMiller’s ownership interest in MillerCoors, the right to brew and sell certain SABMiller beers in the United States and the worldwide Miller beer brand rights.  This settlement will prevent any increase in concentration in the U.S. beer industry. 

The settlement also prohibits ABI from instituting or continuing practices and programs that limit the ability and incentives of independent beer distributors to sell and promote the beers of ABI’s rivals, including high-end craft and import beers.  Moreover, the settlement precludes ABI from acquiring beer distributors or brewers – including non-HSR reportable craft brewer acquisitions – without allowing for department review of the acquisition’s likely competitive effects. 

“The remedy we secured will help preserve and promote competition in the multi-billion dollar U.S. beer industry,” said Deputy Assistant Attorney General Sonia Pfaffenroth of the Justice Department’s Antitrust Division.  “The two largest U.S. brewers – ABI and MillerCoors – will now remain independent competitors after the deal.  The settlement also preserves the ability of smaller brewers – including brewers of craft and import beers – to compete against ABI by protecting their access to important distribution networks.  Independent distributors that sell ABI’s beer will have the freedom to sell and promote the variety of beers that many Americans drink.”

The department’s Antitrust Division filed a civil antitrust lawsuit today in the U.S. District Court for the District of Columbia to block the $107 billion transaction, along with a proposed settlement that, if approved by the court, would resolve the competitive harm alleged in the lawsuit.  The department’s complaint alleges that the proposed transaction would substantially lessen competition in the national market for the sale of beer in the United States and in at least 58 local markets in the United States.

According to the department’s complaint, through its acquisition of SABMiller, ABI would gain a majority interest in MillerCoors.  ABI and MillerCoors jointly account for approximately 70 percent of beer sold in the United States.  The acquisition would create many highly concentrated local geographic markets, with some combined shares in excess of 90 percent.  As a result, under the terms of the proposed settlement, the companies are required to divest SABMiller’s entire ownership stake in MillerCoors.  The companies will also divest the right to brew and sell all SABMiller beer brands currently imported or licensed for sale in the United States.  Finally, the companies will divest all rights to SABMiller’s Miller-branded beer worldwide.

According to a Competitive Impact Statement (CIS) also filed by the department, the divesture of SABMiller’s interest in MillerCoors to Molson Coors alone was insufficient to remedy the competitive harm arising from the transaction.  As explained in the CIS, Molson Coors and ABI have interactions outside the United States which present opportunities to facilitate coordination in the United States – opportunities that MillerCoors does not presently have.  To address this competitive concern, the settlement provides additional relief aimed at protecting the competitive constraint that other brewers provide – in particular, brewers of high-end craft and import beers – on ABI’s and Molson Coors’ ability to raise prices, either unilaterally or through coordination, on their beers.  Among other things, the settlement prohibits ABI from instituting or continuing practices and programs that disincentivize distributors from selling and promoting the beers of ABI’s high-end and other rivals.

In conducting its investigation, the department cooperated with its counterparts in a number of jurisdictions that also reviewed the transaction.  “We thank our enforcement partners around the world, especially from the European Commission, Canada and China, for their close and constructive collaboration on this matter,” added Deputy Assistant Attorney General Pfaffenroth.

ABI is a corporation organized and existing under the laws of Belgium, with its headquarters in Leuven, Belgium.  ABI owns and operates 19 breweries in the United States.  ABI owns more than 40 major beer brands sold in the United States, including Bud Light – the top-selling beer brand in the United States – and other popular beer brands, such as Budweiser, Busch, Michelob, Natural Light, Stella Artois, Shock Top, Goose Island and Beck’s. 

SABMiller is a corporation organized and existing under the laws of the United Kingdom, with its headquarters in London, England.  SABMiller operates in the United States through its 58 percent ownership interest in the MillerCoors joint venture. 

MillerCoors is a limited liability company organized and existing under the laws of the State of Delaware, with its principal place of business in Chicago.  Under MillerCoors’ corporate governance structure, SABMiller and Molson Coors, through their designated representatives, have an equal right to govern MillerCoors.  MillerCoors owns and operates 12 breweries in the United States.  MillerCoors has the sole right to produce and sell in the United States more than 40 major brands of beer, including Coors Light and Miller Lite—the second- and fourth-highest selling beer brands in the United States.  MillerCoors also has the right to produce and sell in the United States other popular beer brands, such as Miller Genuine Draft, Coors Banquet and Blue Moon.  In addition, MillerCoors has the exclusive right to import into and sell in the United States certain beer brands owned by SABMiller, including Peroni, Grolsch and Pilsner Urquell.

The proposed settlement, along with the department’s CIS, will be published in the Federal Register, consistent with the requirements of the Antitrust Procedures and Penalties Act.  At such time, any person may submit written comments concerning the proposed settlement during a 60-day comment period to Peter J. Mucchetti, Chief, Litigation I Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 4100, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the proposed settlement upon finding that it is in the public interest.

Anheuser-Busch CIS

Anheuser-Busch Complaint

Anhueser-Busch Explanation

Anheuser-Busch Hold Separate

Anheuser-Busch PFJ

 

A Montgomery, Alabama, resident pleaded guilty today to one count of a multi-object conspiracy to commit identity theft and wire fraud and one count of aggravated identity theft, announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama.

According to court documents, Alana Wells worked at a healthcare company where she had access to patient information protected from disclosure under the Health Insurance Portability and Accountability Act of 1996.  Wells admitted that she stole the names, dates of birth and social security numbers of patients from her employer’s database and provided these identities to co-conspirator Fredrick Hill.  Hill then provided the stolen personal identification information to another co-conspirator, Christopher Davis, who, along with others, used it to file fraudulent federal tax returns with the Internal Revenue Service (IRS) requesting tax refunds.  Hill and Davis were previously prosecuted and sentenced to 74 months and 60 months in prison, respectively.

A date for Wells’ sentencing hearing has not yet been set.  She faces a maximum sentence of five years in prison for conspiracy and a mandatory two-year prison sentence for aggravated identity theft, as well as a term of supervised release and monetary penalties.

Principal Deputy Assistant Attorney General Ciraolo and U.S. Attorney Beck commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Jason H. Poole and Kathryn A. Kimball of the Tax Division and Assistant U.S. Attorney Jonathan S. Ross of the Middle District of Alabama, who are prosecuting this case.

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

Houston Man Allegedly Falsely Overstated Customers’ Itemized Deductions

A Houston, Texas, tax return preparer fraudulently lowered his clients’ federal income taxes by overstating the deductions they claimed on Schedule A (Itemized Deductions), according to a lawsuit filed by the Justice Department in May.  Now a federal court has barred the defendant in that case from preparing tax returns for others.

Charles Lee Harrison admitted to the allegations in the government’s complaint, including that he prevented his clients from realizing that their returns contained false items by not reviewing the returns with his clients and by sometimes not showing his clients the Schedule A that contained he false deductions.  Harrison also occasionally prepared returns that contained false credits and false Schedule F (Profit or Loss from Farming) losses.  Harrison did business under the names Harrison and Harrison Services and Harrison Tax & Legal Services in Grimes County and Harris County, Texas.  In 2014, Harrison pleaded guilty to willfully aiding and assisting in the preparation and presentation of a false tax return.

Return preparer fraud is one of the Internal Revenue Service’s (IRS) Dirty Dozen Tax Scams for 2016.  The IRS has some tips on their website for choosing a tax preparer and has launched a free directory of federal tax preparers.  In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers.  Information about these cases is available on the Justice Department’s website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

Attorney General Loretta E. Lynch released the following statement today after the Fifth Circuit Court of Appeals ruled against Texas’s voter ID law:

“I am pleased with today’s decision by the full U.S. Court of Appeals for the Fifth Circuit holding that Texas’s 2011 photographic voter identification law violates Section 2 of the Voting Rights Act.  This decision affirms our position that Texas’s highly restrictive voter ID law abridges the right to vote on account of race or color, and orders appropriate relief before yet another election passes.”

Defendant Defrauded Investors in a Nigerian Oil Scheme and Made False Claims to the Department of Veterans Affairs

A Las Vegas resident was sentenced to 25 years in jail today on multiple fraud charges, announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Anton Paul Drago, formerly known as Evan Fogarty, 65, was convicted in March 2016 of all 10 counts of the indictment after an eight-day jury trial.  The jury found him guilty of one count of conspiracy to commit wire fraud, two counts of wire fraud, three counts of submitting false claims to the U.S. Department of Veterans Affairs (VA), one count of theft of government funds, one count of passing a fictitious financial instrument, one count of making false statements to federal agents and one count of failing to file a federal income tax return.

“Today’s sentence reflects the serious nature of Mr. Drago’s crimes and the substantial harm he inflicted on his investors and the U.S. government,” said Principal Deputy Assistant Attorney General Ciraolo.  “When confronted with his extensive fraudulent conduct by federal agents, rather than come clean, Mr. Drago chose to double down on his lies and continue the scheme that funded his extravagant lifestyle.  Today, he paid the heavy price for his illegal activities.”

“We are pleased with today’s sentencing of Anton Drago for his crimes against the U.S. government and innocent taxpayers and shareholders,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “Everything about Mr. Drago’s business was a fraud and he made the costly mistake of failing to file his income tax return.  That mistake brought him to the attention of the IRS and the scrutiny of CI special agents.  Fortunately for the victims of his fraud, the resulting investigation revealed the depth of his fraudulent dealings.”

“Our joint investigation with the IRS’s Criminal Investigation resulted in the conviction of a veteran who defrauded the government by claiming monetary benefits he wasn’t entitled to,” said Special Agent in Charge Douglas J. Carver VA-Office of Inspector General’s Western Field Office.  “The money he stole would have benefited other eligible disabled veterans.  We are pleased that this sentence reflects the seriousness of his crimes and believe this conviction will serve as a deterrent to others who might consider defrauding the Department of Veterans Affairs and our country’s veterans.”

The evidence presented at trial established that Drago orchestrated a large-scale Nigerian oil investment fraud scheme.  From at least 2004 through 2012, Drago told investors that money they invested would be used for legal fees and business expenses to fund the production, refinement and shipment of crude oil from Nigeria to the Bahamas.  Along with co-conspirator Joseph Rizzuti, formerly of Palm City, Florida, Drago also told investors that the money they invested would fund the purchase of an oil refinery in the Bahamas.  Drago lied to investors about his background, falsely claiming that he was an engineer and an expert in the oil industry with over 30 years of experience working worldwide.  He also falsely told some investors that he was the grandson of the Shell Oil founder and heir to a $500 million trust which he invested in the Nigerian oil investment deal.  None of these claims were true.

The government also presented evidence to establish that Drago and Rizzuti contracted with investors, promising them a short-term turnaround on their investment in just 60 days with a return of up to 400 percent.  Unwitting investors gave the conspirators more than $2 million.  Instead of investing in a Nigerian oil deal as promised, Drago and Rizzuti used most of the investors’ money for personal expenses.  Specifically, Drago spent the money on rent; groceries; memberships at the Tournament Players Club Summerlin golf course and an exclusive activity club in Turnberry Towers, both in Las Vegas; maintenance on his Mercedes Benz; jewelry; travel; and luxury purchases at stores such as Louis Vuitton, Nordstrom and Sharper Image.  In addition, nearly $1 million of the investors’ money was transferred to unknown bank accounts in China.  Despite Drago’s receipt of income from this fraudulent scheme, he failed to file his 2007 federal income tax return in a timely manner.

After spending the investors’ money, Drago continued to lie to the investors about other elaborate oil-related schemes that would make them whole.  He attempted to negotiate a fictitious financial instrument purporting to be an International Bill of Exchange worth $10 million at a Wells Fargo Bank branch in Las Vegas.  He also lied to federal agents of the IRS, who were investigating him when he told them that every penny of investor money went to Nigeria.

At the same time he was perpetrating the fraudulent Nigerian oil investment scheme, Drago also falsely claimed individual unemployability compensation benefits from the VA.  Drago served in the U.S. Marine Corps.  The evidence at trial established that for decades, Drago falsely claimed to have a debilitating military service-related knee injury and was totally unable to work in any capacity, when in fact he was self-employed and running several businesses.  The evidence showed that Drago was active and an avid golfer, spending more than $100,000 on golf-related expenses between 2005 and 2008.  Based upon his false claims to the VA, he received thousands of dollars in monthly VA benefits to which he was not entitled.

Rizzuti, who testified at Drago’s trial, previously pleaded guilty to a wire fraud conspiracy and an unrelated charge of obstructing the internal revenue laws and was sentenced in May 2013 to 80 months in prison. 

In addition to the term of imprisonment, Drago was sentenced to pay $2.3 million in restitution and to serve five years of supervised release following his prison term.

Principal Deputy Assistant Attorney General Ciraolo commended the special agents of IRS–CI and the VA-Office of Inspector General, who investigated the case, and Trial Attorneys Charles M. Edgar Jr. and Sean Beaty of the Tax Division, who prosecuted the case.  Principal Deputy Assistant Attorney General Ciraolo also thanked litigation technical support specialist John L. Kost, who provided trial support, and the U.S. Attorney’s Office of the District of Nevada, who provided invaluable assistance to the Tax Division.

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

The Department of Justice and the U.S. Environmental Protection Agency (EPA) today announced a $425 million settlement with subsidiaries of Tesoro Corp., and Par Hawaii Refining that resolves alleged Clean Air Act violations and protects public health by reducing air pollution at six refineries. Under the settlement, the two companies will spend about $403 million to install and operate pollution control equipment, and Tesoro will spend about $12 million to fund environmental projects in local communities previously impacted by pollution. Tesoro will also pay a $10.45 million civil penalty. 

“This settlement, achieved in partnership with states, will benefit the air quality in communities across the Western United States,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “It uses cutting edge technology to address global environmental issues like climate change by controlling flaring and provides important reductions of harmful air pollution in communities facing environmental and health challenges.”

“The advanced technologies Tesoro and Par are required to implement are the future for protecting people from toxic air emissions,” said Assistant Administrator Cynthia Giles for EPA’s Enforcement and Compliance Assurance.  “This settlement puts new enforcement ideas to work that will dramatically cut pollution and protect communities.” 

Today’s settlement, a consent decree lodged in U.S. District Court for the Western District of Texas, includes provisions that resolves ongoing Clean Air Act violations at refineries in Kenai, Alaska; Martinez, California; Kapolei, Hawaii; Mandan, North Dakota; Salt Lake City, Utah; and Anacortes, Washington.  Of the $10.45 million civil penalty that Tesoro will pay, the United States will receive $8,050,000, and co-plaintiffs including the states of Alaska and Hawaii, and the Northwest Clean Air Agency will share $2.4 million.

Once the companies install the pollution controls required by the settlement, annual emissions reductions at the six refineries will total an estimated 773 tons of sulfur dioxide, 407 tons of nitrogen oxides, 1,140 tons of volatile organic compounds, 27 tons of hazardous air pollutants, 20 tons of hydrogen sulfide and the equivalent of 47,034 tons of carbon dioxide, which is a greenhouse gas.  A large number of the emissions reductions will occur in areas with impaired air quality and protect populations at risk for respiratory illnesses.  In particular, this settlement will reduce greenhouse gas emissions from flaring at the subject refineries by over 60 percent.

The settlement addresses a range of alleged leak detection and repair and flaring violations under the Clean Air Act at all six refineries as well as violations of the Act’s Prevention of Significant Deterioration, Non-Attainment New Source Review, New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants at certain refineries.  The settlement also addresses various violations of state clean air laws, programs and permits.

Refineries process crude oil into products like gasoline, diesel fuel, kerosene, jet fuel, asphalt and liquefied petroleum gas and emit pollutants from a number of different sources.  At the refineries subject to this settlement, fluid catalytic cracking units, sulfuric acid plants, heaters, boilers and sulfur recovery units, are substantial emitters of nitrogen oxides (NOx) and sulfur dioxide (SO2).  Flaring results in emissions of SO2, greenhouse gases and toxic air pollutants, including volatile organic compounds (VOCs) and hazardous air pollutants.  Fugitive emissions of VOCs result from leaking valves and pumps and can result in numerous health effects, including eye, nose and throat irritation, headaches, loss of coordination, nausea and damage to liver, kidney and the central nervous system, among other effects.

Leaks, flares, and excess emissions from refineries emit hazardous air pollutants, or air toxics, that are known or suspected to cause cancer, birth defects, and seriously impact the environment.  SO2 and NOx have numerous adverse effects on human health and are significant contributors to acid rain, smog and haze.  Refineries also emit greenhouse gases that contribute to climate change, as well as fugitive VOCs.

The settlement incorporates the latest technological approaches to reducing flaring and making the flaring that does occur as efficient as possible.  And in addition to installing pollution control equipment, the settlement requires Tesoro to use a series of state-of-the-art Next Generation Compliance tools to monitor pollution.  Tesoro will use infrared gas-imaging cameras at four refineries to supplement the company’s enhanced leak detection and repair program.  These cameras are able to locate fugitive VOC emissions that may not be otherwise detected and to address these fugitive emissions and in doing so protect refinery employees from them.  Tesoro will also pay for third-party auditing of compliance with the enhanced leak detection and repair requirements at all six facilities.  EPA’s Next Generation Compliance strategy works to advance the use of state-of-the-art technology to identify and reduce pollution

Under the settlement, Tesoro will also spend about $12.2 million to fund three pollution mitigation projects.  In addition to installing infrared cameras, Tesoro will install ultra-low NOx burners on a furnace at its Salt Lake City refinery.  Tesoro estimates that the cost of this mitigation project is $10.8 million and is expected to result in significant quantifiable reductions in NOX emissions.  Tesoro will also contribute $1 million to fund the replacement of old diesel school buses in Contra Costa County, California, with new compressed natural gas (CNG) school buses. Replacing existing school buses that run on diesel with vehicles that are powered by CNG decreases emissions of NOX, SO2, PM, greenhouse gases and other air pollutants.

This settlement is part of EPA’s National Enforcement Initiative to control harmful emissions from large sources of pollution, which includes refineries, under the Clean Air Act’s Prevention of Significant Deterioration requirements.  The total combined SO2 and NOx emission reductions secured from all settlements under this initiative will exceed 2 million tons each year once all the required pollution controls have been installed and implemented.

Tesoro Corp., is headquartered in San Antonio, Texas, and its subsidiaries, Tesoro Alaska Company LLC, Tesoro Logistics L.P. and Tesoro Refining & Marketing Company LLC operate five of the refineries covered by this settlement.  Par Pacific Holdings, Inc., formerly known as Par Petroleum Corp. and a parent corporation of Par Hawaii Refining, purchased the Kapolei refinery from Tesoro in 2013.

There will be a 30 day public comment period on the consent decree lodged today.  Information on how to comment on the consent decree will be available in the Federal Register and on the Department of Justice’s website: www.justice.gov/enrd/consent-decrees.

For more information on the settlement or to read the consent decree, go to

https://www.epa.gov/enforcement/tesoro-and-par-clean-air-act-settlement

Attorney General Loretta E. Lynch released the following statement regarding the shooting in Baton Rouge, Louisiana:

“I have been briefed on the ongoing situation in Baton Rouge, Louisiana, and I will continue to monitor events throughout the day.  Although information about this morning's incident is still coming in, we do know that at least three officers are feared dead and several others are wounded.  Agents from the FBI and ATF are on the scene, and the Department of Justice will make available victim services and federal funding support, and will provide investigative assistance to the fullest extent possible.

“For the second time in two weeks, multiple law enforcement officers have been killed in the line of duty.  There is no place in the United States for such appalling violence, and I condemn these acts in the strongest possible terms.  I pledge the full support of the Department of Justice as the investigation unfolds.  Our hearts and prayers are with the fallen and wounded officers, their families, and the entire Baton Rouge community in this extraordinarily difficult time.”

Today, in a settlement agreement with the Navajo Nation, the United States agreed to provide funding necessary to continue clean-up work at abandoned uranium mines on the Navajo Nation.  Specifically, the United States will fund environmental response trusts to clean up 16 priority abandoned uranium mines located across the Navajo Nation. The agreement also provides for evaluations of 30 more abandoned uranium mines, and for studies of two abandoned uranium mines to determine if groundwater or surface waters have been affected by those mines.  

The work to be conducted is subject to the joint oversight and approval of the Navajo Nation Environmental Protection Agency and the United States Environmental Protection Agency (EPA).  The United States previously provided funding for evaluations at the 16 priority mines in a “Phase 1” settlement executed in 2015.  

“This second phase agreement takes the next step in ensuring the cleanup of abandoned mines that pose the most significant risks to people’s health and initiates the evaluations of additional mines for future cleanup,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “Addressing the legacy of uranium mining on Navajo lands reflects the commitment of the Justice Department and the Obama Administration to fairly and honorably resolve the historic grievances of American Indian tribes and build a healthier future for their people.”

“We’re very pleased to continue this vital work to address the legacy of uranium mining on the Navajo Nation,” said Acting Regional Administrator Alexis Strauss for the EPA’s Pacific Southwest office. “In the last decade, the EPA has remediated 47 homes, provided safe drinking water to 3,013 families in partnership with the Indian Health Service and conducted field screening at all 523 mines.”

The Navajo Nation encompasses more than 27,000 square miles within Utah, New Mexico and Arizona in the Four Corners area.  The unique geology of the region makes the Navajo Nation rich in uranium, a radioactive ore in high demand after the development of atomic power and weapons at the close of World War II.  Approximately four million tons of uranium ore were extracted during mining operations within the Navajo Nation from 1944 to 1986.  The federal government, through the Atomic Energy Commission (AEC), was the sole purchaser of uranium until 1966, when commercial sales of uranium began.  The AEC continued to purchase ore until 1970.  The last uranium mine on the Navajo Nation shut down in 1986.

Many Navajo people worked in and near the mines, often living and raising families in close proximity to the mines and mills.  Since 2008, federal agencies including EPA, the Department of Energy, the Bureau of Indian Affairs, the Department of the Interior, the Nuclear Regulatory Commission and the Indian Health Service have collaborated to address uranium contamination on the Navajo Nation.  The federal government has invested more than $100 million to address abandoned uranium mines on Navajo lands.  EPA has also compiled a list of 46 “priority mines” for cleanup and performed stabilization or cleanup work at 9 mines. Further, EPA work cleaning up mines has generated 94 jobs for Navajo workers.

This settlement agreement resolves the claims of the Navajo Nation pertaining to costs of engineering evaluations and cost analyses, and cleanups, at the 16 priority mines for which no viable responsible private party has been identified, as well as the costs of evaluations at another 30 such mines, two water studies, and modest costs for pre-assessment of natural resources damages.  In April 2014, the Justice Department and EPA announced in a separate matter that approximately $985 million of a multi-billion dollar settlement of litigation against subsidiaries of Anadarko Petroleum Corp. will be paid to EPA to fund the clean-up of approximately 50 abandoned uranium mines in and around the Navajo Nation, where radioactive waste remains from Kerr-McGee mining operations.  EPA commenced field work with the proceeds from this settlement earlier this year.

A federal grand jury in Charleston, South Carolina, returned an indictment today charging Aegean Shipping Management S.A. and Aegeansun Gamma Inc. with obstruction of an agency proceeding, conspiracy and failing to keep accurate pollution control records, the Justice Department announced.  Three engineering officers were charged with related offenses.

The charges stem from the 2015 falsification of records and obstruction designed to cover up overboard discharges of oily mixtures and machinery space bilge water from the Liberian-flagged chemical tanker, T/V Green Sky.  The vessel’s management company, Aegean Shipping Management of Liberia and the vessel’s owner, Aegeansun Gamma of the Republic of the Marshall Islands, are charged with failing to maintain an accurate oil record book as required by the Act to Prevent Pollution from Ships (APPS), a U.S. law which implements the International Convention for the Prevention of Pollution from Ships, commonly known as “MARPOL.”  The companies were also charged with falsification of records, obstruction and conspiracy.

The individuals, Panagiotis Koutoukakis and Herbert Julian, both former Chief Engineers of the T/V Green Sky and Nikolaos Bounovas, the former Second Engineer onboard the vessel, were charged with aiding and abetting the failure to maintain an accurate oil record book, falsification of federal records and conspiracy.  Julian is facing an additional obstruction charge.

The investigation into illegal activity onboard the vessel began in late August 2015 when the vessel arrived in the Port of North Charleston, South Carolina and members of the engine room staff told the U.S. Coast Guard that they had been ordered to bypass the ship’s oil water separator on multiple occasions.  In a related case, on Feb. 18, the former captain of the T/V Green Sky, Genaro Anciano, pleaded guilty to one count of obstruction for knowingly making false and misleading oral and written statements in an effort to impede the Coast Guard’s investigation of the bypass allegations.

The defendants are scheduled to be arraigned in Charleston on July 26.  An indictment is merely an accusation and defendants are presumed innocent unless and until proven guilty in a court of law.

The case was investigated by agents of the Coast Guard Investigative Service.  The case is being prosecuted by Christopher Hale of the Justice Department’s Environmental Crimes Section and Assistant U.S. Attorney Matt Austin of the U.S. Attorney’s Office for the District of South Carolina.

The U.S. District Court for the District of Minnesota entered a consent decree of permanent injunction against Kwong Tung Foods Inc. (Kwong Tung Foods) doing business as Canton Foods; the firm’s president and owner, Vieta C. Wang; and vice president, Juney H. Wang, to prevent the distribution of adulterated noodles and sprouts, the Department of Justice announced today. 

The Department filed a complaint on July 14, in the U.S. District Court for Minnesota at the request of the U.S. Food and Drug Administration (FDA).  The complaint alleged that Kwong Tung Foods violated the federal Food, Drug and Cosmetic Act by causing noodles and sprouts to be adulterated in that they have been prepared, packed and/or held under insanitary conditions whereby the food may have become contaminated with filth or have been rendered injurious to health.  According to the complaint, the insanitary conditions included failure to exclude pests and rodents from the facility, failure to maintain equipment and failure to ensure adequate employee sanitation. 

“Kwong Tung Foods was repeatedly warned about the insanitary conditions at its Minneapolis food facility,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to work aggressively to protect consumers from adulterated food and enforce our nation’s food safety laws.”

In conjunction with the filing of the complaint, the defendants agreed to be bound by a permanent injunction.  As part of the settlement, the defendants represented that they have ceased receiving, preparing, processing, packing, holding, or distributing any type of food at or from any location.  Under the permanent injunction, if the defendants seek to resume such activity, they must take specific steps to improve the firm’s manufacturing practices, and then receive written approval from FDA. 

According to the complaint, in October 2015, FDA inspected Kwong Tung Foods’ facility, located at 1840 E. 38th Street in Minneapolis, and observed numerous insanitary practices, including the defendants’ failure to take necessary precautions to protect against contamination and maintain buildings in good repair.  Specifically, according to the complaint, FDA observed evidence of live and dead pests and rodents in production rooms, a black mold-like substance and debris on production equipment, inadequate employee sanitation practices, and potential cross-contamination with major allergens.  In addition, FDA observed condensate dripping onto finished bean sprouts, according to the complaint.

FDA inspected Kwong Tung Foods’ facility twice in 2014.  As alleged in the complaint, FDA also observed failures to exclude pests from the facility and to adequately maintain equipment and employee sanitation practices. 

Under federal law, food processors are required to comply with current good manufacturing practices provided by FDA regulation.  The complaint alleged that the defendants violated the law by causing food to become adulterated while it was held for sale after shipment of one or more of its components in interstate commerce. 

The government is represented by Trial Attorney Alistair Reader of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Bahram Samie of the U.S. Attorney’s Office for the District of Minnesota, with the assistance of Associate Chief Counsel for Enforcement Jennifer Kang of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services.

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

The Department of Justice, Office of Community Oriented Policing Services (COPS Office) today announced it will conduct a comprehensive after-action assessment of the Orlando Police Department’s (OPD) response to the mass shooting that took place on June 12 at the Pulse nightclub in Orlando, Florida.

“I commend Orlando Police Chief John Mina for his leadership in asking for this assessment,” said COPS Office Director Ronald Davis. “The lessons learned from this independent, objective and critical review of such a high-profile incident will benefit not only the Orlando Police Department and its community; it will also serve to provide all law enforcement critical guidance and recommendations for responding to future such incidents.”

“Chief Mina has proven to be a tremendous leader of the Orlando Police Department,” said U.S. Attorney A. Lee Bentley, III of the Middle District of Florida. “His decision to seek an independent review of the law enforcement response to the Pulse nightclub shootings is another example of his effective leadership. The results of this review should help not only the Orlando Police Department, but also other law enforcement agencies forced to deal with terrorist attacks.”

Through its Critical Response Technical Assistance program, the COPS Office will bring in a technical assistance provider and use subject matter experts to assess OPD’s preparation and response to the mass shooting, strategies and tactics used during the incident, and how the department is managing the aftermath of the mass casualty event.

The Critical Response Technical Assistance program was designed to provide targeted technical assistance to law enforcement agencies dealing with high-profile events, major incidents or sensitive issues of varying need. The program has been used in a number of other cities, including Minneapolis, Minnesota; San Bernardino, California; Ferguson, Missouri; Tampa, Florida; and Pasco, Washington. Previous after-action assessments have provided valuable guidance on lessons learned and serve as an important tool to help the law enforcement profession advance and grow.

The COPS Office, headed by Director Ronald Davis, is a federal agency responsible for advancing community policing nationwide. Since 1995, COPS has invested more than $14 billion to advance community policing, including grants awarded to more than 13,000 state, local, and tribal law enforcement agencies to fund the hiring and redeployment of more than 127,000 officers and provide a variety of knowledge resource products including publications, training, and technical assistance. For additional information about COPS, please visit www.cops.usdoj.gov.

The Department of Justice announced today that the restructuring of the $1.5 billion transaction between Tullett Prebon Group Ltd. (Tullett Prebon) and ICAP plc addresses the Department’s concerns that the transaction would violate Section 8 of the Clayton Act by creating an interlocking directorate.  An interlocking directorate is where one person – or an agent of one person or company – sits on the board of directors of two competitors.

As originally structured, the transaction would have resulted in ICAP owning 19.9 percent of Tullett Prebon and having the right to nominate one member of Tullett Prebon’s board of directors.  Given that ICAP and Tullett Prebon would continue to compete after the transaction, the department had serious concerns that ICAP’s ability to nominate a Tullett Prebon board member would create an interlocking directorate in violation of Section 8 of the Clayton Act.  The revised agreement will provide that ICAP will not own any part of Tullett Prebon after the transaction and will have no right to nominate a member of Tullett Prebon’s board of directors.

“Robust competition depends on competitors being actually independent of each other – that’s what Section 8 requires,” said Principal Deputy Assistant Attorney General Renata Hesse of the department’s Antitrust Division.  “As originally proposed, this deal would have violated that core principle – creating a cozy relationship among competitors.”

Section 8 of the Clayton Act was enacted to provide a bright line rule prohibiting interlocking directorates which could otherwise facilitate coordination among competitors.  Section 8 serves a prophylactic purpose “to nip in the bud incipient violations of the antitrust laws by removing the opportunity or temptation to such violations through interlocking directorates,” according to United States v. Sears, Roebuck & Co., 111 F. Supp. 614, 616 (S.D.N.Y. 1953). 

During the investigation, the division cooperated with the United Kingdom’s Competition and Markets Authority, the Australian Competition and Consumer Commission and the Competition Commission of Singapore.

Tullett Prebon, a publicly-held British corporation headquartered in London, United Kingdom, and operating in the United States, is a leading provider of voice, hybrid and purely electronic brokerage services across asset classes.  Tullett Prebon reported 2015 annual revenues of $1.18 billion.

ICAP is also headquartered in London and operates in the United States.  After the transaction, the company will be called NEX Group Ltd. and will focus on providing electronic trading platforms for numerous asset classes and associated market data and services.  ICAP reported annual revenues of $1.78 billion for its fiscal year ending March 2016.

The Justice Department announced today that a federal jury convicted the Chief of Police of Stevenson, Alabama, Daniel Winters, 56, of two counts of deprivation of civil rights under color of law: one count for beating an arrestee, identified as D.F., and one count for failing to protect the victim from harm.  

According to evidence presented at trial, on March 22, 2015, Winters and a civilian friend went to a residence to investigate suspicions that property had been stolen from the friend’s business and was located at the residence.  Upon arrival, Winters and his friend entered the residence without a search warrant and encountered the victim, D.F.  Winters and his friend then began to beat D.F.  The beating moved outside where Winters and his friend continued to strike and kick the victim in front of the residence.  Over the course of approximately five minutes, Winters not only participated in the beating, but stood by watching his friend beat D.F. and did nothing to stop it.   A passing motorist called 911 to report the beating.  D.F. was left bloody with wounds to his face, chest and back and was taken to the jail at the Stevenson Police Department.  While at the jail, D.F. began to spit up blood.  A jailor requested Winters’ permission to call an ambulance, but Winters refused the request.  Eventually, the jailor received permission from another supervisor and D.F. was transported to a hospital where he received medical attention.

“This police chief abused his authority, broke the law and violated the public trust,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “When law enforcement leaders engage in egregious, unlawful conduct – as this defendant did here – they do a disservice to the thousands of hard-working officers who perform their difficult, demanding jobs each day with integrity and distinction.”

“Civil rights enforcement is a priority of our office and the trial team on this case did an excellent job of putting the evidence together and presenting it to the jury,” said U.S. Attorney Joyce White Vance of the Northern District of Alabama. 

Winters faces a statutory maximum sentence of 20 years in prison for the civil rights charges.  Sentencing is scheduled for Oct. 27, 2016, before U.S. District Judge Madeline H. Haikala of the Northern District of Alabama.

This case is being investigated by the FBI and Alabama’s State Bureau of Investigation.  The matter is being prosecuted by Deputy Chief Laura Hodge of the Northern District of Alabama and Trial Attorney Samantha Trepel of the Civil Rights Division’s Criminal Section.

The heads of the antitrust agencies of the United States and Japan met today in Washington for their 35th Bilateral Competition Consultation.  Principal Deputy Assistant Attorney General Renata Hesse of the U.S. Department of Justice’s Antitrust Division and Federal Trade Commission Chairwoman Edith Ramirez participated in high level meetings with senior officials from Japan’s Fair Trade Commission (JFTC), including JFTC Chairman Kazuyuki Sugimoto.   

The discussions covered a wide range of topics, including recent enforcement developments, antitrust policy and enforcement involving intellectual property and technology and international enforcement cooperation.  The purpose of the meeting is to reinforce ties of cooperation and share knowledge in light of the increasing internationalization of antitrust enforcement. 

“The fact that this is our 35th bilateral meeting is a testament to the depth and strength of our relationship,” said Principal Deputy Assistant Attorney General Hesse.  “Given the importance of our economic ties and our shared interests in antitrust, we are incredibly fortunate to have such a close and productive relationship with the JFTC.”

“We value our longstanding and productive relationship with the JFTC,” said Chairwoman Ramirez.  “The opportunity to exchange views on both current enforcement efforts as well as cutting edge policy issues such as intellectual property and the sharing economy helps to advance enforcement cooperation and the development of sound competition policies globally.”

The United States-Japan bilateral competition consultations date back to 1976, making them the U.S. antitrust agencies’ longest-running annual consultations with any foreign antitrust agency. 

The Justice Department announced today it has reached an agreement with the Omaha Performing Arts Society (OPAS) resolving an Americans with Disabilities Act (ADA) complaint against the Orpheum Theater in Omaha, Nebraska.

The department alleged that OPAS failed to ensure that, to the maximum extent feasible, the theater provided access to individuals with disabilities as required after the theater underwent a renovation.

“The ADA requires that when doing renovations, public accommodations must ensure their facilities are readily accessible and fully usable by people with disabilities,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “We commend the Omaha Performing Arts Society for cooperating with the Justice Department and taking quick action to implement the necessary reforms.”

The ADA requires alterations of existing theaters to comply with certain ADA Standards for Accessible Design.  Under the settlement agreement, OPAS will provide 20 wheelchair and companion seating locations and 20 designated aisle accessible seats dispersed throughout the theater.  OPAS will also install a permanent lift to provide an accessible route from the orchestra floor to the stage floor and it will revise its ticketing and pricing policies to afford individuals with disabilities an equal opportunity to purchase accessible seats. 

For more information about the ADA and today’s agreement, individuals may access the ADA web page at www.ada.gov.htm or call the toll-free ADA Information Line at (800) 514-0301 or (800) 514-0383 (TTY).

Omaha Performing Arts Society. 

A Jamaica, New York, resident pleaded guilty today in the U.S. District Court for the Eastern District of New York to one count of conspiracy to defraud the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Nafeesah Hines, 46, who worked at the U.S. Food and Drug Administration (FDA), admitted that between 2008 and 2012, she participated in a scheme to submit false tax returns seeking fraudulent income tax refunds in excess of $3.4 million to the Internal Revenue Service (IRS).  According to the indictment, Hines worked with Rodney Chestnut, a retired New York City Department of Correction officer, and Clive Henry, a former IRS employee in the business of preparing tax returns, to recruit clients to this scheme, which involved using fraudulent IRS Forms 1099-OID to falsely claim refunds of taxes that were never paid over to the IRS.  The indictment alleged that Hines, Chestnut, and Henry collected fees from clients based on a percentage of the refunds received, and supplied the clients with correspondence containing false and frivolous claims to send to the IRS in response to IRS warning letters regarding the false tax returns.

In 2013, a federal court permanently enjoined Hines from promoting a tax fraud scheme involving fraudulent Forms 1099-OID and from preparing tax returns for anyone other than herself.

U.S. District Judge Kiyo A. Matsumoto scheduled Hines’ sentencing for Oct. 11.   She faces a statutory maximum sentence of five years in prison, a term of supervised release, and monetary penalties.  Chestnut and Henry previously pleaded guilty to conspiracy to defraud the United States.  Their sentencing hearings are pending.

Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Mark Kotila and Jeffrey A. McLellan of the Tax Division, who are prosecuting the case.

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

Preparer Who Allegedly Fabricated Business Losses, Claimed Fraudulent Credits and Misreported Self-Employment Income for Customers Ordered to Stop Preparing Returns

According to a lawsuit the United States filed in April, a Birmingham, Alabama, tax return preparer continually and repeatedly prepared federal income tax returns that understated her clients’ liabilities or overstated their refunds.  Now a federal court in Birmingham has permanently barred her from preparing tax returns for others and it has ordered her to give the United States a list of her customers since 2014.

Jessica Leverett aka Jessica Harris, owns and operates a number of different tax return preparation businesses in and around Birmingham, including Tax Money Now, Dynamic Tax Services, Dynamic Tax Solutions and Express Money Tax, the civil complaint alleged.  Leverett’s businesses prepared returns that fabricate Schedule C businesses and business losses to offset their customers’ taxable income from other sources or to increase the customers’ Earned Income Tax Credit, according to the complaint.  The complaint also alleged that Leverett’s businesses prepare returns that claim education credits that Leverett’s customers are not entitled to receive and that misreport self-employment income as household employee wages in order to avoid the self-employment tax.

The Internal Revenue Service (IRS) examined 264 returns prepared by Leverett’s businesses and found that 206 understated the customer’s tax due, the complaint alleges.  Altogether, Leverett’s activities may have caused the United States to lose over $2.5 million in understated taxes and/or fraudulent refunds, according to the complaint.   Leverett did not file a response challenging the government’s allegations.

Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2016.  The IRS has some tips on their website for choosing a tax preparer, and has launched a free directory of federal tax preparers.  In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers.  Information about these cases is available on the Justice Department’s website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

Attorney General Loretta E. Lynch released the following statement regarding the attack in Nice, France: 

“I join the President in condemning what appears to be a horrific terrorist attack in Nice, France.  My thoughts and prayers are with the families and loved ones of those lost and wounded.  The Department of Justice has reached out to our French counterparts to offer our assistance in the investigation.”

Company is Fourth Firm Charged in Conspiracy Among Major International Ocean Shipping Lines

Wallenius Wilhelmsen Logistics AS (WWL), a Norwegian corporation, has agreed to plead guilty and pay a $98.9 million criminal fine for its involvement in a conspiracy to fix prices of international ocean shipments of roll-on, roll-off cargo to and from the Port of Baltimore and other locations in the United States, the Department of Justice announced today. 

According to the one-count felony charge filed today in the U.S. District Court for the District of Maryland, WWL conspired with other roll-on, roll-off ocean shipping lines from at least February 2000 until at least September 2012 to fix prices, rig bids, and allocate customers. Roll-on, roll-off cargo is non-containerized cargo that can be rolled onto and off of an ocean-going vessel.  Examples of such cargo include new and used cars and trucks and mining, construction, and agricultural equipment.  

“WWL and its co-conspirators cheated their customers for years by fixing the prices of ocean shipping services for cars, trucks, and other cargo essential to our nation’s economy,” said Principal Deputy Assistant Attorney General Renata B. Hesse, head of the Justice Department’s Antitrust Division.  “The Antitrust Division, working together with our law enforcement colleagues, will continue to hold the ocean shipping companies and executives who perpetrated this scheme accountable for their crimes.”

“These charges brought today, and for the prior eight executives charged, outline a deceptive scheme to destabilize competition in the marketplace,” said Special Agent in Charge Kevin Perkins of the FBI’s Baltimore Division. “Those who engage in this type of criminal activity with the intent on corrupting our economy will be identified and brought to justice. To ensure we don’t erode the public’s trust in the competitive bidding process, the FBI will continue to work with the Antitrust Division to ensure the integrity of competition across all industries.”

WWL is the fourth company to agree to plead guilty in the investigation, which has resulted in over $230 million in agreed-upon fines.  In addition, eight executives have been charged for their participation in the conspiracy.  Four have already pleaded guilty and been sentenced to prison terms.  The other four executives have been indicted, but remain fugitives from justice.

In addition to paying its fine, WWL has agreed to cooperate with the department’s ongoing antitrust investigation.  The plea agreement is subject to court approval. 

Today’s charge is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the international roll-on, roll-off ocean shipping industry, which is being conducted by the Antitrust Division’s Washington Criminal I Section and the FBI’s Baltimore Field Office, along with assistance from the U.S. Customs and Border Protection Office of Internal Affairs, Washington Field Office/Special Investigations Unit.  Anyone with information in connection with this investigation is urged to call the Antitrust Division’s Washington Criminal I Section at 202-307-6694, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Baltimore Field Office at 410-265-8080.

Evercare Hospice and Palliative Care will pay $18 million to resolve False Claims Act allegations that it claimed Medicare reimbursement for hospice care for patients who were not eligible for such care because they were not terminally ill, the Justice Department announced today.  Evercare, now known as Optum Palliative and Hospice Care, is a Minnesota-based provider of hospice care in Arizona, Colorado and other states across the United States.

Hospice care is special end-of-life care for terminally ill patients intended to comfort the dying.  When a terminally ill Medicare patient elects hospice, Medicare no longer covers traditional medical care designed to improve or heal the patient.  Only Medicare patients who have a life expectancy of six months or less are considered terminally ill and eligible for the Medicare hospice benefit. 

“Today’s settlement reflects the Justice Department’s continuing efforts to combat health care fraud and protect the nation’s elderly and most vulnerable citizens,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Our seniors rely on the hospice program to provide them with quality care, dignity and respect when they are terminally ill and need end-of-life care.  It is, therefore, critically important that we hold accountable those hospice providers that bill for medically unnecessary services in order to get higher reimbursements from the Medicare program. Such abuses threaten a vulnerable population and jeopardize this important benefit for others under the program.  The Justice Department will continue to protect taxpayer dollars and ensure that this critical benefit is available for Medicare patients who truly need it.” 

This settlement resolves a lawsuit brought by the government alleging that Evercare knowingly submitted or caused to be submitted false claims to Medicare for hospice care from Jan. 1, 2007, through Dec. 31, 2013, for Medicare patients who were not eligible for the Medicare hospice benefit because Evercare’s medical records did not support that they were terminally ill.  The government’s complaint alleged that Evercare’s business practices were designed to maximize the number of patients for whom it could bill Medicare without regard to whether the patients were eligible for and needed hospice.  These business practices allegedly included discouraging doctors from recommending that ineligible patients be discharged from hospice and failing to ensure that nurses accurately and completely documented patients’ conditions in the medical records. 

The allegations resolved by this settlement arose from whistleblower lawsuits initially filed by former employees of Evercare under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.  The Act allows the United States to intervene in the lawsuits, which it did in this case.  The share to be awarded in this case has not yet been determined. 

“The decision to put someone into hospice care is an emotionally wrenching one for the patient and the patient’s family,” said U.S. Attorney John Walsh for the District of Colorado.  “When hospice companies exploit and overbill Medicare by having people in hospice when they do not belong there, it jeopardizes this important benefit for others.  We will not tolerate such conduct.  The District of Colorado and the Department of Justice’s Civil Fraud Section deserve substantial credit for achieving this result in this Evercare Hospice case.”

“Hospice care is only medically necessary and reimbursable by Medicare for terminally ill patients with a life expectancy of six months or less,” said Special Agent in Charge Steven Hanson of the Department of Health and Human Services’ Office of Inspector General (HHS-OIG).  “We will continue to vigorously investigate health care companies that put their own profits above the medical needs of patients to ensure that companies bill Medicare only for reimbursable health care services.” 

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $30 billion through False Claims Act cases, with more than $18.3 billion of that amount recovered in cases involving fraud against federal health care programs.

This settlement is the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the District of Colorado and HHS-OIG. 

The lawsuits resolved by this settlement, which were consolidated in the District of Colorado, are captioned United States ex rel. Fowler and Towl v. Evercare Hospice, Inc., et al., No. 11-cv-00642 (D. Colo.) and United States ex rel. Rice v. Evercare Hospice, Inc., No. 14-cv-01647 (D. Colo.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.  

Thirteen Branches in Northeast Ohio to Be Divested

The Department of Justice announced today that Huntington Bancshares Incorporated and FirstMerit Corporation have agreed to sell 13 branches in Northeast Ohio, with approximately $737.8 million in deposits, to resolve antitrust concerns that arose from Huntington’s planned acquisition of FirstMerit.  As a result of the acquisition, Huntington will become the largest bank in Ohio based on deposits.

Under their agreement with the department, the companies have agreed to divest two branches in Ashtabula County and 11 branches in Stark County, Ohio.  The divested assets will include the deposits and loans associated with the divested branches.  The companies have also agreed to suspend existing, and not to enter into new, non-compete agreements with their branch managers and loan officers located in Ashtabula County and Stark County, Ohio, for a period of 180 days following the consummation of their merger.  Further, the companies have agreed to sell or lease branches closed within two years of the consummation of the merger in Ashtabula County or Stark County, Ohio, to FDIC-insured depository institutions offering deposit and credit services to small businesses.

“Families and small businesses rely on banks in their communities to keep their money safe and provide them credit for important purchases and investments,” said Principal Deputy Assistant Attorney General Renata Hesse of the Justice Department’s Antitrust Division.  “Today’s settlement protects banking customers in Ashtabula County and the Greater Canton area by ensuring that they continue to have access to competitively priced banking products.” 

The proposed merger is subject to the final approval of the Board of Governors of the Federal Reserve System.  The department said that it will advise the Federal Reserve Board that it will not challenge the merger provided that: the parties divest the branch offices, associated loans and deposits and the entire customer relationships associated with the divestiture branches; the parties commit to the Federal Reserve Board that they will comply with the agreement with the department; and the parties’ commitments to the department are included as a condition to any order the Federal Reserve Board enters allowing the transaction.

Huntington is the holding company of The Huntington National Bank, Columbus, Ohio, with approximately $73 billion in assets.  Huntington operates more than 750 branches and 1,500 ATMs in Ohio, Indiana, Kentucky, Michigan, Pennsylvania and West Virginia.  Huntington specializes in full-service commercial, small business, and consumer banking services, as well as services ranging from mortgage banking to equipment leasing.

FirstMerit is the holding company of FirstMerit Bank, N.A., Akron, Ohio, with approximately $26.1 billion in assets.  With about 370 branches and 400 ATMs in Ohio, Illinois, Michigan, Pennsylvania and Wisconsin, FirstMerit provides a large range of banking and other financial services to consumers and businesses.

A list of the branches to be divested is attached. 

Attachment A - Huntington FirstMerit Branches to be Divested

A Cumberland, Virginia, resident pleaded guilty to one count of corruptly endeavoring to impair and impede the due administration of the internal revenue laws, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Richard Alex, a self-employed low-voltage electrician, admitted that he did not file a timely or valid tax return for more than a decade.  For tax years 1998 and 2000 through 2003, Alex filed a tax return on which he falsely claimed that he had not earned any income.  Alex failed to file any tax returns for the 2004 through 2013 tax years, despite receiving income above the filing threshold each year, as well as numerous warnings and notices from the Internal Revenue Service (IRS).

According to court documents, Alex attempted to conceal his assets and income to prevent the IRS from collecting his unpaid taxes.  Starting in 2004, Alex used bank accounts held in the names of nominees to receive income he earned from dispatch companies for subcontract work.  Alex also provided false information to a tax return preparer for the purpose of preparing federal tax returns for Alex’s nominee business, Cole Data Services.

Alex’s sentencing hearing is scheduled for Oct. 5.  He faces a statutory maximum sentence of three years in prison.  Alex also faces financial penalties and a term of supervised release.

Acting Assistant Attorney General Ciraolo commended special agents of IRS–Criminal Investigation, who investigated the case, and thanked the U.S. Attorney’s Office for the Western District of Virginia for their assistance, as well as Trial Attorney Sean Beaty of the Tax Division and Assistant U.S. Attorney C. Patrick Hogeboom, who are prosecuting the case.

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

Two Kentucky residents were sentenced to prison today after pleading guilty in January to conspiring to defraud the United States with respect to claims, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kerry B. Harvey of the Eastern District of Kentucky.

Patsy Carnes and Diana Hill were sentenced to 22 and 16 months in prison, respectively.  According to court documents, during the years 2011 and 2012, Hill and Carnes worked at the Bailey Switch Pawn Shop in Knox County, Kentucky.  There, they conspired with Billy Ray Hamilton and Brian Hamilton, to submit false federal tax returns, sometimes intentionally using personal identifying information without the permission of the named taxpayer.

To advance the conspiracy, Hill and Carnes received and collected taxpayer information, including personal identifying information and provided that information to Billy Ray Hamilton and Brian Hamilton for use in the preparation of false tax returns.  Carnes received the fraudulently obtained tax refunds and opened as the sole signature authority of bank accounts into which she knew that some of the fraudulently obtained tax refunds would be deposited.  

In addition to the prison terms, U.S. District Judge Amul R. Thupar of the Eastern District of Kentucky ordered Hill to serve three years of supervised release and pay restitution to the Internal Revenue Service (IRS) in the amount of $226,652.89.   Judge Thupar ordered Carnes to serve three yearsof supervised release and pay restitution to the IRS in the amount of $226,652.89.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Harvey commended special agents of IRS–Criminal Investigation, who investigated the case and Assistant U.S. Attorney Neeraj Gupta of the Eastern District of Kentucky and Trial Attorney Abigail Burger Chingos of the Tax Division, who prosecuted the case.

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

Attorney General Loretta E. Lynch and Deputy Attorney General Sally Q. Yates released the following statements today on the passing of Associate Deputy Attorney General David Margolis, senior-most career employee at the Department of Justice.

Statement by Attorney General Lynch:    

“David Margolis was a dedicated law enforcement officer and a consummate public servant who served the Department of Justice – and the American people – with unmatched devotion, remarkable skill and evident pride for more than half a century.  From his earliest days as a hard-charging young prosecutor with a singular sense of style to his long tenure as one of the department’s senior leaders, David took on our nation’s most pressing issues and navigated our government’s most complex challenges.  To generations of Justice Department employees, he was a respected colleague, a trusted advisor and most importantly, a beloved friend.  We are heartbroken at his loss and he will be deeply missed.  My thoughts and prayers are with David’s family, his friends and all who loved him.”

Statement by Deputy Attorney General Yates:

“David Margolis was the personification of all that is good about the Department of Justice.  His dedication to our mission knew no bounds, and his judgment, wisdom and tenacity made him the “go-to” guy for department leaders for over 50 years.  David was a good and loyal friend to all of us, and his loss leaves a gaping hole in the department and in our hearts.”

As part of the federal government’s ongoing efforts to address unlawful dietary supplements, the Department of Justice announced today criminal cases against three individuals for violations of the federal Food, Drug and Cosmetic Act (FDCA) related to purported disease cures.  Each of the three individuals was also the subject of a civil case brought by the department, which they have now agreed to settle by entry of consent decrees of permanent injunction. 

Each of the individuals and companies is alleged to have marketed and sold products as treatments for serious diseases including herpes, cancer, Alzheimer’s and AIDS, without obtaining approval from the U.S. Food and Drug Administration (FDA) to distribute such products as drugs. 

“These enforcement actions highlight the department’s continued focus on unlawful dietary supplements, including unsupported cures for serious diseases such as cancer, Alzheimer’s, and herpes,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Consumers desperate for help, including Americans facing serious illnesses, sometimes turn to untested substances and forgo proven therapies.  The Department of Justice is committed to seeking out those firms that risk public health in favor of profit.”

Guy Lyman and Flor Nutraceuticals LLC                            

Today, the United States filed a criminal information in the U.S. District Court for the Eastern District of Louisiana, charging Guy Lyman of New Orleans, Louisiana, with one misdemeanor count of introduction of an unapproved new drug into interstate commerce in violation of the FDCA.  The information alleges that Lyman distributed the product Herpaflor as a herpes treatment, without receiving approval from FDA to distribute Herpaflor.

The United States simultaneously filed a civil complaint against Lyman and his company, Flor Nutraceuticals LLC, in the Eastern District of Louisiana.  The civil complaint alleges that the defendants sold liquid and tablet drug and dietary supplement products named Herpaflor, which they intended as herpes treatments, but that the products were not approved by FDA.  Lyman and Flor Nutraceuticals agreed to a consent decree of permanent injunction to prohibit the sale of Herpaflor as a treatment for herpes.  The consent decree, which is subject to court approval, was also filed today. 

James Hill

Today, the United States also filed a criminal information in the U.S. District Court for the Middle District of Florida, charging James Hill of Ocala, Florida, with one misdemeanor count of distributing an unapproved new drug in violation of the FDCA.  The information alleges that Hill distributed the unapproved new drug Viruxo Immune Support (Viruxo) as a treatment for herpes.

The Justice Department previously announced the entry of a consent decree of permanent injunction against Hill on Feb. 26, to resolve a civil complaint filed against him in the Middle District of Florida.  The injunction prohibits Hill from selling Viruxo as a herpes treatment.

Clifford Woods and Clifford Woods LLC

The Justice Department also announced today that Clifford Woods, of Los Angeles, California, pleaded guilty to a criminal charge for distribution of an unapproved new drug and agreed to entry of a consent decree.  On May 9, Woods pleaded guilty in U.S. District Court for the Central District of California to a one-count information alleging that he promoted and distributed the product Taheebo Life Tea as a treatment for cancer, despite the fact that the product had not been approved as a drug by the FDA.

Woods, along with his company, Clifford Woods LLC, also agreed to a consent decree of permanent injunction to prohibit them from selling products as cures for a variety of diseases.  The consent decree, which was entered by the Court on June 27, resolves a civil complaint that the department filed against Woods and Clifford Woods LLC in the Central District of California.  The civil complaint alleged that the defendants, doing business as Vibrant Life, sold products that they promoted as treatments for cancer, type 2 diabetes, Alzheimer’s disease, HIV infection and AIDS.  For instance, the complaint alleged that the defendants promoted certain products “as a treatment for cancer,” as having “shown results in tumor reduction,” and as being able to “change a cancer cell into a non-malignant cell.”   The complaint further alleged that the defendants defrauded consumers by promoting certain products to cure, mitigate, treat, or prevent a disease despite the absence of well-controlled clinical studies or other credible scientific substantiation to support those claims.  

Principal Deputy Assistant Attorney General Mizer thanked the Postal Inspection Service for its thorough investigation of these cases.  The government is represented in the three criminal cases by Trial Attorney Ann Entwistle and in the three civil cases by Trial Attorney Daniel Zytnick, both of the Civil Division’s Consumer Protection Branch.  The government is also represented in the civil case against Hill by Assistant U.S. Attorney Lacy R. Harwell Jr. of the U.S. Attorney’s Office for the Middle District of Florida.  Deputy Chief Counsel Perham Gorji and Senior Counsel Claudia J. Zuckerman of the Department of Health and Human Services’ Office of General Counsel – Food and Drug Division provided assistance in these cases.  Further assistance was provided by the U.S. Attorney’s Offices for the Eastern District of Louisiana, Middle District of Florida, and Central District of California.

For more information about the Consumer Protection Branch, visit its website at http://www.justice.gov/civil/consumer-protection-branch.  

ValueAct to Pay $11 Million for Investing in Halliburton and Baker Hughes without Notifying Antitrust Authorities

The Department of Justice announced today that ValueAct has agreed to pay $11 million to settle allegations that certain ValueAct entities violated the reporting and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”).  As part of the settlement, ValueAct has also agreed to injunctive relief designed to prevent future violations. 

On Nov. 17, 2014, Baker Hughes and Halliburton – two of the three largest providers of oilfield products and services in the world – announced their plan to merge in a deal valued at $35 billion.  Thereafter, ValueAct, an activist investment firm, purchased over $2.5 billion of Halliburton and Baker Hughes voting shares without complying with the HSR Act’s notification requirements.  According to a complaint filed on April 4, 2016 in the U.S. District Court for the Northern District of California, ValueAct purchased these shares with the intent to influence the companies’ business decisions – including decisions related to the merger – and therefore could not rely on the limited “investment-only” exemption to the HSR Act’s notification requirements.  The complaint details how ValueAct used its access to senior executives of both Halliburton and Baker Hughes to attempt to influence the companies’ proposed merger and other aspects of their businesses.  Halliburton and Baker Hughes abandoned their proposed merger on May 2, 2016 after the Antitrust Division sued to block it in U.S. District Court for the District of Delaware.

“ValueAct acquired substantial stakes in Halliburton and Baker Hughes in the midst of our antitrust review of the companies’ proposed merger, and used its position to try to influence the outcome of that process and certain other business decisions,” said Principal Deputy Assistant Attorney General Renata Hesse, head of the Justice Department’s Antitrust Division.  “ValueAct was not entitled to avoid the HSR requirements by claiming to be a passive investor, while at the same time injecting itself in this manner.  The HSR notification requirements are the backbone of the government’s merger review process, and crucial to our ability to prevent anticompetitive mergers and acquisitions.  Today’s record penalty and important injunctive relief demonstrate our continued commitment to vigorous enforcement of these important notification and waiting period requirements.”

The HSR Act imposes notification and waiting period requirements for transactions meeting certain size thresholds to ensure that such transactions undergo premerger antitrust review by the department and the Federal Trade Commission.  The HSR Act has a narrow exemption for acquisitions of less than 10 percent of a company’s outstanding voting securities if the acquisition is made “solely for the purposes of investment” and the purchaser has no intention of participating in the company’s business decisions. 

Federal courts can assess civil penalties for premerger notification violations under the HSR Act in lawsuits brought by the department.  The current maximum civil penalty for an HSR violation is $16,000 per day; however, the maximum penalty will increase to $40,000 per day effective Aug. 1, 2016.

As part of the settlement, ValueAct agreed to pay a record $11 million.  The highest fine previously paid for an HSR violation was $5.67 million.  ValueAct is also enjoined from relying on the “investment-only” exemption when it intends to influence, or is considering influencing, certain basic business decisions, including those relating to merger and acquisition strategy, corporate restructuring, and the company’s pricing, production capacity, or production output.

ValueAct is an investment firm headquartered in San Francisco that manages over $16 billion on behalf of investors.

As required by the Tunney Act, the proposed settlement, along with the department’s competitive impact statement, will be published in The Federal Register.  Any person may submit written comments concerning the proposed settlement within 60 days of its publication to Kathleen S. O’Neill, Chief, Transportation, Energy & Agriculture Section, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 8000, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the U.S. District Court for the Northern District of California may enter the final judgment upon finding that it serves the public interest.

ValueAct Explanation

ValueAct Complaint

ValueAct CIS

ValueAct PFJ

ValueAct Stipulation with Proposed Order

More than 1,500 Victims of Fraud

The Department of Justice announced that an Orange County, California, man pleaded guilty in U.S. District Court in Santa Ana, California, for his role as the sales manager of a multi-million dollar fraudulent mortgage modification scheme. 

Charles Wayne Farris, 55, of Aliso Viejo, California, pleaded guilty before U.S. District Court Judge David O. Carter for the Central District of California to one count of conspiracy to commit mail and wire fraud. 

“This defendant supervised dozens of telemarketers who used lies and false promises to take money from struggling homeowners for a worthless service,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will continue to prosecute all kinds of mass-marketing and telemarketing fraud schemes, especially those that prey on vulnerable victims.”

“This defendant managed an entire team of people whose sole job was to lure struggling home owners into the fraud scheme,” said U.S. Attorney Eileen Decker of the Central District of California. “It is because of Mr. Farris that so many people were victimized for so much money.”

Farris admitted that, between October 2008 and June 2009, he participated in a scheme to induce homeowners to pay between $3,500 and $5,500 for the services of the Rodis Law Group (RLG) and a successor entity, America’s Law Group (ALG).  RLG and ALG advertised on radio stations nationwide, urging struggling homeowners to call a toll-free number and stating that the companies consisted of “a team of experienced attorneys” who were “highly skilled in negotiating lower interest rates and even lowering your principal balance.”  In fact, RLG and ALG were telemarketing operations that never had teams of experienced attorneys.  During much of the scheme, Ronald Rodis was the only attorney at RLG.

Farris supervised a sales force of dozens of telemarketers who fielded calls from struggling homeowners.  At Farris’s direction and using scripts that he created, the telemarketers made numerous misrepresentations regarding the companies’ ability to negotiate loan modifications from the homeowners’ mortgage lenders.  For example, the telemarketers stated that RLG and ALG had been in business for 11 years when in fact the company had only opened in October 2008.  They falsely stated that RLG and ALG routinely obtained positive results for homeowners, including lower monthly payments, reductions in principal balance and lower interest rates.  In fact, positive results were rarely achieved for any RLG or ALG clients.  Telemarketers also falsely reiterated that homeowners would have a team of attorneys and real estate professionals assigned to their case.         

“The defendants in this case preyed upon vulnerable homeowners facing the loss of their home and callously took advantage of what hope they had left,” said Assistant Director in Charge Deirdre L. Fike of the FBI’s Los Angeles Field Office. “Paid advertisements can lend a veneer of credibility to any scam, and I would encourage anyone considering paying fees up front for services to be skeptical before handing over hard earned money.”

In a plea agreement filed in federal court, Farris admitted that the RLG and ALG schemes fraudulently obtained approximately $9 million from more than 1,500 victims. His sentencing is on April 17, 2017.

Farris was charged along with two co-defendants, Bryan D’Antonio and Ronald Rodis.  Rodis pleaded guilty to one count of conspiracy to commit mail and wire fraud on June 27.  D’Antonio is charged with 23 felony counts.  He is charged with nine counts of wire fraud and one count of conspiracy to commit wire fraud.  Each of these counts carries a statutory maximum penalty of 20 years in prison.  In addition, D’Antonio is charged with 13 counts of criminal contempt for violating a 2001 federal court order, which permanently banned D’Antonio from participating in future telemarketing operations.  Criminal contempt of court has no statutory maximum penalty.  D’Antonio is scheduled for trial beginning Sept. 20.

This case was investigated by the FBI and is being prosecuted by Trial Attorney John W. Burke of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Joseph T. McNally of the Central District of California.

For more information about the Consumer Protection Branch, visit its website at http://www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Central District of California, visit its website at https://www.justice.gov/usao-cdca.

A Newport Beach, California, man pleaded guilty today for his role as a salesman at fraudulent debt relief firms that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service announced.

John Vartanian, 57, pleaded guilty to one count of an indictment alleging conspiracy to commit mail fraud and wire fraud in connection with companies known as Nelson Gamble & Associates (Nelson Gamble) and Jackson Hunter Morris & Knight LLP (Jackson Hunter).  According to the indictment, the conspirators portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors.  Clients made monthly payments expecting the money to go toward settlements.  The conspirators instead took at least 15 percent of the total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees. 

“These scams take advantage of vulnerable consumers trying to climb out of debt,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to prosecute fraudulent debt relief schemes.”

“We are gratified with today’s plea, not only on behalf of our postal inspectors who exposed these conspirators for the scammers they were, but for the many unsuspecting victims who were seeking to climb out from their debts but instead were thrown into even deeper financial holes,” said Inspector in Charge Regina L. Faulkerson of Criminal Investigations, U.S. Postal Inspection Service.  “People who rely on the U.S. mail expect what they receive will be truthful, honest communication – free from false statements and from attempts to further victimize them.  I appreciate the work of the Consumer Protection Branch in bringing the last of these fraudulent credit repair conspirators to justice.”

“This defendant preyed upon victims that were already burdened by significant debt,” said U.S. Attorney Eileen M. Decker for the Central District of California.  “He gave them false hope while stealing the money that could have been used to reduce their obligations.”

The scheme ran from February 2010 to September 2012.  Vartanian admitted that he did not tell customers during sales calls that the companies charged significant up-front fees.  Additionally, he admitted that he falsely told customers that the companies were backed by a law group and that money would be refunded if customers were not satisfied.  When his co-conspirators changed the name of the company from Nelson Gamble to Jackson Hunter in 2011 because of customer complaints, Vartanian continued to make the same pitch without disclosing that the new company was essentially the same as the old company.  In speaking with unhappy customers, the conspirators at Jackson Hunter blamed past problems on Nelson Gamble and denied requests for refunds of money paid to Nelson Gamble.

Vartanian faces a statutory maximum sentence of 20 years in prison.  The court set a sentencing date of Oct. 17 before U.S. District Judge Dale S. Fischer in Los Angeles.  Four other defendants previously pleaded guilty in connection with the same scheme: Jeremy Nelson of Laguna Nigel, California, Elias Ponce of Santa Ana, California, Christopher Harati of Anaheim, California, and Athena Maldonado of Lake Forest, California.  The defendants have not yet been sentenced. 

In September 2012, the Federal Trade Commission brought a civil case against Nelson and the companies, alleging that the defendants misrepresented debt relief services offered to consumers.  (See https://www.ftc.gov/enforcement/cases-proceedings/122-3030-x120048/nelson-gamble-associates-llc-et-al). The case was settled by entry of a consent decree in August 2013.

Principal Deputy Assistant Attorney General Mizer commended the Postal Inspection Service team assigned to the Civil Division’s Consumer Protection Branch for their investigative efforts and thanked the U.S. Attorney’s Office for the Central District of California for their contributions to the case. The case is being prosecuted by trial attorneys Alan Phelps and James Harlow of the Consumer Protection Branch. 

For more information about the Consumer Protection Branch, visit its website at http://www.justice.gov/civil/consumer-protection-branch. 

Defendant Failed to Report More Than $6 Million in Gross Receipts

A Subway franchisee and resident of Alexandria, Virginia, was sentenced to more than two years in prison today for conspiracy to defraud the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente for the Eastern District of Virginia.

Obayedul Hoque, was sentenced to 30 months in prison followed by two years of supervised release by U.S. District Judge Liam O’Grady.  Judge O’Grady ordered Hoque to pay a $20,000 fine and $2,022,106 in restitution to the Internal Revenue Service (IRS) for tax liabilities for the years 2008 through 2013.

According to court documents, Hoque owned and operated Skyhill Shell, a gas station in Alexandria and multiple Subway restaurant franchises in Washington, D.C., Arlington, Virginia, and Alexandria.  Hoque admitted that between 2008 and 2014, he and his co-conspirators, who were managers of some of the Subway franchises and the gas station, conspired to defraud the United States for the purpose of obstructing the IRS in the ascertainment and collection of individual and corporate income taxes.  Hoque and his co-conspirators did not deposit all of the gross receipts of the gas station or the Subway franchises into the corporate or partnership bank accounts.  Instead, Hoque and the managers retained a portion of the gross receipts for their personal benefit and failed to report those funds to the IRS.  For the Subway franchises that had no co-conspirator managers, Hoque retained all of the unreported gross receipts for himself. 

For the period of 2008 through 2013, point of sales records for the Subway franchises reflected total sales of $20,805,667.  However, Hoque and his co-conspirators provided false monthly sales figures to the accounting firm to prepare the Subway entities’ tax returns.  As a result, Hoque and his co-conspirators caused false corporate and partnership tax returns to be filed for the Subway franchises which reported sales of only $14,377,696.  Hoque and his co-conspirators also caused false corporate tax returns to be filed on behalf of Skyhill Shell.  For some years, some of the entities did not file tax returns with the IRS.   Additionally, Hoque filed false individual income tax returns with the IRS.  Hoque admitted that his conduct caused a tax loss to the IRS of between $1.5 million and $3.5 million. 

Acting Assistant Attorney General Ciraolo and U.S. Attorney Boente thanked special agents of IRS-Criminal Investigation, who investigated the case and Assistant U.S. Attorney Uzo Asonye and Assistant Chief Caryn Finley and Trial Attorney Kimberly Shartar of the Tax Division, who prosecuted the case.

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

According to a civil complaint the United States filed in 2014, a Chicago-based tax return preparer prepared returns that falsely claimed that recipients of discrimination awards related to a class-action lawsuit could claim large deductions on their federal tax returns and that falsely inflated the amount of wages that city of Chicago employees claimed were withheld from their paychecks.  Now a federal court has completely barred this tax return preparer from preparing tax returns for others.

Victor M. Crown promoted two false and fraudulent schemes through which he claimed that his customers could obtain significant federal income tax refunds, the complaint alleged.  In the first scheme, as set out in the complaint, Crown falsely inflated the amount of income tax that was withheld from his customers’ paychecks because the city of Chicago purportedly calculated an incorrect withholding amount.  Taxpayers may not claim a withholding credit larger than the amount that was actually withheld from their wages.  The second scheme is founded on the 1969 class-action lawsuit Shakman v. Democratic Organization of Cook County, et al., No. 69-cv-2145 (N.D. Ill.), according to the United States’ complaint.  Shakman was a discrimination case against the city of Chicago that alleged that the city improperly used political patronage when hiring and promoting public officials.  As part of an agreed Shakman settlement order, the city set up a $12 million fund to compensate claimants for violations of the federal district court’s orders.  Claims were submitted to the court-appointed monitor, who was responsible for evaluating the claims and, if justified, assigning a monetary award amount.  According to the United States’ complaint against Crown, Crown asserted that his customers who were Shakman award recipients were entitled to claim net operating loss deductions for the difference between their claim and the amount they actually received in their award.  The federal tax law does not permit a deduction in the amount of a denied discrimination claim.

In explaining its reasons for enjoining Crown, the court noted that the scope of Crown’s misconduct involved “at least 2,900 fraudulent tax returns,” as well as his “failure to accept responsibility and cease his operations.”  The court’s injunction order forbids Crown from preparing tax returns for others and from making false statements about securing any tax benefit by virtue of receiving or not receiving an award in the Shakman litigation.  It also requires Crown to give the United States a list of all his tax-preparation customers since 2010.

Return preparer fraud is one of the Internal Revenue Service’s (IRS) Dirty Dozen Tax Scams for 2016.  The IRS has some tips on its website for choosing a tax preparer and has launched a free directory of federal tax preparers.  In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters.  Information about these cases is available on the Justice Department’s website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

The Department of Justice announced today that it is returning approximately $1.5 million to Taiwan, the proceeds of the sale of a forfeited New York condominium and a Virginia residence that the United States alleged in its complaint were purchased with the proceeds of bribes paid to the family of Taiwan’s former President Chen Shui-Bian.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Executive Associate Director Peter T. Edge of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) made the announcement.

According to the civil forfeiture complaints filed in this case, Yuanta Securities Co. Ltd. paid a bribe of 200 million New Taiwan dollars (equivalent to approximately $6 million USD) to former First Lady Wu Shu-Jen in 2004, during former President Chen Shui-Bian’s administration.  The bribe was allegedly paid to ensure that the president would use his power so that the Taiwan authorities would not oppose Yuanta’s bid to acquire a financial holding company.  The former first family used Hong Kong and Swiss bank accounts, shell companies and a St. Kitts and Nevis trust to transfer the bribe proceeds needed to purchase the properties in Keswick, Virginia, and New York.  The properties were owned by the former first family of Taiwan through two limited liability companies.  In October 2012, U.S. District Courts in Virginia and in New York entered final forfeiture judgments against these two properties without opposition by the record owners.  The United States then sold these two properties and obtained approximately $1.5 million in proceeds, which is being returned to Taiwan. 

“The Kleptocracy Initiative was established to prevent corrupt leaders from using the United States as a safe haven for their ill-gotten gains,” said Assistant Attorney General Caldwell.  “We are committed to rooting out foreign official corruption and preventing corrupt officials from enjoying their spoils in the United States.  We appreciate the cooperation of Taiwan law enforcement in this matter.”

“After many years of collaborative work, we are happy to return these funds to their rightful owners,” said Executive Associate Director Edge.  “This is part of an ongoing effort by HSI to identify and seize illegal assets in the United States obtained by corrupt foreign leaders who abuse our financial systems in order to conceal the illicit proceeds of their crimes.  HSI special agents in our 62 offices in 43 countries will continue to work with our domestic offices and international law enforcement partners to hold these individuals accountable.”

ICE-HSI investigated the case, with assistance from the agency’s attaché in Hong Kong, HSI Miami's Foreign Corruption Investigation Group and the Taiwan Supreme Prosecutors Office’s Special Investigations Division.  Trial Attorney Jennifer Wallis and former Deputy Chief Linda Samuel of the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS) prosecuted the case.  The Criminal Division’s Office of International Affairs also provided valuable assistance. 

The Justice Department’s Kleptocracy Asset Recovery Initiative is carried out by a dedicated team of prosecutors in AFMLS, working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, return those proceeds to benefit those harmed.  Individuals with information about possible proceeds of foreign corruption located in or laundered through institutions in the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov.

HSI’s Foreign Corruption Investigations Group targets corrupt foreign officials around the world who attempt to utilize U.S. financial institutions to launder illicit funds.  The group conducts investigations into the laundering of proceeds emanating from foreign public corruption, bribery or embezzlement.  The objective is to prevent foreign derived ill-gotten gains from entering the U.S. financial infrastructure, to seize identified assets in the United States and repatriate these funds on behalf of those affected.

An Oregon, Ohio, psychiatrist pleaded guilty to tax evasion today in the U.S. District Court for the Northern District of Ohio, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Sandra Vonderembse admitted that despite earning compensation in excess of $240,000 per year from 2009 through 2011 as a psychiatrist working for multiple businesses and the state of Ohio, she falsely claimed zero taxable income and zero tax owing for each of those years on federal tax returns.  In tax years stretching back to 2005, Vonderembse failed to pay taxes due on her income and filed tax returns falsely claiming taxable income as “None.”  From 2005 to 2011, she also had her earnings paid to nominee entities to conceal income from the Internal Revenue Service (IRS) and sent fake financial instruments to the IRS in purported payment of her taxes.  

Vonderembse faces a statutory maximum sentence of five years in prison, as well as a term of supervised release.  She has agreed to pay restitution to the IRS in the amount of $565,000. 

Acting Assistant Attorney General Ciraolo commended special agents of IRS - Criminal Investigation, who investigated the case and Assistant U.S. Attorney Noah Hood and Trial Attorneys Jack Morgan and Jeffrey McLellan of the Justice Department’s Tax Division, who are prosecuting the case.

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

A federal grand jury sitting in Chicago, Illinois, returned an indictment, which was unsealed yesterday, charging four Chicago-area residents with conspiracy to commit theft of government money, wire fraud, theft of government money, aggravated identity theft and access device fraud, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Zachary T. Fardon of the Northern District of Illinois.

The indictment charges Roxann Gist, Dominique King, Nellyvette Mojica and Rosa Alverio, with conspiracy to commit theft of government money.  Gist and King also are charged with wire fraud, aggravated identity theft and access device fraud.  Mojica and Alverio also are charged with theft of government money.

According to the indictment, Gist and King used the means of identification of other individuals without their knowledge and consent in order to prepare and file false tax returns that claimed large tax refunds.  The refund checks were mailed to addresses in the Chicago area or electronically deposited into bank accounts controlled by the defendants and others.  After Mojica and Alverio received a number of the fraudulent refund checks into accounts under their control, they split the proceeds with Gist and King.  From 2012 to 2015, the defendants and others received in excess of $1.3 million in fraudulent tax refunds.

If convicted, the defendants each face a statutory maximum sentence of five years in prison for the conspiracy count.  Gist and King also face a statutory maximum sentence of 20 years in prison for wire fraud, 10 years in prison for access device fraud and a mandatory minimum sentence of two years in prison for each count of aggravated identity theft, which must run consecutive to any other sentence imposed by the court.  Mojica and Alverio also face a statutory maximum sentence of 10 years in prison for the theft of government money counts.  In addition, the defendants face potential fines, forfeiture and restitution.

An indictment merely alleges that crimes have been committed.  A defendant is presumed innocent until proven guilty beyond a reasonable doubt.

Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Ryan R. Raybould and Timothy M. Russo of the Tax Division, who are prosecuting this case.

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

A former Coöperatieve Centrale Raiffeisen-Boerenleebank B.A. (Rabobank) derivatives trader, who worked in Hong Kong and Singapore as the bank’s Head of Money Market and Derivatives Trading for Northeast Asia, pleaded guilty today to conspiracy to commit wire fraud and bank fraud for his role in a scheme to manipulate the London InterBank Offered Rate (LIBOR) to Rabobank’s advantage.    

Assitant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antiturst Division and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office made the announcement. 

Paul Thompson, 50, of Dalkeith, Western Australia, pleaded guilty before U.S. District Judge Jed S. Rakoff of the Southern District of New York, who set sentencing for Nov. 9, 2016. 

“Confidence in the integrity of our financial markets is critical to the stability of the U.S. economy,” said Assistant Attorney General Caldwell.  “Trillions of dollars in derivative contracts, loans, consumer debt and other financial products are linked to LIBOR, but Thompson schemed to manipulate this important benchmark to advantage his bank’s own trading positions.  This case demonstrates that we will work with our partners around the world to bring to justice those whose crimes threaten our financial markets, wherever they reside.”

“The defendant conspired to manipulate LIBOR, putting his interests above those who depend on LIBOR as a reliable, impartial reference rate,” said Deputy Assistant Attorney General Snyder.  “The Antitrust Division will continue to work with our colleagues in the Criminal Division and the FBI to ensure that individuals who conspire to cheat or manipulate markets are held accountable for their crimes.”

“In today’s plea, a former Rabobank executive admitted to his role in conspiring to manipulate the LIBOR interest rate to his bank’s advantage,” said Assistant Director in Charge Abbate.  “This multi-year investigation represents the ongoing effort of the FBI and its domestic and international law enforcement and regulatory partners to identify and stop those who commit complex financial crimes effecting the United States, no matter where they operate or reside.”

Thompson is the fourth individual to plead guilty in this matter: Paul Robson, Lee Stewart and Takayuki Yagami, former Rabobank traders, pleaded guilty to one count of conspiracy in connection with their roles in the scheme.  Another former Rabobank employee, Tetsuya Motomura, of Tokyo, has been charged and awaits trial.

LIBOR is an average interest rate, calculated based on submissions from leading banks around the world, reflecting the rates those banks believe they would be charged if they borrowed from other banks.  LIBOR serves as the primary benchmark for short-term interest rates globally and is used as a reference for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products.  The Bank of International Settlements estimated that as of the second half of 2009, outstanding interest rate contracts tied to LIBOR were valued at approximately $450 trillion.  At the time relevant to the charges, LIBOR was published by the British Bankers’ Association (BBA), a trade association based in London.  LIBOR was calculated for 10 currencies at 15 borrowing periods, known as maturities.  The published LIBOR “fix” for Yen and U.S. Dollar (USD) LIBOR at a specific maturity is the result of a calculation based upon submissions from a panel of 16 banks, including Rabobank. 

According to admissions made in connection with his plea, Thompson traded derivative products tied to the USD and Japanese Yen LIBOR rates.  In an effort to increase the profitability of his derivative positions, Thompson entered into a scheme with several other Rabobank employees to influence the rate to Rabobank’s advantage, he admitted.  Electronic communications offered at Allen and Conti’s trial showed that Thompson schemed with Paul Robson, a former Rabobank trader responsible for submitting Rabobank’s Yen LIBOR rate to the BBA, and others, to make LIBOR submissions calculated to increase the profitability of Thompson’s derivatives positions.  For example, on May 19, 2006, Thompson informed Robson that his net exposure to the three-month duration of the Yen LIBOR rate was 125 billion Yen and asked Robson to “sneak your 3m libor down a cheeky 1 or 2 [basis points] because “it will make a bit of diff for me.”  On Nov. 8, 2006, Thompson wrote to Robson, “Got a few big 3mth fixings in next 2 days, any chance you cud bump [LIBOR] up a couple?”  And on May 10, 2006, Robson informed another Rabobank submitter that, “for info I’ve been asked by my Singapore man [Thompson] to help him out with a silly low 6m fixing today.” 

On Nov. 5, 2015, a federal jury in the Southern District of New York convicted Anthony Allen, formerly Rabobank’s Global Head of Liquidity and Finance, and Anthony Conti, formerly Rabobank’s primary U.S. Dollar LIBOR submitter, for their roles in the scheme.  They were sentenced to 24 months and 12 months and a day in prison, respectively.  On Oct. 29, 2013, Rabobank entered into a deferred prosecution agreement with the department and agreed to pay a $325 million penalty to resolve violations arising from Rabobank’s LIBOR submissions.

The FBI’s Washington Field Office is conducting the investigation.  Senior Litigation Counsel Carol L. Sipperly and Assistant Chief Brian R. Young of the Criminal Division’s Fraud Section and Trial Attorney Michael T. Koenig of the Antistrust Division are prosecuting the case.  The Criminal Division’s Office of Internaional Affairs has provided assistance in this matter. 

The Justice Department expresses its appreciation for the assistance provided by various enforcement agencies in the United States and abroad.  The Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the department and, along with the U.K. Financial Conduct Authority, has played a major role in the LIBOR investigation.  The Securities and Exchange Commission has also played a significant role in the LIBOR series of investigations and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.  The department has worked closely with the Dutch Public Prosecution Service and the Dutch Central Bank in the Rabobank investigation.  The department also thanked the Australian Attorney-General’s Department, the Australian Federal Police and the Western Australia Police for their assistance.  Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.

This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.  For more information about the task force visit www.stopfraud.gov.  

Conspired with Others to Seek Over $1.5 Million in Fraudulent Refunds

A federal district court judge sentenced a Virginia man today to 47 months in prison for his involvement in a far-reaching stolen identity refund fraud scheme in which he worked with others to seek over $1.5 million in income tax refunds through the filing of fraudulent federal income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Channing D. Phillips of the District of Columbia, Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation (IRS-CI), Inspector in Charge Maria L. Kelokates of the U.S. Postal Inspection Service, Washington Division and Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of the Treasury.

Bradley King, 35, of Fredericksburg, Virginia, is among approximately 20 participants in this scheme who have pleaded guilty to charges in the U.S. District Court for the District of Columbia.  According to court documents, the overall case involves the filing of at least 12,000 fraudulent federal income tax returns that sought refunds of at least $42 million. King pleaded guilty earlier this year to one count of conspiracy to defraud the United States with respect to claims, one count of theft of public money and one count of aiding and abetting in fraud and related activity in connection with identification documents.

King was sentenced by U.S. District Judge Ellen S. Huvelle of the District of Columbia. In addition to the prison term, he must also pay $493,436 in restitution to the IRS and a forfeiture money judgment in the amount of $5,400.  Following his prison term, King will be placed on three years of supervised release.

According to the government’s evidence, King participated in a massive and sophisticated stolen identity refund fraud scheme that involved an extensive network of more than 130 people, many of whom were receiving public assistance.  The refunds were sought for tax years 2005 through 2013, often in the names of people whose identities had been stolen, including the elderly, residents of assisted living facilities, drug addicts and incarcerated prisoners.  Returns were also filed in the names of and refunds were issued to, people who were willing participants in the scheme.  The refunds listed more than 400 “taxpayer” addresses located in the District of Columbia, Maryland and Virginia.

According to documents filed with the court, King’s involvement in the scheme began in 2008 and continued through July 2015.  Initially, he permitted co-conspirators to use his name, social security number and residential address for the creation and submission of fraudulent income tax returns.  From March 2010 through July 2015, he recruited others to provide him with means of identification for use in preparing and filing fraudulent returns.  He also recruited others to permit the use of their residential addresses on fraudulent returns that he prepared and filed.  King split the proceeds of the fraudulently obtained U.S. Treasury checks with his co-conspirators.  In addition, he and others used bank accounts for the negotiation of refund checks that were issued in the names of other persons.  Finally, according to the court documents, he sold fraudulently obtained refund checks to another individual in June 2015.

Taking together the losses generated by the use of residential addresses and bank accounts under his control, including checks associated with his co-conspirators, King was responsible for the filing of approximately 444 fraudulent returns that sought more than $1.5 million.  These actions led to a total actual loss of approximately $493,436 to the U.S. Treasury, based on the negotiation of a total of 153 U.S. Treasury checks listing addresses under his control and/or negotiated by his recruits.

In announcing the sentence, Acting Assistant Attorney General Ciraolo, U.S. Attorney Phillips, Special Agent in Charge Jankowski, Inspector in Charge Kelokates and Assistant Inspector General Phillips commended those who investigated the case.   They also acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office of the District of Columbia, including former Assistant U.S. Attorney Sherri L. Schornstein and Paralegal Specialists Donna Galindo and Julie Dailey.  Finally, they expressed appreciation for the work of Assistant U.S. Attorney Ellen Chubin Epstein of the District of Columbia’s Fraud and Public Corruption Section and Trial Attorneys Jeffrey B. Bender and Thomas F. Koelbl and former Trial Attorney Jessica Moran of the Tax Division, who prosecuted the case. 

Attorney General Loretta E. Lynch released the following statement today regarding the State Department email investigation:

“Late this afternoon, I met with FBI Director James Comey and career prosecutors and agents who conducted the investigation of Secretary Hillary Clinton’s use of a personal email system during her time as Secretary of State.  I received and accepted their unanimous recommendation that the thorough, year-long investigation be closed and that no charges be brought against any individuals within the scope of the investigation.”

Pharmaceutical Innovations Inc., based in Newark, New Jersey, pleaded guilty today to criminal charges and resolved a civil lawsuit arising from the company’s distribution of ultrasound gel contaminated with bacteria, the Department of Justice announced.  The devices at issue are gels that doctors and hospitals use to take ultrasound scans, sonograms, EKGs and similar procedures.

Pharmaceutical Innovations Inc. pleaded guilty before U.S. District Court Judge Esther Salas in Newark federal court to an information charging it with two misdemeanor counts of introducing adulterated medical devices into interstate commerce. In addition to placing the company on two years of probation, Judge Salas ordered the company to pay a criminal fine of $50,000 and to forfeit an additional $50,000 – the approximate value of the adulterated gel.

In a related civil settlement, which was also resolved today,  Pharmaceutical Innovations agreed to the forfeiture and destruction of particular gel products that tested exceptionally high for infectious bacteria and agreed to a permanent injunction that requires independent experts and auditors to conduct regular inspections and certifications at the company’s expense.

“The sale of adulterated medical devices puts patients at great risk,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Device manufacturers that fail to comply with good manufacturing practices, thereby threatening patient safety, will be held accountable.”

“Pharmaceutical Innovations shipped defective products that exposed hospital patients to dangerous bacterial contamination,” said U.S. Attorney Paul J. Fishman for the District of New Jersey.  “Today’s plea agreement and civil settlement require Pharmaceutical Innovations to accept responsibility for the contamination and take the necessary steps to prevent it from happening again.”

According to documents filed in the case and statements made in court:

Doctors and hospitals use ultrasound gel to take ultrasound scans, sonograms, EKGs and similar procedures. In February 2012, a Michigan hospital reported that 16 surgical patients were infected with Pseudomonas aeruginosa, a bacterial pathogen.  The hospital believed the infections were associated with a particular lot of Pharmaceutical Innovations ultrasound gel.

A sample of that lot then tested positive for Pseudomonas aeruginosa.  A second lot was shipped in April 2012 and found to be contaminated with two types of bacteria, Pseudomonas aeruginosa and Klebsiella oxytoca, both at the Michigan hospital, and at the company’s Newark facility.

The U.S. Department of Justice filed suit in October 2014 against Pharmaceutical Innovations and its founder, owner, and longtime president, Gilbert Buchalter.  (Gilbert Buchalter was later dropped from the case; his son, Charles Buchalter, became company president and was added to the case.)  The civil complaint alleged that the company was selling medical devices that the U.S. Food and Drug Administration (FDA) had not approved or cleared, that it was violating current good manufacturing practices and that it failed to take required actions after receiving reports in February 2012 of serious injuries associated with its products. 

The Consent Decree of Permanent Injunction requires Pharmaceutical Innovations to submit a detailed compliance plan to FDA within 20 days, and to have outside experts certify in writing by Oct. 31, that the company meets current good manufacturing practice requirements.  The FDA will then conduct a follow-up inspection at the company’s expense. For the next three years, Pharmaceutical Innovations must hire outside auditors to conduct and submit detailed audit reports to FDA.  In addition, the company will forfeit and pay for the destruction of contaminated “Other Sonic Gel” that the U.S. Marshals Service seized in April 2012 as part of a seizure and forfeiture case filed by the United States.

The criminal investigation in this matter was handled by special agents of the FDA’s Office of Criminal Investigations’ New York Field Office, under the direction of Acting Special Agent in Charge Jeffrey Ebersole. 

The criminal prosecution was handled by Assistant U.S. Attorney R. David Walk Jr. of the U.S. Attorney’s Office for the District of New Jersey’s Health Care and Government Fraud Unit, with the assistance of Associate Chief Counsel Lynn M. Marshall of the Department of Health and Human Services’ Office of General Food-Food and Drug Division.  The civil cases were handled by Trial Attorney Daniel K. Crane-Hirsch of the Civil Division’s Consumer Protection Branch and by Senior Counsel Michele Lee Svonkin and Associate Chief Counsel Julie A. Dohm of the Department of Health and Human Services’ Office of General Counsel–Food and Drug Division.  Additional assistance in the civil cases was provided by Assistant U.S. Attorneys Lucy Muzzy, Marion Purcell, Peter Gaeta and Jacob Elberg of the U.S. Attorney’s Office for the District of New Jersey.

For more information about the Consumer Protection Branch, visit its website at http://www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the District of New Jersey, visit its website at https://www.justice.gov/usao/district/nj.