District Not Recorded

Used Stolen Personally Identifiable Information to Gain Access to the Get Transcript Database

An Austell, Georgia husband and wife pleaded guilty today to charges relating to their involvement in a stolen identity income tax refund fraud scheme, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney John A. Horn of the Northern District of Georgia.

Anthony Alika, 42, pleaded guilty to one count of conspiracy to commit money laundering.  His wife Sonia Alika, 27, pleaded guilty to one count of illegally structuring cash withdrawals to evade bank reporting requirements. 

“With the number of stolen identity refund fraud victims increasing at an alarming rate, the Justice Department, working with the Internal Revenue Service (IRS) and its other federal, state and local law enforcement partners, remains committed to investigating these abusive schemes and criminal networks, prosecuting these offenders, and seeking lengthy prison terms and monetary penalties,” said Acting Assistant Attorney General Ciraolo. “The guilty pleas of Anthony Alika, Sonia Alika and Rapheal Atebefia in connection with their attempt to infiltrate and abuse the “Get Transcript” database are yet another example of these continued efforts. The investigation and successful prosecution of these defendants sends a clear message to those individuals engaged in, or considering, this criminal conduct that the Department will bring all available resources to bear to hold them accountable.”

“The IRS is committed to working with our law enforcement partners to pursue identity thieves, and we continue to make important progress in Georgia as well as elsewhere across the country,” said IRS Commissioner John Koskinen. “The IRS is also continuing to strengthen its operations and working with state revenue departments and the tax industry to provide further protections for taxpayers against identity theft.”

“Criminals continually discover more sophisticated methods of stealing personal information and unfortunately seek to capitalize on this theft by filing phony tax returns demanding excessive refunds,” said U.S. Attorney Horn.  “Because this is a growing problem, we are applying additional resources to help stem the tide and protect both our personal information and precious tax dollars.”

In January 2016, Anthony Alika and Sonia Alika were charged with laundering the proceeds from a stolen identity refund fraud scheme.  The indictment alleged that Anthony Alika, along with Rapheal Atebefia, 33, of Austell, Georgia, obtained means of identification of actual individuals, including their names and social security numbers, and used this information to access the IRS “Get Transcript” database.  The indictment further alleged that Anthony Alika, Atebefia, and others obtained prepaid debit cards from stores located in multiple states, registered the cards in the names of the stolen identities, filed false income tax returns using the stolen identities and information obtained from the Get Transcript database, and directed the IRS to deposit the tax refunds onto these cards.  To conceal their fraud, Anthony Alika, Atebefia and others were alleged to have used the prepaid debit cards to purchase money orders, which Anthony Alika, Sonia Alika and Atebefia deposited into bank accounts and then structured cash withdrawals of the proceeds in order to prevent the bank from filing Currency Transaction Reports (CTRs).  

As part of his guilty plea, Anthony Alika admitted that during 2015 he received money orders from several individuals and deposited those money orders into bank accounts in his name or had his wife deposit them into bank accounts in her name.  Anthony Alika would then structure out cash withdrawals from his bank accounts in amounts less than $10,000 to evade the bank reporting requirements.  Anthony Alika admitted that the funds used to purchase the money orders were the proceeds of illegal activity, including the filing of fraudulent tax returns using stolen identities.  Sonia Alika admitted as part of her guilty plea that between February and June 2015, she withdrew more than $250,000 from multiple bank accounts she controlled in amounts less than $10,000 to prevent the bank from filing CTRs.

U.S. District Judge Thomas W. Thrash, Jr. set sentencing for July 27.  Anthony Alika faces a statutory maximum sentence of 20 years in prison and Sonia Alika faces a statutory maximum sentence of 10 years in prison.  They also face substantial monetary penalties, restitution and forfeiture.  In March, Atebefia pleaded guilty to one count of money laundering for his role in this scheme.  He is scheduled to be sentenced on June 22. 

Acting Assistant Attorney General Ciraolo and U.S. Attorney Horn commended special agents of IRS-Criminal Investigation and the U.S. Postal Inspection Service, who investigated the case and Trial Attorneys Michael C. Boteler and Charles M. Edgar, Jr. of the Tax Division and Assistant U.S. Attorney Brian Pearce of the Northern District of Georgia, who are prosecuting this case.

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

The U.S. District Court for the Southern District of Mississippi permanently barred Teresa Chism of Durant, Mississippi, from preparing federal tax returns for others, the Justice Department announced today.

According to the government’s civil complaint, Chism, who operated her business as Lady T. Taxes, prepared federal income tax returns that fraudulently overstated her customers’ claims for refunds.  She did so by claiming refundable credits, including the Earned Income Tax Credit (EITC) and credits for education expenses, that her customers either were ineligible to receive, or were not entitled to receive in the amounts claimed on the returns, the complaint alleged.  The complaint further alleged that Chism frequently fabricated Forms W-2 and submitted them with a tax return as evidence of a customer’s eligibility for the EITC.

The United States alleged in the complaint that Chism prepared at least 2,845 returns since 2010.  Audits of 220 returns prepared by Chism claiming the EITC and/or other refundable credits revealed that 98 percent of these returns claimed credits totaling more than $1 million that Chism’s customers were not eligible to receive, according to the complaint.

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.

FALLS CHURCH, VA – The Executive Office for Immigration Review (EOIR) today announced the investiture of two immigration judges. Acting Chief Immigration Judge Michael C. McGoings presided over the investiture during a ceremony held April 21, 2016, at the U.S. Court of Appeals for the Armed Forces in Washington, D.C.

After a thorough application process, Attorney General Loretta E. Lynch appointed Kuyomars Golparvar and Robin J. Rosche to their new positions.

“We are pleased to welcome these appointees to the immigration judge corps,” said McGoings. “We look forward to continuing to hire qualified people to fill these important public service positions.”

Biographical information follows.

Kuyomars Golparvar, Immigration Judge, York Immigration Court

Attorney General Loretta E. Lynch appointed Kuyomars Golparvar to begin hearing cases in April 2016. Judge Golparvar received a Bachelor of Arts degree in 1998 from The George Washington University and a Juris Doctor in 2002 from the University of Pittsburgh School of Law. From 2004 through April 2016, Judge Golparvar served in various capacities, including: division chief, section chief, senior advisor to the principal legal advisor, deputy chief counsel, and assistant chief counsel for Immigration and Customs Enforcement, Department of Homeland Security. From 2003 through 2004, Judge Golparvar was an associate attorney for Deasy & Whitehill PC, in Pittsburgh. In 2013, Judge Golparvar joined the faculty at The George Washington University Law School where he serves as an adjunct professor. Judge Golparvar is a member of the District of Columbia and Pennsylvania Bars.

Robin J. Rosche, Immigration Judge, Chicago Immigration Court

Attorney General Loretta E. Lynch appointed Robin J. Rosche to begin hearing cases in April 2016. Judge Rosche received a Bachelor of Science degree in 1997 from the University of Wisconsin-Milwaukee, a Juris Doctor in 2000 from Marquette University Law School, and a Master of Laws in 2005 from the University of London, University College. From 2014 through March 2016, Judge Rosche served as a general attorney for Customs and Border Protection, Department of Homeland Security (DHS). From 2005 through 2014, Judge Rosche served as an assistant chief counsel for Immigration and Customs Enforcement, DHS. From 2000 through 2004, Judge Rosche served as an assistant district attorney for the Milwaukee County District Attorney’s Office. From 1988 through 1997, Judge Rosche served in various capacities including: uniformed patrol officer, undercover officer and detective for the Milwaukee Police Department in Wisconsin. From 1983 through 1987, Judge Rosche served as a security police investigator for the U.S. Air Force at Ramstein Air Base, in Germany. Judge Rosche is a member of the State Bar of Wisconsin.

- EOIR -

The Executive Office for Immigration Review (EOIR) is an agency within the Department of Justice. Under delegated authority from the Attorney General, immigration judges and the Board of Immigration Appeals interpret and adjudicate immigration cases according to United States immigration laws. EOIR's immigration judges conduct administrative court proceedings in immigration courts located throughout the nation. They determine whether foreign-born individuals—whom the Department of Homeland Security charges with violating immigration law—should be ordered removed from the United States or should be granted relief from removal and be permitted to remain in this country. The Board of Immigration Appeals primarily reviews appeals of decisions by immigration judges. EOIR's Office of the Chief Administrative Hearing Officer adjudicates immigration-related employment cases. EOIR is committed to ensuring fairness in all of the cases it adjudicates.

Attorney General Lynch and Secretary Castro to Kickoff National Reentry Week in Philadelphia

Justice Department to Announce New Efforts to Improve Outcomes for Justice-Involved Individuals Including Youth

As part of the Obama Administration’s commitment to strengthening the criminal justice system, the Department of Justice designated the week of April 24-30, 2016, as National Reentry Week.  Attorney General Loretta E. Lynch and U.S. Department of Housing and Urban Development Secretary Julián Castro will travel to Philadelphia on MONDAY, APRIL 25, 2016, to hold events as part of National Reentry Week with public housing advocates, legal services providers and community leaders where they will announce new efforts to improve outcomes for justice-involved individuals including youth. 

Later in the week, the Attorney General will visit a Federal Bureau of Prisons (BOP) facility in Talladega, Alabama, to highlight reentry programs in prison.  Similarly, Deputy Attorney General Sally Q. Yates will visit a federal women’s prison in Texas and will later hold a media availability at Santa Maria Hostel, a specialized residential substance abuse, mental health and trauma facility.  Acting Director Thomas Kane of the Bureau of Prisons will accompany both Attorney General Lynch and Deputy Attorney General Yates on their visits.

“Too often, justice-involved individuals who have paid their debt to society confront daunting obstacles to good jobs, decent housing, adequate health care, quality education, and even the right to vote,” said Attorney General Lynch.  “National Reentry Week highlights the many ways that the Department of Justice – and the entire Obama Administration – is working to tear down the barriers that stand between returning citizens and a meaningful second chance – leading to brighter futures, stronger communities, and a more just and equal nation for all.”

The Obama Administration has taken major steps to make our criminal justice system fairer, more efficient and more effective at reducing recidivism and helping formerly incarcerated individuals contribute to their communities. Removing barriers to successful reentry helps formerly incarcerated individuals compete for jobs, attain stable housing, and support their families. An important part of that commitment is preparing those who have paid their debt to society for substantive opportunities beyond the prison gates, and addressing collateral consequences to successful reentry that too many returning citizens encounter.  

Leadership from across the Administration are traveling during National Reentry Week in support of these many events and are encouraging federal partners and grantees to work closely with stakeholders like federal defenders, legal aid providers and other partners across the country to increase the impact of this effort.  National Reentry Week events are being planned in all 50 states, the District of Columbia, Puerto Rico and the Virgin Islands.  U.S. Attorney’s Offices alone are hosting over 200 events and BOP facilities are holding over 370 events.

ATTORNEY GENERAL LYNCH AND SECRETARY CASTRO HOLD NATIONAL REENTRY WEEK EVENT

WHO:             Attorney General Loretta E. Lynch

U.S. Department of Housing and Urban Development Secretary Julián Castro

WHEN:          MONDAY, APRIL 25, 2016

2:30 p.m. EDT

WHERE:       Raymond Rosen Manor Auditorium

                        2301 W. Edgley St.

                        Philadelphia, PA 19121

OPEN PRESS (Media Gather Time: 1:30 p.m. EDT; Final Access: 2:00 p.m. EDT)                     

NOTE: All media must present government-issued photo I.D. (such as a driver’s license) as well as valid media credentials.  Members of the media must RSVP for the above events to Heather Fluit at Heather.L.Fluit@hud.gov and press@usdoj.gov by Monday, Apr. 25, 2016, at 9:00 a.m. EDT.  Space is limited and not guaranteed.  Press inquiries regarding logistics should be directed to Heather Fluit at Heather.L.Fluit@hud.gov and press@usdoj.gov.  Following the event, Attorney General Lynch and Secretary Castro will hold a media availability.    

ATTORNEY GENERAL LYNCH VISITS FEDERAL BUREAU OF PRISONS FACILITY IN ALABAMA

WHO:             Attorney General Loretta E. Lynch

                        Acting Director Thomas Kane of the Bureau of Prisons

WHEN:          FRIDAY, APRIL 29, 2016

WHERE:       FCI Talladega

565 East Renfroe Road

Talladega, AL 35160

POOLED PRESS

NOTE: This event is pooled press.  There is no RSVP for this event.  Press inquiries should be directed to the Office of Public Affairs at press@usdoj.gov.     

DEPUTY ATTORNEY GENERAL YATES VISITS FEDERAL WOMEN’S PRISON FACILITY AND HOLDS MEDIA AVAILABILITY AT REENTRY CENTER

Federal Women’s Prison

WHO:             Deputy Attorney General Sally Q. Yates

                        Acting Director Thomas Kane of the Bureau of Prisons

WHEN:          TUESDAY, APRIL 26, 2016

WHERE:       FPC Bryan

1100 Ursuline Avenue

Bryan, TX 77803

OPEN TO PRE-CREDENTIALED MEDIA

NOTE: This event is open only to pre-credentialed media.  There is no RSVP for this event.    

Media Availability at Reentry Center

WHO:             Deputy Attorney General Sally Q. Yates

WHEN:          TUESDAY, APRIL 26, 2016

4:30 p.m. CDT / 5:30 p.m. EDT

WHERE:       Santa Maria Hostel

2605 Parker Road

Houston, TX 77093

OPEN PRESS (Media Gather Time: 3:30 p.m. CDT / 4:30 p.m. EDT; Final Access: 4:00 p.m. CDT / 5:00 p.m. EDT)

NOTE: All media must present government-issued photo I.D. (such as a driver’s license) as well as valid media credentials.  Members of the media must RSVP for the above events to press@usdoj.gov by Monday, Apr. 25, 2016, at 5:00 p.m. EDT.  Space is limited and not guaranteed.  Press inquiries regarding logistics should be directed to Emily Pierce at Emily.Pierce@usdoj.gov and Wyn Hornbuckle at Wyn.Hornbuckle@usdoj.gov.                                                                                                                                   

OTHER WHITE HOUSE AND DEPARTMENT OF JUSTICE EVENTS SURROUNDING NATIONAL REENTRY WEEK INCLUDE:

• On Monday, April 25, 2016, the White House will hold an event with the Brennan Center on the costs of incarceration.

• On Monday, April 25, 2016, Deputy Attorney General Sally Q. Yates will deliver remarks before a screening of “Pull of Gravity” a documentary that follows returning inmates as they encounter reentry obstacles, hosted by the Justice Department as part of National Reentry Week.  Assistant Attorney General Leslie R. Caldwell of the Criminal Division will also participate.

• On Monday, April 25, 2016, Director Lisa Foster of the Office for Access Justice will hold a joint event in Los Angeles with the Department of Housing and Urban Development to announce new efforts to improve outcomes for justice-involved youth.

• On Monday, April 25, 2016, Director Lisa Foster of the Office for Access Justice will attend a Conviction and Sentence Alternatives (CASA) Program Graduation Ceremony in Los Angeles.

• On Tuesday, April 26, 2016, Assistant Attorney General Karol V. Mason of the Office of Justice Programs will attend a girls mentoring event at a local detention facility. The event is sponsored by the U.S. Attorney’s Office for the District of Columbia.

• On Tuesday, April 26, 2016, Acting Associate Attorney General Bill Baer will deliver remarks at a reentry event at Central Union Mission, sponsored by the U.S. Attorney’s Office for the District of Columbia. Assistant Attorney General Karol V. Mason of the Office of Justice Programs will participate in Q+A.

• On Tuesday, April 26, 2016, Second Chance Fellow Daryl Atkinson of the Office of Justice Programs will deliver remarks at a reentry simulation in Birmingham sponsored by the U.S. Attorney’s Office for the Northern District of Alabama.

• On Wednesday, April 27, 2016, the White House will host the Fair Chance Opportunities Champions of Change event in South Court Auditorium.Attorney General Loretta E. Lynch will deliver remarks and Deputy Attorney General Sally Q. Yates will moderate a panel at the event.

• On Thursday, April 28, 2016, the head of the Civil Rights Division, Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division will deliver remarks at a reentry event at Mickey Leland Transitional Housing Facility, sponsored by the U.S. Attorney’s Office for the District of Columbia.

• On Friday, April 29, 2016, Principal Deputy Director Bea Hanson of the Office on Violence Against Women will visit a federal women’s prison in West Virginia.

• On Friday, April 29, 2016, the Department of Labor will host a celebration of the 50th Anniversary of the Bonding Program.Deputy Attorney General Sally Q. Yates will deliver remarks at the event.

The Department of Justice and the U.S. Environmental Protection Agency (EPA) today announced that OXY USA Inc., a subsidiary of Occidental Petroleum Company, has agreed to clean up contaminated water and sediments in the Ocoee River and one of its watersheds at the Copper Basin Mining District Superfund Site in Polk County, Tennessee.  The settlement requires the company to spend an estimated $40 million to maintain and operate a water treatment system, prevent access by the public to contaminated water and monitor contamination in the Ocoee River.

In addition, OXY USA Inc. will reimburse EPA approximately $10.8 million toward costs incurred in its past cleanup actions at the site.  The company will also reimburse EPA and the state of Tennessee for costs incurred by those agencies in overseeing the work required by the settlement

“This settlement is the product of excellent cooperation between private parties, and the state and federal government to find a long term solution to cleaning up the contamination at the Copper Basin site,” said Assistant Attorney General John Cruden of the Justice Department’s Environment and Natural Resources Division.  “This agreement will yield lasting benefits for water quality in this Ocoee River watershed.”

“This settlement marks a significant turning point in the remediation and restoration of an area that has borne the brunt of contamination from industrialized operations for over a century,” said Regional Administrator Heather McTeer Toney of EPA’s Southeast Region.  “The provisions incorporated by these consent decrees exemplifies the hard work by multiple federal agencies, the state of Tennessee, Tennessee Valley Authority and OXY USA to ensure the remediation and recovery of the Ocoee River and the North Potato Creek and Davis Mill Creek Watersheds continues well into the future.”

“This settlement formalizes the cooperation and commitments exhibited between the company and regulators over the past two decades,” said Tennessee Department of Environment and Conservation Commissioner Bob Martineau.  “This major project follows a shared goal of compliance and achievement of long-term water quality performance in the Copper Basin that benefits our natural resources and the citizens of Tennessee.”  

Pursuant to earlier agreements with EPA and the state of Tennessee, OXY constructed and installed a system to collect and treat contaminated water and sediments from the Davis Mill Creek watershed prior to discharge in the Ocoee River.  Under the settlement lodged today, OXY will continue to operate and maintain the system, including any necessary refurbishments of the plant.  In addition, the Tennessee Valley Authority (TVA) agreed to implement measures at its dams along a 38-mile stretch of the Ocoee River in order to prevent contaminants from becoming airborne.  EPA will oversee the work, which will implement the cleanup remedy required by the agency’s 2011 and 2014 Records of Decision for the Ocoee River and the Davis Mill Creek watershed, respectively.  

From the mid-1800s until 1989, the Copper Basin Mining District Superfund Site was the location of extensive copper, iron and sulfur mining operations, mineral processing and sulfuric acid production.  Throughout that time, wastes generated through those operations, which included sulfuric acid, lead, mercury, PCBs and other contaminants, were disposed of in, on and around Davis Mill Creek and North Potato Creek, both of which discharge to the Ocoee River.  These contaminants can still be found in the sediments and surface water at the site.

EPA, the Tennessee Department of Environment and Conservation and OXY began response work at the Copper Basin Mining District Superfund Site in 1990.  Over the last 25 years, EPA has overseen extensive work at the site, including the construction of two water treatment plants (WTPs).  The first WTP went online in 2002 and the second in 2005.  To date, 535,231 kilograms of hazardous waste, oil, equipment and soil contaminated with lead and polychlorinated biphenyls have been removed from the site and properly disposed.  The volume of water treated to date is 8,266,257,000 gallons at the London Mill Wastewater Treatment Plant, 9,761,564,000 gallons at the Cantrell Flats Wastewater Treatment Plant, and 49,362,271,000 gallons at the North Potato Creek Water Treatment Plant, totaling 67,390,092,000 gallons.

Also under the consent decree, the United States, on behalf of the Department of Defense and the Department of Commerce, agreed to pay OXY approximately $12.6 million to settle claims for OXY’s past and future cleanup costs, based primarily on the United States’ ownership and operation of a portion of the site between 1941 and 1946.

Taking into account the settlement being lodged today and the work previously performed at the site, over $217 million is being devoted to cleaning up the contamination at this site. 

The settlement, lodged in the Eastern District of Tennessee today as two consent decrees, will be posted in the Federal Register and available for public comment for a period of 30 days.  The consent decree can be viewed on the Justice Department website: www.justice.gov/enrd/Consent_Decrees.html.  The Justice Department also concurrently filed a complaint initiating the case that the consent decrees resolve.  

For more information on the site, please visit: https://cumulis.epa.gov/supercpad/cursites/csitinfo.cfm?id=0406638

For almost a decade, INTERPOL Washington, the United States National Central Bureau (USNCB), has empowered the nation’s law enforcement to utilize both national and INTERPOL criminal indices. The process of linking states together to use INTERPOL systems, known as federation, will assist officers across the country in making determinations about persons or items they encounter in the field: suspected fugitives, victims, stolen vehicles, stolen travel documents, etc.

The national goal of federation is to streamline law enforcement queries into single requests, accessible via an officer’s vehicle or handheld device. Those queries would be routed through various national systems, such as the International Justice and Public Safety Network (Nlets) and National Criminal Information Center (NCIC). Such systems provide information such as a suspect’s name, charges, and threat level. That information enhances the effectiveness of all police action, from an officer’s safety during a traffic stop to informational support for an investigation.

To date, 12 states and the District of Columbia have become consistent users of these services. Their combined 67 million queries for people, vehicles, firearms, and/or travel documents have allowed for the dissemination of information about dangerous criminals, who may be moving within or outside the United States. As more states utilize this service, the likelihood of successfully identifying a suspect increases. Since 2006, the total number of queries made by states has grown exponentially, a growth assisted by the cost to federate being minimal: personnel training, administration, and other ‘soft’ costs. As the program grows, it may be used to increase U.S. law enforcement’s situational awareness in the period following terrorist attacks.

Following the San Bernardino attack in 2015, the USNCB is discussing a federation pilot with the Community Oriented Policing Services (COPS). The component’s close relationship with state and local law enforcement will allow it and the USNCB to identify grants and/or funding streams for federating states.

Today, David Daoud Wright, aka Dawud Sharif Abdul Khaliq, aka Dawud Sharif Abdul Khaliq, 26, of Everett, Massachusetts, and Nicholas Alexander Rovinski, aka Nuh Amriki, aka Nuh Andalusi, 25, of Warwick, Rhode Island, were charged in a superseding indictment with conspiracy to commit acts of terrorism transcending national boundaries.

The announcement was made by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Carmen M. Ortiz of the District of Massachusetts and Special Agent in Charge Harold H. Shaw of the FBI’s Boston Division.

This charge, as well as additional conspiracy allegations, were included in a new superseding indictment against Wright and Rovinski today.  A grand jury in June 2015, charged them with conspiracy to provide material support to the Islamic State of Iraq and the Levant (ISIL).  The indictment also charged Wright with conspiracy to obstruct justice and obstruction of justice. 

Wright and Rovinski are charged with conspiring with each other, known and unknown conspirators, and Usaamah Abdullah Rahim, 26, Wright’s uncle, to provide material support to ISIL and commit acts of terrorism that transcended national boundaries.  On June 2, 2015, Rahim was shot and killed after he attacked law enforcement officers in a Roslindale, Massachusetts, parking lot. 

The superseding indictment alleges that, beginning in at least February 2015, Wright began discussing ISIL’s call to kill non-believers in the United States with Rahim and Rovinski and they began plotting and recruiting members for their “martyrdom” operation.  In March 2015, Wright drafted organizational documents for a “Martyrdom Operations Cell” and conducted Internet search queries about firearms, the effectiveness of tranquilizers on human subjects and the establishment of secret militias in the United States.  Simultaneously, Rahim was communicating with ISIL members overseas, including Junaid Hussain.  On Aug. 24, 2015, Hussain was killed in an airstrike in Raqqah, Syria. 

As alleged in the indictment, beginning in or about May 2015, Hussain allegedly communicated directly with Rahim.  Rahim in turn communicated Hussain’s instructions to Wright, with regard to the murder of an individual residing in New York.  Wright, Rovinski and Rahim each allegedly conspired to commit attacks and kill persons inside the United States on behalf of ISIL.  In preparation for their attack, Rovinski conducted research on weapons that could be used to behead their victims.  Since being arrested, Rovinski has sought to continue their planned attacks and has written letters to Wright from prison discussing ways to take down the U.S. government and decapitate non-believers.   

The charge of conspiracy to provide material support provides a maximum sentence of 20 years in prison, a lifetime term of supervised release and a $250,000 fine; conspiracy to obstruct justice provides a maximum sentence of five years in prison, three years of supervised release and a $250,000 fine; obstruction of justice provides a maximum sentence of 20 years in prison, three years of supervised release and a $250,000 fine; conspiracy to commit acts of terrorism transcending national boundaries provides a maximum sentence of life in prison, lifetime supervised release and a $250,000 fine.  Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

This investigation is being conducted by the Boston Joint Terrorism Task Force (JTTF) and the Rhode Island JTTF with critical assistance from the Boston Police Department; Boston Regional Intelligence Center; Massachusetts State Police; Commonwealth Fusion Center; Everett Police Department; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; Rhode Island State Police; Warwick, Rhode Island, Police Department; Rhode Island Fusion Center; Naval Criminal Investigative Service; and member agencies of the JTTF.

The case is being prosecuted by Assistant U.S. Attorney B. Stephanie Siegmann of the District of Massachusetts’s National Security Unit and Trial Attorney Greg R. Gonzalez of the National Security Division’s Counterterrorism Section.

The details contained in the charging documents are allegations.  The defendants are presumed to be innocent unless and until proven guilty beyond a reasonable doubt in the court of law.

 Wright Indictment

A San Antonio, Texas, artist pleaded guilty today in the U.S. District Court for the Western District of Texas in San Antonio to one count of failure to file a tax return, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

According to court documents, Carlos Cortes is an artist who works in the medium of “Faux Bois,” an artistic imitation of wood or wood grains in various media.  Cortes’ work has been commissioned by the City of San Antonio along with several San Antonio businesses.  According to Internal Revenue Service (IRS) records, Cortes did not file individual income tax returns for 2006, 2007, 2008 and 2009 despite earning gross income well in excess of the filing requirements.  Cortes admitted that he had gross income of $62,043 in 2006, $66,138 for 2007, $457,192 for 2008 and $781,847 for 2009.

Cortes will be sentenced on June 21.  He faces a statutory maximum sentence of one year in prison and a $100,000 fine.  As part of his plea agreement, Cortes agreed to pay restitution to the IRS in the amount of $404,433 to cover the tax due and owing for the years 2006 to 2009.

Acting Assistant Attorney General Ciraolo thanked special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorney Robert Kemins 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.

SACRAMENTO, California – Ligia Sandoval Spafford (Sandoval), 48 años de edad, y residente de Roseville, fue condenada el jueves por el Juez del Distrito de los Estados Unidos Troy L. Nunley a dos años y tres meses de prisión por una trama que se dirigía a propietarios de viviendas que se encontraban en dificultades económicas, anunció el Procurador de los Estados Unidos Benjamín B. Wagner. Se le ordenó a Sandoval a que se entregara el 9 de junio de 2016.

Sandoval pagó $115,065.00 de dólares en indemnizaciones, la cantidad total de restitución ordenada por el tribunal, para compensar a las víctimas por las pérdidas en que incurrieron como resultado de esta trama fraudulenta. En febrero de 2015, Sandoval y su marido de entonces, Martin Wayne Flanders, 51 años de edad, y residente de Roseville, se declararon culpables de fraudes de correo para llevar a cabo la trama fraudulenta. El 29 de octubre de 2015, Flanders fue condenado a seis años y cinco meses de prisión.

En la declaración de la sentencia, el Juez Nunley dijo: “Ella sabía lo que estaba ocurriendo e incitó a estas personas a que formaran parte en esta trama. Ellos confiaban en ella. … Ella arruinó las vidas de algunas personas. El que ella pagara una indemnización no quita la ansiedad y el miedo que ellos (las víctimas) mantuvieron mientras ocurría esto. Estas víctimas estaban devastadas.”

Según documentos del tribunal, entre los años 2008 y 2010, Flanders cobró tarifas por adelantado a sus clientes por un número de servicios financieros que incluían modificaciones de préstamos, revisiones de préstamos hipotecarios, recuperación de crédito, liberación de deuda, peticiones de bancarrota y un programa para vender casas a “inversionistas” que las alquilaban con la opción a compra. Sandoval y Flanders comerciaban con estos servicios con propietarios de viviendas que se encontraban en dificultades económicas y ponían un énfasis particular en personas de habla hispana. Sandoval, siendo hispano-hablante, promovía los servicios que ella y Flanders, quien no dominaba el español, ofrecían durante un programa de radio que se emitía dos veces a la semana en la zona del “Bay Area” por Radio Luz, una emisora de radio Cristiana en español.  Sandoval, una agente de bienes y raíces autorizada, además asistía a Flanders en la trama fraudulenta manteniendo relación con y explicando los servicios a clientes de habla-hispana. Los servicios ofrecidos por Flanders y Sandoval también se anunciaban en Univisión, un canal de televisión en español, y en revistas en español. Cerca de un 98 por ciento de los clientes de los demandados eran de descendencia hispana; algunos hablaban poco o nada de inglés.

Sandoval y Flanders dieron numerosos testimonios falsos a los inversores sobre el éxito de los programas que se ofrecían o, en el caso, de las devoluciones que estaban disponibles si los programas no prosperaban. En intentos de retrasar los procesos de embargo de las viviendas, Sandoval y Flanders también se servían de ofertas ficticias llamadas “ofertas fantasma” para comprar las viviendas de las víctimas a precio reducido en un proceso llamado “short sale,” como también de fingidas peticiones de bancarrota llamadas “bancarrotas de esqueleto” que eran rápidamente desestimadas por el tribunal de bancarrotas. Al menos, entre 25 a 30 individuos pagaron por los servicios que nunca recibieron o no recibieron las devoluciones cuando los programas dejaron de cumplir con lo prometido. Como mínimo, las pérdidas totales de las víctimas fueron de $115,000 dólares. Algunos de los propietarios que no pudieron recibir subsidios fueron embargados por sus entidades de crédito.

Este caso ha sido el producto de una investigación llevada a cabo por la Oficina Federal de Investigaciones (FBI). Los Procuradores Auxiliares de los Estados Unidos Todd A. Pickles y Shelley Weger han procesado el caso.

The Justice Department today announced the closure of its case concerning the provision of language assistance to individuals with limited English proficiency (LEP) in the state court system following the successful implementation of reforms by the Rhode Island Judiciary.

The Rhode Island Judiciary and the Justice Department successfully resolved an investigation of an administrative complaint filed under Title VI of the Civil Rights Act of 1964, which prohibits discrimination on the basis of race, color or national origin in federally funded programs or activities.  The complaint alleged that the Rhode Island Judiciary failed to provide interpreters and other language assistance services to LEP court users.  In 2012, following extensive negotiations between the Rhode Island Judiciary and the department, Chief Justice Paul A. Suttell of the Rhode Island Supreme Court issued Executive Order No. 2012-05 on language services in the courts to mandate that qualified interpreters and other approved language assistance be provided at no charge for individuals with LEP in all court proceedings, services and programs.

In 2014, the department approved the Rhode Island Judiciary’s language access plan and the parties signed a voluntary resolution agreement that required the successful implementation of the executive order and plan, continued input from a stakeholder committee, compliance with Title VI and two years of monitoring and technical assistance.  Today, after the Rhode Island Judiciary completed the conditions for termination of the agreement, the department officially closed the case.

The department and the Rhode Island Judiciary have worked cooperatively to improve how the courts communicate with LEP court users.  In addition to adopting the comprehensive language access policy contained in the executive order, the judiciary’s accomplishments include:

• Designating staff qualified to provide services to court customers in languages other than English;

• Posting signage in six languages throughout each court house advising the public of the right to an interpreter at no cost;

• Requiring both parties to state court actions to report interpreter needs data to the court through new e-filing requirements;

• Translating forms and website content into commonly spoken languages in Rhode Island, such as Spanish, Portuguese, Khmer and Cape Verdean;

• Creating a multilingual notice of right to language assistance and adopting a court rule requiring service of the notice upon each defendant in a proceeding;

• And, creating a language services complaint policy and posting a complaint form in multiple languages on the court’s website, in court clerk’s offices and in the Office of Court Interpreters.

“Access to justice requires that all people, including those with limited English proficiency, can fully access and fairly participate in our courts,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “We commend Chief Justice Suttell and staff in the Administrative Office of State Courts for their efforts to make the promise of equal access to justice a reality for all Rhode Island residents.” 

The Rhode Island matter was handled by Attorney Paul M. Uyehara of the Civil Rights Division’s Federal Coordination and Compliance (FCS) Section.

The complaint was resolved as part of the initiative by FCS to ensure that state courts comply with the language access requirements of Title VI.  To ensure that no LEP individual is denied justice due to a court’s failure to provide language services, the FCS courts team provides policy guidance and technical assistance to state court systems and undertakes enforcement actions across the country.

For further information about FCS and Title VI, please visit https://www.justice.gov/crt/fcs.  For additional LEP-related resources, please visit http://www.lep.gov/index.htm. 

In early 2014, INTERPOL Washington, the U.S. National Central Bureau (USNCB), initiated a 30-day pilot program to test how INTERPOL member countries would assimilate data from the National Center for Missing and Exploited Children (NCMEC). The source of the shared information is NCMEC’s Cyber Tipline Reports, the organization’s analytical result for child abuse leads received. To start, the USNCB disseminated NCMEC information to 10 random member countries, excluding child exploitation imagery. National Central Bureaus (NCBs) in other countries could receive the images via requests to the USNCB, however.

By May 2014, the program went live and the service became available to approximately 140 INTERPOL member countries. By November 2015, 1 million leads had been distributed, with 38 countries requesting additional information for follow-up investigations. These leads are distributed electronically, without the need for dedicated personnel resources.

Now, on April 11th, 2016, less than 2 years later, over 2 million leads have been distributed across 130 different countries. The project’s focus is now to develop the ability of NCBs to retrieve the images without involvement from the USNCB.

Among the program’s most recent successes was the arrest of Colin Fisher, a British national operating in Gibraltar. Of the many leads the USNCB distributed, a Cyber Tipline report was utilized by NCB Gibraltar to inform the country’s own law enforcement to locate Fisher. He was charged with multiple counts of possession (and distribution) of indecent images of children. Combined with a voyeurism charge unrelated to the abuse, Fisher is now serving a 3-year, 8-month sentence.

Defendant is Charged with Acting as an Illegal Agent of a Foreign Government in the United States Without Prior Notification to the Attorney General, Among Other Crimes

An 18-count superseding indictment was unsealed today charging Amin Yu, 53, of Orlando, Florida, with acting as an illegal agent of a foreign government in the United States without prior notification to the Attorney General, conspiring to defraud the United States and to commit offenses against the United States, committing unlawful export information activities, smuggling goods from the United States, conspiring to and committing international money laundering and making false statements to the U.S. Citizenship and Immigration Services.

The indictment was announced by Assistant Attorney General for National Security John P. Carlin and U.S. Attorney A. Lee Bentley III of the Middle District of Florida.

According to the superseding indictment, from at least 2002 until approximately February 2014, Yu obtained systems and components for marine submersible vehicles from companies in the United States.  She did so at the direction of co-conspirators working for Harbin Engineering University (HEU), which is a state-owned entity in the People’s Republic of China.  Yu proceeded to illegally export the systems and components to China for use by her co-conspirators in the development of marine submersible vehicles – unmanned underwater vehicles, remotely operated vehicles and autonomous underwater vehicles – for HEU and other state-controlled entities.  It is alleged that Yu illegally exported items by failing to file electronic export information as required by U.S. law and also by filing false electronic export information.  In particular, Yu completed and caused the completion of export-related documents in which she significantly undervalued the items that she had exported and also provided false end-user information for those items.

An indictment is merely an allegation and every defendant is presumed innocent unless, and until, proven guilty.

If convicted, Yu faces a maximum penalty of 20 years in federal prison on each of the money laundering counts.  She faces a maximum sentence of 10 years in prison for acting as an illegal agent of a foreign government and faces a maximum sentence of five years in prison on all other counts.  The indictment also notifies Yu that the United States intends to forfeit approximately $2,668,648.92, the alleged traceable proceeds of the offenses.

This case was investigated by the FBI, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the Internal Revenue Service-Criminal Investigation and the Naval Criminal Investigative Service.  The case is being prosecuted by Assistant U.S. Attorney Daniel C. Irick of the Middle District of Florida and Trial Attorneys David C. Recker and Thea D. R. Kendler of the National Security Division’s Counterintelligence and Export Control Section.

Yu Indictment

WASHINGTON – El Departamento de Justicia anunció hoy el cierre de su caso sobre el ofrecimiento de asistencia lingüística a personas con conocimientos limitados del inglés [Limited English Proficiency (LEP)] en el sistema de tribunales estatales después de la implementación exitosa de reformas por parte del Poder Judicial de Rhode Island.

El Poder Judicial de Rhode Island y el Departamento de Justicia resolvieron con éxito una investigación de una demanda administrativa entablada bajo el Título VI de la Ley de Derechos Civiles de 1964, que prohibe la discriminación con base en la raza, el color o el origen nacional en programas o actividades con financiamiento federal.  La demanda alegaba que el Poder Judicial de Rhode Island no ofrecía intérpretes y otros servicios de asistencia lingüística a usuarios LEP de los tribunales.  En 2012, después de amplias negociaciones entre el Poder Judicial de Rhode Island y el departamento, el Juez Principal Paul A. Suttell de la Corte Suprema de Rhode Island emitió la Orden Ejecutiva No. 2012-05 sobre servicios lingüísticos en los tribunales para exigir que se ofrecieran intérpretes calificados y otros tipos aprobados de asistencia lingüística sin cargo para personas con LEP en todos los procedimientos, servicios y programas judiciales.

En 2014, el departamento aprobó el plan de acceso idiomático del Poder Judicial de Rhode Island y las partes firmaron un acuerdo de resolución voluntaria que exigía la implementación exitosa de la orden ejecutiva y el plan, participación constante de un comité de partes interesadas, cumplimiento con el Título VI y dos años de monitoreo y asistencia técnica.  Hoy, después de que el Poder Judicial de Rhode Island completara las condiciones para la rescisión del acuerdo, el departamento cerró oficialmente el caso.

El departamento y el Poder Judicial de Rhode Island han colaborado conjuntamente para mejorar la manera en que los tribunales se comunican con los usuarios LEP de los tribunales.  Además de adoptar la política integral de acceso lingüístico incluída en la orden ejecutiva, los logros del poder judicial incluyen:

• Designar a personal calificado para ofrecer servicios a clientes de los tribunales en idiomas que no sean el inglés;

• Colocar carteles en seis idiomas en cada tribunal informándole al público sobre el derecho de contar con un intérprete de manera gratuita;

• Exigir que ambas partes en acciones judiciales estatales informen al tribunal sobre la necesidad de intérprete a través del nuevo requerimiento de presentación electrónica de los escritos;

• Traducción de formularios y contenido de los sitios webs en idiomas comúnmente hablados en Rhode Island, como español, portugués, jemer y caboverdiano;

• Creación de un aviso multilingüe sobre el derecho a asistencia lingüística y adopción de una norma judicial que requiera la entrega del aviso a cada demandado en un procedimiento;

• Y creación de una guía a seguir para la presentación de quejas relacionadas a los servicios lingüísticos y publicación de un formulario de queja en múltiples idiomas en el sitio web, en las secretarías del juzgado y en la Oficina de Intérpretes Judiciales.

“El acceso a la justicia requiere que todas las personas, entre ellas las que tienen conocimientos limitados del inglés, puedan acceder plenamente y participar de manera justa en nuestros tribunales”, dijo la Secretaria de Justicia Auxiliar Adjunta Principal Vanita Gupta, jefa de la División de Derechos Civiles del Departamento de Justicia.  “Felicitamos al Juez Principal Suttell y al personal de la Oficina Administrativa de Tribunales Estatales por su labor para hacer realidad la promesa de igualdad de acceso para todos los residentes de Rhode Island”. 

El asunto de Rhode Island fue tratado por el Fiscal Paul M. Uyehara de la Sección de Coordinación y Cumplimiento Federal [Federal Coordination and Compliance Section (FCS)] de la División de Derechos Civiles.

La demanda fue resuelta como parte de la iniciativa de la FCS para asegurar que los tribunales estatales cumplan con las exigencias de acceso idiomático del Título VI.  Para asegurar que no se le niegue justicia a ninguna persona LEP por la falta de servicios lingüísticos del tribunal, el equipo judicial de la FCS ofrece orientación sobre políticas y asistencia técnica a sistemas judiciales estatales y realiza acciones de coacción en todo el país.

Para obtener información adicional sobre la FCS y el Título VI, por favor visite https://www.justice.gov/crt/fcs.  Para acceder a recursos adicionales relacionados con LEP, visite http://www.lep.gov/index.htm.

The former president of an automotive parts company pleaded guilty today and was sentenced to serve 18 months in a U.S. prison for his role in a conspiracy to fix prices and rig bids for the sale of automotive body sealing products sold in the United States, the Justice Department announced.

Keiji Kyomoto, a former executive of an automotive body sealing products supplier based in Hiroshima, Japan, and former president of its U.S. joint venture, pleaded guilty today in the U.S. District Court for the Eastern District of Kentucky to a single-count indictment charging him with bid rigging and price fixing.  As part of his plea agreement, Kyomoto also agreed to pay a $20,000 criminal fine.

“Today’s plea is yet another example of our commitment to holding senior-level executives accountable for corporate wrongdoing,” said Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division.  “Whether collusion has affected automobile parts, shipping services, financial products, electronic components or even heir location services, the department has a strong and ever increasing record of prosecuting individuals in order to deter criminal antitrust practices.”

“The FBI is committed to aggressively investigating individuals who engage in criminal conduct that corrupts the global marketplace,” said Special Agent in Charge Howard S. Marshall of the FBI’s Louisville Division.  “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.”

On Oct. 8, 2015, a federal grand jury in Covington, Kentucky, returned an indictment against Kyomoto and two other individuals, charging them with conspiring to rig bids for and fix the prices of body sealing products sold to Honda Motor Company Ltd., Toyota Motor Corp. and certain of their subsidiaries and affiliates for installation in vehicles manufactured and sold 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.  

According to the indictment, Kyomoto and his co-conspirators instructed subordinates at their respective companies to communicate with co-conspirators at other companies in order to allocate sales of, rig bids for and fix the prices of automotive body sealing products; were aware that employees under their supervision were engaging in such communications; and condoned such communications.  The indictment further alleged that Kyomoto attended meetings in the United States with co-conspirators during which Kyomoto and the co-conspirators reached agreements regarding sales of automotive body sealing products to Honda and Toyota.  The indictment charged Kyomoto with participating in the conspiracy beginning at least as early as September 2003 until at least October 2011.  For most of this period, Kyomoto resided in the United States and served as president of an unnamed joint venture with offices in Indiana and Michigan, which manufactured and sold automotive body sealing products.

Today’s guilty plea 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.  A total of 58 individuals and 39 companies have been charged and have agreed to pay more than $2.6 billion in criminal fines.  This case was brought by the Antitrust Division’s Chicago Office and the FBI’s Louisville Division, Covington Resident Agency, with the assistance of the FBI’s International Corruption Unit and the U.S. Attorney’s Office of the Eastern District of Kentucky.  Anyone with information about anticompetitive conduct in the automotive parts industry should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Louisville Division at 502-263-6000.

A federal court entered a permanent injunction yesterday against Grandview, Washington tax return preparer Jose Magana and his business, Genesis Bookkeeping and Accounting.  The injunction bars Magana and Genesis Bookkeeping from preparing tax returns for others.  Magana and Genesis Bookkeeping admitted in a court filing that they had interfered with the enforcement and administration of the federal tax laws.  They agreed to entry of the injunction.

According to the United States’ complaint, Magana and his business have engaged in a pattern of claiming for their clients false or inflated dependency exemptions, inappropriate filing status, and false or inflated Child Tax Credits and Additional Child Tax Credits.  Their practice of claiming these false exemptions and credits has resulted in significant lost tax revenues by understating tax liabilities and claiming improper refunds, according to the suit.

Specifically, the suit alleges that, as of March 26, 2015, the Internal Revenue Service (IRS) had examined close to 300 tax returns that Magana and Genesis Bookkeeping and Accounting had filed from 2012 through 2014.  Over 95 percent of these examinations resulted in adjustments to tax, with proposed deficiencies averaging approximately $3,150 per return, according to the complaint.  The suit alleges that Magana and his business prepared more than 10,000 returns from 2012 through 2014. 

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 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 and the U.S. Environmental Protection Agency (EPA) today announced that a group of 66 companies have agreed to clean up contaminated groundwater at the Omega Chemical Corporation Superfund Site in Whittier, California.  The settlement requires the companies to spend an estimated $70 million to install wells and operate a groundwater treatment system.  In addition, the parties will reimburse EPA $8 million and the California Department of Toxic Substances Control $70,000 toward costs incurred in those agencies’ past cleanup actions at the site.  

“We are pleased that the settling parties have come forward to do the work of cleaning up the groundwater contamination to which they and others contributed,” said Assistant Attorney General John C. Cruden of the Justice Department’s Environment and Natural Resources Division.  “This settlement makes excellent progress in cleaning up the Omega site and will also put additional systems in place to monitor and evaluate the level of contamination in order to guide future work.”

“Today’s settlement ensures the protection of a vital drinking water source for LA County,” said Regional Administrator Jared Blumenfeld of EPA’s Pacific Southwest Region. “The cleanup of this polluted aquifer is critical because groundwater in the region has been depleted because of the drought.”

“Our current drought has underscored the importance of protecting California’s groundwater resources,” said Director Barbara A. Lee of the California Department of Toxic Substances Control.  “It has taken a lot of work between state and federal agencies to get to this point and it is vital we begin the work of cleaning up this aquifer."

Design work on the new treatment system, extraction wells and piping will begin later this year and continue into 2017, with construction expected to begin in 2018.  EPA will oversee the work, which will implement the cleanup remedy required by the Agency’s 2011 Record of Decision for three miles of the groundwater plume.  The settling parties will also install and sample groundwater monitoring wells later this year to investigate and evaluate the remaining contaminated area at the site to determine what additional remediation is needed.

The former Omega Chemical Corporation facility operated from approximately 1976 to 1991 and was located at 12504 and 12512 Whittier Boulevard, across the street from a residential neighborhood and within one mile of several schools.  It handled drums and bulk loads of industrial waste solvents and chemicals that were processed to form commercial products.  Subsurface soil and groundwater have high concentrations of trichloroethylene (TCE), perchloroethylene (PCE), Freons and other contaminants.  Drinking high levels of TCE and PCE for extended periods of time could cause damage to the nervous system, liver and lungs and increase risk of cancer.  

The Omega Superfund Site was placed on Superfund’s National Priorities List in 1999 and extends from Whittier through Santa Fe Springs and into Norwalk.  Over the last 20 years, EPA has overseen the removal of more than 2,700 drums as well as more than 9,000 pounds of contaminants from the soil and groundwater.  A soil vapor extraction system to address vapor intrusion from the Omega Site has been operating since 2010.  A small groundwater pump and treatment system has treated more than 30 million gallons of contaminated groundwater since 2009.  

The settling parties include a group of 66 corporations that will conduct the work.  An additional 171 parties that have either sent waste to the site or operated in the area and contributed to the contamination, have also agreed to fund a portion of the work.

The settlement, lodged today in federal court in the Central District of California, will be posted in the Federal Register and available for public comment for a period of 30 days.  The consent decree can be viewed on the Justice Department website: www.justice.gov/enrd/Consent_Decrees.html.  The Justice Department also concurrently filed a complaint initiating the case that the consent decree resolves.  

For more information on the site, please visit: www.epa.gov/superfund/omegachemical

Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division, released the following statement regarding the ruling issued by U.S. District Judge Catherine D. Perry of the Eastern District of Missouri approving the department’s consent decree with the city of Ferguson, Missouri:

“Now that the consent decree has been approved by the court, the department is looking forward to working with the city of Ferguson as it implements the decree and continues the essential work to create a police department that the Constitution requires and that residents deserve.”

A Lincoln, Montana, man was sentenced today to five years in prison for manufacturing marijuana, being a felon in possession of a firearm and tax evasion, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Michael W. Cotter for the District of Montana.

Dennis Peiker, 61, was sentenced by U.S. District Court Judge Brian Morris for the District of Montana to serve 60 months in prison, followed by four years of supervised release and ordered to pay $409,819 in restitution to the Internal Revenue Service (IRS).  Following a jury trial in August 2015, Peiker was convicted of manufacturing more than 100 marijuana plants.  In September 2015, Peiker pleaded guilty to two counts of felon in possession of a firearm and one count of tax evasion. Judge Morris ordered Peiker to forfeit all firearms seized by law enforcement authorities.

Peiker evaded the payment of more than $628,000 in federal income tax, penalties and interest for the years 2002 through 2009 by concealing the true nature of his assets, making false statements to IRS officials, and placing funds and property in the names of others.  Peiker was previously convicted in 1999 of filing false federal income tax returns.  Despite the fact that Peiker is a convicted felon and therefore prohibited from possessing firearms, law enforcement agents seized ammunition and multiple firearms, including a semi-automatic pistol, two single-shot rifles, three automatic rifles and a shotgun, from his residence on two separate occasions in 2011 and 2015.  Additionally, when Peiker was arrested in April 2015 following his indictment on the tax evasion charge, law enforcement agents discovered more than 100 marijuana plants at his residence.  

Acting Assistant Attorney General Ciraolo and U.S. Attorney Cotter commended special agents of IRS-Criminal Investigation, the Bureau of Alcohol, Tobacco, Firearms, and Explosives and the Lewis and Clark County Sheriff’s Office as part of the Missouri River Drug Task Force, who investigated the case, and Assistant U.S. Attorneys Paulette Stewart and Chad Spraker and Trial Attorney John Mulcahy of the Tax Division, who are prosecuting the case.

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

Attorney General Loretta E. Lynch today announced that the Department of Justice released the 2016 National Strategy for Child Exploitation Prevention and Interdiction.  The strategy provides a comprehensive threat assessment of the nature and scope of the current dangers facing our nation’s children, including child pornography offenses, sextortion and live-streaming of child sexual abuse, child sex trafficking, child sex tourism and sex offense registry violations.  For the first time, the strategy also dedicates an entire section to the unique challenges confronting child exploitation in Indian Country.

“No matter what form child exploitation takes and  no matter how technologically advanced it is, it demands the full attention of law enforcement, policymakers, community leaders and  service providers alike,” said Attorney General Loretta Lynch.  “This strategy examines existing efforts, assesses new threats and plots a course for the future.  It identifies innovative ways in which the federal government and its partners can address child exploitation.  And it reaffirms our unwavering commitment to ensure that every child in America is able to reach his or her potential, free of violence and abuse.” 

The strategy analyzes the work of federal law enforcement agencies and prosecutors, as well as other agencies and offices that play important roles by supporting victims, providing grants to state, local and tribal governments and non-profit partners and educating the public about the dangers of child exploitation.  Since FY 2011, the Department of Justice has filed 20,260 Project Safe Childhood (PSC) cases against 19,111 defendants.  These cases include prosecutions of child sex trafficking; sexual abuse of a minor or ward; child pornography offenses; obscene visual representation of the sexual abuse of children; selling or buying of children; and many more statutes.

Despite the vigorous and coordinated efforts to combat the different aspects of child exploitation, the department also recognized that more work remains and that the response must continue to evolve with the threat.  To that end, the strategy outlines four goals and objectives that build upon the department’s accomplishments in combating child exploitation: investigations and prosecutions; outreach and education; victim services; and policy initiatives. 

As part of its public outreach efforts, the department is also unveiling a public service announcement that specifically addresses the issue of sextortion – a crime where someone threatens to distribute your private and sensitive material if you don’t provide them images of a sexual nature, sexual favors or money.  Made in conjunction with the National Center for Missing and Exploited Children, the video highlights the ways in which malicious actors can use the internet to obtain and use private material to extort innocent individuals of all ages.  The announcement concludes by directing individuals with tips or leads regarding suspected crimes of sexual exploitation to file a report at www.cybertipline.org.

This year marks the 10th anniversary of the Project Safe Childhood (PSC) initiative.  PSC is a department initiative launched in May 2006 that aims to combat the proliferation of technology-facilitated sexual exploitation crimes against children.  Led by U.S. Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, PSC marshals federal, state, tribal and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims.  To learn more about PSC’s work, please visit: https://www.justice.gov/psc.

For more information regarding the National Strategy to Combat Child Exploitation, Prevention and Interdiction, please visit: https://www.justice.gov/psc/national-strategy-child-exploitation-prevention-and-interdiction.

Defendants Prepared Tax Returns for Clients that Contained False and Inflated Expenses and Credits

Three El Paso, Texas, residents were sentenced to prison for preparing and conspiring to prepare false income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Richard L. Durbin Jr. for the Western District of Texas.   

Belia Mendoza, 60; Margarita Hernandez, 36; and Denise Duchene, 46, were convicted on Feb. 3 following a jury trial of conspiracy to defraud the United States for their involvement in a fraudulent tax return preparation scheme and numerous counts of aiding and assisting in the preparation and filing of materially false tax returns.

“Tax return preparers owe a duty to their clients to prepare true and accurate tax returns for filing with the Internal Revenue Service (IRS),” said Acting Assistant Attorney General Ciraolo.  “When preparers intentionally include false items on tax returns, they are not only violating that duty to their clients, but they are also violating the law and exposing themselves to significant penalties, including incarceration.”

“The sentencing of these three tax return preparers sends a clear warning to unscrupulous tax preparers who break the law and abuse the tax system,” said Special Agent in Charge William Cotter of the IRS-Criminal Investigation’s San Antonio Field Office.  “Knowingly falsifying documents filed with the IRS is a crime and IRS-Criminal Investigation works year-round pursuing those tax preparers who enrich themselves while cheating their clients and the U.S. Treasury.” 

At today’s sentencing hearing, U.S. District Judge Frank Montalvo sentenced Mendoza to 96 months in prison, followed by five years of supervised release and ordered her to pay restitution to the IRS in the amount of $35,391.  On April 15, Hernandez was sentenced to 10 months in prison, followed by three years of supervised release and ordered to pay $18,150 in restitution to the IRS.  Also on Friday, Duchene was sentenced to 33 months in prison, followed by three years of supervised release and ordered to pay $2,394 in restitution to the IRS.

According to evidence and witness testimony introduced at the trial, Mendoza was the owner of Mendez Tax Services (MTS), a tax preparation business she operated out of her home in El Paso.  Hernandez and Duchene, relatives of Mendoza’s, were employees of MTS hired and trained by Mendoza to prepare tax returns for clients for tax years 2008, 2009 and 2010.  From February 2009 until June 2011, Mendoza, Hernandez and Duchene conspired to prepare and submit to the IRS numerous false Forms 1040 (U.S. Individual Income Tax Returns).   

To maximize their clients’ fraudulently claimed income tax refunds, Mendoza, Hernandez and Duchene placed materially false items on the clients’ tax returns, at times without the knowledge or consent of the clients, including false or inflated figures for unreimbursed employee business expenses, child and dependent care expenses and education credits.  Income tax returns prepared by the defendants also included false filing statuses and improperly claimed Earned Income Tax Credits.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Durbin commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorney Joseph M. Giannullo of the Tax Division and Assistant U.S. Attorneys Adrian Gallegos and Rifian Newaz of the Western District of Texas, who prosecuted the case.

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

Return Preparer Allegedly Claimed Fraudulent Education, Fuel Credits

Rose M. Chazulle, a tax return preparer in Miami has prepared fraudulent federal tax returns that claim education and fuel credits to which her clients are not entitled, according to a civil lawsuit filed by the Justice Department today.  The suit seeks to bar Chazulle and her company, RMC Professional Services Corporation, from preparing federal tax returns for others.

According to the complaint, Chazulle prepared federal income tax returns for customers that falsely claimed refundable credits, including American Opportunity Tax Credit and Lifetime Learning Credit.  Chazulle included the false education credits for customers who did not incur educational costs and otherwise did not qualify for this credit, the complaint alleges.  In addition, the complaint states Chazulle prepared tax returns that falsely claimed:

• Fuel tax credits for customers who had no businesses of any kind, even though the credit can only be taken when fuel is used for certain business purposes or to operate a school bus;
• Fabricated business losses, claimed on Schedule C, Profit or Loss from Business, even though the customers did not have a business; and
• Wages described as household help income in order to falsely claim a larger Earned Income Tax Credit than the customer otherwise would have been able to claim.

The complaint estimates that Chazulle’s conduct cost the United States over $14 million for the tax years 2011 to 2013.

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.

A Broward County, Florida, man prepares fraudulent tax returns and should be barred from preparing federal tax returns for others, according to a civil complaint filed by the Justice Department today.

The civil complaint against Eli St. Phard was filed in the U.S. District Court for the Southern District of Florida.  The complaint alleges that St. Phard prepares income tax returns that fraudulently understate his customers’ tax liabilities by falsely claiming deductions for business expenses his customers never incurred, fraudulently overstating his customers’ claims for refunds by falsely claiming education or fuel tax credits to which his customers are not entitled, or both.  According to the complaint, the Internal Revenue Service (IRS) audited 340 of the more than 3,132 returns St. Phard prepared since 2009 and found that St. Phard understated the tax owed on all but five of the 340 returns—a total of more than $1.8 million in understatements.  As a result of St. Phard’s fraudulent activities, many of his customers are now liable for significant tax deficiencies, penalties and interest, the complaint alleges.

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 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 owners of a tax preparation business that filed fraudulent tax returns on behalf of inmates at various New Jersey prisons were each sentenced today to multi-year prison sentences,  announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Paul J. Fishman for the District of New Jersey.       

Kamal J. James aka Bro Messiah Aziz El, 34, of Seaford, Delaware, and Crystal G. Hawkins aka Sis. Crystal Gabri El, 39, of Laurel, Delaware, were sentenced to 96 and 48 months in prison, respectively.  They were previously charged in a superseding indictment with one count of conspiracy, 16 counts of making false claims and three counts of mail fraud.  They were convicted on all counts following a one-week trial before U.S. District Judge Peter G. Sheridan for the District of New Jersey, who imposed the sentences today in Trenton, New Jersey federal court.

According to the superseding indictment and the evidence presented at trial:

Between October 2011 and October 2013, James and Hawkins operated Release Refunds, a purported tax preparation business – previously based in Brick, New Jersey, and in Seaford – through which they solicited current and former New Jersey prison inmates as clients and then filed fraudulent tax returns on their behalf. The company is no longer in business. 

James and Hawkins sent Release Refunds “promotional” flyers to inmates at various New Jersey prisons and halfway houses offering tax return preparation services.  The pair asked inmates interested in Release Refunds’ services to provide basic identification information and to sign income tax returns and other Internal Revenue Service (IRS) documents, but not to include any information about their income or withholdings.  James and Hawkins then filled in the missing income information on the return forms, fabricating the inmates’ earnings to trigger fraudulent and inflated refunds.

During the course of the investigation, an undercover IRS-Criminal Investigation agent posing as an inmate in a New Jersey prison submitted a completed Release Refunds form and sent it to James and Hawkins.  They then sent the “inmate” blank income tax forms and other IRS documents and instructions to sign the documents.  James and Hawkins did not request any financial information from the undercover agent before preparing three fraudulent tax returns – including false income information that James and Hawkins provided – to be filed on behalf of the agent for tax years 2010 through 2012.  The fraudulent returns resulted in several thousand dollars in refunds and a $1,485 fee for the defendants.

In addition to the prison terms, Judge Sheridan sentenced both James and Hawkins to three years of supervised release and ordered them to pay restitution in the amount of $570,897.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Fishman credited special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Jonathan D. Larsen, with the investigation leading to today’s sentences.  They also thanked the U.S. Postal Inspection Service, under the direction of Assistant Inspector in Charge James V. Buthorn and the New Jersey Department of Corrections, under the direction of Commissioner Gary M. Lanigan, for their roles in the case.

The government is represented by Assistant U.S. Attorney Nicholas P. Grippo of the U.S. Attorney’s Office Criminal Division in Trenton and former Trial Attorney Thomas Jaworski of the Tax Division. 

Filed Fraudulent Income Tax Returns Using the Stolen Identities of Puerto Rican U.S. Citizens

A Lawrence, Massachusetts, resident pleaded guilty today to one count of conspiracy to defraud the United States, 14 counts of conversion of government property, two counts of access device fraud and 14 counts of aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Carmen M. Ortiz for the District of Massachusetts, Special Agent in Charge Joel Garland of the Internal Revenue Service–Criminal Investigation’s (IRS-CI) Boston Field Office and Special Agent in Charge Stephen A. Marks of the U.S. Secret Service.

According to the indictment and documents filed with the court, between 2011 and 2015, Juan Santiago, 38, and another individual used the personal identifying information of Puerto Rican U.S. citizens to file fraudulent federal income tax returns.  The fraudulent tax returns resulted in the issuance of tax refunds in the form of U.S Treasury checks, which were mailed to addresses in Massachusetts and elsewhere, controlled by Santiago and the other individual.  The scheme resulted in thousands of fraudulent income tax returns filed with the IRS during the prosecution years.  Santiago distributed a list of 100 stolen identities that were associated with approximately $333,540 in fraudulent tax refunds.

Sentencing is set for July 15.  Santiago faces a statutory maximum sentence of five years in prison on the conspiracy charge, five years in prison on each count of conversion of government property and five years in prison on each count of access device fraud.  For each count of aggravated identity theft, Santiago faces a mandatory minimum prison term of two years, which will run consecutive to any other term of imprisonment he receives.  Santiago also faces monetary penalties.

Acting Assistant Attorney General Ciraolo thanked special agents of IRS-Criminal Investigation and the U.S. Secret Service, who investigated this case and Senior Litigation Counsel Corey Smith of the Tax Division, who prosecuted this case in conjunction with the U.S. Attorney’s Office’s Public Corruption Unit.

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

Businesses Allegedly Prepare Fraudulent Tax Returns While Charging Customers Undisclosed, Unconscionable Fees

The United States filed a civil injunction suit seeking to bar Patrick Clarke of Hallandale Beach, Florida, and Ruby Rodriguez of Orlando, Florida, from owning, operating, or franchising a tax return preparation business and preparing tax returns for others, the Justice Department announced today. 

The complaint also requests that the court order Clarke and Rodriguez to disgorge the fees that they obtained through the alleged fraudulent tax return preparation.  According to the complaint, Clarke owns and operates Tax MD, a tax return preparation business with stores in Florida and North Carolina.  Rodriguez allegedly manages one of Clarke’s stores located in Orlando.

According to the complaint, Clarke’s preparers, including Rodriguez, target primarily low to moderate income customers with misleading advertisements, prepare and file fraudulent tax returns to improperly increase their customers’ refunds and profit through unconscionable, exorbitant and often undisclosed fees—all at the expense of their customers and the U.S. Treasury.

The complaint alleges that Clarke’s preparers, including Rodriguez, engage in fraudulent activity, including:

• Falsely claiming the Earned Income Tax Credit;
• Claiming improper filing status (i.e. head of household for married individuals);
• Fabricating businesses and related business income and expenses;
• Fabricating Schedule A deductions, including for unreimbursed employee business expenses; and
• Charging deceptive and unconscionable fees 

According to the complaint, Clarke was previously a franchisee of LBS Tax Services.  This is one of 10 lawsuits that the Justice Department has filed in Florida against former LBS franchisees or related individuals, including Walner Gachette, Douglas Mesadieu, Jean Demesmin, Kerny Pierre-Louis, Demetrius Scott, Jason Stinson, Wilfrid Antoine, Tonya Chambers, Jehoakim Victor, Lauri Rodriguez, Milot Odne, Christopher Lawrence and Kenneth Aikens.

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 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.

Freedom Mortgage Corporation has agreed to pay the United States $113 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting single family mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements for the FHA insurance program, the Justice Department announced today.  Freedom Mortgage Corporation is headquartered in Mt. Laurel, New Jersey.

“It is imperative that mortgage lenders that participate in the FHA insurance program follow the rules and requirements set forth by HUD,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will continue to work with our partners at HUD, its Office of Inspector General, and U.S. Attorneys around the country to protect homeowners and taxpayers from those who knowingly seek to abuse the FHA program for their own gain.”

“Freedom Mortgage did not properly comply with FHA rules for the mortgages it was generating and did not adequately monitor early payment defaults,” said U.S. Attorney Paul J. Fishman for the District of New Jersey.  “It also failed to report to HUD the defaults it did discover, as required by its participation in the program.  Today’s settlement recognizes those failures and imposes an appropriate sanction.”

During the time period covered by the settlement, Freedom Mortgage Corporation participated as a direct endorsement lender (DEL) in the FHA insurance program.  A DEL has the authority to originate, underwrite and endorse mortgages for FHA insurance.  If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan.  Under the DEL program, the FHA does not review a loan for compliance with FHA requirements before it is endorsed for FHA insurance.  DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and endorsing mortgages for FHA insurance, to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices and to self-report any deficient loans identified by their quality control program.

The settlement announced today resolves allegations that Freedom Mortgage Corporation failed to comply with certain FHA origination, underwriting and quality control requirements.  As part of the settlement, Freedom Mortgage Corporation admitted to the following facts: Between Jan. 1, 2006 and Dec. 31, 2011, it certified mortgage loans for FHA insurance that did not meet HUD underwriting requirements and were therefore not eligible for FHA mortgage insurance.  Additionally, Freedom Mortgage Corporation did not adhere to FHA’s quality control (QC) requirements.  Between 2006 and 2008, Freedom Mortgage Corporation did not share its early payment default (EPD) QC reviews with production and underwriting management, nor did it require responses to its EPD QC findings from its production or underwriting staff.  Due to staffing limitations between 2008 and 2010, Freedom Mortgage Corporation did not always perform timely QC reviews or perform audits of all EPD loans, as required by HUD.  An EPD is a loan that becomes 60 days past due within the first six months of the loan.  The EPD QC reviews that Freedom Mortgage Corporation did perform revealed high defect rates, exceeding 30 percent between 2008 and 2010.  Yet, between 2006 and 2011, Freedom Mortgage Corporation did not report a single improperly originated loan to HUD, despite its obligation to do so.  Additionally, in 2012, after identifying hundreds of loans that “possibly should have been self-reported to HUD,” it reported only one.  As a result of Freedom Mortgage Corporation’s conduct, HUD insured hundreds of loans that were not eligible for FHA mortgage insurance under the DEL program, and that HUD would not otherwise have insured and subsequently incurred substantial losses when it paid insurance claims on the ineligible loans approved by Freedom Mortgage Corporation.

“This recovery on behalf of the Federal Housing Administration should serve as a reminder of the potential consequences of not following HUD program rules and demonstrates HUD OIG’s continued efforts to combat fraud in the origination of single family mortgages insured by the FHA,” said HUD Inspector General David A. Montoya.

“FHA-approved lenders have a responsibility to comply with underwriting standards,” said HUD’s General Counsel Helen Kanovsky.  “We are gratified that Freedom Mortgage Corporation has accepted responsibility for its actions.”

The settlement was the result of a joint investigation conducted by HUD, HUD OIG, the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the District of New Jersey.

Attorney General Loretta E. Lynch announced today that Principal Deputy Assistant Attorney General Renata B. Hesse of the Antitrust Division will assume leadership of the Division.

Hesse succeeds Bill Baer, who became the Acting Associate Attorney General.

“Renata Hesse is an outstanding leader, a determined advocate, and a faithful servant of the law,” said Attorney General Lynch.  “Through her long record of public service, Renata has developed a wide-ranging and comprehensive expertise in antitrust and intellectual property law that makes her exceptionally qualified for her new position.  She has played a key role in some of the most challenging antitrust cases brought by the department in the last 15 years.  And she has distinguished herself at every turn through her tireless work ethic, her keen intelligence, and her steadfast commitment to doing justice.  I am confident that, under her guidance, the Antitrust Division will continue to excel in its work to ensure free and fair markets and to protect American consumers.”

Before her selection to run the Antitrust Division, Hesse served as the Deputy Assistant Attorney General for Criminal and Civil Operations in the division for almost four years.  During this time, she also served as the division’s Acting Assistant Attorney General immediately prior to Baer’s confirmation.  Hesse was a career trial attorney in the division between 1997 and 2006, in the last four years of which she served as the Chief of the Networks and Technology Section.

Hesse has also served as a senior counsel to the Chairman of the Federal Communications Commission, where she was responsible for overseeing the FCC’s review of AT&T’s proposed acquisition of T-Mobile, and was a partner at Wilson Sonsini Goodrich & Rosati.

Hesse received her J.D. from the University of California, Berkeley School of Law and her B.A. from Wellesley College.

“I am deeply honored to have been chosen to lead the hardworking men and women of the Antitrust Division,” Hesse said.  “For over three years, Bill provided the division with exceptional leadership and sharp judgment and it has been a privilege to work with him.  During Bill’s tenure, the division achieved outstanding results in both its criminal and civil enforcement programs.  We intend to continue to vigorously enforce the nation’s antitrust laws on behalf of American consumers.”

A criminal defense attorney, who operated a law practice in Anchorage, Alaska, was sentenced to 14 months in prison today following his guilty plea in June 2014 to three counts of willful failure to file income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Paul D. Stockler admitted that he failed to file federal income tax returns with the Internal Revenue Service (IRS) for the years 2006, 2008 and 2009 despite earning gross income in excess of the filing threshold.  The court found that Stockler’s conduct caused a tax loss to the government of $886,058.

“This case is a reminder that no one is above the law,” said Acting Assistant Attorney General Ciraolo.  “Indeed, as an attorney who has defended individuals charged with financial crimes, Mr. Stockler was particularly aware of his obligations under the tax laws and the consequences of violating them.  Taxpayers who willfully disregard their legal responsibilities will be held to account.”   

According to a sentencing memorandum filed by the government, Stockler still has not paid the more than $800,000 in income taxes that he owed for the years 2006, 2008 and 2009.  At the same time that he failed to file his tax returns and pay the taxes due, Stockler made personal expenditures for gambling, cars, and property.  The government’s filing also reveals that Stockler failed to file timely income tax returns for the years 2000 through 2004, 2007, 2010 and 2011, failed to file employment tax returns during the years 2004 through 2008 and failed to pay employment taxes to the IRS.  According to documents filed with the court, Stockler also submitted a false Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, to the IRS in 2009.  A Form 433-A is used by the IRS to obtain financial information from a taxpayer to determine his ability to pay an outstanding tax liability.  On the Form 433-A, which he signed under the penalties of perjury, Stockler failed to disclose certain retirement assets.     

In addition to the prison term, Stockler was ordered to serve one year of supervised release and pay restitution to the IRS in the amount of $886,058.

Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorney Kevin F. Sweeney of the Tax Division and Assistant U.S. Attorney Katherine Wong of the Eastern District of Virginia, formerly 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.

A two-count indictment was unsealed today in the Eastern District of Tennessee charging Szuhsiung Ho, aka Allen Ho, a citizen of the United States; China General Nuclear Power Company (CGNPC), formerly known as the China Guangdong Nuclear Power Company and Energy Technology International (ETI) for conspiracy to unlawfully engage and participate in the production and development of special nuclear material outside the United States, without the required authorization from the U.S. Department of Energy.  This authorization is required by U.S. law and is robustly observed through frequent legal U.S.-China civil nuclear cooperation.  Ho was also charged with conspiracy to act in the United States as an agent of a foreign government.

The announcement was made by Assistant Attorney General for National Security John P. Carlin, Acting U.S. Attorney Nancy Stallard Harr of the Eastern District of Tennessee and Executive Assistant Director Michael Steinbach of the FBI’s National Security Branch. 

“Allen Ho, at the direction of a Chinese state-owned nuclear power company allegedly approached and enlisted U.S. based nuclear experts to provide integral assistance in developing and producing special nuclear material in China,” said Assistant Attorney General Carlin.  “Ho did so without registering with the Department of Justice as an agent of a foreign nation or authorization from the U.S. Department of Energy.  Prosecuting those who seek to evade U.S. law by attaining sensitive nuclear technology for foreign nations is a top priority for the National Security Division.”

“The prosecution of individuals who potentially endanger our U.S. citizens by violating laws enacted to ensure our national security, has been and will remain a priority for the U.S. Attorney’s Office in eastern Tennessee,” said Acting U.S. Attorney Harr.

“The arrest and indictment in this case send an important message to the U.S. nuclear community that foreign entities want the information you possess,” said Executive Assistant Director Steinbach.  “The federal government has regulations in place to oversee civil nuclear cooperation, and if those authorities are circumvented, this can result in significant damage to our national security.  The U.S. will use all of its law enforcement tools to stop those who try to steal U.S. nuclear technology and expertise.”

According to the indictment, Ho is a nuclear engineer employed by CGNPC as a senior advisor and is also the owner and president of ETI.  Born in China, he is a naturalized U.S. citizen with dual residency in Delaware and China.  CGNPC, which is owned by China’s State-Owned Assets Supervision and Administration Commission of the State Council, is the largest nuclear power company in China and specializes in the development and manufacture of nuclear reactors. ETI is a Delaware corporation headquartered in Ho’s home in Wilmington, Delaware.

According to allegations in the indictment, which was returned on April 5, 2016, beginning in 1997 and continuing through April 2016, Ho, CGNPC and ETI allegedly conspired with others to engage and participate in the development and production of special nuclear material in China, with the intent to secure an advantage to China and without specific authorization to do so from the U.S. Secretary of Energy, as required by law.  In particular, the defendants allegedly sought technical assistance related to, among other things, CGNPC's Small Modular Reactor Program; CGNPC's Advanced Fuel Assembly Program; CGNPC's Fixed In-Core Detector System; and verification and validation of nuclear reactor-related computer codes.

The indictment further alleges that Ho, under the direction of CGNPC, identified, recruited and executed contracts with U.S.-based experts from the civil nuclear industry who provided technical assistance related to the development and production of special nuclear material for CGNPC in China.  Ho and CGNPC also allegedly facilitated the travel to China and payments to the U.S.-based experts in exchange for their services.  

The indictment further alleges that during this same period of time, Ho conspired with others to knowingly act as an agent of China without prior notification to the Attorney General, as required by law.  On or about Oct. 4, 2009, Ho allegedly told experts who he was attempting to recruit that, “China has the budget to spend,” and that he needed assistance so that, “China will be able to design their Nuclear Instrumentation System independently and manufactur[e] them independently after the project is complete.”  In further correspondence with nuclear experts in the United States, Ho made clear that he was charged with obtaining necessary expertise from the United States at the direction of the CGNPC and the China Nuclear Power Technology Research Institute, a subsidiary of CGNPC, and that he was to do so surreptitiously.

If convicted, the charge of conspiracy to unlawfully engage and participate in the production and development of special nuclear material outside the United States carries a maximum sentence of life in prison and a $250,000 fine.  The charge of conspiring to act in the United States as an agent of a foreign government carries a maximum sentence of 10 years in prison along with fines and supervised release.

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

The case is being investigated by the FBI, the Tennessee Valley Authority-Office of the Inspector General, the Department of Energy-National Nuclear Security Administration and the U.S. Immigration and Customs Enforcement Homeland Security Investigations, with assistance from other agencies.  The case is being prosecuted by Assistant U.S. Attorney Charles E. Atchley Jr. of the Eastern District of Tennessee and Trial Attorney Casey T. Arrowood of the National Security Division’s Counterintelligence and Export Control Section.

Ho Indictment

Defendants Prepared Thousands of False Tax Returns for Filing with IRS and State of Minnesota

Three tax return preparers based in Minneapolis, Minnesota, were sentenced to prison yesterday for their involvement with a fraudulent return-preparation business with multiple storefronts in the Minneapolis area, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Ishmael Kosh, 39, of Philadelphia, Pennsylvania, and Amadou Sangaray, 36, of New York, New York, were convicted following a two-week jury trial in September 2015.  Kosh was convicted of one count of conspiracy to defraud the United States and eight counts of aiding and assisting in the filing of false tax returns.  Sangaray was convicted of one count of conspiracy to defraud the United States, four counts of aggravated identity theft and eight counts of aiding and assisting in the filing of false tax returns.  Francis Saygbay, 43, of Minneapolis, failed to appear for trial, but later pleaded guilty to one count of conspiracy to defraud the United States, one count of aggravated identity theft, and two counts of aiding and assisting in the preparation of false tax returns. 

Yesterday, Chief U.S. District Judge John R. Tunheim sentenced Kosh to 52 months in prison, Sangaray to 50 months in prison and Saygbay to 40 months in prison.  In addition to the prison terms, Judge Tunheim also ordered each Kosh and Saygbay to serve three years of supervised release and Sangaray two years of supervised release, following their release from prison.

“As the 2016 tax filing season draws to a close, taxpayers are reminded to be wary of return preparers who make promises that seem too good to be true,” said Acting Assistant Attorney General Ciraolo.  “Dishonest return preparers like Messrs.  Kosh, Sangaray and Saygbay cost the U.S. Treasury billions of dollars each year.  Taxpayers should stay alert for the warning signs that their preparer is more interested in making a quick buck than filing an accurate tax return.”

According to the evidence presented at the trial, Kosh, Sangaray, Saygbay and a fourth individual, Chatonda Khofi, 50, of St. Paul, Minnesota, established a storefront location of Primetime Tax Services Inc. (Primetime), a tax return preparation business in the Minneapolis area.  Along with a fifth individual, David Mwangi, 47, of Arlington, Texas, the defendants prepared over 2,000 fraudulent individual income tax returns on behalf of customers of Primetime for filing with the Internal Revenue Service (IRS) for the years 2006, 2007 and 2008.  The defendants also prepared approximately 1,700 fraudulent state income tax returns for filing with the state of Minnesota for those years.  At yesterday’s sentencing hearing, Judge Tunheim found that the defendants’ conduct caused a total tax loss of between $1.5 and $3.5 million.

On the fraudulent returns, the defendants included false dependents, fake business income and losses, inflated deductions and credits and false filing status in order to obtain inflated tax returns for their customers.  The defendants also bought and sold dependents for use on their customers’ tax returns in order to falsely qualify their customers for inflated deductions and tax credits.  The defendants caused the fraudulently obtained refunds to be sent directly to Primetime in order to maintain control over the funds.  When a customer came to pick up their refund checks or debit card, the defendants sometimes demanded an additional fee in cash, and/or escorted that customer to a check cashing location or ATM. 

“Tax-return preparers who try to scam the government for tax refunds are not only stealing from the government, they are stealing from all the honest citizens who pay their fair share of taxes,” stated Special Agent in Charge Shea Jones of IRS-Criminal Investigation St. Paul Field Office.  “The special agents of IRS-Criminal Investigation are committed to protecting the integrity of our system of taxation by investigating tax and accounting professionals who conspire with others to violate the tax laws.  It is our hope that yesterday’s sentencings of Ishmael Kosh, Amadou Sangaray and Francis Saygbay, send the strong message that tampering with the integrity of our nation’s tax system will result in jail time.”

In November 2014, Mwangi pleaded guilty to one count of conspiracy to defraud the United States and Khofi pleaded guilty to one count of conspiracy to defraud the United States and one count of aggravated identity theft.  They are currently awaiting sentencing.  A sixth individual associated with this scheme, Stephanie Robinson, 33, of Minneapolis, pleaded guilty in August 2013 to one count of filing a false tax return in her own name and one count of aiding and assisting in the filing of a false tax return for another individual.

Acting Assistant Attorney General Ciraolo thanked special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Thomas W. Flynn and Ryan R. Raybould, and former Trial Attorney Dennis R. Kihm of the Tax Division, who prosecuted the case.  Acting Assistant Attorney General Ciraolo also thanked the Minnesota Department of Revenue for their significant work on this matter. 

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

The Department of Justice today sued Charleston Area Medical Center (“CAMC”) and St. Mary’s Medical Center for unlawfully agreeing to allocate territories for the marketing of healthcare services, a practice that deprived consumers of the benefits of access to important information about competing healthcare providers.  The department filed the civil antitrust lawsuit in the U.S. District Court for the Southern District of West Virginia, while simultaneously filing a proposed settlement that, if approved by the court, would resolve the lawsuit.

According to the department’s complaint, one way that hospitals compete to attract patients is by marketing their healthcare services, including through print advertisements, such as newspaper advertisements, and outdoor advertisements, such as billboards.  Advertising also spurs hospitals to compete for patients by investing in providing better care and a broader range of services.  The complaint alleges that CAMC and St. Mary’s curtailed competition for years by agreeing to geographic limits on the marketing of competing healthcare services.  CAMC agreed not to place print or outdoor advertisements in Cabell County, West Virginia, and St. Mary’s agreed not to place print or outdoor advertisements in Kanawha County, West Virginia.  The agreement disrupted competition, deprived patients of information needed to make informed healthcare decisions, and denied physicians working for the defendants the opportunity to advertise their services to potential patients. 

“These hospitals limited competition by agreeing on how and where each would advertise competing healthcare services,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “Marketing is an important tool that hospitals use to compete for patients.  Today’s action will end the hospitals’ anticompetitive agreement and promote competition.”

The proposed settlement prohibits CAMC and St. Mary’s from agreeing with other healthcare providers, including hospitals and physicians, to limit marketing or to divide any geographic market or territory.  The proposed settlement also prohibits communications between the defendants about their marketing activities, subject to limited exceptions.  The hospitals will also implement compliance measures designed to prevent the recurrence of these types of anticompetitive practices.

CAMC is a nonprofit West Virginia corporation headquartered in Charleston, West Virginia, which operates four general acute-care hospitals (CAMC General Hospital, CAMC Memorial Hospital, CAMC Women and Children’s Hospital, and CAMC Teays Valley Hospital) with a total of 908 beds and a medical staff of over 120 employed physicians.

St. Mary’s is a nonprofit West Virginia corporation headquartered in Huntington, West Virginia, which operates a general acute-care hospital located in Cabell County with 393 beds and a medical staff of over 50 employed physicians.  St. Mary’s also serves as a teaching hospital for medical students and residents from Marshall University School of Medicine.

The proposed settlement with CAMC and St. Mary’s, along with the department’s competitive impact statement, will be published in the Federal Register, as required by the Antitrust Procedures and Penalties Act.  Any person may submit written comments concerning the proposed settlement within 60 days of its publication 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 court may enter the final judgment upon a finding that it serves the public interest.

Filed False Documents with the IRS and Metropolitan Police Department

A former Metropolitan Police Department (MPD) officer and resident of Glenarden, Maryland, was sentenced to 11 months in prison today after a federal jury in the District of Columbia convicted him in October 2015 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.

Ishmeal Heru-Bey, formerly known as Jamal Adams, failed to file timely federal income tax returns for the years 2005 through 2012 to report his MPD wages and other income to the Internal Revenue Service (IRS).  Between 2006 and 2010, Heru-Bey submitted three IRS Forms W-4 to the MPD on which he falsely claimed that he was exempt from federal income tax withholding.  These false forms caused his employer to withhold little or no federal income taxes from his wages during that period.  After Heru-Bey was indicted for tax crimes in March 2015, he also filed false income tax returns for the years 2011 through 2014 on which he claimed to have incurred expenses relating to his job with the MPD, including expenses for the use of his personal vehicle, meals and entertainment, uniforms and dry cleaning.  Heru-Bey was on paid administrative leave from the police force during those years and did not incur the expenses he claimed on his tax returns.  At the sentencing hearing, U.S. District Judge James E. Boasberg for the U.S. District Court for the District of Columbia, who also presided over the trial, found that Heru-Bey intended to cause a loss to the IRS between $40,000 and $100,000. 

In addition to the prison term, Heru-Bey was also ordered to serve one year of supervised release and pay restitution to the IRS in the amount of $45,712.

Acting Assistant Attorney General Ciraolo thanked special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Jeffrey A. McLellan and Melissa S. Siskind of the Tax Division, who prosecuted the case.

A federal grand jury returned an indictment April 12 charging a District of Columbia tax return preparer with 35 counts of aiding in the preparation of false tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Joann Little, 59, of Suitland, Maryland, made her initial appearance in the U.S. District Court for the District of Columbia this afternoon on the federal charges. According to the indictment, Little worked at a tax return preparation business called Instant Tax Service, presently operating under the name Speedy Tax Service, which is located at 1002 H Street, NE, in Washington, D.C.  The indictment alleges that Little prepared false personal income tax returns for clients for tax years 2009 through 2014.  She is alleged to have attached schedules that reported inflated or fictitious deductions, which resulted in fraudulently claimed income tax refunds.  

If convicted, Little faces a maximum sentence of three years in prison and a fine of up to $250,000 on each count.

An indictment merely alleges that crimes have been committed and defendants are presumed innocent until proven guilty beyond a reasonable doubt. 

Acting Assistant Attorney General Ciraolo thanked special agents of Internal Revenue Service–Criminal Investigation, who investigated the case and Trial Attorney Jason Scheff and Assistant Chief Karen Kelly of the Tax Division, who are prosecuting the case. 

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

U.S. Attorneys are joining forces with local law enforcement and community leaders for a series of events around the country to address backlash against Muslim, Arab, Sikh and South Asian Americans following the tragic terrorist attacks in Brussels, Paris and San Bernardino, California.  The 14 events in 11 districts will build on both the Justice Department’s prosecutorial work in countering post-September 11th backlash, as well as its outreach efforts, including the new interagency initiative to combat religious discrimination throughout the country.

From April 12 through May 6, U.S. Attorneys in California, Colorado, Connecticut, Idaho, Louisiana, Massachusetts, Michigan, Minnesota, New Jersey, Ohio and Utah will work with community leaders and law enforcement to address discrimination, violence and harassment targeting people because of what they look like, which country they come from or where they worship.  The aim is to reaffirm the Department of Justice’s commitment to protecting civil rights and preventing and prosecuting hate crimes.

“The Department of Justice is determined to uphold the fundamental principle that all Americans should be free from violence and protected from hatred no matter who they are, what they look like, or where they're from,” said Attorney General Loretta E. Lynch.  “These events underscore our ongoing commitment to safeguard the civil rights of every American – including Muslim, Arab, Sikh and South Asian Americans, who are so often the targets of threats on the basis of their appearance or religion.  There is no place for intolerance in our country.  In the weeks and months ahead, the Department of Justice will continue to work with local law enforcement partners and community leaders to defend the safety and the dignity of all our people.”

During the last several months, individuals who are, or who are perceived to be, Muslim, Arab, Sikh and South Asian have been targeted for harassment and violence around the country.  

A Connecticut man pleaded guilty to firing a high-powered rifle at a mosque; a Florida man pleaded guilty to threatening to firebomb two mosques and shoot their congregants; a former Missouri man pleaded guilty to violating the civil rights of others by leading a conspiracy to deface a local Islamic center with graffiti and burn two copies of the Qur’an; and a New York man was sentenced to 13 months in prison for emailing death threats to the executive director of an Islamic advocacy group.

Places of worship also face discrimination through unlawful barriers to construction in many communities around the country.  In the last year, the Justice Department filed suit against Des Plaines, Illinois, over the city’s denial of rezoning to allow a Muslim congregation to use a vacant office building as a mosque.  The complaint alleged that the city treated the mosque less favorably than it has treated nonreligious assemblies, discriminated against the mosque based on religion and imposed a substantial burden on the mosque members’ religious exercise without justification.  The Justice Department also closed its investigation into Norwalk, Connecticut, after the city made changes to treat religious assemblies equally with nonreligious assemblies in five of its zoning districts.  The department had opened an investigation of Norwalk’s zoning practices in 2012 in response to the city’s denial of a special use permit to the Al Madany Islamic Center to build a mosque on land it had bought in a residential zoning district.

Backlash against Muslim, Arab, Sikh and South Asian Americans can have a particularly harmful impact on education, employment and housing.  In March, the Civil Rights Division announced that the Educational Opportunities Section launched a new enforcement initiative with the U.S. Attorneys’ Offices to strengthen our efforts to combat religious discrimination in schools and other educational settings.  The new initiative, together with Justice Department’s recent work in Bakersfield, California; Lewisville, Texas; Pine Bush, New York; Dearborn Heights, Michigan; DeKalb County, Georgia; and many more cities and counties through the nation, will help ensure that schools remain free from discrimination, harassment and violence for all students.

This effort is a reflection of the Department of Justice’s long-standing commitment to working to protect Muslim, Sikh, Arab and South Asian Americans from threats and violence directed at them because of their religion or ethnicity, and to prevent acts of discrimination against them in the workplace, schools or elsewhere.  Since September 11th, the Department of Justice has investigated over 1,000 incidents involving acts of violence, threats, assaults, vandalisms and arsons targeting Arab, Muslim, Sikh and South Asians, and those perceived to be members of these groups.  The Civil Rights Division and U.S Attorneys’ offices have brought prosecutions against more than 60 defendants in such cases, with 57 convictions to date. 

Muslim Backlash Event List 

Assistant Attorney General Bill Baer of the U.S. Department of Justice’s Antitrust Division and Federal Trade Commission Chairwoman Edith Ramirez participated in high level bi-lateral meetings with officials responsible for China’s three anti-monopoly agencies – National Development and Reform Commission (NDRC) Vice Minister Hu Zucai, Ministry of Commerce (MOFCOM) Assistant Minister Tong Daochi and State Administration for Industry and Commerce (SAIC) Vice Minister Wang Jiangping.

The meetings took place this morning in Washington, D.C., and allowed the participating agencies to exchange information and views on antitrust developments and priorities.  In addition, the agencies discussed the role of competition enforcement and advocacy in promoting innovation.  The meetings will continue this afternoon and tomorrow with separate meetings between U.S. antitrust enforcers and each of the three Chinese agencies.

These are the third joint, high-level meetings between the agencies since the Justice Department and the FTC signed an antitrust memorandum of understanding with the Chinese antitrust agencies on July 27, 2011.  The MOU is designed to promote communication and cooperation between U.S. and Chinese antitrust enforcement agencies and provides for periodic high-level consultations.

Highlights Focus on Traditional Tax Enforcement

With the annual tax return filing deadline approaching, the Justice Department’s Tax Division reminds U.S. taxpayers that willful failure to comply with our nation’s tax laws is a crime.  Whether they willfully fail to file returns, file false returns, or evade tax due, taxpayers who cheat will face serious consequences including prison and monetary sanctions.

“Our nation depends on all taxpayers, regardless of age, profession or economic status, to file accurate returns and promptly pay their taxes,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “Individuals and businesses that willfully fail to comply with their legal responsibilities harm not only the U.S. Treasury, but also all Americans who are paying their fair share.  The department is committed to continuing to aggressively prosecute those individuals who seek to circumvent U.S. tax laws.”

“Paying taxes is not a choice but a responsibility,” said Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI).  “IRS-Criminal Investigation works with our partners at the Department of Justice to enforce our nation’s tax laws and ensure that we are all playing by the same rules.  IRS-CI special agents are specifically trained to investigate complex financial fraud, and bring their considerable skill and experience to these investigations.  Those who think they can evade our efforts will find they are terribly mistaken.”

Over the past year, the Tax Division and the U.S. Attorney’s Offices have worked closely with the IRS and other law enforcement partners to enforce the nation’s tax laws fully, fairly and consistently through criminal investigations and prosecutions across the country.

Failure to File Tax Returns and Failure to Pay Taxes

• In April 2016, James Redding, the president of an interior construction business in the District of Columbia and Maryland, was sentenced to two years in prison for failing to pay over $1.4 million in income and employment taxes.  Redding also filed false tax returns on behalf of himself and his wife and on behalf of his business.  Instead of paying his company’s employment taxes, Redding used company funds to pay the company’s creditors and for the benefit of himself and his family members.  This case was prosecuted by the U.S. Attorney’s Office for the District of Columbia.
   
• In September 2015, Thomas Tilley, a businessman in North Carolina, was sentenced to 32 months in prison and ordered to pay more than $7 million in restitution to the IRS for a decades-long scheme, which included his failure to file returns despite earning a substantial income, sending fraudulent financial instruments to the IRS in an effort to discharge his tax debt, using nominee entities and sham trusts to purchase and sell real estate and placing false liens on his properties to prevent the IRS from collecting his taxes.  This case was prosecuted jointly by the Tax Division and the U.S. Attorney’s Office for the Middle District of North Carolina.
   
• In June 2015, Ronald Martin, the former owner and operator of a New Hampshire construction company, pleaded guilty to three counts of tax evasion.  Martin failed to file corporate or individual tax returns despite the fact that his company generated more than $1 million in gross revenue over a three year period.  Martin also attempted to conceal the business revenue from the IRS by directing that payments be made in his nephew’s name, depositing only a fraction of the business receipts into the business’s bank accounts, and diverting a significant portion to his personal use.  This case was prosecuted jointly by the Tax Division and the U.S. Attorney’s Office for the District of New Hampshire.

Filing False Tax Returns

• In March 2016, Lorenzo Shane Stewart, the owner of an excavation and construction business in Illinois, was sentenced to 30 months in prison following his guilty plea to tax evasion.  Stewart failed to report his business income on his tax returns and failed to pay more than $1.12 million in income taxes.  This case was prosecuted by the U.S. Attorney’s Office for the Central District of Illinois.
   
• In February 2016, Avan Nguyen, the owner of a wholesale beauty supply business in Texas, was sentenced to three years in prison, ordered to forfeit $1.1 million, and ordered to pay restitution to the IRS for aiding and assisting in the filing of a false tax return.  Nguyen caused a tax return to be filed for his company that omitted nearly $5 million of income.  This case was prosecuted by the U.S. Attorney’s Office for the Northern District of Texas.
   
• In November 2015, Tammy Denise Westbrooks, a Texas resident and manager of a tax return preparation business in Charlotte, North Carolina, was convicted for filing false tax returns and attempting to obstruct the IRS.  Westbrooks underreported her net business profit by inflating her business expenses, paid workers in cash, and failed to file the required Forms W-2 and 1099 to report workers’ compensation to the government.  This case was prosecuted by the Tax Division.

Concealing Income and Assets Through Nominee Entities and Offshore Bank Accounts

• In April 2016, Michael D. Brandner, an Alaska plastic surgeon, was sentenced to four years in prison for wire fraud and tax evasion.  After his wife filed for divorce, Brandner collected millions of dollars in marital assets and drove from Tacoma, Washington, to Costa Rica, where he opened two bank accounts into which he deposited over $350,000 in cash and hid a thousand ounces of gold in a safe deposit box.  He then traveled to Panama where he opened an account under the name of a sham corporation and in 2008, deposited $4.6 million into the account.  Brandner concealed both the existence of the accounts and the interest income earned on those accounts from the court in the divorce proceedings and from the IRS.  This case was prosecuted jointly by the Tax Division and the U.S. Attorney’s Office for the District of Alaska.
   
• In January 2016, Gregory Claxton, a Michigan certified public accountant and tax return preparer, pleaded guilty to tax evasion after he concealed assets from the IRS to avoid paying nearly $150,000 in taxes.  Claxton admitted he deposited the proceeds of his business into bank accounts in his wife’s name to avoid the appearance that he had the ability to pay his income taxes.  Claxton also admitted that, just two days prior to meeting with the IRS to discuss his ability to pay his outstanding tax bill, he transferred title to his house to a trust in his wife’s name in an effort to thwart IRS collection efforts.  This case was prosecuted by the U.S. Attorney’s Office for the Western District of Michigan.
   
• In October 2015, Terry Myr, a Michigan mechanic, who specialized in repairing classic and rare cars, including Ferraris, was sentenced to two years in prison for tax evasion and failure to file tax returns.  Myr attempted to prevent the IRS from collecting nearly $200,000 in taxes by transferring property to third parties, using nominee companies and dealing in cash.  Myr also failed to file tax returns for multiple years to report his income to the government.  This case was prosecuted by the Tax Division.

Using Businesses to Pay Personal Expenses

• In March 2016, Faiger Blackwell, the owner of a North Carolina funeral home and other businesses, was sentenced to two years in prison for tax fraud and bankruptcy fraud.  Blackwell filed for bankruptcy after accumulating more than $300,000 in federal taxes and more than $1 million in other debts.  During the bankruptcy proceedings, Blackwell concealed rental income and used the money to pay for business and personal expenses.  After the IRS levied one of Blackwell’s business bank accounts, he set up another company and corresponding bank accounts to divert and conceal funds and circumvent the levy.  Blackwell used these funds to pay business and personal expenses, including paying for a cruise.  This case was prosecuted jointly by the Tax Division and the U.S. Attorney’s Office for the Middle District of North Carolina.
   
• In September 2015, Sheila Mohammed, a doctor in Florida, was sentenced to one year in prison and ordered to pay restitution for filing false income tax returns for herself and her medical practice.  Mohammed used the more than one million dollars she failed to disclose to the IRS to purchase vehicles and properties in Florida, Hawaii and New Mexico.  This case was prosecuted by the U.S. Attorney’s Office for the Northern District of Florida. 

Obstructing IRS Efforts to Assess and Collect Taxes

• In January 2016, James S. Faller II, a former private investigator and legal consultant in Kentucky, was sentenced to serve three years in prison for obstructing the IRS, tax evasion and failing to file tax returns.  Faller failed to file tax returns to report his income, which ranged from $126,000 to $289,000 per year, and attempted to hide his income from the IRS by having his income paid to a nominee and using nominee bank accounts.  Faller also signed and submitted a false Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, to an IRS revenue officer as part of the IRS’s efforts to collect his unpaid taxes.  This case was prosecuted jointly by the Tax Division and the U.S. Attorney’s Office for the Eastern District of Kentucky.
   
• In August 2015, F. William Messier, a Maine businessman who earned income by leasing telecommunications towers located on his property, was sentenced to one year and one day in prison for conspiracy to defraud the United States and corruptly endeavoring to impair and impede the due administration of the internal revenue laws.  Messier attempted to obstruct the IRS by, among other things, providing false tax documents to customers, submitting a fake money order and other false documents to the IRS, and dealing extensively in cash.  This case was prosecuted jointly by the Tax Division and the U.S. Attorney’s Office for the District of Maine.
   
• In April 2015, John Fall, a Rhode Island real estate consultant, was sentenced to 30 months in prison for obstructing the IRS, tax evasion, and aiding in the filing of false corporate tax returns.  Fall used nominee entities and business names to conceal his business and financial transactions, caused false tax returns to be filed in the name of his wife’s dental practice, and attempted to obstruct an IRS audit by encouraging his wife’s accountant not to provide information to the IRS and providing false documents during the audit.  This case was prosecuted by the Tax Division.

“The Justice Department, along with our colleagues in the IRS, will continue to identify and vigorously pursue those engaged in tax crimes,” said Acting Assistant Attorney General Ciraolo.  “These efforts are critical to the continued integrity of our national tax system and send a strong message to those individuals who make good faith efforts to comply with their tax obligations that we will hold accountable those who do not. If someone suspects or knows of an individual or a business that is not complying with the tax laws, we encourage them to report that information to the IRS.” 

More information about the Tax Division’s civil and criminal enforcement efforts in these and other areas is on the division’s website.  The IRS website also has information about how to report tax fraud. 

Attached please find a PDF version of the supplemental brief in Zubik v.Burwell that was filed April 12, 2016. 

A Leawood, Kansas, business owner was convicted today of tax fraud following a month-long jury trial, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Barry R. Grissom of the District of Kansas.

The jury found Kathleen Stegman, 58, guilty of four counts of tax evasion relating to her evasion of corporate income taxes for the years 2008 and 2009 and individual income taxes for the years 2007 and 2008.  Stegman and her husband, Christopher Smith, 51, were both acquitted on the charge of conspiracy to defraud the United States and Stegman was acquitted on one count of tax evasion.   

Stegman owned Midwest Medical Aesthetics Center in Leawood, which provided aesthetic services including microdermabrasion, laser hair removal and anti-aging procedures and products.  Smith owned Encompass Construction Group in Independence, Missouri. 

“Today’s verdict is a reminder to business owners that they cannot use their companies as their personal piggy banks,” said Acting Assistant Attorney General Ciraolo.  “All taxpayers must file true and accurate returns with the IRS to report their income and expenses.  Those that fail to do so face significant consequences, including criminal prosecution, prison and monetary penalties.” 

According to the evidence at trial, Stegman under-reported her company’s gross receipts and overstated her company’s expenses on the corporate tax returns filed with the Internal Revenue Service (IRS).  Stegman also diverted income from the company for her personal use and failed to report the income on her tax returns.  The government also presented evidence that Stegman and Smith agreed to fabricate a repairs and maintenance contract between Smith and Midwest Medical in order to increase the company’s business deductions and divert money from the company to their personal use.  In December 2010, Stegman wrote a check in the amount of $50,575 to Encompass Construction, which was drawn on Midwest Medical’s bank account.  Smith used the money to buy gold coins that were shipped to Stegman’s business address in Leawood.  On Midwest Medical’s 2010 corporate tax return, Stegman fraudulently deducted this payment as a business expense for repairs and maintenance.

“Today’s verdict is an important victory for America’s taxpayers who play by the rules and have no tolerance for those who make up their own rules,” said Special Agent in Charge Karl Stiften of IRS-Criminal Investigation.  “There is no such thing as free money and there are no awards or incentives for creativity when it comes to crime.”

Stegman faces a statutory maximum sentence of five years in prison and a $250,000 fine on each count of tax evasion.  A sentencing date has not yet been set.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Grissom thanked special agents of IRS Criminal Investigation, who investigated the case and Trial Attorneys Ryan R. Raybould and John T. Mulcahy from the Tax Division and Assistant U.S. Attorney Jabari B. Wamble of the District of Kansas, who prosecuted the case.

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

The Department of Justice and the Federal Trade Commission (FTC) today issued a joint statement reaffirming the importance of preserving competition in the defense industry.  The statement describes the agencies’ framework for analyzing defense industry mergers and acquisitions and emphasizes that the antitrust agencies work closely with the Department of Defense, which is in a unique position to assess the impact of proposed defense industry consolidation on its ability to fulfill its mission.

“The Department of Justice is committed to preserving competition for current and future defense procurement,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “In light of recent speculation about possible future consolidation, we thought it timely to reinforce that message.  Working with our colleagues at the Department of Defense, our mission in reviewing proposed defense industry consolidation is to ensure that our military continues to receive the most effective and innovative products at competitive prices in both the short- and long-term thereby protecting  our national security, American soldiers, sailors, marines and air crews, and our nation’s taxpayers.”

“Competition is the essential ingredient that leads to high-quality products at lower prices,” said Chairwoman Edith Ramirez of the Federal Trade Commission.  “This is especially critical when it comes to America’s defense industry, which provides the weapons and equipment that our men and women in uniform rely on every day.”  

In the joint statement, the federal antitrust agencies emphasize that the particular aspects of the defense industry, such as high barriers to entry, the importance of investment in research and development and the need for surge capacity, can be central to reviewing defense industry mergers and acquisitions.  The joint statement also states that defense industry mergers should not adversely affect short or long-term innovation and must maintain a sufficient number of competitors, including both prime and subcontractors, to ensure that competition for current, planned and future procurement remains robust. 

The antitrust agencies will continue their close working relationship with the Department of Defense as established by the Defense Science Board Task Force on Antitrust Aspects of Defense Industry Consolidation and are committed to the long-standing practice of giving the Department of Defense's assessment substantial weight in areas where it has special expertise and information, such as national security.

DOJ-FTC Statement (April 12, 2016)

Attorney General Loretta E. Lynch today recognized crime victim survivors, advocates and allied professionals at the National Crime Victims’ Rights Service Awards ceremony.  This year’s event honored 10 individuals and programs for their extraordinary actions to bring positive and lasting change in the lives of crime victims.

“The extraordinary individuals being honored today are inspiring examples of service and selflessness,” said Attorney General Loretta Lynch.  “Whether they are conducting research, championing new policies, or working directly with victims in need, these honorees are helping to revive hopes, restore futures, and reclaim lives.  I am deeply grateful for their contributions, and I am proud to say that the Justice Department stands with them in the work of ensuring that every victim of crime in the United States receives the assistance that they need and deserve.”

This year’s theme—Serving Victims, Building Trust, Restoring Hope—focuses the observances for the 2016 Crime Victims’ Rights Week, April 10-16.  President Reagan proclaimed the first Victims’ Rights Week in 1981, calling for greater sensitivity to the rights and needs of victims.  The Justice Department’s Office for Victims of Crime leads communities across the country in observing National Crime Victims’ Rights Week and hosts an annual award ceremony.

Following is a list of the award recipients, who were nominated by their colleagues in the field and selected by the Attorney General:

• Tomorrow’s Leaders Award – new award for 2016 – honors and highlights youth up to 24 years old who dedicate their efforts to supporting victims of crime. 

Recepient: Miki K. Nishizawa of Waipahu, Hawaii.

• Award for Professional Innovation in Victim Service Award recognizes a program, organization or individual who helps expand the reach of victims’ rights and services.

Recipient: Choctaw Nation Victim Services of Hugo, Oklahoma.

• The Crime Victims Financial Restoration Award recognizes individuals, programs, organizations or teams that develop innovative ways of funding services for crime victims or instituted innovative approaches for securing financial restoration for crime victims.

Recipients: Stephen J. Pfleger and Laura D. Rottenborn of the U.S. Attorney’s Office for the Western District of Virginia.

• The Crime Victims’ Rights Award honors those whose efforts to advance or enforce crime victims’ rights benefit crime victims at the state, tribal, or national level. 

Recipient: Russell P. Butler, Esq., Executive Director of Maryland’s Crime Victims’ Resource Center from Upper Marlboro, Maryland.

• The National Crime Victim Service Award honors extraordinary efforts in direct service to crime victims.

Recipient: National Domestic Violence Hotline of Austin, Texas. 

• The Ronald Wilson Reagan Public Policy Award honors leadership, innovation and vision that lead to noteworthy changes in public policy that benefit crime victims.

Recipient: Dr. John P. J. Dussich of Fresno, California.

• The Special Courage Award recognizes extraordinary bravery in the aftermath of a crime or courageous act on behalf of a victim or potential victim.

Recipients: Kim Case of Jefferson City, Missouri and Brenda Tracy of Salem, Oregon.

• The Vision 21 Crime Victims Research Award recognizes individual researchers or research teams that make a significant contribution to the nation’s understanding of crime victims’ issues.

Recipient: Dr. Anne P. DePrince of Denver. 

Descriptive narratives and videos of the contributions of recipients are available at Office for Victims of Crime’s Gallery: https://ovcncvrw.ncjrs.gov/Awards/AwardGallery/gallerysearch.html.

About the Office of Justice Programs (OJP)

OJP, headed by Assistant Attorney General Karol V. Mason, provides federal leadership in developing the nation’s capacity to prevent and control crime, administer justice and assist victims.  OJP has six components: the Bureau of Justice Assistance; the Bureau of Justice Statistics; the National Institute of Justice; the Office of Juvenile Justice and Delinquency Prevention; the Office for Victims of Crime and the Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering and Tracking.  More information about OJP can be found at www.ojp.gov.

A fugitive and former lawyer, who had been on the run since being sentenced to more than six years in prison on tax charges in 2002 was apprehended last week in Phoenix, Arizona, by the U.S. Marshals Service, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Palle Bognaes aka Pono, 74, was convicted in 2001 following a two-week jury trial in Reno, Nevada, of conspiracy to defraud the United States, obstructing the administration of the internal revenue laws, tax evasion and failure to file income tax returns.  On Jan. 28, 2002, U.S. District Judge David W. Hagen of the District of Nevada sentenced Bognaes to 80 months in prison.  Bognaes failed to report to prison in March 2002 to begin serving his sentence and remained a fugitive until he was apprehended on April 2.

The evidence at trial demonstrated that Bognaes, a lawyer, engaged in a scheme in which he created Unincorporated Business Organizations (UBOs) for his clients.  Bognaes then instructed his clients to transfer title of their assets into the UBOs and told them that they did not have to pay personal income taxes on those assets.  Bognaes collected significant fees for his services.  Bognaes referred to these UBOs by various names, including Massachusetts Trust, Common Law Trust and Pure Trust Organizations.  

Bognaes also assisted co-defendant Jose Gastanaga of Reno, in setting up a UBO.  Together they conspired to evade the payment of more than $2 million in taxes owed by Gastanaga.  Bognaes assisted Gastanaga by attempting to prevent the Internal Revenue Service (IRS) from seizing two homes for nonpayment of those taxes and obstructed the IRS’s sale of Gastanaga’s interest in a ranch located in Paradise Valley, Nevada.  Bognaes also created UBOs for several other clients, including doctors and chiropractors and taught his clients how to conduct their transactions through the use of nominees and by wiring funds offshore to Turks and Caicos.  For one client, Bognaes generated fake receipts to support $67,000 of false deductions during an IRS audit.

At the time of his arrest, Bognaes contended that his name was Sam Smith.  However, after the FBI confirmed that the individual arrested was, in fact, Bognaes, he was transferred to the custody of the Bureau of Prisons to begin serving his prison term.

Acting Assistant Attorney General Ciraolo commended the diligent investigation of the U.S. Marshals Service in Phoenix and in Reno  for bringing Bognaes to justice after 14 years.  Acting Assistant Attorney General Ciraolo also thanked IRS – Criminal Investigation, who investigated this case and Trial Attorney Lori A. Hendrickson of the Tax Division and Assistant U.S. Attorney Anastasia King, formerly of the Tax Division, who prosecuted this case with valuable assistance from the U.S. Attorney’s Office in Reno. 

Cashed More Than 360 Checks Totaling More Than $780,000

A Columbus, Georgia, resident was sentenced today to 18 months in prison for her role in a stolen identity refund fraud conspiracy, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and Acting U.S. Attorney G.F. Peterman, III for the Middle District of Georgia.

According to court documents, between February 2013 and May 2014, Vicky Wheeler, 55, worked as a bank teller at a SunTrust Bank branch in Columbus.  Wheeler was approached by several co-conspirators who wanted her to cash fraudulently obtained tax refund checks in exchange for a fee.  Wheeler was informed that the tax refund checks were generated from tax returns filed using stolen identities.  To disguise the fraudulent nature of the checks, Wheeler made false entries on the face of the checks to make it appear as if she received identification when the checks were cashed.  Wheeler never received any forms of identification.  In total, Wheeler received and cashed approximately 361 fraudulent tax refund checks, including U.S. Treasury checks and tax refund checks issued by financial institutions that claimed $780,760.17 in tax refunds.  

“The prosecution of stolen identity refund crimes remains a top priority of the department,” said Acting Assistant Attorney General Ciraolo.  “These cases are not limited to those individuals who file fictitious tax returns.  We will vigorously pursue participants at all levels of these schemes, including those who steal identities and those who, like Ms. Wheeler, assist in cashing the refund checks that result from the fraud.”

“Stolen identity refund fraud results in major loss of revenue to the United States Government,” said Special Agent in Charge Veronica F. Hyman-Pillot of the Internal Revenue Service-Criminal Investigation (IRS-CI).  “Vicky Wheeler abused her position of trust and allowed greed and deceit to fuel criminal behavior.  Today she is being held accountable for her actions.  Her prison sentence and restitution order should send a message that refund fraud, greed, and deceit does not payoff in the end.”

In addition to the prison term, U.S. District Judge Clay D. Land ordered Wheeler to serve three years of supervised release and pay restitution in the amount of $780,760.17.

Acting Assistant Attorney General Ciraolo and Acting U.S. Attorney Peterman commended special agents of IRS-CI and the U.S. Secret Service, who investigated the case and Trial Attorney Michael C. Boteler of the Tax Division and Assistant U.S. Attorney Crawford L. Seals of the Middle District of Georgia, who prosecuted the case. 

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

A federal grand jury sitting in Nashville, Tennessee, returned an indictment on April 6, which was unsealed today, against a Nashville woman charging her with six counts of assisting in the preparation of false tax returns, two counts of filing false personal tax returns and one count of obstructing the due administration of the internal revenue laws, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney David Rivera for the Middle District of Tennessee.

According to the indictment, Tracey Brown operated a tax return preparation business, Total Tax Services, from her residence.  It is alleged that between 2006 and 2010, she filed false tax returns on behalf of her clients.  On these returns, Brown claimed a variety of fraudulent deductions, including medical expenses, charitable contributions and unreimbursed employee expenses.  After one of her clients was audited, Brown provided false documentation to the Internal Revenue Service (IRS).  Brown is also alleged to have under-reported the gross receipts and sales figures on her personal income tax returns for the years 2008 and 2009.    

If convicted, Brown faces a statutory maximum sentence of three years in prison for each count.  She also faces substantial monetary penalties, supervised release and restitution.

An indictment merely alleges that crimes have been committed.  Defendants are presumed innocent until proven guilty beyond a reasonable doubt.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Rivera commended special agents of IRS-Criminal Investigation, who investigated the case and Assistant U.S. Attorney Tom Jaworski and Trial Attorneys Alex Effendi and Nathan Brooks 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.

Attorney General Loretta E. Lynch released the following statement announcing that Bill Baer, who currently serves as Assistant Attorney General of the Antitrust Division, will serve as Acting Associate Attorney General effective April 17, 2016.  The Associate Attorney General is the Justice Department’s third-ranking post.

“Bill Baer is an extraordinary public servant, an outstanding attorney and a champion of all those who look to the law for empowerment and protection,” said Attorney General Lynch.  “From his work at the Federal Trade Commission to his leadership of the Justice Department’s Antitrust Division, he has demonstrated keen intelligence, strong judgment and consummate skill.  In the last few years alone, he has led the Antitrust Division to new heights – unlocking $400 million in relief for consumers in a case against Apple’s price-fixing of e-books; achieving a record $2.5 billion in fines in a case that exposed a scheme by Citicorp, JPMorgan Chase, Barclays and the Royal Bank of Scotland and others to rig the foreign currency exchange spot market; and standing up against corporate behavior that would have damaged our markets and hurt consumers in industries from beer and wine to airlines and phone companies.  With his hard work and unwavering dedication, he has earned the trust and respect of Justice Department employees at every level.  I could not imagine a better individual to fill Stuart Delery’s shoes as Associate Attorney General of the United States.”

Wells Fargo Bank Admits That It Certified that Loans Were Eligible for FHA Mortgage Insurance When They Were Not, and That It Did Not Disclose Thousands of Faulty Mortgage Loans to HUD

The Department of Justice announced today that the United States has settled civil mortgage fraud claims against Wells Fargo Bank, N.A. (Wells Fargo) and Wells Fargo executive Kurt Lofrano, stemming from Wells Fargo’s participation in the Federal Housing Administration (FHA) Direct Endorsement Lender Program.  In the settlement, Wells Fargo agreed to pay $1.2 billion and admitted, acknowledged and accepted responsibility for, among other things, certifying to the Department of Housing and Urban Development (HUD), during the period from May 2001 through December 2008, that certain residential home mortgage loans were eligible for FHA insurance when in fact they were not, resulting in the Government having to pay FHA insurance claims when some of those loans defaulted.  The agreement resolves the United States’ civil claims in its lawsuit in the Southern District of New York, as well as an investigation conducted by the U.S. Attorney’s Office for the Southern District of New York regarding Wells Fargo’s FHA origination and underwriting practices subsequent to the claims in its lawsuit and an investigation conducted by the U.S. Attorney’s Office for the Northern District of California into whether American Mortgage Network, LLC (AMNET), a mortgage lender acquired by Wells Fargo in 2009, falsely certified and submitted ineligible residential mortgage loans for FHA insurance.

The settlement was approved today by U.S. District Judge Jesse M. Furman for the Southern District of New York.

“This settlement is another step in the Department of Justice’s continuing efforts to hold accountable FHA approved lenders that unlawfully submitted false claims at the expense of American homeowners and taxpayers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “In addition to today’s resolution with Wells Fargo, the department has pursued similar misconduct by numerous other lenders, returning more than $4 billion to the FHA fund and the Treasury and filing suit where appropriate.  We remain committed to protecting the public fisc from all who seek to abuse it, whether they do business on Wall Street or Main Street.”

“This Administration remains committed to holding lenders accountable for their lending practices,” said Secretary Julián Castro for HUD.  “The $1.2 billion settlement with Wells Fargo is the largest recovery for loan origination violations in FHA’s history.  Yet, this monetary figure can never truly make up for the countless families that lost homes as a result of poor lending practices.” 

“Today, Wells Fargo, one of the biggest mortgage lenders in the world, has been held responsible for years of reckless underwriting, while relying on government insurance to deal with the damage,” said U.S. Attorney Preet Bharara for the Southern District of New York.  “Wells Fargo has long taken advantage of the FHA mortgage insurance program, designed to help millions of Americans realize the dream of home ownership, to write thousands and thousands of faulty loans.  Driven to maximize profits, Wells Fargo employed shoddy underwriting practices to drive up loan volume, at the expense of loan quality.  Even though Wells Fargo identified through internal quality assurance reviews thousands of problematic loans, the bank decided not to report them to HUD.  As a result, while Wells Fargo enjoyed huge profits from its FHA loan business, the government was left holding the bag when the bad loans went bust.  With today’s settlement, Wells Fargo has finally resolved the years-long litigation, adding to the list of large financial institutions against which this office has successfully pursued civil fraud prosecutions.” 

“Misconduct in the mortgage industry helped lead to a destructive financial crisis that spanned the globe,” said Acting U.S. Attorney Brian Stretch for the Northern District of California.  “American Mortgage Network’s origination of FHA-insured loans that did not comply with government requirements also caused major losses to the public fisc.  Today’s settlement demonstrates the Department of Justice’s resolve to pursue remedies against those who engaged in this type of misconduct.”                  

“This matter is not just a failure by Wells Fargo to comply with federal requirements in FHA’s Direct Endorsement Lender program – it’s a failure by one of our trusted participants in the FHA program to demonstrate a commitment to integrity and to ordinary Americans who are trying to fulfill their dreams of homeownership,” said Inspector General David A. Montoya for HUD.

According to the second amended complaint filed in Manhattan federal court, the government had alleged:

Wells Fargo has been a participant in the Direct Endorsement Lender program, a federal program administered by FHA.  As a Direct Endorsement Lender, Wells Fargo has the authority to originate, underwrite and certify mortgages for FHA insurance.  If a Direct Endorsement Lender approves a mortgage loan for FHA insurance and the loan later defaults, the holder or servicer of the loan may submit an insurance claim to HUD for the outstanding balance of the defaulted loan, along with any associated costs, which HUD must then pay.  Under the Direct Endorsement Lender program, neither the FHA nor HUD reviews a loan for compliance with FHA requirements before it is endorsed for FHA insurance.  Direct Endorsement Lenders are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance and maintaining a quality control program that can prevent and correct any deficiencies in their underwriting.  The quality control program requirements include conducting a full review of all loans that go 60 days into default within the first six payments, known as “early payment defaults”; taking prompt and adequate corrective action upon discovery of fraud or serious underwriting problems; and disclosing to HUD in writing all loans containing evidence of fraud or other serious underwriting deficiencies.  Wells Fargo failed to comply with these basic requirements. 

First, between at least May 2001 and October 2005, Wells Fargo, the largest HUD-approved residential mortgage lender, engaged in a regular practice of reckless origination and underwriting of its FHA retail loans, all the while knowing that it would not be responsible when the defective loans went into default.  To maximize its loan volume (and profits), Wells Fargo elected to hire temporary staff to churn out and approve an ever increasing quantity of FHA loans, but neglected to provide this inexperienced staff with proper training.  At the same time, Wells Fargo’s management applied pressure on its underwriters to approve more and more FHA loans.  The bank also imposed short turnaround times for deciding whether to approve the loans, employed lax underwriting standards and controls and paid bonuses to underwriters and other staff based on the number of loans approved.  Predictably, as a result, Wells Fargo’s loan volume and profits soared, but the quality of its loans declined significantly.  Yet, when Wells Fargo’s senior management was repeatedly advised by its own quality assurance reviews of serious problems with the quality of the retail FHA loans that the Bank was originating, management disregarded the findings and failed to implement proper and effective corrective measures, leaving HUD to pay hundreds of millions of dollars in claims for defaulted loans.

Second, Wells Fargo failed to self-report to HUD the bad loans that it was originating, in violation of FHA program reporting requirements.  During the period 2002 through 2010, HUD required Direct Endorsement Lenders to perform post-closing reviews of the loans that they originated and to report to HUD in writing loans that contained fraud or other serious deficiencies.  This requirement provided HUD with an opportunity to investigate the defective loans and request reimbursement for any claim that HUD had paid or request indemnification for any future claim, as appropriate.  During this nine-year period, Wells Fargo, through its post-closing reviews, internally identified thousands of defective FHA loans that it was required to self-report to HUD, including a substantial number of loans that had gone into “early payment default.”  However, instead of reporting these loans to HUD as required, Wells Fargo engaged in virtually no self-reporting during the four-year period from 2002 through 2005 and only minimal self-reporting after 2005. 

In his capacity as Vice President of Credit-Risk – Quality Assurance at Wells Fargo, Lofrano executed on Wells Fargo’s behalf the annual certifications required by HUD for the Bank’s participation in the Direct Endorsement Lender program for certain years.  Lofrano also organized and participated in the working group responsible for creating and implementing Wells Fargo’s self-reporting policies and procedures.  In contravention of HUD’s requirements, that group failed to report to HUD loans that Wells Fargo had internally identified as containing material underwriting findings.  Moreover, Lofrano received Wells Fargo quality assurance reports identifying thousands of FHA loans with material findings – very few of which Wells Fargo reported to HUD.

*          *          *

As part of the settlement, Wells Fargo has admitted, acknowledged and accepted responsibility for, among other things, the following conduct:  During the period from May 2001 through, on or about Dec. 31, 2008, Wells Fargo submitted to HUD certifications stating that certain residential home mortgage loans were eligible for FHA insurance when in fact they were not, resulting in the Government having to pay FHA insurance claims when certain of those loans defaulted.  From May 2001 through January 2003, Wells Fargo’s quality assurance group conducted monthly internal reviews of random samples of the retail FHA mortgage loans that the Bank had already originated, underwritten, and closed, which identified for most of the months that in excess of 25 percent of the loans and in several consecutive months, more than 40 percent of the loans, had a material finding.  For a number of the months during the period from February 2003 through September 2004, the material finding rate was in excess of 20 percent. A “material” finding was defined by Wells Fargo generally as a loan file that did not conform to internal parameters and/or specific FHA parameters, contained significant risk factors affecting the underwriting decision and/or evidenced misrepresentation.

Wells Fargo also admitted, acknowledged and accepted responsibility for the following additional conduct:  Between 2002 and October 2005, Wells Fargo made only one self-report to HUD, involving multiple loans.  During that same period, the Bank identified through its internal quality assurance reviews approximately 3,000 FHA loans with material findings.  Further, during the period between October 2005 and December 2010, Wells Fargo only self-reported approximately 300 loans to HUD.  During that same period, Wells Fargo’s internal quality assurance reviews identified more than 2,900 additional FHA loans containing material findings that the Bank did not self-report to HUD.  The government was required to pay FHA insurance claims when certain of these loans that Wells Fargo identified with material findings defaulted. 

Lofrano admitted, acknowledged, and accepted responsibility for, among other things, the following matters in which he participated:  From Jan. 1, 2002, until Dec. 31, 2010, he held the position of Vice President of Credit Risk – Quality Assurance at Wells Fargo; in that capacity, he supervised the Decision Quality Management group; in 2004, he was asked to organize a working sub-group to address reporting to HUD; in or about October 2005, he organized a working group that drafted Wells Fargo’s new self-reporting policy and procedures; and during the period October 2005 through Dec. 31, 2010, based on application of the Bank’s new self-reporting policy and by committee decision, Wells Fargo did not report to HUD the majority of the FHA loans that the Bank’s internal quality assurance reviews had identified as having material findings.

*          *          *

Principal Deputy Assistant Attorney General Mizer thanked the U.S. Attorney’s Office for the Southern District of New York and the U.S. Attorney’s Office for the Northern District of California for their diligent pursuit and successful resolution of this matter and the Commercial Litigation Branch, HUD’s Office of General Counsel and HUD’s Office of Inspector General, for their extraordinary support. 

The case settled by today’s settlement is captioned United States v. Wells Fargo Bank, N.A., et. al., 12-cv-7527 (S.D.N.Y.)

          Alicia A.G. Limtiaco, United States Attorney for the Districts of Guam and the Northern Mariana Islands (NMI), announced that the U.S. Attorney’s Office sponsored training on Child Sexual Exploitation, Child Pornography, Sexting, Internet Dangers and Safety Tips, on April 6, 2016.  The presenters at the training were U.S. Attorney Alicia Limtiaco, and U.S. Department of Homeland Security/Homeland Security Investigations Special Agents Avery Cepeda and Richard Flores.

          The training was attended by over 60 school officials, including administrators, principals, vice principals, psychologists, program coordinators, and others.

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The Norwegian shipping company DSD Shipping (DSD) was sentenced to pay a total corporate penalty of $2.5 million as a result of its convictions in Mobile, Alabama, for obstructing justice, violating the Act to Prevent Pollution from Ships (APPS), tampering with witnesses and conspiring to commit these offenses.  The company was ordered to pay $500,000 of the penalty to the Dauphin Island Sea Lab Foundation to fund marine research and enhance coastal habitats in the Gulf of Mexico and Mobile Bay. 

In addition, DSD was placed on a three year term of probation and was ordered to implement an environmental compliance plan to ensure the company’s vessels obeyed domestic and international environmental regulations in the future.  The sentence was announced by Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division and U.S. Attorney Kenyen R. Brown for the Southern District of Alabama.

The operation of commercial marine vessels generates large quantities of waste oil, oil-contaminated waste water and garbage.  International and U.S. law forbid the discharge of waste oil and garbage into the ocean and require that these vessels use pollution prevention equipment, known as an oily-water separator, to prevent the discharge of oil-contaminated waste water.  Should any overboard discharges occur, they must be documented in either an oil record book or a garbage record book, logs that are regularly inspected by the U.S. Coast Guard.

The evidence demonstrated at trial that DSD operated the M/T Stavanger Blossom, a 56,000 gross ton crude oil tanker, from 2010 to 2014 without an operable oily-water separator as required by law.  On Jan. 29, 2010, an internal corporate memorandum written by a vessel engineer warned DSD that the pollution prevention equipment did not work.  The memo further warned that if the problem was not addressed, “some day, it might end up that someone is getting caught for polluting.”  However, rather than repair or replace the oily-water separator, DSD operated the vessel illegally for the next 57 months before the conduct was identified by U.S. Coast Guard inspectors in November 2014.  As the testimony at trial revealed, DSD illegally discharged approximately 20,000 gallons of oil-contaminated waste water and plastic bags containing 270 gallons of sludge into the ocean during the last two-and-a-half months of the vessel’s operation.

The evidence also established that DSD lied about these activities by maintaining fictitious record books aboard the vessel.  These records omitted the illegal discharges of oil and garbage and falsely claimed that pollution prevention equipment was used when it was not.  Further, when the U.S. Coast Guard examined the ship, DSD’s senior ship officers lied about the discharges and ordered their subordinates to do the same. 

In court documents filed prior to sentencing, prosecutors informed the court that despite convictions for eight felony offenses, DSD continued to deny wrongdoing in Norwegian press accounts.  Prosecutors also noted that previous deficiencies in the operation of pollution prevention equipment had been identified in other DSD vessels while they were in international ports.

Three senior engineering officers employed by DSD to operate the ship were also sentenced.  Defendant Bo Gao, chief engineer of the vessel, and Xiaobing Chen, second engineer of the vessel, were both sentenced to six months imprisonment as a result of their conduct.  Defendant Xin Zhong, fourth engineer of the vessel, was sentenced to two months imprisonment.  All three also face the loss of their marine engineering license and exclusion from employment in the merchant marine.  A fourth DSD employee, Daniel Paul Dancu, pleaded guilty in October 2015, and will be sentenced on April 11, 2016.

“We will continue to aggressively prosecute and hold accountable those shipping companies who flout the laws that protect our oceans and coastal waterways from harmful vessel pollution and waste,” said Assistant Attorney General Cruden.  “It is fitting that a portion of this penalty will go towards repairing and protecting the Gulf coastal environment that is threatened by these illegal discharges.  This egregious abuse of the seas we share as a nation and an international community must stop.”

“We are very pleased with the fines and custody sentences imposed by the court in the case today,” announced U.S. Attorney Brown. “The fine and probation imposed against DSD, and the custody sentence imposed on the engineering officers reflect the seriousness of the offenses committed against the United States and the environment.  The U.S. Attorney’s Office will continue to investigate and prosecute environmental crimes.  It is incumbent upon all individuals and corporations to protect our environment and the resources along the Northern Gulf of Mexico.”

“The Coast Guard will not tolerate the pollution of our marine environment,” said Rear Admiral Dave Callahan for the Eighth Coast Guard District Commander.  “The individuals committing environmental crimes are putting our natural resources at risk and they must be held accountable.  I am thankful for the hard work and dedication that Coast Guard Sector Mobile, the Coast Guard Investigative Service, the Department of Justice, and the Environmental Protection Agency have put into the investigation and prosecution of this case.”

“The Coast Guard Investigative Service is deeply committed to protecting our nation’s waters and ensuring that those within the commercial shipping industry are good stewards of the marine environment,” said Director Michael Berkow for the Coast Guard Investigative Service.  “Sadly, although entirely preventable, pollution from vessels remains all too common. We hope the sentences in this case deter others from committing similar conduct.  We are grateful to our investigative partners for their assistance in the prosecution of this case.”

“When a company fails to comply with our nation’s environmental laws, it can have a devastating effect on both public health and wildlife,” said Special Agent in Charge Andy Castro of EPA’s criminal enforcement program in Alabama.  “The defendants knowingly discharged oily waste from a vessel into the open water and then tried to cover up their crimes by falsifying entries in the vessel’s log books.  This successful prosecution is another example of the effective partnership between the Department of Justice, the Coast Guard and EPA to protect the environment and our natural resources.”

This case was investigated by the U.S. Coast Guard Sector Mobile, U.S. Coast Guard District Eight, the Coast Guard Investigative Service, and the EPA’s Criminal Investigations Division.  Assistant U.S. Attorney Michael D. Anderson, with the U.S. Attorney’s Office for the Southern District of Alabama, and Trial Attorney Shane N. Waller, with the Department of Justice’s Environmental Crimes Section, prosecuted the case.

Return Preparer in De Kalb, Mississippi, Allegedly Overstated Refunds through
Fictitious or Exaggerated Business and Farm Losses and Tax Credits

Christopher Chamberlin, a tax return preparer in De Kalb, Mississippi, has prepared income tax returns for customers that fraudulently overstate the customers’ refunds, according to a civil complaint filed by the Justice Department today.  The complaint asks the U.S. District Court for the Southern District of Mississippi to permanently bar Chamberlin from preparing tax returns for anyone other than himself. 

According to the complaint, Chamberlin is the sole proprietor of C&T Services LLC, located in De Kalb.  The complaint alleges that Chamberlin prepared returns that fraudulently overstated refunds by reporting fictitious or exaggerated expenses on Schedule C, Profit or Loss from Business (Sole Proprietorship) and Schedule F, Profit or Loss from Farming.  The falsely claimed Schedule C and Schedule F expenses in turn generated losses that purportedly qualified Chamberlin’s customers to receive or increase the earned income tax credit (EITC) or to otherwise create or maximize refunds, according to the complaint.  Based on audit adjustments the Internal Revenue Service (IRS) has made to tax returns prepared and filed by Chamberlin for tax years 2012 and 2013, the suit alleges, the United States estimates that the defendant’s conduct may have cost the U.S. Treasury over $1 million for those years alone.

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 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.

Canadian Pacific’s Proposed Voting Trust Structure Risks Irreversibly Harming Competition

The Department of Justice filed a reply today in opposition to Canadian Pacific Railway Limited’s (“CPRL”) petition for a declaratory order regarding use of a voting trust pending the Surface Transportation Board’s (“STB”) review of a potential merger between Canadian Pacific Railway Company (“CP”) and Norfolk Southern Railway Company (“NS”).

The reply states that the proposed voting trust would fail to preserve the independence of the merging railroads during the pendency of the transaction’s regulatory review and would risk harm to current and future competition.  It urges the STB to reject the proposed voting trust structure or, in the alternative, to deny the request for a declaratory order. 

“Canadian Pacific’s voting trust proposal would compromise Norfolk Southern’s independence and effectively combine the two railroads prior to completion of the STB’s  review,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “That makes no sense.  We urge the STB to preserve its ability to review the impact of the proposal on competition and consumers before Canadian Pacific starts scrambling the eggs.”

On March 2, 2016, CPRL, the holding company that owns CP, petitioned the STB for a declaratory order approving a proposed voting trust structure pending the STB’s review of a merger between CP and NS.  Under the proposed voting trust structure, CPRL would acquire NS, CP’s stock would be placed in trust, and CP’s current CEO would become CEO of NS.  As explained in the filing, this proposed voting trust structure fails under each prong of the STB’s regulatory requirements.

The proposal fails to preserve the independence of NS and CP.  In addition, both CP and NS will have the economic incentives and the ability to align their business strategies before a review of the transaction.  Finally, the proposal would also make it difficult, if not impossible, to effectuate a successful divestiture if the STB were to reject the merger applications.

The STB is an independent agency.  The Administrative Procedure Act provides the STB discretion to issue declaratory orders to terminate a controversy or remove uncertainty.  

The Department of Justice’s Antitrust Division today issued its 2016 spring update.  The update highlights the Antitrust Division’s civil and criminal enforcement actions, international cooperation efforts, and competition guidance and advocacy over the last year.

The spring update includes a message from Assistant Attorney General Bill Baer discussing the division’s recent litigation successes, civil enforcement wins, and its prosecution of domestic and international cartels.  The update includes profiles of some of division employees who helped make that happen. 

The spring update describes the division’s successes in civil enforcement over the past year.  These include several wins in just the last few weeks: the Supreme Court’s recent denial of Apple’s cert. petition, ending that company’s efforts to avoid liability for its role in orchestrating a conspiracy with book publishers to raise the price of eBooks; United Airlines’ abandoned efforts to bolster its monopoly at Newark International Airport; and the temporary restraining order that foiled Tribune Company’s efforts to monopolize local newspaper markets in southern California.  The spring update also provides an in-depth look at the division’s suit to block the Electrolux-General Electric merger, which the parties abandoned before the end of trial, and its earlier work to protect competition among broadband internet providers, canned tuna companies, and installment lenders.

This year’s update also describes the division’s criminal enforcement efforts, which included obtaining more than $3.6 billion in criminal fines and penalties – the largest amount ever secured by the division in a single fiscal year – and bringing charges against 20 companies and more than 60 individuals for criminal violations of U.S. antitrust laws.  The update looks at the milestones the division reached in its prosecution of collusion and fraud in the financial industry and among real estate investors in the southeastern United States and northern California.  It discusses the recent guilty verdict returned in the trial against John Bennett, a former CEO extradited to face charges for kickbacks and fraud.  And it details the division’s work to protect competition in online marketplaces and among firms that help out the heirs of people who died without a will.

Finally, the update explores the division’s competition advocacy in the U.S., its efforts to provide guidance on important issues about the intersection of intellectual property and antitrust, and its work with enforcers across the globe to protect competition and promote sound enforcement of antitrust laws. 

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