District Not Recorded

Attorney General Loretta E. Lynch and Solicitor General Donald B. Verrilli Jr. released the following statements regarding the passing of Supreme Court Justice Antonin Scalia:

“Justice Antonin Scalia was, and will always be remembered as, one of the most influential and eloquent Justices ever to serve on the U.S. Supreme Court,” said Attorney General Lynch.  “His indomitable conviction and his fierce intelligence left a lasting imprint – not just on the way the Supreme Court resolves cases, but on the legal landscape that he helped to transform.  A lion of American law has left the stage, and it is up to all of us – every American – to keep our national constitutional dialogue as lively and as learned as he left it.”

“I am saddened by the passing of Justice Antonin Scalia,” said Solicitor General Verrilli.  “He was a great jurist and a great man who served the Court and the country with honor and distinction.  We will miss him very much.  On behalf of my colleagues in the Office of the Solicitor General, I extend our deepest condolences to Mrs. Scalia and to the rest of his family.”

          ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands (NMI), was invited to be the guest speaker at the Pacific Asia Travel Association (PATA) meeting, which was held on December 2, 2015, at the office of the Guam Visitors Bureau.  U.S. Attorney Limtiaco presented information to the PATA membership about our Pacific Regional Response to Combat Human Trafficking Initiative, how human trafficking relates to the visitor and tourism industry, and what the tourism industry can do to prevent human trafficking and identify and support victims of trafficking.  

          The Pacific Regional Response to Combat Human Trafficking Initiative (the “Initiative”), which is a collaborative effort of the U.S. Attorney’s Office for the Districts of Guam and the NMI; the U.S. Department of State, Office to Monitor and Combat Trafficking in Persons; the U.S. Department of Labor; the U.S. Department of Interior, Office of Insular Affairs; the Guam HTTF; the NMI HTIC; and other community partners.  U.S. Attorney Limtiaco also elaborated on the intersection and relationship between human trafficking, sexual assault, child abuse and domestic and family violence, and prevention and enforcement efforts in the Pacific region.  

          The Initiative employs a multidisciplinary model, including participation, coordination, and collaboration among law enforcement, prosecution, victim service providers, social services, medical, mental and public health professionals, faith based organizations, educational institutions, Consulates, and other community stakeholders.  The Initiative calls for the establishment and provision of victim services, investigation and prosecution of human trafficking, training opportunities, community outreach/ public awareness and prevention programs, and creation of human trafficking task forces and coalitions in the Pacific region island communities.  The Initiative also provides fundamental training in human trafficking, including victimization, investigation and prosecution, prevention efforts, and other related topics to law enforcement, prosecution, victim service providers, social services, medical, mental and public health professionals, faith based organizations, educational institutions, Consulates, and other community stakeholders in our Pacific region island communities, which is critical to effective prevention and enforcement efforts in the region.

          As taken from their website, PATA was founded in 1951, and “is a not-for profit association that is internationally acclaimed for acting as a catalyst for the responsible development of travel and tourism to, from and within the Asia Pacific region.  Its member organizations comprise of 88 government, state and city tourism bodies, nearly 22 international airlines, airports and cruise lines, 62 educational institutions, and hundreds of travel industry companies in Asia Pacific and beyond.  Thousands of travel professionals belong to 43 active PATA chapters worldwide.”

 

Monty McDowell, Member, PATA Board of Directors/Assistant Secretary Education Committee Co-Chair, U.S. Attorney Alicia Limtiaco and Pilar Laguana, President of PATA

 

          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 law enforcement sensitive training on Guam on February 3, 2016, and in Saipan, Northern Mariana Islands, on February 5, 2016.  The presenters at the training were Teri Alexander, Special Agent in Charge, IRS-Criminal Investigation (IRS-CI); Jean Song, IRS Attorney; Ryan Thompson, Special Agent from the Seattle IRS Office; IRS-CI Special Agents Todd Peterson and Sith Khamvongsa from the Guam IRS Office; and Guam Department of Revenue and Taxation (DRT) Special Agents Carolyn Aguon Rivera and Jerome Aguon.

          The law enforcement sensitive training topics included an Overview of IRS-CI; Money Laundering; Bank Secrecy Act; Financial Crimes (Ponzi Schemes, Bank Fraud, Investment Fraud); Mirror System of Taxation; Tax Crimes (Dual Filers, Identity Theft, Law Enforcement Assistance Program, Employment Tax, FBAR); and case studies.  The Special Agents from DRT provided an overview of the DRT Criminal Investigation Branch (CIB), DRT and Identity Theft, and DRT and Dual Filer Issues.

          The trainings in Guam and the NMI were attended by over 80 law enforcement officers.  The IRS-CI trainers also presented at the U.S. District Conference held on February 4, 2016 in Guam, and the U.S. District Conference held on February 6, 2016 in Saipan, NMI. 

         

          Photos taken at both training events.

         

Participants at the law enforcement sensitive training in Guam IRS-CI Special Agent in Charge Teri Alexander, U.S. Attorney Alicia Limtiaco and Special Agent Carolyn Aguon from the Department of Revenue and Taxation in Guam at a media event in Guam Participants at the law enforcement sensitive training in Saipan, NMI Presenters from the IRS-CI pictured here with U.S. Attorney Alicia Limtiaco in the center Participants at the law enforcement sensitive training in Saipan, NMI U.S. Attorney Alicia Limtiaco and IRS-CI Special Agent in Charge Teri Alexander at a media event in Saipan, NMI

 

The U.S. District Court for the District of Maine entered a consent decree of permanent injunction against Hancock, Maine-based Mill Stream Corporation (doing business as Sullivan Harbor Farm) and its owner, Ira J. (Joel) Frantzman, to prevent the distribution of adulterated seafood products, the Department of Justice announced today.

The department filed a complaint in the U.S. District Court for the District of Maine at the request of the U.S. Food and Drug Administration (FDA), alleging that the defendants’ seafood products are adulterated in that they have been prepared, packed, or held under insanitary conditions whereby the products may have become contaminated with filth or have been rendered injurious to health.

“The failure to plan for and control the presence of bacteria and neurotoxins commonly found in seafood-processing facilities can pose a significant risk to the public health,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to work aggressively with FDA to prevent the distribution of adulterated food.”

The complaint alleges that the defendants prepare, process, pack, hold, and distribute refrigerated, vacuum-packed, ready-to-eat, cold and hot smoked fish or fishery products, such as smoked salmon, trout and char, for distribution to cities across the country, including Boston, Massachusetts, and Washington, D.C.  The complaint also alleges that Frantzman is Mill Stream’s owner and has the authority and responsibility to prevent and correct the violations of federal law at the company.

In conjunction with the filing of the complaint, the defendants agreed to settle the case and be bound by a consent decree of permanent injunction that requires the defendants to cease all manufacturing operations and provides that, in order for defendants to resume distributing their products, FDA first must determine that the defendants’ manufacturing practices comply with the federal Food, Drug and Cosmetic Act (FDCA). 

According to the complaint, an FDA inspection of defendants’ facility in March and April 2015 identified significant, recurring violations of seafood Hazard Analysis and Critical Control Point (HACCP) regulations and current Good Manufacturing Practices (cGMP) requirements.  As alleged in the complaint, the HACCP violations included inadequate plans to control risks of Clostridium botulinum (C. bot), which produces a potent neurotoxin that can cause botulism.  Though the incidence of botulism is rare, its effect can be severe.  Botulism can cause paralysis or death if not promptly treated. 

The complaint also alleges that FDA documented insanitary conditions at the defendants’ facility in violation of cGMP requirements.  FDA investigators observed, among other things, rodent excreta pellets too numerous to count in the area of the facility where smoker trays are cleaned, apparent black mold and water staining on the doorframe of the walk-in freezer where fish is stored, an open rack of salmon stored beneath a pipe with frozen condensate build-up, and water splashing from the processing floor onto a cutting board and into bins where fish is stored.

Additionally alleged in the complaint, FDA’s testing of samples collected from the defendants’ facility during a December 2011 inspection revealed Listeria monocytogenes (L. mono) in the facility’s environment and on a fish-skinning machine.  As noted in the complaint, as a result of that finding, FDA issued to defendants an Administrative Detention Order and defendants subsequently had the affected products destroyed and recalled.  L. mono is the bacterium that causes listeriosis, a disease commonly contracted by eating food contaminated with L. mono. Listeriosis can be serious, even fatal, for vulnerable groups such as newborns and those with impaired immune systems. The most serious forms of listeriosis can result in meningitis and septicemia. Pregnant women may contract flu-like symptoms from listeriosis, and complications from the disease can result in miscarriage or septicemia in the newborn.

The complaint alleges that, for more than a decade, FDA repeatedly warned the defendants about HACCP and cGMP violations at the defendants’ facility.  The complaint also alleges that FDA communicated these warnings through regulatory meetings, teleconferences, an Administrative Detention Order, Lists of Inspectional Observations and a Warning Letter.  Yet, the complaint alleges, FDA continued to observe HACCP and cGMP violations at the defendants’ facility.

The government is represented by Trial Attorney Thomas E. Ross of the Civil Division’s Consumer Protection Branch and Andrew K. Lizotte of the U.S. Attorney’s Office for the District of Maine, with the assistance of Associate Chief Counsel Yen Hoang of the Department of Health and Human Services’ Office of General Counsel – Food and Drug Division.

SACRAMENTO, Calif. — Helaman Hansen, de 63 años de edad, y residente de Elk Grove fue arrestado hoy después de que un gran jurado federal dictara una acusación formal de 13 cargos inculpándolo de conspirar para cometer fraude por correo y fraude por telegrama, 11 cargos de fraude por correo y uno cargo de fraude por telegrama para operar un programa de adopción de adultos fraudulento que se dirigía a personas indocumentadas, ha anunciado el Procurador Federal Benjamín B. Wagner.

Según los documentos del tribunal, entre los meses de octubre de 2012 y enero de 2016, Hansen y otras personas utilizaron varias entidades como la organización Americans Helping America (AHA) para vender afiliaciones a miembros de comunidades de inmigrantes para lo que él llamaba un “Programa de Migración.” Un distintivo central del programa era el reclamo fraudulento de que los inmigrantes adultos podrían conseguir la ciudadanía americana si eran legalmente adoptados por un ciudadano americano y después de cumplir con una lista de cometidos adicionales. Al principio, las afiliaciones eran vendidas por una cuota anual de $150 dólares, pero esa cuota aumentó gradualmente hasta que eventualmente alcanzó la elevada cifra de $10,000 dólares.

Según la acusación formal, ni una sola persona obtuvo la ciudadanía aunque algunas de las víctimas habían completado la fase de adopción del “Programa de Migración.” Tan pronto como octubre de 2012, Hansen había sido informado por los Servicios de Ciudadanía e Inmigración que aquellas personas indocumentadas adoptadas después de cumplir los 16 años no podrían obtener la ciudadanía de la manera en la que lo estaba promoviendo Hansen. A pesar de ello, Hansen y sus co-conspiradores indujeron a aproximadamente 500 víctimas a pagar más de $500,000 dólares en cuotas para hacerse socios del programa fraudulento.

Este caso es el producto de una investigación llevada a cabo por la Oficina Federal de Investigaciones (FBI) y de las Investigaciones para la Seguridad Nacional (HSI) del Servicio del Orden Público de Inmigración y Aduanas de los Estados Unidos (ICE). El Procurador Federal Auxiliar André M. Espinosa está procesando el caso.

Si es declarado culpable, Hansen se enfrentaría a una pena máxima establecida por la ley de 20 años de prisión y una multa de $250,000 dólares. No obstante, cualquier sentencia sería determinada según la discreción del tribunal después de considerar cualquier factor establecido por la ley aplicable y las Normas para Sentenciar Federales. Los cargos son solo alegaciones; el demandado es presunto inocente hasta y a menos de que sea encontrado culpable sin duda razonable.

Se urge a las víctimas a llamar al FBI al 916-977-2479.

Today, Attorney General Loretta E. Lynch met with representatives from the Major County Sheriffs’ Association (MCSA) at their Winter Meeting at the JW Marriott Hotel, in Washington, D.C.  The meeting began with a moment of silence led by Sandra Hutchens, President of the MCSA, in honor of law enforcement officials killed in the line of duty, including Harford County, Maryland Senior Sheriff’s Deputies Mark Logsdon and Patrick Dailey, who were killed yesterday. 

Attorney General Lynch remarked that yesterday’s tragic events highlighted the dangers public safety officers face every day – and the courage and commitment they routinely demonstrate in the fulfilment of their duties.  She thanked the sheriffs and their deputies for their hard work, acknowledging the difficulty of their jobs and the immense sacrifices they have made for the people they serve.    

During the meeting, Attorney General Lynch also discussed challenges facing law enforcement officials today, such as countering violent extremism, treatment of mental health issues, and challenges presented by technology.  She noted with appreciation the work that MCSA had done with the Stepping Up Initiative, which exemplifies goals identified in the final report of the President’s Task Force on 21st Century Policing. 

The MCSA is a professional law enforcement association of elected sheriffs representing counties or parishes with populations of 500,000 or more.  MCSA is dedicated to preserving the highest integrity in law enforcement and the elected office of the Sheriff.  The association identifies and works to address challenges facing law enforcement.  It also pursues the development of innovative education along with prevention and enforcement strategies and programs. 

The Justice Department today announced that Morgan Stanley will pay a $2.6 billion penalty to resolve claims related to Morgan Stanley’s marketing, sale and issuance of residential mortgage-backed securities (RMBS).  This settlement constitutes the largest component of the set of resolutions with Morgan Stanley entered by members of the RMBS Working Group, which have totaled approximately $5 billion.  As part of the agreement, Morgan Stanley acknowledged in writing that it failed to disclose critical information to prospective investors about the quality of the mortgage loans underlying its RMBS and about its due diligence practices.  Investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued by Morgan Stanley in 2006 and 2007. 

“Today’s settlement holds Morgan Stanley appropriately accountable for misleading investors about the subprime mortgage loans underlying the securities it sold,” said Acting Associate Attorney General Stuart F. Delery.  “The Department of Justice will not tolerate those who seek financial gain through deceptive or unfair means, and we will take appropriately aggressive action against financial institutions that knowingly engage in improper investment practices.”

“Those who contributed to the financial crisis of 2008 cannot evade responsibility for their misconduct,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “This resolution demonstrates once again that the Financial Institutions Reform, Recovery and Enforcement Act is a powerful weapon for combatting financial fraud and that the department will not hesitate to use it to hold accountable those who violate the law.”

An RMBS is a type of security comprised of a pool of mortgage loans created by banks and other financial institutions.  The expected performance and price of an RMBS is determined by a number of factors, including the characteristics of the borrowers and the value of the properties underlying the RMBS.  Morgan Stanley was one of the institutions that issued RMBS during the period leading up to the economic crisis in 2007 and 2008.

As acknowledged by Morgan Stanley in a detailed statement of facts that is a part of this agreement (and is quoted below), the company made representations to prospective investors about the characteristics of the subprime mortgage loans underlying its RMBS – representations with which it did not comply:

• In particular, Morgan Stanley told investors that it did not securitize underwater loans (loans that exceeded the value of the property).  However, Morgan Stanley did not disclose to investors that in April 2006 it had expanded its “risk tolerance” in evaluating loans in order to purchase and securitize “everything possible.”  As Morgan Stanley’s manager of valuation due diligence told an employee in 2006, “please do not mention the ‘slightly higher risk tolerance’ in these communications.  We are running under the radar and do not want to document these types of things.”  As a result, Morgan Stanley ignored information – including broker’s price opinions (BPOs), which are estimates of a property’s value from an independent real estate broker – indicating that thousands of securitized loans were underwater, with combined-loan-to-value ratios over 100 percent.  From January 2006 through mid-2007, Morgan Stanley acknowledged that “Morgan Stanley securitized nearly 9,000 loans with BPO values resulting in [combined loan to value] ratios over 100 percent.”
• Morgan Stanley also told investors that it did not securitize loans that failed to meet originators’ guidelines unless those loans had compensating factors.  Morgan Stanley’s offering documents “represented that ‘[the mortgage loans originated or acquired by [the originator] were done so in accordance with the underwriting guidelines established by [the originator]’ but that ‘on a case-by-case-basis, exceptions to the [underwriting guidelines] are made where compensating factors exist.’”  Morgan Stanley has now acknowledged, however, that “Morgan Stanley did not disclose to securitization investors that employees of Morgan Stanley received information that, in certain instances, loans that did not comply with underwriting guidelines and lacked adequate compensating factors . . . were included in the RMBS sold and marketed to investors.”  So, in fact, “Morgan Stanley . . . securitized certain loans that neither comported with the originators’ underwriting guidelines nor had adequate compensating factors.”
• Likewise, “Morgan Stanley also prepared presentation materials . . . that it used in discussions with potential investors that described the due diligence process for reviewing pools of loans prior to securitization,” but “certain of Morgan Stanley’s actual due diligence practices did not conform to the description of the process set forth” in those materials.
• For example, Morgan Stanley obtained BPOs for a percentage of loans in a pool.  Morgan Stanley stated in these presentation materials that it excluded any loan with a BPO value exhibiting an “unacceptable negative variance from the original appraisal,” when in fact “Morgan Stanley never rejected a loan based solely on the BPO results.” 
• Through these undisclosed practices, Morgan Stanley increased the percentage of mortgage loans it purchased for its RMBS, notwithstanding its awareness about “deteriorating appraisal quality” and “sloppy underwriting” by the sellers of these loans.  The bank has now acknowledged that “Morgan Stanley was aware of problematic lending practices of the subprime originators from which it purchased mortgage loans.”  However, it “did not increase its credit-and-compliance due diligence samples, in part, because it did not want to harm its relationship with its largest subprime originators.” Indeed, Morgan Stanley’s manager of credit-and-compliance due diligence was admonished to “stop fighting and begin recognizing the point that we need monthly volume from our biggest trading partners and that . . . the client [an originator] does not have to sell to Morgan Stanley.” 

“In today’s agreement, Morgan Stanley acknowledges it sold billions of dollars in subprime RMBS certificates in 2006 and 2007 while making false promises about the mortgage loans backing those certificates,” said Acting U.S. Attorney Brian J. Stretch of the Northern District of California.  “Morgan Stanley touted the quality of the lenders with which it did business and the due diligence process it used to screen out bad loans.  All the while, Morgan Stanley knew that in reality, many of the loans backing its securities were toxic.  Abuses in the mortgage-backed securities industry such as these helped bring about the most devastating financial crisis in our lifetime.  Our office is committed to dedicating the resources necessary to hold those who engage in such reckless actions responsible for their conduct.”

The $2.6 billion civil monetary penalty resolves claims under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).  FIRREA authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud.  The settlement expressly preserves the government’s ability to bring criminal charges against Morgan Stanley, and likewise does not release any individuals from potential criminal or civil liability.  In addition, as part of the settlement, Morgan Stanley promised to cooperate fully with any ongoing investigations related to the conduct covered by the agreement. 

In conjunction with today’s announcement of the federal government’s settlement with Morgan Stanley, the states of New York and Illinois – also members of the RMBS Working Group – have announced settlements with Morgan Stanley for $550 million and $22.5 million, respectively, arising from its sale of RMBS.  Among other resolutions, Morgan Stanley previously paid $225 million to  resolve claims brought by the National Credit Union Administration arising from losses related to corporate credit unions’ purchases of RMBS; $1.25 billion to resolve claims by Federal Housing Finance Agency (FHFA) for Morgan Stanley’s alleged violations of federal and state securities laws and common law fraud in connection with RMBS purchased by Fannie Mae and Freddie Mac; and $86.95 million to resolve federal and state securities laws claims brought by the Federal Deposit Insurance Corporation as receiver on behalf of failed financial institutions.  Morgan Stanley also previously entered into a consent decree with the U.S. Securities and Exchange Commission (SEC) to pay $275 million to resolve certain RMBS claims.  With today’s announcement, Morgan Stanley will have paid nearly $5 billion to members of the RMBS Working Group in connection with its sale of RMBS.   

Today’s settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered billions of dollars arising from misconduct related to the financial crisis.  The RMBS Working Group is a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis.  The RMBS Working Group brings together attorneys, investigators, analysts and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the SEC, the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA Office of Inspector General (OIG), the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country.  The RMBS Working Group is led by Director Joshua Wilkenfeld and five co-chairs: Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, U.S. Attorney John Walsh of the District of Colorado and New York Attorney General Eric Schneiderman.

“The securitization of defective mortgages and the billions of dollars that were lost as a result caused such a hardship to our economy, the housing industry and our nation as a whole that we are still feeling the effects years after,” said Deputy Inspector General for Investigations Rene Febles of FHFA-OIG.  “Morgan Stanley is responsible for their role, which caused enormous losses to investors.  This settlement is one step in recovering from those losses.  We are proud to work with the RMBS Working Group and the U.S. Department of Justice on this and all RMBS matters.”

The settlement was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office of the Northern District of California, with investigative support from FHFA-OIG and the Special Inspector General for the Troubled Asset Relief Program.

Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at: www.stopfraud.gov

Attorney General Loretta E. Lynch released the following statement regarding yesterday’s fatal shooting of Harford County, Maryland Senior Sheriff’s Deputies Mark Logsdon and Patrick Dailey:

“I am deeply saddened by the shooting in Harford County, Maryland, that took the lives of two long-serving sheriff’s deputies.  This was an appalling and senseless crime, carried out against two dedicated guardians of the public.  Losses like these are a tragic reminder of the dangers our public safety officers face every day – and the courage and commitment they routinely demonstrate in the fulfilment of their extraordinary charge.  My thoughts and prayers – and those of my colleagues throughout the law enforcement community – are with the families and loved ones of our fallen friends.”

Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division, released the following statement regarding the Ferguson, Missouri, City Council vote on the proposed consent decree with the Department of Justice: 

“The Ferguson City Council has attempted to unilaterally amend the negotiated agreement.  Their vote to do so creates an unnecessary delay in the essential work to bring constitutional policing to the city, and marks an unfortunate outcome for concerned community members and Ferguson police officers.  Both parties engaged in thoughtful negotiations over many months to create an agreement with cost-effective remedies that would ensure Ferguson brings policing and court practices in line with the Constitution.  The agreement already negotiated by the department and the city will provide Ferguson residents a police department and municipal court that fully respects civil rights and operates free from racial discrimination.

“The Department of Justice will take the necessary legal actions to ensure that Ferguson’s policing and court practices comply with the Constitution and relevant federal laws.”

Attorney General Loretta E. Lynch announced today that the Department of Justice filed a lawsuit in U.S. District Court against the city of Ferguson, Missouri, alleging a pattern or practice of law enforcement conduct that violates the First, Fourth and 14th Amendments of the Constitution and federal civil rights laws.

“Today, the Department of Justice is filing a lawsuit against the city of Ferguson, Missouri, alleging a pattern or practice of law enforcement conduct that violates the Constitution and federal civil rights laws,” said Attorney General Lynch.  “The residents of Ferguson have waited nearly a year for their city to adopt an agreement that would protect their rights and keep them safe.  They have waited nearly a year for their police department to accept rules that would ensure their constitutional rights and that thousands of other police departments follow every day.  They have waited nearly a year for their municipal courts to commit to basic, reasonable rules and standards.  But residents of Ferguson have suffered the deprivation of their constitutional rights – the rights guaranteed to all Americans – for decades.  They have waited decades for justice.  They should not be forced to wait any longer.”

“Our investigation found that Ferguson’s policing and municipal court practices violate the Constitution, erode trust and undermine public safety,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “As shown by our lawsuit today, the Justice Department will continue to vigorously enforce the law to ensure that Ferguson implements long-overdue reforms necessary to create constitutional, effective and accountable policing.  Ferguson residents and police officers deserve a law enforcement system that productively and fairly serves the entire community.”

The lawsuit, filed pursuant to Section 14141 of the Violent Crime Control and Law Enforcement Act of 1994 and Title VI of the Civil Rights Act of 1964 (Title VI), alleges that the city of Ferguson, through its police department and municipal court:

• conducts stops, searches and arrests without legal justification, and uses excessive force, in violation of the Fourth Amendment;
• interferes with the right to free expression in violation of the First Amendment;
• prosecutes and resolves municipal charges in a manner that violates due process and equal protection guaranteed by the 14th Amendment; and
• engages in discriminatory law enforcement conduct against African Americans in violation of the 14th Amendment and federal statutory law.  

The lawsuit follows a comprehensive investigation of Ferguson’s police department and municipal court conducted by the Civil Rights Division.  In March 2015, the department detailed its investigative findings in a 104-page report.  The department found that Ferguson’s focus on generating revenue over public safety, together with racial bias, has a profound effect on Ferguson’s police and court practices, resulting in conduct that routinely violates the Constitution and federal civil rights laws. 

The complaint alleges that from October 2012 to October 2014, African Americans were more than twice as likely to be searched, to receive a citation or to be arrested, than other stopped individuals.  Of all incidents from 2010 to August 2014, African Americans account for 88 percent of all incidents in which a Ferguson police officer reported using force.  For municipal offenses where Ferguson police officers have a high degree of discretion in charging, African Americans were again disproportionately represented as compared to their relative representation in Ferguson.  While African Americans make up 67 percent of the Ferguson’s population, they make up 95 percent of manner of walking in roadway charges; 94 percent of failure to comply charges; 92 percent of resisting arrest charges; 92 percent of disturbing the peace charges; and 89 percent of failure to obey charges.  The department also found that Ferguson’s law enforcement conduct has created a lack of trust between the police department and the community members it serves, especially African Americans. 

On Feb. 9, the Ferguson City Council voted to reject the consent decree that the city’s negotiating team had negotiated.  Unable to reach a mutually agreed upon court-enforceable settlement to remedy the department's findings, the lawsuit was filed today in order to seek declaratory and injunctive relief to remedy the unlawful conduct identified by the department’s investigation. 

This matter was investigated by attorneys from the Civil Rights Division.

 

A Baltimore, Maryland, man was convicted by a federal jury yesterday in the U.S. District Court for the District of Maryland of preparing false income tax returns for clients of his tax return preparation business, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. 

Charles Imariagbe was convicted of 15 counts of aiding and assisting in the preparation of false income tax returns after a five day jury trial.  According to court documents and testimony at trial, between 2008 and 2012, the defendant operated a tax preparation business called JC Tax Service Inc., in Baltimore.  During that time, the defendant prepared false individual income tax returns for at least seven clients for submission to the Internal Revenue Service (IRS).  These tax returns claimed false and fraudulent income and expenses from Schedule C businesses and grossly inflated or wholly fictitious mileage expenses.  The false items on these returns resulted in the clients receiving larger tax refunds than they were entitled to receive.   

“Yesterday’s verdict sends a clear message that tax return preparers who knowingly prepare and file false returns will be investigated and prosecuted, and will face substantial incarceration,” said Acting Assistant Attorney General Ciraolo.  “As we enter the 2016 filing season, U.S. taxpayers are entitled to seek assistance from honest and competent professionals, and the Tax Division is committed to holding these return preparers accountable for their conduct.”  

U.S. District Judge Ellen L. Hollander for the District of Maryland set sentencing for May 12.  The defendant faces a statutory maximum sentence of three years in prison and a maximum fine of $250,000 on each count of conviction. 

Acting Assistant Attorney General Ciraolo commended agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Brittney Campbell and Andrew J. Kameros, who prosecuted the case.

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

President’s Request Invests in Department of Justice Criminal Justice Priorities, Including National Security, Cyber Security, Smart on Crime, Building Community Trust, Among Other Priority Initiatives

President Obama’s FY 2017 Budget proposal totals $29 billion for the Department of Justice to support federal law enforcement priorities and the criminal justice priorities of our state, local and tribal law enforcement partners.  The request represents a comprehensive investment in the Justice mission and includes increases in funding for countering violent extremism and other national security areas, civil rights and advancing equality under the law, Smart on Crime activities, including increased funds for prisoner reentry initiatives and other key enforcement initiatives. 

“The Department of Justice is committed to ensuring the safety of our communities and the strength of our nation and the resources laid out in President Obama’s budget are vital to our efforts,” said Attorney General Loretta E. Lynch.  “With investments in priority areas from national security and cybercrime to community policing, this budget will allow us to protect the progress we have made and build on our success in the years to come.”

 The Department of Justice’s areas of investment include:

• +$1.1 billion for the department’s law enforcement components, including the Federal Bureau of Investigation, Drug Enforcement Administration, Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Marshals Service and the Organized Crime Drug Enforcement Task Force program.
• +$70 million for our litigating components, including the U.S. Attorneys, National Security Division, Criminal Division, Civil Rights Division, Civil Division and the Environment and Natural Resources Division.
• +$214 million for the prisons and detention functions of the Federal Bureau of Prisons and U.S. Marshals Service.
• +$47 million for immigration, administration, technology and other support functions; includes the Executive Office for Immigration Review, Office of the Pardon Attorney, Office of the Inspector General, Community Relations Service, General Administration and Justice Information Sharing Technology.
• +$443 million for Justice Department grant programs overall (Office of Justice Programs, Office of Community Oriented Policing Services and Office on Violence Against Women), for a total grant program request of $4.7 billion.

National Security

As the Attorney General remarked in December 2015, “my highest priorities are the security of our country and the safety of the American people.”  National security threats are constantly evolving, requiring additional investments to adapt to those threats in innovative ways.  The FY 2017 Budget request provides $780.7 million in program increases to counter violent extremism, improve intelligence collection and analysis, strengthen foreign partnerships and address critical law enforcement technology challenges.

Today’s national security and crime threats require that the Federal Bureau of Investigation (FBI) maintain an interconnected and nimble workforce.  The complexities of today’s National Security work dictate that the FBI be in an interconnected workspace to promote internal information sharing.  A new modern FBI facility will consolidate disparate worksites in to one common location and exploit synergies previously stovepiped in the FBI.  The men and women of the FBI are critical to protecting national security, and this request demonstrates our commitment to invest in their safety and provide them with an appropriate environment conducive to their important work.

The FY 2017 request supports a comprehensive national security strategy towards countering violent extremism (CVE) in U.S. communities.  The recent tragedy in San Bernardino is a painful reminder that this work is critical to achieving a peaceful society, and the department is committed to addressing the multi-faceted nature of this crime problem in FY 2017.  Supported by Community Oriented Policing Services (COPS) and the Office of Justice Programs (OJP) grants, the department will foster community-led CVE efforts and emphasize trusted partnerships between public safety agencies and local residents and community organizations.  Grant funding through the OJP will also provide training and assistance to local efforts and continue to support research to better understand violent extremism and advance evidence-based strategies for prevention and intervention.  U.S. Attorneys will expand their community presence and enhance federal engagement and support to local communities.  These efforts will work to counter violent extremism encouraged by both international and homegrown actors.

The department must continue to address worldwide threats by enhancing its intelligence capacity and capabilities and strengthening coordination with foreign partners.  The FY 2017 request includes resources for the FBI to improve collaboration with the Intelligence Community (IC) through enhanced intelligence programs and leveraging the common IC information technology (IT) infrastructure.  The request also supports the FBI’s new Biometrics Technology Center, which will enhance biometric investigations.  The request will also improve the FBI ability to conduct physical surveillance on the highest priority targets.  The FY 2017 request includes resources to improve evidence sharing and extraditions with our foreign partners and overseas security sector assistance programs operations.  The department’s foreign experts are best situated to build the strong overseas partnerships that are essential to joint efforts to fight terrorism and transnational crime.

The FBI must also adapt to evolving communication technologies, anonymization, and encryption.  Law enforcement faces an increased threat of Going Dark – the degradation of law enforcement’s ability to lawfully access, collect, and intercept real-time communications and stored data.  The FY 2017 request includes critical resources to develop and acquire tools to address the challenges Going Dark poses to law enforcement and national security.

For more information, view the National Security Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.

Cyber Security

The Department of Justice has a unique and critical role in cyber security that emphasizes countering and mitigating cyber threats, including by investigating, prosecuting, and providing legal and policy support to other departments for intrusion and cybercrime cases.  The FY 2017 Budget provides $121.1 million in additional resources to investigate and address computer intrusions and cybercrimes, defend the security of the department’s critical information networks, and protect against insider threats.  This request provides resources to enhance the technical capabilities of FBI investigative personnel, increase the number of cyber investigations, and improve cyber collection and analysis.

Building on the significant investments made in FY 2015 and FY 2016, this request also provides additional resources for the Justice Information Sharing Technology (JIST) account to maintain and strengthen the department’s cyber security environment: to counter cyber threats and to ensure its personnel have unimpeded access to the Information Technology (IT) systems, networks, and data necessary to achieve their missions.   Similarly, the department requests additional resources for the Drug Enforcement Administration (DEA), to enhance its ability to combat insider threats and to enhance its cyber security posture.

For more information, view the Cyber Security Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.

Smart on Crime

While we must remain vigilant in our efforts to stop violent crime, we cannot simply prosecute and incarcerate our way into becoming a safer nation.  The FY 2017 budget invests an additional $246.9 million to support Smart on Crime programs.  The Smart on Crime initiative focuses on effectively using federal resources for the most significant federal law enforcement priorities—including violent crime—and implementing a series of commonsense reforms to reduce unnecessarily long sentences for low-level, nonviolent drug offenders.  The Smart on Crime policies also bolster prevention and reentry programs to deter crime, reduce recidivism, and create pathways of opportunity for eligible candidates.

The department’s plan focuses federal resources on, and directs prosecutors to pursue, cases implicating the most substantial federal interests, rather than prioritizing the sheer number of prosecutions.  Considering alternatives to incarceration for low-level, non-violent offenses also strengthens our justice system and places a lower financial burden on the budget. This means increased use of diversion programs, such as drug courts, that reduce taxpayer expense and have the potential to be successful at preventing recidivism. When imprisonment is appropriate, sentencing should reflect the individualized circumstances of the case.

We must also provide necessary care for inmates by expanding mental health services, medical treatments, and reducing the use and need for restrictive housing.  To better prevent recidivism, it is important to reduce barriers to reentry for formerly incarcerated individuals. This includes emphasizing reentry programs, and revisiting rules and regulations that make it harder for these individuals to find a job, an education, or affordable housing.

For more information, view the Smart on Crime Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.

Building Community Trust

The FY 2017 Budget includes $129.4 million in increases to further the efforts the department and its state and local law enforcement partners have made to build and sustain community trust.

Building trust and nurturing legitimacy on both sides of the police/citizen divide is the foundational principle underlying the nature of relations between law enforcement agencies and the communities they serve.  Law enforcement cannot build community trust if it is seen as an occupying force coming in from outside to impose control on the community.

Through the Office of Community Oriented Policing Services (COPS) and other components, the department is making good on its pledge to provide law enforcement with access to the tools and support they need to do their jobs as safely and effectively as possible.  With the launch of its National Initiative for Building Community Trust and Justice, the department is striving to strengthen the partnerships between community members and law enforcement professionals at every level of government.

Through the President’s Task Force on 21st Century Policing, the department is bringing law enforcement leaders and experts together to provide strong, national direction on a scale not seen in nearly half a century.  And going forward, the department intends to continue to use every tool at its disposal to enhance its capacity to combat crime while restoring public trust.

For more information, view the Building Community Trust Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.

Enhancing Public Safety

The department’s mission and responsibility is to investigate and prosecute those who break federal laws.  Continued investments to uphold its commitments are needed to strengthen the department’s ability to protect the health and well-being of our Nation’s citizens, and have the flexibility to address threats as they emerge.  Simply maintaining existing law enforcement capacity is not sufficient to meet the demands of this commitment.  For FY 2017, the department requests $164.2 million in additional investments to address the threats of violent crime and illicit drugs, and to strengthen the litigating divisions of the department.

In FY 2017, the department is requesting additional resources to respond to the recent increase in heroin abuse and support increased prosecution of drug trafficking organizations along the Southwest Border.  The funding will create four new enforcement groups, including support personnel and operational funding, to counteract growing heroin abuse in the United States. 

The Budget request supports significant investments that focus on combatting violent crime in the U.S. and support the President’s initiatives on reducing gun violence.  The request includes funding to enhance the enforcement of existing federal firearms laws and expand the Bureau of Alcohol, Tobacco, Firearms and Explosives’ (ATF) regulatory capacity.  Funding is also requested for the FBI to maintain FY 2016 investments in the National Instant Criminal Background Check System (NICS).

The investments to combat violent crime also include resources for the U.S. Marshals Service (USMS) to support hiring of additional Deputy U.S. Marshals and the creation of a new Regional Fugitive Task Force to apprehend violent fugitives.

The department’s request also invests funding in litigating divisions to enforce laws that address economic competition, animal welfare, immigration, and to ensure public safety.  The department seeks to improve the Antitrust Division’s ability to promote economic competition, strengthen the Environment and Natural Resources Division’s ability to enforce animal welfare laws through the development of a new animal welfare enforcement program, augment the Civil Division’s immigration litigation capabilities, and to provide security services at U.S. Trustee meetings.    

For more information, view the Enhancing Public Safety Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.

Protecting Vulnerable Populations

The department’s priority of upholding the civil and constitutional rights of all Americans, particularly the most vulnerable members of our society, remains vital importance. Accomplishing this requires resources to investigate, litigate, conduct outreach, and provide capacity-building education, training, and technical assistance.  The FY 2017 President’s Budget will address these needs by dedicating an additional $80.7 million to these tasks, thereby enhancing the lives of the country’s vulnerable populations.

The nation’s vulnerable populations deserve the same rights, opportunities, and protections from injustices as the rest of society.  The Administration and the department are committed to accomplishing this goal.  The FY 2017 President’s Budget requests funding to prevent and investigate elder abuse and fraud, particularly health care fraud, which remains a top priority for the department.  The Budget will also address environmental concerns in Indian Country.

Our nation’s children and youth are a vulnerable demographic group.  At a national summit on Youth Violence Prevention last year, the Attorney General spoke of the importance of providing services to children exposed to violence in order to break the cycle of violence.  The FY 2017 request includes additional funding to do just that.  Additional resources are requested to ensure the nation’s police are properly trained to interact with children and people with disabilities, and to support enforcement, technical assistance, and the issuance of guidance and regulations related to the Americans with Disabilities Act.

For more information, view the Vulnerable Populations Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.

Mission Critical Infrastructure

In order to maintain an effective and efficient Department of Justice, the department must maintain a robust infrastructure to support its investigative and prosecutorial enterprises.  The department’s request of $179.1 million addresses gaps in critical infrastructure, including information technology (IT) system improvements that support law enforcement and litigating components, facility construction and maintenance, policy oversight, and personnel security investments.

Resources are requested to upgrade outdated IT systems, enhance capabilities of existing systems, and construct and maintain facilities.  Resources for the USMS Office of Professional Responsibility and the department’s policy offices are included to enhance policy analysis, coordination, and compliance functions.  Finally, resources are requested to address the department’s current backlog of security investigations of both federal employees and contractors and future security investigation needs.

For more information, view the Mission Critical Infrastructure Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.

State, Local and Tribal Law Enforcement

The Department of Justice strongly supports its partnerships with state, local, and tribal entities.  The FY 2017 Budget maintains its commitments to state, local, and tribal law enforcement partners without reducing the department’s federal operational role.  Simultaneously, efficiencies are identified to ensure that federal resources are being targeted to the most effective grant programs.  The FY 2017 discretionary and mandatory request for state, local, and tribal law enforcement assistance is $4.7 billion, including discretionary enhancements of $442.7 million. 

The FY 2017 request for OJP totals $4.2 billion, including $1.6 billion for discretionary grant programs and $2.6 billion for mandatory grant programs.  It includes $326.2 million in discretionary enhancements, including increased funding for an indigent defense initiative, Second Chance Prisoner Reentry, Justice Reinvestment, and juvenile justice programs, and new funding to support the Violence Reduction Network.

The FY 2017 request for COPS totals $286 million, including $88 million in enhancements.  The COPS request includes an increase of $42 million for the COPS Hiring Program. 

The FY 2017 request for the Office on Violence Against Women (OVW) totals $489 million.  OVW’s Budget includes a total of $28.5 million in enhancements.  The Budget includes enhancements of $11.25 million for Improving Criminal Justice Responses to Sexual Assault, Domestic Violence, Dating Violence and Stalking Program (Arrest), $7.5 million for Legal Assistance to Victims and $6 million for OVW’s Campus Violence Program. 

For more information, view the State, Local and Tribal Law Enforcement Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.

Public Safety In Indian Country

The United States has a unique legal and political relationship with American Indian tribes and Alaska Native communities as provided by the Constitution, treaties, court decisions, and federal statutes.  The Department of Justice has an important legal and moral responsibility to prosecute violent crime in Indian Country because under current law, in much of Indian Country, the department alone has the authority to seek an appropriate sentence when a major crime has been committed.  Federal investigation and prosecution of serious violent crime in Indian Country is often the primary avenue of protection for the victims of these crimes.

The FY 2017 President’s Budget requests $417.6 million in total resources for public safety initiatives in Indian Country.  Investments support activities across many Department of Justice components that address a range of criminal and civil justice issues facing Native American communities.  A highlight is the COPS Tribal Resources Grant Program, which facilitates tribal access to critical information sharing systems.  The increase will support the department’s Tribal Access Program for National Crime Information that was launched in August 2015 allowing tribes to more effectively serve and protect their tribal members by ensuring the exchange of critical data across systems, such as those managed by the Criminal Justice Information Services Division of the Federal Bureau of Investigation.  The department is also requesting resources to strengthen the enforcement of environmental laws on tribal lands, and to support consultation with tribes and coordination of tribal policies through the Office of Tribal Justice. 

For more information, view the Public Safety in Indian Country Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.

FY 2017 Budget Rollout PowerPoint (683.85 KB)

A Clayton, North Carolina, resident was arrested yesterday after being indicted on Dec. 2 by a federal grand jury sitting in Raleigh, North Carolina, on one count of conspiracy to commit theft of public money, 25 counts of theft of public money and two counts of aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and Acting U.S. Attorney John Stuart Bruce of the Eastern District of North Carolina. 

Felipe Hurtado aka “Juan de Dios” is alleged to have conspired with check cashers during the years 2011 and 2012 to cash U.S. Treasury checks issued as a result of fraudulent tax returns filed in the names of third parties. According to the allegations in the indictment, Hurtado provided the check cashers with U.S. Treasury checks in the names of payees purportedly living in New York.  These checks ranged in value from approximately $5,000 to $10,000.  The indictment alleges that the check cashers deposited the U.S. Treasury checks into their business bank accounts and then provided Hurtado with cash equal to the value of the check minus a check cashing fee.  The third party payees were not present when the checks were cashed.  The indictment further alleges that Hurtado cashed U.S. Treasury checks in the names of individuals whose identities had been stolen.

If convicted, Hurtado faces a statutory maximum sentence of five years in prison for the conspiracy charge, 10 years in prison for each count of theft of public funds and a two year mandatory sentence for the counts of aggravated identity theft.  He also faces substantial monetary penalties, supervised release and restitution.

Acting Assistant Attorney General Ciraolo and Acting U.S. Attorney Bruce commended special agents of Internal Revenue Service-Criminal Investigation, who investigated the case and Trial Attorneys Nathan Brooks and Lauren Castaldi of the Tax Division, who are prosecuting this case.  Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office of the Eastern District of North Carolina for their assistance.

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

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

South Carolina Man Allegedly Owns Three Liberty Tax Service Stores Accused of Preparing Fraudulent Tax Returns

Three Columbia-area, South Carolina Liberty Tax Service franchises deliberately prepare false federal income tax returns in order to increase their customers’ refunds, according to a civil lawsuit filed today by the Justice Department.  The United States’ complaint asks the U.S. District Court for the District of South Carolina to permanently bar the alleged franchisee for all three locations, Christopher Paul Haynes of Irmo, South Carolina, from preparing federal tax returns for others.

According to the suit, Haynes and his employees prepare tax returns that include misstatements such as false or inflated Schedule C (Profit or Loss From Business) income and expenses, bogus dependents, false filing statuses and improper unreimbursed employee business expenses.  For example, the complaint alleges that Haynes’s employees included a bogus “arts and crafts” business on one customer’s tax return and a bogus “hair care” businesses on another’s.  In each case, according to the complaint, the false statements purported to allow the customer to qualify for a larger Earned Income Tax Credit and receive inflated tax refunds from the Internal Revenue Service (IRS).

The lawsuit states that Haynes’s Liberty Tax Service offices have prepared more than 9,700 federal income tax returns since 2010.  Based on adjustments the IRS has made to tax returns prepared and filed by Haynes’s Liberty Tax Service offices for 2010 to 2013, the average tax deficiency for tax returns audited in connection with the IRS’s investigation of Haynes is $3,834 per tax return, according to the suit.

The complaint also alleges that Haynes does not report to the IRS the wages he pays some of his employees, even though the report is required by law.  According to the complaint, Haynes also fails to withhold and pay over to the IRS federal employment taxes for those same employees.

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

The Justice Department announced today that Theodore Robert, 41, a former police officer with the South Bend, Indiana, Police Department (SBPD), pleaded guilty today in federal court to violating the civil rights of an arrestee.

During his guilty plea before U.S. Magistrate Judge Christopher A. Nuechterlein of the Northern District of Indiana, Robert admitted that, acting under his authority as an SBPD officer, he punched a handcuffed victim in the face, as multiple officers attempted to intervene.  He also admitted that, prior to punching the victim in the face, he forcefully pushed the victim into a wall and pressed his arm against the victim’s head and throat.  Robert’s actions caused the victim to suffer a laceration above the eye.  According to information presented in court, the incident occurred at the St. Joseph County Jail in South Bend and was recorded by the jail’s surveillance cameras.

“When police officers violate the laws they swear to uphold, it threatens the credibility of our criminal justice system,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “The Justice Department will continue to vigorously prosecute and hold accountable those officers who violate the constitutional rights of people in their custody.”

A sentencing hearing has been scheduled for May 19, 2016.  Robert faces a maximum sentence of 10 years in prison.

This case was investigated by the FBI Indianapolis Division’s South Bend Resident Agency.  The case is being prosecuted by Trial Attorneys Stephen Curran and Sanjay Patel of the Civil Rights Division, with the assistance of the U.S. Attorney’s Office of the Northern District of Indiana.

Robert Plea Agreement

Second Phase to Highlight Six Jurisdictions Effectively Implementing Recommendations from the President’s Task Force on 21st Century Policing Final Report

Attorney General Loretta E. Lynch will travel to Miami-Dade County, Florida, on THURSDAY, FEBRUARY 11, 2016, and FRIDAY, FEBRUARY 12, 2016, to launch the second phase of her national Community Policing Tour.  In this phase, the Attorney General will visit six jurisdictions around the country that have excelled in each of the six pillars discussed in the President’s Task Force on 21st Century Policing final report: (1) Building Trust and Legitimacy; (2) Policy and Oversight; (3) Technology and Social Media; (4) Community Policing and Crime Reduction; (5) Officer Training and Education; and (6) Officer Safety and Wellness.  The trip to Miami Dade County will highlight Pillar 1 – Building Trust and Legitimacy.  As part of the tour, Attorney General Lynch will also visit Portland, Oregon; Indianapolis; Fayetteville, North Carolina; Phoenix; and Los Angeles in the coming months.  

“One of my top priorities as Attorney General is strengthening relationships between law enforcement officers and the communities we serve and protect,” said Attorney General Lynch.  “During the second phase of my Community Policing Tour, I will be highlighting some of the innovative efforts underway around the country to build trust, foster cooperation and enhance public safety.  I look forward to meeting with law enforcement officers, local leaders and residents in the weeks and months ahead to discuss how we can ensure that every American benefits from neighborhoods that are supportive, safe and strong.” 

“We in South Florida are proud of the work we have done to implement the recommendations outlined in the President’s Task Force on 21st Century Policing,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.  “Through active engagement and meaningful dialogue, members of law enforcement work hard to build trust with the communities they serve.  As an example of this approach, the city of Doral Police Department has adopted the Blue Courage initiative, a training and leadership development course which focuses on how to enhance their officers’ effectiveness and relationships with the citizens they serve.  Many other local departments have also developed robust community policing initiatives.  During Attorney General Loretta Lynch’s visit this week, we will share strategies and continue to identify and cultivate the best practices for creating stronger and safer communities.”

While in Miami-Dade County, the Attorney General will be joined by U.S. Attorney Ferrer, Director Ronald Davis of the Office of Community Oriented Policing Services (COPS Office), Assistant Attorney General Karol V. Mason of the Office of Justice Programs and Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division for a convening with law enforcement, local officials and other members of the community at Miami Dade College’s Wolfson Campus in downtown Miami. 

The Attorney General will also host a youth town hall with student “Peace Ambassadors" to discuss police-community relations and visit the Doral Police Department to recognize the department’s commitment to community policing strategies through the Blue Courage initiative.  Also during her visit, Attorney General Lynch will hold a press availability at the historic Freedom Tower, visit with Miami-Dade Police Department officers and thank them for their service to the community, tour the Black Police Precinct & Courthouse Museum and visit staff at the U.S. Attorney’s Office of the Southern District of Florida. 

The Attorney General’s national Community Policing Tour builds on President Obama’s commitment to engage with law enforcement and other members of the community to implement key recommendations from the President’s Task Force on 21st Century Policing final report.  The first phase of the tour launched on May 19, 2015, in Cincinnati and also included visits to Birmingham, Alabama; Pittsburgh; East Haven, Connecticut; Seattle; and Richmond, California.  

A federal grand jury sitting in New Orleans returned an indictment on Jan. 29 against two Tangipahoa Parish, Louisiana residents, charging them with federal crimes related to filing false income tax returns using stolen identities, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kenneth A. Polite of the Eastern District of Louisiana announced today.  The indictment was unsealed today after the last defendant was arrested.

Alicia Washington aka Alicia Keith, 40, and Jackie Chaney aka Jackie Scott, 47, were charged with one count of a multi-prong conspiracy to defraud the United States and to commit theft of public money, wire fraud and aggravated identity theft; five counts of wire fraud and 11 counts of aggravated identity theft. Washington was arrested Thursday and Chaney was arrested today.

As alleged in the indictment, Washington and Chaney conspired together and with others to prepare false tax returns using stolen identities.  Washington is alleged to have obtained several Electronic Filing Identification Numbers and used them to electronically file false tax returns with the Internal Revenue Service (IRS) that requested tax refunds.  Washington, Chaney and others received the fraudulently obtained tax refunds in the form of U.S. Treasury checks or on prepaid debit cards in the names of other individuals.  It is further alleged that Washington and Chaney conspired with others to convert the U.S. Treasury checks into cash.

If convicted, Washington and Chaney face a statutory maximum sentence of five years in prison for the conspiracy charge, 20 years in prison for each count of wire fraud and a mandatory two years in prison for each count of identity theft, which will be imposed in addition to any other term of imprisonment they receive.  They also face substantial monetary penalties, supervised release, and restitution.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Polite commended special agents of IRS Criminal Investigation, who investigated the case and Assistant U.S. Attorney Hayden Brockett of the Eastern District of Louisiana and Trial Attorney Lauren Castaldi of the Tax Division, who are prosecuting this case.

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

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

The Justice Department, the Department of Housing and Urban Development (HUD) and the Consumer Financial Protection Bureau, along with 49 state attorneys general and the District of Columbia’s attorney general, have reached a $470 million agreement with HSBC Bank USA NA and its affiliates (collectively, HSBC) to address mortgage origination, servicing and foreclosure abuses. 

“This agreement is the result of a coordinated effort between federal and state partners to hold HSBC accountable for abusive mortgage practices,” said Acting Associate Attorney General Stuart F. Delery.  “This agreement provides for $370 million in creditable consumer relief to benefit homeowners across the country and requires HSBC to reform their servicing standards.  The Department of Justice remains committed to rooting out financial fraud and holding bad actors accountable for their actions.”  

“This settlement illustrates the department’s continuing commitment to ensure responsible mortgage servicing,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The agreement is part of our ongoing effort to address root causes of the financial crisis.”

“Even as the mortgage crisis recedes, the U.S. Trustee Program will continue to combat mortgage servicer abuse of the federal bankruptcy laws so that homeowners are given their legal right to try to save their homes,” said Director Cliff White of the Justice Department’s U.S. Trustee Program.  “Homeowners in financial distress sometimes depend on chapter 13 bankruptcy to help them catch up on their payments.  When banks violate bankruptcy laws at the expense of homeowners and other creditors, they must pay a price.  This settlement holds HSBC accountable for its actions and helps to protect the most vulnerable homeowners.”

“Mortgage servicers have a responsibility to help struggling borrowers remain in their home, not to push them into foreclosure,” said General Counsel Helen Kanovsky of HUD.  “This agreement is another example of how multiple agencies in the federal government and state attorneys general across the country are working to make sure the mortgage industry treats consumers fairly.”

“This agreement not only provides relief to borrowers affected by HSBC’s past practices, it puts in place protections for current and future homeowners through tough mortgage servicing standards,” said Iowa Attorney General Tom Miller.  “For years we’ve worked together to hold mortgage servicers responsible for their past conduct.  We’re doing that here through this settlement and we’ll continue to address bad conduct in the future.”

The settlement reflects a continuation of enforcement actions by the department and its federal and state enforcement partners to hold financial institutions accountable for abusive mortgage practices.  The settlement parallels the $25 billion National Mortgage Settlement (NMS) reached in February 2012 between the federal government, 49 state attorneys general and the District of Columbia’s attorney general and the five largest national mortgage servicers, as well as the $968 million settlement reached in June 2014 between those same federal and state partners and SunTrust Mortgage Inc.  This settlement with HSBC is the result of negotiations that, as has been reported in HSBC Holdings plc’s Annual Report and Accounts, began following the announcement of the NMS.

Under the agreement announced today, HSBC has agreed to provide more than $470 million in relief to consumers and payments to federal and state parties, and to be bound to mortgage servicing standards and be subject to independent monitoring of its compliance with the agreement.  More specifically, the settlement provides that:

• HSBC will pay $100 million: $40.5 million to be paid to the settling federal parties; $59.3 million to be paid into an escrow fund administered by the states to make payments to borrowers who lost their homes to foreclosure between 2008 and 2012; and $200,000 to be paid into an escrow fund to reimburse the state attorneys general for investigation costs.
• By July 2016, HSBC will complete $370 million in creditable consumer relief directly to borrowers and homeowners in the form of reducing the principal on mortgages for borrowers who are at risk of default, reducing mortgage interest rates, forgiving forbearance and other forms of relief.  The relief to homeowners has been underway and will likely provide more than $370 million in direct benefits to borrowers because HSBC will not be permitted to claim credit for every dollar spent on the required consumer relief. 
• HSBC will be required to implement standards for the servicing of mortgage loans, the handling of foreclosures and for ensuring the accuracy of information provided in federal bankruptcy court.  These standards are designed to prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create new consumer protections.  The standards provide for oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court.  The servicing standards ensure that foreclosure is a last resort by requiring HSBC to evaluate homeowners for other loss-mitigation options first.  In addition, the standards restrict HSBC from foreclosing while the homeowner is being considered for a loan modification.

The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia.  Compliance with the agreement will be overseen by an independent monitor, Joseph A. Smith Jr., who is also the monitor for the NMS and SunTrust settlement.  Smith has served as the North Carolina Commissioner of Banks and is also the former chairman of the Conference of State Banks Supervisors.  Smith will oversee implementation of the servicing standards required by the agreement, will certify that HSBC has satisfied its consumer relief obligations and will file regular public reports that identify any quarter in which HSBC fell short of the standards imposed in the settlement.  The parties may seek penalties for non-compliance. 

The agreement resolves potential violations of civil law based on HSBC’s deficient mortgage loan origination and servicing activities.  The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by HSBC, or from punishing wrongful securitization conduct that is the focus of President Barack Obama’s Financial Fraud Enforcement Task Force Residential Mortgage-Backed Securities Working Group.  State attorneys general also preserved, among other things, all claims against Mortgage Electronic Registration Systems.  Additionally, the agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.

The Department of Treasury, the Federal Trade Commission, the Department of Agriculture, the Veterans Administration and the Special Inspector General for the Troubled Asset Relief Program also made critical contributions to reaching this settlement.

A former Cumberland, Virginia, resident was arraigned in federal court in Roanoke, Virginia, on Feb. 3, on a seven-count indictment charging him with tax evasion, corruptly endeavoring to impede and impair the due administration of the internal revenue laws and failure to file tax returns, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S Attorney John P. Fishwick, Jr. of the Western District of Virginia announced today.    

According to the indictment, which was returned in June 2015 and unsealed in December 2015, Richard Alex, a self-employed low-voltage electrician, had not filed a timely or valid federal income tax return in more than a decade.  For tax years 1998 and 2000 through 2003, Alex filed a tax return on which he falsely claimed that he had not earned any income.  For tax years 2004 through 2013, Alex failed to file any tax returns despite earning gross income in excess of the filing requirement and receiving numerous warnings and notices from the Internal Revenue Service (IRS).

The indictment further alleges that, to prevent the IRS from collecting his unpaid taxes, Alex attempted to conceal his assets and income by establishing nominee businesses to conceal his gross income and using bank accounts held in the names of nominees to receive income.  Alex also provided false information to a tax return preparer for the purpose of preparing federal tax returns for Alex’s nominee entity, Cole Data Services.

Alex’s detention hearing is tomorrow before U.S. Magistrate Judge Robert S. Ballou.  Trial is set for April 11 before U.S. District Judge Norman K. Moon.  If convicted, Alex faces a statutory maximum sentence of five years in prison for the tax evasion count, three years in prison for the charge of corruptly endeavoring to impede and impair the due administration of the internal revenue laws and one year in prison for each count of failure to file a tax return.  He is also subject to a fine and restitution.

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

Acting Assistant Attorney General Ciraolo and U.S. Attorney Fishwick Jr. commended special agents of IRS Criminal Investigation, who investigated the case and Trial Attorney Sean Beaty of the Tax Division and Assistant U.S. Attorney C. Patrick Hogeboom of the Western District of Virginia, who are prosecuting the case.

A federal grand jury sitting in Minneapolis returned an indictment on Feb. 1, which was unsealed today, charging a chiropractor with one count of tax evasion and one count of passing a fictitious obligation, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Andrew Luger of the District of Minnesota announced today.

According to the allegations in the indictment, Donald Gibson failed to file federal income tax returns with the Internal Revenue Service (IRS) for the years 2004 through 2010 to report his income from his work as a chiropractor.  In May 2012, the IRS informed Gibson that he owed approximately $330,000 in federal income taxes for those years.  Gibson allegedly evaded paying his federal income taxes for 2004 through 2010 by, among other things, cashing his business checks at a check-cashing facility, purchasing money orders and directing his income onto stored-value debit cards.  Gibson is further alleged to have used Sovereign Christian Mission, a nonprofit corporation he registered with the Oregon Secretary of State, to hide his income and pay his personal expenses. The indictment also charges Gibson with submitting a fake bond that he claimed to be valued at $300 million to the Department of the Treasury to pay off his tax liabilities.

If convicted, Gibson faces a statutory maximum sentence of five years in prison for the tax evasion charge and a statutory maximum sentence of 25 years in prison for the passing a fictitious obligation charge. 

An indictment is not a finding of guilt.  The individual charged in the indictment is presumed innocent until proven guilty beyond a reasonable doubt.     

Acting Assistant Attorney General Ciraolo and U.S. Attorney Luger thanked special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorney Ryan R. Raybould of the Tax Division and Assistant U.S. Attorney Joseph Thompson of the District of Minnesota, who are prosecuting the case.

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

A federal court has ordered Chel-C Ventures Inc., which operated Donut Connection stores in Milford, Georgetown, and Harbeson, Delaware, to file its federal payroll tax returns on time and pay federal payroll taxes as they become due, the Justice Department announced.  Although Chel-C Ventures has said that it closed the stores after the United States filed its civil complaint in this case, the court’s order directs Chel-C Ventures and its owner, Elva Davidson of Sussex County, Delaware, to file the returns and pay the taxes on time if the business starts operating again.  The injunction is effective immediately.

According to the United States’ civil complaint in the case, Chel-C Ventures repeatedly failed over a period of years to fully pay its payroll taxes.  The court’s order also determined that Chel-C Ventures was liable for more than $645,000 in federal payroll taxes, penalties and interest and that Davidson was personally liable to the United States for more than $250,000.  Chel-C Ventures and Davidson agreed to entry of the court’s order, but did not admit to the allegations in the United States’ civil complaint in the case.

Acting Assistant Attorney General Caroline D. Ciraolo of the Tax Division thanked the revenue officer of Internal Revenue Service’s Field Collection for investigating and preparing the civil case.

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

Bank Admits to Helping U.S. Taxpayer-Clients Hide Billions of Dollars in Offshore Accounts

Bankers Daniela Casadei and Fabio Frazzetto, Fugitives Since 2011, Surrender and Plead Guilty to Felony Tax Charges

Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Preet Bharara of the Southern District of New York, and Chief Richard Weber of the Internal Revenue Service – Criminal Investigation, (IRS-CI), announced the filing of criminal charges against Bank Julius Baer & Co. Ltd. (Julius Baer or the company), a financial institution headquartered in Zurich, Switzerland.   Julius Baer is charged with conspiring with many of its U.S. taxpayer-clients and others to help U.S. taxpayers hide billions of dollars in offshore accounts from the IRS and to evade U.S. taxes on the income earned in those accounts. 

Acting Assistant Attorney General Ciraolo and U.S. Attorney Bharara also announced a deferred prosecution agreement with Julius Baer (the agreement) under which the company admits that it knowingly assisted many of its U.S. taxpayer-clients in evading their tax obligations under U.S. law.  The admissions are contained in a detailed Statement of Facts attached to the agreement.  The agreement requires Julius Baer to pay a total of $547 million by no later than Feb. 9, 2016, including through a parallel civil forfeiture action also filed today in the Southern District of New York.              

The criminal charge is contained in an Information (the information) alleging one count of conspiracy to (1) defraud the IRS, (2) to file false federal income tax returns and (3) to evade federal income taxes.  If Julius Baer abides by all of the terms of the agreement, the government will defer prosecution on the Information for three years and then seek to dismiss the charges.

In addition, two Julius Baer client advisers, Daniela Casadei and Fabio Frazzetto, pleaded guilty in Manhattan federal court today.   Casadei and Frazzetto were originally charged in 2011 and remained at large until Feb. 1, when they each made initial appearances before the Honorable Gabriel W. Gorenstein, U.S. Magistrate Judge for the Southern District of New York. 

Casadei and Frazzetto each pleaded guilty to an Information (collectively, with the Julius Baer information, the informations) before U.S. District Judge Laura Taylor Swain charging them with conspiring with U.S. taxpayer-clients and others to help U.S. taxpayers hide their assets in offshore accounts and to evade U.S. taxes on the income earned in those accounts. 

“Today’s resolution with Bank Julius Baer and the guilty pleas entered by two bank employees reflect the department’s continued commitment to hold accountable those financial institutions who conspired with U.S. taxpayers to conceal assets abroad and evade U.S. tax obligations, as well as those individuals responsible for such crimes,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “The deferred prosecution agreement filed today makes it clear that there is a heavy price to pay for this conduct, and that there is a significant benefit in fully cooperating with the department.”

“Bank Julius Baer not only turned a blind eye to tax avoiders, but actually conspired with them to break the law,” said U.S. Attorney Bharara. “Together with our partners at the IRS, we will continue to prosecute financial institutions and individuals who facilitate tax evasion.”

“In taking responsibility for their actions, Bank Julius Baer has agreed to cooperate and pay a substantial penalty for their role in circumventing offshore disclosure laws, said IRS-CI Chief Weber.  “The agreement – as well as the guilty pleas of client advisors Daniela Casadei and Fabio Frazzetto – sends a strong message to the international banking community as well as U.S. taxpayers who think they can outsmart the system by hiding their money in these international banks.  The consequences of not reporting your foreign accounts and paying the taxes you owe will be significant for those who do not heed the warnings that agreements like this yield.”

According to the informations, statements made during the proceedings today and other documents filed in Manhattan federal court, including the statement of facts to the agreement:

The Offense Conduct

From at least the 1990s through 2009, Julius Baer helped many of its U.S. taxpayer-clients evade their U.S. tax obligations, file false federal tax returns with the IRS and otherwise hide accounts held at Julius Baer from the IRS (hereinafter, undeclared accounts).  Julius Baer did so by opening and maintaining undeclared accounts for U.S. taxpayers and by allowing third-party asset managers to open undeclared accounts for U.S. taxpayers at Julius Baer.  Casadei and Frazzetto, bankers who worked as client advisers at Julius Baer, directly assisted various U.S. taxpayer-clients in maintaining undeclared accounts at Julius Baer in order to evade their obligations under U.S.  law.  At various times, Casadei, Frazzetto and others advised those U.S. taxpayer-clients that their accounts at Julius Baer would not be disclosed to the IRS because Julius Baer had a long tradition of bank secrecy and no longer had offices in the United States, making Julius Baer less vulnerable to pressure from U.S. law enforcement authorities than other Swiss banks with a presence in the United States.   

In furtherance of the scheme to help U.S. taxpayers hide assets from the IRS and evade taxes, Julius Baer undertook, among other actions, the following:

• Entering into “code word agreements” with U.S. taxpayer-clients under which Julius Baer agreed not to identify the U.S. taxpayers by name within the bank or on bank documents, but rather to identify the U.S. taxpayers by code name or number, in order to reduce the risk that U.S. tax authorities would learn the identities of the U.S. taxpayers.

• Opening and maintaining accounts for many U.S. taxpayer-clients held in the name of non-U.S. corporations, foundations, trusts, or other legal entities (collectively, structures) or non-U.S. relatives, thereby helping such U.S. taxpayers conceal their beneficial ownership of the accounts.

Julius Baer was aware that many U.S. taxpayer-clients were maintaining undeclared accounts at Julius Baer in order to evade their U.S. tax obligations, in violation of U.S. law.  In internal Julius Baer correspondence, undeclared accounts held by U.S. taxpayers were at times referred to as “black money,” “non W-9,” “tax neutral,” “unofficial,” or “sensitive” accounts. 

Julius Baer also advised its bankers to take certain steps to avoid scrutiny from U.S. authorities when travelling to the United States, as well as steps to avoid U.S. law enforcement identifying Julius Baer clients.  In a memo entitled “U.S. Clients Do’s & Don’ts,” circulated internally in 2006, a Julius Baer employee provided client advisers with advice regarding travel to the United States, including:

• “At Immigration . . . When asked by Officer what will you do while in the USA, say Business and of course some leisure, trying to take some time to enjoy your beautiful country. Proud government employees usually love this type of statement.One can throw in skydiving or another fun sport/activity.This tends to shift the questioning away from the business purpose to the ‘fun time’ part of the trip (carrying a tennis racket also puts the emphasis on “fun and games,” and not on business).”

• In regard to communicating while in the U.S.:“Only use mobile phone[s] registered in and operating from Switzerland.Avoid phone calls from hotel to clients.It is recommended to purchase a telephone calling card from the post office, grocery stores, or electronic shops.This allows you to use practically any phone with no specific link left behind.The best is to pay for the calling card in cash.For ex: a 400 minutes local calling card costs less than $50, but the rates can vary.Most cards can also be used to call anywhere abroad.”

At its high-water mark in 2007, Julius Baer had approximately $4.7 billion in assets under management relating to approximately 2,589 undeclared accounts held by U.S. taxpayer-clients.  From 2001 through 2011, Julius Baer earned approximately $87 million in profit on approximately $219 million gross revenues from its undeclared U.S. taxpayer accounts, including accounts held through structures. 

Julius Baer’s Blocked Effort to Self-Report, Acceptance of Responsibility, and Cooperation in the Government Investigation

Notwithstanding its lucrative criminal conduct, by at least 2008, Julius Baer began to implement institutional policy changes to cease providing assistance to U.S. taxpayers in violating their U.S. legal obligations.  For example, by November 2008, the company began an “exit” plan for U.S. client accounts that lacked evidence of U.S. tax compliance.  In that same month, Julius Baer imposed a prohibition on opening accounts for any U.S. clients without a Form W-9.

Additionally, in November 2009, before Julius Baer became aware of any U.S. investigation into its conduct, Julius Baer decided proactively to approach U.S. law enforcement authorities regarding its conduct relating to U.S. taxpayers.  Prior to self-reporting to the Department of Justice, Julius Baer notified its regulator in Switzerland of its intention to contact U.S. law enforcement authorities.  This Swiss regulator requested that Julius Baer not contact U.S. authorities in order not to prejudice the Swiss government in any bilateral negotiations with the United States on tax-related matters.  Accordingly, Julius Baer did not, at that time, self-report to U.S. law enforcement authorities.

After ultimately engaging with U.S. authorities, Julius Baer has taken exemplary actions to demonstrate acceptance and acknowledgement of responsibility for its conduct.  Julius Baer conducted a swift and robust internal investigation, and furnished the U.S. government with a continuous flow of unvarnished facts gathered during the course of that internal investigation.  As part of its cooperation, Julius Baer also, among other things, (1) successfully advocated in favor of a decision provided by the Swiss Federal Council in April 2012 to allow banks under investigation by the U.S. Department of Justice to legally produce employee and third-party information to the department, and subsequently produced such information immediately upon issuance of that decision; and (2) encouraged certain employees, including specifically Frazzetto and Casadei, to accept responsibility for their participation in the conduct at issue and cooperate with the ongoing investigation.     

*                *                *

Casadei, 52, a Swiss citizen, and Frazzetto, 42, an Italian and Swiss citizen, each pleaded guilty to one count of conspiracy to defraud the IRS, to evade federal income taxes and to file false federal income tax returns.  Casadei and Frazzetto each face a statutory maximum sentence of five years in prison.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentences imposed on the defendants will be determined by the judge. 

Casadei and Frazzetto are each scheduled to be sentenced before Judge Swain on Aug. 12, 2016.

This case is being handled by the U.S. Attorney’s Office of the Southern District of New York Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Jason H. Cowley and Sarah E. Paul are in charge of the prosecution.  Acting Assistant Attorney General Ciraolo and U.S. Attorney Bharara praised the outstanding investigative work of IRS-CI and thanked the U.S. Department of Homeland Security for its assistance with the case. 

A federal grand jury in Atlanta charged in separate indictments two real estate investors with bid rigging and bank fraud related to public real estate foreclosure auctions in Georgia, the Justice Department announced today.  

Real estate investor Douglas L. Purdy has been charged with one count of bid rigging and five counts of bank fraud for participating in the alleged conspiracy and scheme at Forsyth County, Georgia, foreclosure auctions from 2008 to 2012.  Clifford Wayne Hill was charged with one count of bid rigging and seven counts of bank fraud related to public foreclosure auctions in Gwinnett County, Georgia, from 2007 to 2012.  The defendants and their co-conspirators allegedly rigged bids at public foreclosure auctions and defrauded banks that owned the mortgage notes.  Among other methods, the conspirators allegedly held secret “second auctions” of properties they had obtained through rigged bids, dividing the auction proceeds that should have gone to pay off debts against the properties and, in some cases, to homeowners who had defaulted.

“These defendants corrupted public foreclosure auctions in Georgia to keep for themselves money that rightfully belonged to banks and homeowners,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “Those who illegally enrich themselves at the expense of financially distressed homeowners and their lenders should be held accountable for their crimes.”

“The FBI continues its work with the U.S. Department of Justice’s Antitrust Division in ridding corrupt activities within the public real estate foreclosure auction process in Georgia,” said Special Agent in Charge J. Britt Johnson of the FBI’s Atlanta Field Office.  “The additional federal indictments of these two real estate investors illustrate not only the scope of the problem but also the federal efforts to address it.  Anyone with information regarding such criminal activity as alleged here should contact their nearest FBI field office.”

An indictment is not evidence of guilt.  All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

Including the indictments filed today in the Northern District of Georgia, 14 defendants have been charged in connection with the department’s ongoing investigation into bid rigging and fraudulent schemes involving real estate foreclosure auctions in the Atlanta area; 12 have pleaded guilty.  

These charges have been filed as a result of the ongoing investigation being conducted by the Antitrust Division’s Washington Criminal II Section, the FBI’s Atlanta Division and the U.S. Attorney’s Office of the Northern District of Georgia, in connection with the president’s Financial Fraud Enforcement Task Force.  The president established the task force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ Offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information about the task force, please visit www.StopFraud.gov.  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 888-647-3258, or visit http://www.justice.gov/atr/report-violations.

Purdy Indictment (211.42 KB)

Hill Indictment (274.93 KB)

Three El Paso, Texas, tax return preparers were convicted by a jury yesterday in the U.S. District Court for the Western District of Texas (El Paso Division) 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 federal income tax returns, 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 announced. 

According to evidence and witness testimony introduced at the trial, Belia Mendoza, 60, was the owner of Mendez Tax Services (MTS), a tax preparation business she operated out of her home in El Paso.  Margarita Hernandez, 36, and Denise Duchene, 46, 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 Internal Revenue Service (IRS) numerous false Forms 1040 (U.S. Individual Income Tax Returns). 

To maximize their clients’ 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.

“These verdicts represent our continued commitment to identifying and prosecuting those individuals who willfully prepare and file false and fraudulent tax returns,” said Acting Assistant Attorney General Ciraolo.  “The millions of U.S. taxpayers who will file returns during the 2016 filing season are entitled to the assistance of honest and competent professionals, and the Tax Division will hold those preparers who in engage in criminal conduct accountable.”

“It’s tax season and the guilty verdicts for Belia Mendoza and her relatives, Margarita Hernandez and Denise Duchene, are proof that taxpayers are fed up with tax fraud and abuse,” said Special Agent in Charge William Cotter of IRS-Criminal Investigation, San Antonio. “Dishonest return preparers use a variety of methods to cheat the government. Remember, it is your responsibility to know what is on your income tax return. You are ultimately responsible for what gets filed with the IRS. Taxpayers are encouraged to visit the IRS.gov website for tips on looking for a reputable return preparer.”

Mendoza, Hernandez and Duchene each face up to five years in federal prison on the conspiracy charge and up to three years in federal prison for each false tax return preparation charge.

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, who prosecuted the case.

The Department of Justice announced today that an Athens, Texas, woman has been sentenced to more than one year in prison for her role in the smuggling of imitation, unapproved and misbranded prescription drugs from China.

Catherine Nix, 42, pleaded guilty in April 2015 to one count of conspiracy to smuggle the drugs into the United States.  Nix was sentenced to 15 months in prison, followed by two  years of supervised release.  Two co-defendants, Tom Giddens, 59, and Wanda Hollis, 64, also of Athens, were each sentenced to 15 months in prison in October 2015.

“Consumers of prescription drugs need to know that what they are buying is legitimate, safe, and approved,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “This illegal operation introduced more than 100,000 bogus pills into the stream of commerce, potentially posing a huge public health and safety risk.  Consumers should know that the drugs they are buying are exactly what they appear to be, and not false versions of name-brand products that could ultimately do them more harm than good.”

In 2009, the defendants smuggled at least 43 known shipments, totaling approximately 106,000 pills, from China to Texas.  The shipments contained unapproved, bogus versions of several FDA-approved drugs that, because of the health and safety risks associated with their use, require valid prescriptions to dispense.  The prescription drugs seized included:  Xanax®; Valium®; sibutramine; Cialis®; Viagra® and Stilnox®, marketed in the United States as Ambien®.  None of the pills that were seized and tested were legitimate.  Some were sub-potent, but most contained entirely different active ingredients from their legitimate, approved versions.  The defendants attempted to hide their smuggling by using shipping labels that concealed the contents of their shipments and customs declarations falsely describing the contents as “gifts” or “toys.” They used multiple addresses in an effort to reduce the likelihood of seizures by U.S. Customs and Border Protection authorities.

“This office remains committed to stemming the increasing flood of illegitimate prescription drugs that come into East Texas,” said U.S. Attorney John M. Bales for the Eastern District of Texas.  “This case puts the very real, inherent dangers of counterfeit prescription drugs on full display.  These pills looked almost exactly like their legitimate counterparts, but lacked any of the safety or efficacy of the legitimate versions.”

“FDA’s laws are in place to ensure that consumers have access to safe and effective prescription drugs,” said Director George M. Karavetsos of the FDA’s Office of Criminal Investigations.  “Those who evade those laws risk harming the public’s health.  We will continue to work with our law enforcement partners to keep the U.S. marketplace free of illegitimate medical products.”

This case was investigated by the FDA’s Office of Criminal Investigations and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.  The case was prosecuted by Assistant U.S. Attorney Allen Hurst for the U.S. Attorney’s Office for the Eastern District of Texas and by Trial Attorney John W.M. Claud of the Civil Division’s Consumer Protection Branch.

The Justice Department announced today that Robert A. Zauzmer will become the new Acting Pardon Attorney effective immediately.

Zauzmer, the Chief of Appeals in the U.S. Attorney’s Office of the Eastern District of Pennsylvania, has been a key player in the department’s implementation of both the 2013 Smart on Crime initiative and the U.S. Sentencing Commission’s retroactive sentence reductions.

“Bob’s long-standing commitment to criminal justice reform and his knack for devising and implementing the department’s sentencing reduction policies made him a natural choice to serve as Pardon Attorney,” said Deputy Attorney General Sally Q. Yates.  “Bob also shares my unwavering dedication to the president’s clemency initiative.  Given his experience and dedication, I am confident that Bob will hit the ground running.” 

“As someone who has been part of the criminal justice system for more than 25 years, I have long been troubled by the imposition of disproportionately lengthy sentences, even as long as life imprisonment, that were imposed on low-level drug offenders on the basis of laws and policies that have since been changed,” said Zauzmer.  “I have dedicated much of the past decade to assisting in the efforts to right some of those unfairly long sentences, and it is my profound honor to aid the president in using his clemency power to continue to restore the sense of proportionality and fairness that is at the heart of our justice system.”

As part of his efforts on behalf of the department, Zauzmer has testified multiple times before the U.S. Sentencing Commission on sentencing guideline issues, including the retroactive application of reductions in drug sentences.  He also trained federal prosecutors nationwide on how to apply retroactivity in a way that provides relief to all eligible inmates in the most efficient manner possible.  From 2012 to 2014, Zauzmer served as a member of the Attorney General’s Advisory Committee (AGAC), working closely with Attorney General Loretta E. Lynch and Deputy Attorney General Yates at a time that they served as chair and vice-chair, respectively, of the AGAC.

The Office of the Pardon Attorney assists the president in the exercise of executive clemency.  Under the Constitution, the president’s clemency power extends only to federal criminal offenses.  All requests for executive clemency for federal offenses are directed to the Pardon Attorney for investigation and review.  After review and recommendation by the Pardon Attorney, the Deputy Attorney General makes a recommendation to the president for final disposition of each application.  Executive clemency may take several forms, including pardon, commutation of sentence, remission of fine or restitution, and reprieve.

In December 2013, President Obama directed the department to prioritize applications for clemency from inmates who were sentenced under outdated policies and would have received a lesser sentence under current policies and laws.  Since the clemency initiative was announced in April 2014, the president has granted 187 commutations, more than the last five presidents combined.

Used Hong Kong Entity and Foreign Accounts in Switzerland, Monaco and Singapore to Conceal Funds

A former U.S. citizen residing in Switzerland pleaded guilty today to one count of filing a false income tax return, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

“U.S. taxpayers have been given ample opportunity to come forward, disclose their secret foreign accounts, and come into compliance,” said Acting Assistant Attorney General Ciraolo.  “Those individuals and entities who rolled the dice in the hope of remaining anonymous are facing the consequences.  The Tax Division remains committed to investigating and prosecuting individual taxpayers with undeclared foreign financial accounts, as well as the financial institutions, bankers, financial advisors and other professionals who facilitate the concealment of income and assets offshore.  And as today’s guilty plea clearly indicates, the department’s reach is well beyond Switzerland.”

According to court documents, in 2006, Albert Cambata, 61, established Dragonflyer Ltd., a Hong Kong corporate entity, with the assistance of a Swiss banker and a Swiss attorney.  Days later, he opened a financial account at Swiss Bank 1 in the name of Dragonflyer.  Although he was not listed on the opening documents as a director or an authorized signatory, Cambata was identified on another bank document as the beneficial owner of the Dragonflyer account.  That same year, Cambata received $12 million from Hummingbird Holdings Ltd., a Belizean company.  The $12 million originated from a Panamanian aviation management company called Cambata Aviation S.A. and was deposited to the Dragonflyer bank account at Swiss Bank 1 in November 2006. 

“IRS Criminal Investigation will continue to pursue those who do not pay the taxes they owe to the United States,” said Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation, Washington, D.C. Field Office.  “Today’s plea is a reminder that we are committed to following the money trail across the globe and will not be deterred by the use of sophisticated international financial transactions that hide the real ownership of income taxable by the United States.”

On his 2007 and 2008 federal income tax returns, Cambata failed to report interest income earned on his Swiss financial account in the amounts of $77,298 and $206,408, respectively.  In April 2008, Cambata caused the Swiss attorney to request that Swiss Bank 1 send five million Euros from the Swiss financial account to an account Cambata controlled at the Monaco branch of Swiss Bank 3.  In June 2008, Cambata closed his financial account with Swiss Bank 1 in the name of Dragonflyer and moved the funds to an account he controlled at the Singapore branch of Swiss Bank 2. 

In 2012, Cambata, who has lived in Switzerland since 2007, went to the U.S. Embassy in Bratislava, Slovakia, to renounce his U.S. citizenship and informed the U.S. Department of State that he had acquired the nationality of St. Kitts and Nevis by virtue of naturalization.

U.S. District Judge Claude Hilton of the Eastern District of Virginia set sentencing for April 15.  Cambata faces a statutory maximum sentence of three years in prison and a fine of up to $250,000.  As part of his plea agreement, Cambata agreed to pay $84,849 in restitution to the Internal Revenue Service (IRS).

Acting Assistant Attorney General Ciraolo and U.S. Attorney Boente thanked special agents of IRS-Criminal Investigation, who investigated the case, and Assistant Chief Todd Ellinwood of the Tax Division and Assistant U.S. Attorney Mark D. Lytle of the Eastern District of Virginia, who prosecuted the case.

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

Divestitures Avoid Creating Monopolies or Duopolies for Critical Fueling and Support Services

The Department of Justice announced today that it will require BBA Aviation plc, the parent company of Signature Flight Support, to divest fixed‑base operator assets (FBOs) at six U.S. airports in order to proceed with its $2.065 billion acquisition of Landmark Aviation.  

The department’s Antitrust Division filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to block the proposed acquisition, and simultaneously filed a proposed settlement that, if approved by the court, would resolve the competitive harm alleged in the lawsuit.  The department said that without the required divestitures, the transaction would have created a monopoly for FBO services at three airports and reduced the number of full-service FBO providers from three to two at three others, resulting in higher prices and lower quality of FBO services for consumers.

“The merger would have subjected general aviation customers at six airports to a monopoly or duopoly for critical fueling and support services,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “Higher prices and lower quality services were the likely result.  Today’s proposed settlement will ensure that customers at these airports will continue to receive the benefits of vigorous competition.”

FBOs provide fuel and related support services to general aviation customers, which include charter, private and corporate aircraft operators.  Signature and Landmark own or operate full-service FBOs at airports throughout the United States.  Signature and Landmark are the only two full-service FBOs at Washington Dulles International Airport (IAD) in Dulles, Virginia; Scottsdale Municipal Airport (SDL) in Scottsdale, Arizona; and Fresno Yosemite International Airport (FAT) in Fresno, California.  Signature and Landmark are two of only three full-service FBOs at Jacqueline Cochran Regional Airport (TRM) in Thermal, California; Westchester County Airport (HPN) in White Plains, New York; and Ted Stevens Anchorage International Airport (ANC) in Anchorage, Alaska.  At each of these three airports, the third FBO is much smaller than Signature and Landmark.

Under the terms of the proposed settlement, BBA Aviation must divest Landmark’s FBO assets at each of the six impacted airports to a buyer approved by the Antitrust Division.

BBA Aviation plc is a United Kingdom public limited company headquartered in London.  Its subsidiary, Signature Flight Support, a Delaware corporation headquartered in Orlando, Florida, has the world’s largest FBO network and operates approximately 70 FBO facilities in the United States.  BBA had worldwide revenues of approximately $2.3 billion in 2014, of which over $900 million were derived from Signature’s U.S. FBO business.

Landmark U.S. Corp LLC and LM U.S. Member LLC (collectively doing business as Landmark Aviation), are Delaware limited liability companies headquartered in Houston and are owned by investment funds managed by the Carlyle Group.  Landmark operates approximately 60 FBO facilities in the United States.  Landmark had worldwide revenues of over $700 million in 2014, of which over $500 million were derived from its U.S. FBO business.

As required by the Tunney Act, the proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement during a 60-day comment period to James J. Tierney, Chief, Networks & Technology Enforcement Section, Antitrust Division, U.S. Department of Justice, 450 5th Street, N.W., Suite 7100, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the proposed final judgment upon finding that it serves the public interest.

BBA_Landmark CIS (86.52 KB)

BBA_Landmark PFJ (84.97 KB)

BBA_Landmark Hold Separate (105.15 KB)

BBA_Landmark Explanation (26.9 KB)

BBA_Landmark Complaint (115.75 KB)

A government contractor based in Fort Lauderdale, Florida, was sentenced to 12 months and one day in prison for filing a false income tax return, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division announced today.

According to court documents, Maxim Silinsky, 44, owned an aircraft-leasing and parts-supply company called Simplex Corporation.  Simplex contracted with the federal government to lease Russian aircraft to the U.S. Air Force for training purposes and to supply parts and equipment to U.S. military forces deployed to Afghanistan. 

Silinsky used a complex web of domestic and foreign corporate entities and financial accounts to facilitate his underpayment of both corporate and individual income tax for the years 2007 through 2010.  Silinsky filed false corporate tax returns for these years that overstated Simplex’s expenses.  For the years 2008 through 2010, Silinsky also filed false individual income tax returns on which he understated the amount of income he received from the business.  To conceal his fraud from the Internal Revenue Service (IRS), Silinsky transferred approximately $1.7 million from Simplex to nominee bank accounts that he controlled and disguised the transfers as costs of goods sold, which led to overstated costs-of-goods-sold expenses on Simplex’s corporate returns.  In 2012, during an audit of Simplex’s 2008 corporate return, Silinsky made false statements to the IRS about these expenses.  Silinsky also purchased real estate using funds he diverted from the business and titled the property in nominee names to hide his involvement.  Additionally, a family member served as a nominee shareholder of a shell corporation that Silinsky established to receive income from Simplex on his behalf, which allowed Silinsky to pay taxes on this money at a lower rate.  In the plea documents, Silinsky also admitted that he was involved in making illicit payments to a government contractor and U.S. military personnel. 

“All taxpayers are required to provide truthful information to the Internal Revenue Service, whether it be on a tax return, during an audit, or with respect to collections” said Acting Assistant Attorney General Ciraolo.  “The Tax Division is committed to pursuing those taxpayers who seek to obstruct or evade the assessment and collection of federal income taxes by lying to the government about their income, expenses or assets.”

Silinsky cooperated with federal authorities in the prosecution of a federal government contractor, Victor Villalobos, and a retired senior non-commissioned Air Force officer, Trevor Smith, who have both pleaded guilty in separate cases to government contracting and tax fraud.  Smith was sentenced last month to 18 months in prison and Villalobos is set to be sentenced on Feb. 17. 

In addition to the prison term, Silinsky was also ordered to pay a $6,000 fine. Silinsky paid restitution to the IRS prior to his sentencing.

Acting Assistant Attorney General Ciraolo commended special agents of IRS Criminal Investigation, the U.S. Air Force’s Office of Special Investigations and the U.S. Department of Defense’s Defense Criminal Investigative Service, who investigated this case, and Trial Attorneys Charles M. Edgar Jr. and Jason H. Poole of the Tax Division, who prosecuted this case.  Ciraolo also thanked the U.S. Attorney’s Office of the Southern District of Florida for their substantial assistance.

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

Company Sentenced to Pay a Total of Over $1.7 Million in Fines and Restitution

A New Jersey industrial pipe supply company and its owner were sentenced today for conspiring to commit fraud and pay bribes to a purchasing manager at Consolidated Edison of New York in return for the manager’s efforts to steer contracts to the company, the Department of Justice announced.

Andrew Martingano, of Staten Island, New York, was sentenced by U.S. District Judge Deborah A. Batts of the Southern District of New York to 32 months and a day in prison.  American Pipe Bending and Fabrication Co. Inc. of Edison, New Jersey, was sentenced to pay a $150,000 criminal fine.  Martingano and American Pipe were also sentenced to pay over $1.6 million in restitution, jointly and severally with their co-conspirators, to the victim, Con Ed.  The company and its owner pleaded guilty to committing wire fraud and conspiring to defraud Con Ed on Aug. 15, 2012.

According to court documents, Martingano and others agreed to pay approximately $510,000 in cash bribes to James M. Woodason, a department manager of the purchasing department at Con Ed.  In exchange for the bribes, Woodason steered Con Ed industrial pipe supply contracts to American Pipe by secretly providing Martingano with confidential competitor bid information, thereby causing Con Ed to pay higher, non-competitive prices for materials.  At the time of Woodason’s arrest in August 2010, Woodason had already received approximately $45,000 in cash bribes from Martingano and American Pipe.

The department said the conspiracy took place from approximately January 2009 to August 2010.  In addition, Martingano and American Pipe defrauded Con Ed by requesting a 14 percent price increase and basing that request on a fake email purporting to document a “Steel Mill” price increase that American Pipe was passing on to Con Ed.  These false and fraudulent price increase requests caused actual losses to Con Ed in the amount of approximately $1.4 million and intended losses of approximately $9.4 million.

Con Ed is a regulated utility headquartered in Manhattan.  It provides electric service to approximately 3.2 million customers, and gas service to approximately 1.1 million customers in New York City and Westchester County, New York.  Con Ed received more than $10,000 in federal funding each year between 2003 through 2010, and cooperated with the department’s investigation.

Including Martingano and American Pipe, a total of five individuals and two companies have been charged as part of this investigation and have been ordered to serve a total of more than 16 years in prison and to pay criminal fines and restitution of more than $3 million. 

The charges arose from an ongoing federal antitrust investigation of bid rigging, bribery, fraud and tax-related offenses in the power generation industry.  The investigation is being conducted by the Antitrust Division’s New York Office, with assistance from the FBI and the Internal Revenue Service-Criminal Investigation.  Anyone with information concerning bid rigging, bribery, tax offenses or fraud in the power generation industry should contact the FBI’s New York Division at 212-384-3720 or the Antitrust Division’s New York Office at 212-335-8000, or visit www.justice.gov/atr/contact/newcase.htm.   

The Justice Department announced today that MCC Construction Company (MCC) has agreed to pay $1,769,294 in criminal penalties and forfeiture for conspiring to commit fraud on the United States by illegally obtaining government contracts that were intended for small, disadvantaged businesses.

The court agreement was announced today by Assistant Attorney General William J. Baer of the Justice Department’s Antitrust Division, U.S. Attorney Channing D. Phillips of the District of Columbia, Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office, Inspector General Peggy E. Gustafson of the Small Business Administration (SBA), Inspector General Carol Fortine Ochoa of the U.S. General Services Administration (GSA), Special Agent in Charge Brian J. Reihms of the Defense Criminal Investigative Service’s (DCIS) Central Field Office and Director Frank Robey of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit (MPFU).

“This conspiracy defrauded the government and denied small, disadvantaged businesses the opportunity to compete to do business with the United States,” said Assistant Attorney General Baer.  “We will continue to work with U.S. Attorney Phillips and his talented colleagues to protect the integrity of the government contracting process.”

“This prosecution shows that there will be consequences for companies that violate federal contracting rules meant to assist small, disadvantaged businesses,” said U.S. Attorney Phillips.  “MCC Construction Company secured millions of dollars in contracts by hiding behind two small businesses that did not perform labor on the projects.  Its conduct took away opportunities that could have gone to companies that truly are socially and economically disadvantaged and deserving of the work.”

“An uneven marketplace is created when businesses engage in illegal backroom deals to fraudulently obtain government contracts, placing competitors at an unfair disadvantage,” said Assistant Director in Charge Abbate.  “In this case, the FBI and our partners moved to protect the American taxpayer and ensure the integrity of the process.  Together, we will continue to work to protect federal contract opportunities for socially and economically disadvantaged businesses within our communities from unlawful conduct.”

“Fraudulently passing work through eligible small businesses to a large business does not provide taxpayers the best value and certainly does not support the role of small businesses as engines of economic development and job creation,” said Inspector General Gustafson.  “In fact, it subverts the purpose of SBA’s preferential contracting programs and harms the small businesses the programs are designed to assist.  I want to thank the U.S. Attorney’s Office and our law enforcement partners for their leadership and dedication to serving justice.”

“We will continue our work on behalf of taxpayers and legitimate small business owners to expose and punish nationwide small business fraud schemes such as this,” said Inspector General Ochoa.

“The Defense Criminal Investigative Service is committed to working with our partner agencies to combat fraud impacting the Department of Defense’s vital programs and operations and maintain the integrity of the procurement system,” said Special Agent in Charge Reihms.

“This settlement is a testament to our steadfast and continued commitment to working closely with our law enforcement partners in rooting out this type of activity,” said Director Robey.

MCC was a construction management company and general contractor headquartered in Colorado. 

A criminal information was filed last month in the U.S. District Court for the District of Columbia charging MCC with one count of knowingly and willfully conspiring to commit major fraud on the United States.  MCC waived the requirement of being charged by way of federal indictment, agreed to the filing of the information and accepted responsibility for its criminal conduct and that of its employees.  U.S. District Judge Ketanji B. Jackson accepted the company’s guilty plea today.  The plea agreement is subject to the court’s approval at a sentencing hearing scheduled for March 15, 2016.

According to court documents, MCC conspired with two companies that were eligible to receive federal government contracts set aside for small, disadvantaged businesses with the understanding that MCC would, illegally, perform all of the work.  In so doing, MCC was able to win 27 government contracts worth over $70 million from 2008 to 2011.  The scope and duration of the scheme resulted in a significant number of opportunities lost to legitimate small and disadvantaged businesses.

Under the illegal agreement, the companies awarded these government contracts were allowed to keep 3 percent of the value of the contracts for allowing MCC to use the companies small business status to win the contracts.

Court documents state that MCC violated the provisions of the SBA 8(a) program.  The SBA 8(a) development program is designed to award contracts to businesses that are owned by “one or more socially and economically disadvantaged individuals.”  To qualify for the 8(a) program, a business must be at least 51 percent owned and controlled by a U.S. citizen (or citizens) of good character who meet the SBA’s definition of socially and economically disadvantaged.  The firm must also be a small business (as defined by the SBA) and show a reasonable potential for success.  Participants in the 8(a) program are subject to regulatory and contractual limits.  Also, under the program, the disadvantaged business is required to perform a certain percentage of the work.  For the types of contracts under investigation here, the SBA 8(a)-certified companies were required to perform 15 percent or more of the work with its own employees.

MCC, along with the two 8(a) companies used to illegally obtain the contracts, engaged in and executed a scheme to defraud the SBA by, among other things: 

• Allowing the two 8(a) companies to retain a guaranteed percentage of each contract for simply obtaining the contracts for MCC;
• Allowing the two 8(a) companies to perform no labor on these projects;
• Performing the accounting and government reporting for the two 8(a) companies on certain projects;
• Falsely representing to the government that MCC employees were in fact employees of the 8(a) companies;
• Obtaining certain contracts on behalf of the 8(a) companies without first informing those 8(a) companies prior to bidding; and
• Conspiring with the 8(a) companies to hire straw employees for the 8(a) companies whose labor and salaries were paid for by MCC.

For the contracts obtained through this scheme on which MCC made a profit, MCC’s profit was at least $1,269,294.  The criminal penalty in this case includes a $500,000 fine and a forfeiture money judgment of $1,269,294.

The investigation is being conducted by the FBI’s Washington Field Office, the Inspector General for the SBA, the Inspector General of the U.S. GSA, the DCIS’ Central Field Office, and the MPFU. 

The Department of Justice, the U.S. Environmental Protection Agency (EPA) and the State of Utah have reached an agreement with Salt Lake County to resolve alleged Clean Water Act violations associated with the County’s stormwater management program.  This agreement, lodged as a consent decree in the U.S. District Court for the District of Utah today, requires the county to take specific measures to reduce illegal stormwater and non-stormwater discharges to Jordan River Valley surface waters by thoroughly implementing the requirements of its municipal separate storm sewer system (MS4) permit.  The county will also pay a civil penalty of $280,000.

“This agreement is good news for water quality in Salt Lake County and the people and wildlife that depend on it,” said Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division. “The settlement today is the result of a joint enforcement action by the State of Utah and the United States that will protect the area’s precious water resources from contaminated runoff for many years to come.”

“Protecting the water quality in Salt Lake County is a priority for all of us,” said U.S. Attorney John W. Huber for the District of Utah.  “Salt Lake County, working together with the State of Utah, the EPA, and the Department of Justice, has agreed to take several measures that will help protect the Jordan River watershed going forward.”

“Preventing and managing polluted runoff in urban areas is essential to protecting water quality,” said Director Suzanne Bohan for EPA’s Enforcement Program in Denver, Colorado.  “The rivers and streams in the Jordan River watershed support growing populations and provide significant economic and recreational benefits in Salt Lake County’s communities.  EPA will continue to take steps to ensure that municipalities have viable stormwater programs in place to reduce polluted runoff and protect water resources.”  

Under the terms of the agreement, Salt Lake County will secure adequate resources to fully maintain and implement its stormwater program, including training and maintaining full-time staff.  The county will also take measures to remedy several identified deficiencies, including procedures to review construction site stormwater control plans, inspect sites with active construction or industrial activity and enforce sediment and erosion control requirements.  In addition, the county will ensure structural controls are properly installed and maintained and will improve efforts to identify and eliminate illegal discharges to stormwater infrastructure.

The volume of annual runoff in the Jordan River Valley is estimated at 190 million cubic meters per year, a figure that underscores the importance of local efforts to manage stormwater so it does not become contaminated before reaching surface waters.  The Jordan River watershed supports fish, migratory bird species and wildlife and provides water for recreation, irrigation and public supply.

Stormwater runoff from rain and snowmelt events can pick up pollutants like trash, chemicals, oils and sediment as it flows over land and impervious surfaces, such as industrial storage areas, paved streets and parking lots.  These pollutants can damage the health of a watershed and cause changes in the water quality, resulting in impaired drinking water sources, habitat modification and loss, increased flooding, decreased aquatic biological diversity and increased sedimentation and erosion.  Stormwater controls—also known as best management practices—filter out pollutants and prevent pollution by controlling it at its source.

The Clean Water Act uses a permitting process to manage stormwater discharges from three types of sources: municipal separate storm sewer systems (MS4s), construction activities, and industrial activities.  These permits are designed to prevent runoff from rain and snowmelt events from washing harmful pollutants into local surface waters.  MS4s are systems of conveyances for storm water that include infrastructure such as storm drains, pipes, ditches and roads.  MS4 permits are designed to reduce the release of contaminated runoff into MS4s and the waters into which they discharge.  EPA and the Utah Department of Environmental Quality inspected the County’s MS4 in 2012 and identified numerous violations of the County’s MS4 permit.

The consent decree agreement requires the county to pay a one-time civil penalty of $280,000, including $140,000 to the United States and $140,000 to the State of Utah, with an opportunity to offset a portion of the state amount through the completion of supplemental environmental projects.

The settlement, lodged today is subject to a 30-day public comment period and approval by the federal court.  The settlement will be available for viewing at www.justice.gov/enrd/Consent_Decrees.html

For more information on EPA’s NPDES stormwater program visit: http://www.epa.gov/npdes/npdes-stormwater-program

Attorney General Loretta E. Lynch announced today the appointment of U.S. Attorney Dana J. Boente of the Eastern District of Virginia to the Attorney General’s Advisory Committee (AGAC), effective Feb. 1, 2016.

“Dana Boente embodies the vision and leadership we need to empower our communities and strengthen our nation, and I am pleased to welcome him to the Attorney General’s Advisory Committee,” said Attorney General Lynch.  “Throughout his career – as a Trial Attorney in the Department of Justice’s Tax Division, as a federal prosecutor dedicated to rooting out fraud, and as a U.S. Attorney in Louisiana and Virginia – he has demonstrated his perseverance, his dedication and his wisdom.  I have no doubt that he will be an outstanding addition to the Committee, and I look forward to receiving the benefit of his experience as we continue to work towards a safer, more just future for all Americans.”

Boente will fill the seat vacated by former U.S. Attorney Booth Goodwin of the Southern District of West Virginia, who resigned on Dec. 31, 2015.

Boente was appointed by President Barack Obama and confirmed by the Senate on Dec. 15, 2015 as the U.S. Attorney of the Eastern District of Virginia (EDVA).  Boente is a 31-year veteran of the Department of Justice, joining the department in 1984 at the conclusion of a clerkship with a U.S. District Court Judge.  From 1984 to 1999, Boente was a Trial Attorney with the department’s Tax Division.  In January 2000, Boente became an Assistant U.S. Attorney in the Fraud Unit in EDVA.  In August 2005, Boente was detailed back to the Tax Division to serve as the Principal Deputy Assistant Attorney General.  He returned to EDVA in May 2007, when he was selected as the First Assistant U.S. Attorney.  In December 2012, Boente went to serve as the U.S. Attorney of the Eastern District of Louisiana.  He returned to the U.S. Attorney’s Office in EDVA in September 2013.

The AGAC was created in 1973 to serve as the voice of the U.S. Attorneys and to advise the Attorney General on policy, management and operational issues impacting the U.S. Attorneys’ Offices.

FARGO - U. S. Attorney Christopher C. Myers announced that on Jan. 29, 2016, Andrew Jerome Ford, and Carlos Henry Bethel, both 28, pled guilty before U. S. District Judge Ralph R. Erickson to Interference with the Commerce by Threats and Violence-Hobbs Act Robbery and Possession of a Firearm in Furtherance of a Crime of Violence.

On September 28, 2015, Bottle Barn Wine and Liquor, 2515 South University Dr., and The Spirit Shop Liquor Store, 1404 33rd St. S., were robbed within an hour of each other. Bethel pled guilty to robbing Bottle Barn while brandishing a firearm and threatening the cashier to hand over money. Ford has agreed to plead guilty to robbing The Spirit Shop through violence or threat of violence and did knowingly possess a firearm in furtherance of the crime of violence.

As part of the plea agreement Ford and Bethel also agreed that they participated or aided and abetted the following crimes:

(a) A home invasion on June 24, 2015, in Hillsboro, North Dakota, where currency was stolen;

(b) A burglary resulting in a stolen firearm in Hillsboro in or about July through September 2015;

(c) A burglary of a vehicle in Fargo, North Dakota, in which monetary instruments were stolen on or about August 24, 2015, and on or about September 24, 2015;

(d) A burglary of a residence in Fargo, resulting in the theft of five firearms on or about September 24, 2015;

(e) Setting fire to four dumpsters in Fargo in an effort to determine law enforcement response time on or about September 28, 2015, as well as robbery of The Spirit Shop Liquor Store in Fargo;

(f) The pistol whipping assault of a victim resulting in serious bodily injury including unconsciousness on or about September 19, 2015 in Fargo; and,

(g) Conspiracy to distribute marijuana in North Dakota.

Judge Erickson has set sentencing for Ford to be held on April 19, 2016, and Bethel’s sentencing is scheduled for April 25, 2016, in the U. S. District Court, Fargo, ND.

This case is being investigated by the Fargo Police Department and Alcohol, Tobacco, Firearms, and Explosives (ATFE).

U. S. Attorney Christopher C. Myers is prosecuting the case

Virginia-based hardwood flooring retailer Lumber Liquidators Inc. was sentenced today in federal court in Norfolk, Virginia, and will pay more than $13 million in criminal fines, community service and forfeited assets related to its illegal importation of hardwood flooring, much of which was manufactured in China from timber that had been illegally logged in far eastern Russia, in the habitat of the last remaining Siberian tigers and Amur leopards in the world, announced the Department of Justice.  

In total, the company will pay $13.15 million, including $7.8 million in criminal fines, $969,175 in criminal forfeiture and more than $1.23 million in community service payments.  Lumber Liquidators has also agreed to a five-year term of organizational probation and mandatory implementation of a government-approved environmental compliance plan and independent audits.  In addition, the company will pay more than $3.15 million in cash through a related civil forfeiture.  The more than $13.15 million dollar penalty is the largest financial penalty for timber trafficking under the Lacey Act and one of the largest Lacey Act penalties ever.  

Lumber Liquidators pleaded guilty and was charged in October 2015 in the Eastern District of Virginia with one felony count of importing goods through false statements and four misdemeanor violations of the Lacey Act, which makes it a crime to import timber that was taken in violation of the laws of a foreign country and to transport falsely-labeled timber across international borders into the United States.  The charges describe Lumber Liquidators’ use of timber that was illegally logged in Far East Russia, as well as false statements on Lacey Act declarations which obfuscated the true species and source of the timber.  This is the first felony conviction related to the import or use of illegal timber and the largest criminal fine ever under the Lacey Act.

“The case against Lumber Liquidators shows the true cost of turning a blind eye to the environmental laws that protect endangered wildlife,” said Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division.  “This company left a trail of corrupt transactions and habitat destruction.  Now they will pay a price for this callous and careless pursuit of profit.”

“This prosecution has been the result of hard work of federal agents and prosecutors who have been dedicated to protecting our natural habitats in the United States and around the world,” said U.S. Attorney Dana Boente of the Eastern District of Virginia. 

“Today’s sentence – which includes the largest financial penalty ever under the Lacey Act – demonstrates the consequences companies will face if they knowingly accept illegally sourced materials and violate U.S. customs laws,” said Special Agent in Charge Clark E. Settles of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) in Washington, D.C.

“By knowingly and illegally sourcing timber from vulnerable forests in Asia and other parts of the world, Lumber Liquidators made American consumers unwittingly complicit in the ongoing destruction of some of the world's last remaining intact forests,” said Director Dan Ashe of the U.S. Fish and Wildlife Service.  “Along with hastening the extinction of the highly endangered Siberian tiger and many other native species, illegal logging driven by the company's greed threatens the many people who depend on sustainable use of these forests for food, clean water, shelter and legitimate jobs.  These unprecedented sanctions show how seriously we take illegal trade, and I am grateful to the Service special agents and wildlife inspectors, Homeland Security agents, and Justice Department attorneys who halted Lumber Liquidators' criminal acts and held the company accountable under the law.”

According to a joint statement of facts filed with the court, from 2010 to 2013, Lumber Liquidators repeatedly failed to follow its own internal procedures and failed to take action on self-identified “red flags.”  Those red flags included imports from high risk countries, imports of high risk species, imports from suppliers who were unable to provide documentation of legal harvest and imports from suppliers who provided false information about their products.  Despite internal warnings of risk and non-compliance, very little changed at Lumber Liquidators.

For example, Lumber Liquidators employees were aware that timber from the Russian Far East was considered, within the flooring industry and within Lumber Liquidators, to carry a high risk of being illegally sourced due to corruption and illegal harvesting in that remote region.  Despite the risk of illegality, Lumber Liquidators increased its purchases from Chinese manufacturers using timber sourced in the Russian Far East.  In 2013, the defendant imported Russian timber logged under a concession permit that had been utilized so many times that the defendants’ imports alone exceeded the legal harvest allowance of Mongolian oak, Quercus mongolica, by more than 800 percent.  The investigation revealed a prevalent practice in timber smuggling enterprises, where a company uses a seemingly legitimate government permit to log trees.  Corruption and criminal activity along the supply chain results in the same permit being used multiple times and in areas outside of the designated logging area, sometimes vastly exceeding its legal limits. 

On other occasions, Lumber Liquidators falsely reported the species or harvest country of timber when it was imported into the United States.  In 2013, Lumber Liquidators imported Mongolian oak from Far East Russia which it declared to be Welsh oak and imported merpauh from Myanmar which it declared to be mahogany from Indonesia. 

The illegal cutting of Mongolian oak in far eastern Russia is of particular concern because those forests are home to the last 450 wild Siberian tigers, Panthera tigris altaica.  Illegal logging is considered the primary risk to the tigers’ survival, because they are dependent on intact forests for hunting and because Mongolian oak acorns are a chief food source for the tigers’ prey species.  Mongolian oak forests are also home to the highly endangered Amur leopard, Panthera pardus orientalis, of which fewer than 50 remain in the wild.  In June 2014, in response to illegal logging and the decline in tiger populations, Mongolian oak was added to the Convention on the International Trade in Endangered Species (CITES) Appendix III.

The $1,230,825 in community service payments is being provided to two Congressionally-chartered recipients, the National Fish and Wildlife Foundation (NWFW) and the USFWS Rhinoceros and Tiger Conservation Fund.  One project that will be funded is the development of a wood identification device that if successful, could fill a critical gap in enforcement when it comes to identifying the species of timber at a border or in an enforcement scenario.  The device would be able to identify timber species that are listed on the CITES Appendices, including the species that were at issue in this case.  If U.S. border officials would have had access to such a device in 2011, then perhaps Lumber Liquidators could have been flagged for violation years ago, thus averting the flow of money back to China and Far East Russia in support of illegal logging.  Other projects would involve protecting, researching and preserving the Siberian tiger, Amur leopard and their habitat. 

The case was jointly investigated by agents of the USFWS and HSI as part of Operation Oakenshield.  The case is being prosecuted by Patrick M. Duggan and Christopher L. Hale of the Justice Department’s Environmental Crimes Section of the Environment and Natural Resources Division, and Stephen Haynie and Kevin P. Hudson of the U.S. Attorney’s Office in Norfolk.

FALLS CHURCH, VA – The Executive Office for Immigration Review (EOIR) today announced the investiture of nine immigration judges. Acting Chief Immigration Judge Print Maggard presided over the investiture during a ceremony held Jan. 29, 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 Xiomara Davis-Gumbs, Jennifer M. Gorland, Denise C. Hochul, Mark J. Jebson, Margaret M. Kolbe, Ramin Rastegar, Shifra Rubin, Meredith B. Tyrakoski, and Daniel H. Weiss to their new positions.

“Our agency continues to work hard to hire highly qualified immigration judges who will help to decrease our pending caseload,” said Maggard. “With these nine new immigration judges, our immigration judge corps now totals 254, and we will continue adding to this number throughout this year to further enhance EOIR’s capacity to meet the tremendous challenges we face.”

Xiomara Davis-Gumbs, Immigration Judge, Dallas Immigration Court

Attorney General Loretta E. Lynch appointed Judge Davis-Gumbs to begin hearing cases in January 2016. Judge Davis-Gumbs earned a Bachelor of Science degree in 1983 from John Jay College of Criminal Justice, City University of New York and a Juris Doctor in 1992 from Touro College, Jacob D. Fuchsberg Law Center. From 2008 through 2015, Judge Davis-Gumbs served in the Office of the Chief Counsel, U.S. Citizenship and Immigration Services (USCIS), U.S. Department of Homeland Security (DHS), in Dallas, in various capacities including deputy chief counsel, and previously as associate counsel, Central Law Division, and as associate counsel, Training and Knowledge Management Division. From 2002 through 2008, Judge Davis-Gumbs served as assistant chief counsel in the Office of Principal Legal Advisor, U.S. Immigration and Customs Enforcement, DHS, in Newark, N.J. From 1997 through 2002, Judge Davis-Gumbs served as an asylum officer in the Office of International Affairs, in the former Immigration and Naturalization Service, U.S. Department of Justice (DOJ), in Rosedale, N.Y. From 1994 through 1997, Judge Davis-Gumbs served as special assistant/litigation coordinator for the Federal Bureau of Prisons, DOJ, in New York, N.Y. From 1993 through 1994, Judge Davis-Gumbs served as a law clerk, and from 1988 through 1993, as an inmate grievance counselor in the Trial Unit, New York City Department of Corrections. Judge Davis-Gumbs is a member of the New York Bar.

Jennifer M. Gorland, Immigration Judge, Detroit Immigration Court

Attorney General Loretta E. Lynch appointed Judge Gorland to begin hearing cases in January 2016. Judge Gorland received a Bachelor of Arts degree in 1982 from the University of Michigan and a Juris Doctor in 1985 from Wayne State University School of Law. From 1989 through 2015, Judge Gorland served in the U.S. Attorney’s Office for the Eastern District of Michigan, in Detroit, as an assistant U.S. attorney in various capacities, including: first assistant U.S. attorney; chief, General Crimes Unit; deputy chief, and previously as assistant U.S. attorney, General Crimes Unit; assistant U.S. attorney, Economic Crimes Unit; and, as assistant U.S. attorney, Civil Division. From 1985 through 1989, Judge Gorland served as an associate for Pepper, Hamilton and Scheetz, in Detroit. Judge Gorland is a member of the State Bar of Michigan.

Denise C. Hochul, Immigration Judge, Buffalo Immigration Court

Attorney General Loretta E. Lynch appointed Judge Hochul to begin hearing cases in January 2016. Judge Hochul received a Bachelor of Arts degree in 1980 from the State University of New York at Buffalo and a Juris Doctor in 1985 from the Ohio Northern University, Claude W. Pettit College of Law. From 1996 through 2015, Judge Hochul served in the Office of the Chief Counsel, U.S. Immigration and Customs Enforcement (ICE), Department of Homeland Security, in Buffalo, in various capacities, including: senior attorney; assistant chief counsel; designated human rights law special interest attorney; designated national security special interest attorney; member of the Trial Advocacy Training Team; and as a special assistant U.S. attorney in the U.S. Attorney’s Office for the Western District of New York. From 1987 through 1996, she served as an assistant district attorney in the Erie County District Attorney’s Office in Buffalo. Judge Hochul is a member of the New York Bar.

Mark J. Jebson, Immigration Judge, Detroit Immigration Court

Attorney General Loretta E. Lynch appointed Judge Jebson to begin hearing cases in January 2016. Judge Jebson received a Bachelor of Arts degree in 1990 from the University of California, Los Angeles, a Juris Doctor in 1994 from the John Marshall Law School, and a Master of Laws degree in 1995 from the New York University School of Law. From 2003 through 2015, Judge Jebson served in the Office of Chief Counsel, U.S. Immigration and Customs Enforcement (ICE), Department of Homeland Security, in Detroit, in various capacities, including: senior attorney, deputy chief counsel, assistant chief counsel, and as a special assistant U.S. attorney in the U.S. Attorney’s Office for the Eastern District of Michigan. From 2002 through 2003, Judge Jebson served as an assistant U.S. attorney in the U.S. Attorney’s Office for the Northern District of Texas, in Dallas. From 1997 through 2002, Judge Jebson served as an assistant district counsel in the former Immigration and Naturalization Service, U.S. Department of Justice, in Detroit. From 1996 through 1997, he served as a judicial law clerk for the Michigan Supreme Court, and from 1995 through 1996, as a prehearing attorney for the Michigan Court of Appeals, in Detroit. Judge Jebson is a member of the Illinois State Bar and the State Bar of Michigan.

Margaret M. Kolbe, Immigration Judge, New York Immigration Court

Attorney General Loretta E. Lynch appointed Judge Kolbe to begin hearing cases in January 2016. Judge Kolbe received a Bachelor of Arts degree in 1987 from the University of Cincinnati, a Master of Arts degree in 1989 from the University of Cincinnati, and a Juris Doctor in 1996 from the Notre Dame Law School. From 2002 through 2015, Judge Kolbe served as assistant U.S. attorney in the U.S. Attorney’s Office for the Eastern District of New York, in Brooklyn, N.Y. From 1996 through 2002, Judge Kolbe served as an attorney advisor for the Board of Immigration Appeals, Executive Office for Immigration Review, U.S. Department of Justice, in Falls Church, Va., and from 1991 through 1993, as a Peace Corps volunteer in Gabon, Africa. Judge Kolbe is a member of the Ohio Bar.

Ramin Rastegar, Immigration Judge, Newark Immigration Court

Attorney General Loretta E. Lynch appointed Judge Rastegar to begin hearing cases in January 2016. Judge Rastegar received a Bachelor of Science in 1991 from George Mason University and a Juris Doctor in 1995 from New York Law School. From 2000 through 2015, Judge Rastegar served as assistant chief counsel in the Office of the Chief Counsel, U.S. Immigration and Customs Enforcement, Department of Homeland Security, in New York, N.Y. From 1997 through 2000, Judge Rastegar served as an associate at Barst and Mukamal LLP, in New York, N.Y., and from 1996 through 1997, as an associate in the Law Offices of Ronald Salomon, in New York, N.Y. Judge Rastegar is a member of the Connecticut and New York Bars.

Shifra Rubin, Immigration Judge, Newark Immigration Court

Attorney General Loretta E. Lynch appointed Judge Rubin to begin hearing cases in January 2016. Judge Rubin received a Bachelor of Arts degree in 1992 from Rutgers University and a Juris Doctor in 2002 from Rutgers School of Law. From 2003 through 2015, Judge Rubin served in various capacities for the Immigration Representation Project, Legal Services of New Jersey, in Edison, N.J., including serving as a senior attorney, supervising attorney, and staff attorney. Judge Rubin is a member of the New Jersey Bar.

Meredith B. Tyrakoski, Immigration Judge, San Antonio Immigration Court

Attorney General Loretta E. Lynch appointed Judge Tyrakoski to begin hearing cases in January 2016. Judge Tyrakoski received a Bachelor of Arts degree in 1996 from Northwestern University and a Juris Doctor in 2003 from the William and Mary School of Law. From 2006 through 2015, Judge Tyrakoski served as an assistant U.S. attorney in a number of U.S. Attorney’s Offices throughout the country, including the U.S. Attorney’s Office for the District of Nebraska in Omaha, the U.S. Attorney’s Office for the Western District of Texas in El Paso, Texas, and as special assistant attorney in the U.S. Attorney’s Office for the Central District of California in Los Angeles, Calif. From 1997 through 2008, Judge Tyrakoski served in the U.S. Marine Corps in various capacities, including: staff judge advocate, legal assistance attorney, defense counsel, student judge advocate, operations officer, public affairs officer, and supply officer. Judge Tyrakoski is a member of the State Bar of Texas and the Virginia Bar.

Daniel H. Weiss, Immigration Judge, Dallas Immigration Court

Attorney General Loretta E. Lynch appointed Judge Weiss to begin hearing cases in January 2016. Judge Weiss received a Bachelor of Arts degree in 1986 from the University of Pennsylvania and a Juris Doctor in 1990 from the University of Maryland School of Law. From 2010 through 2015, Judge Weiss served as senior trial attorney in the Human Trafficking Prosecution Unit, Criminal Section, Civil Rights Division, U.S. Department of Justice (DOJ), in Washington, D.C. From 2005 through 2010, Judge Weiss served as deputy chief, and, previously as a trial attorney, in the Special Litigation Section, Civil Rights Division, DOJ. From 1992 through 2000, Judge Weiss served as an assistant public defender II in the Appellate Trials Division, State of Maryland Office of the Public Defender, in Baltimore. From 1991 through 1992 Judge Weiss served as an attorney at the Fidelity & Deposit Companies of Maryland, in Baltimore, and from 1990 through 1991, as law clerk to the Honorable Ellen Hollander, Circuit Court for Baltimore City. Judge Weiss is a member of the District of Columbia and Maryland Bars.

- 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.

The Department of Justice today announced the launch of an independent and comprehensive review of the San Francisco Police Department.  This review will be conducted by the Office of Community Oriented Policing Services (COPS Office) through its Collaborative Reform Initiative.

The review is in response to requests made by city officials and community members asking that the Justice Department conduct an in-depth look into the use of force policies and practices of the San Francisco Police Department. 

“The Department of Justice is dedicated to upholding the highest standards of law enforcement throughout the United States, and this Collaborative Reform Initiative is a vital component of that effort,” said Attorney General Loretta E. Lynch.  “In the days and months ahead, we will examine the San Francisco Police Department’s current operational policies, training practices and accountability systems, and help identify key areas for improvement going forward.  I am confident that together we can make certain that our officers have the tools and training they need to do their jobs, and that every member of the San Francisco community has the protection and service they deserve.”

Director Ronald Davis of the COPS Office, the Justice Department agency responsible for collaborative review, and Acting U.S. Attorney Brian J. Stretch of the Northern District of California, were joined by San Francisco city and law enforcement leaders to announce the launch of the collaborative reform process.

“As part of the collaborative reform process, the Justice Department will conduct a thorough, independent and objective assessment of the San Francisco Police Department’s policies, practices and accountability systems,” said Director Davis.  “The findings will allow the police department to implement best practices in law enforcement and empower the community to hold the department to those standards.”

“San Francisco Mayor Ed Lee and San Francisco Police Department Chief Greg Suhr have jointly requested this collaborative review and have publicly committed to providing the resources necessary for its successful completion,” said Acting U.S. Attorney Stretch.  “The Department of Justice will engage the police department, the Mayor's office, and the communities they serve in a constructive assessment.  We are also committed to monitoring and assisting with the implementation of any reforms recommended by the COPS Office.” 

– MORE –

The Collaborative Reform Initiative for Technical Assistance is an independent and objective way to transform a law enforcement agency through an analysis of policies, practices, training, tactics and accountability methods around key issues facing law enforcement today.  The initiative is designed to provide technical assistance to agencies facing significant law enforcement-related issues.  Using subject matter experts, interviews and direct observations, as well as conducting extensive research and analysis, the COPS Office assists law enforcement agencies in enhancing and improving their policies and procedures, operating systems and professional culture.

Following the assessment, the Justice Department will issue a public report detailing the findings of the assessment, along with specific recommendations for improvement.  The COPS Office will assess progress made in implementing those recommendations over an 18-month period following the initial assessment.  Two progress reports will be released tracking implementation of those recommendations.

The COPS Office is currently providing collaborative reform in Spokane, Washington; Philadelphia; St. Louis County, Missouri; Salinas, California; Fayetteville, North Carolina; Calexico, California; and Milwaukee, Wisconsin, and has completed the process in Las Vegas.

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

An Orange County, California, man pleaded guilty today for his role in operating fraudulent debt relief firms that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service announced.

Jeremy Nelson, 30, pleaded guilty to one count of an indictment alleging conspiracy to commit mail fraud and wire fraud in connection with companies known as Nelson Gamble & Associates (Nelson Gamble) and Jackson Hunter Morris & Knight LLP (Jackson Hunter).  According to the indictment, Nelson and his employees portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors.  Clients made monthly payments expecting the money to go toward settlements.  Nelson and his co-conspirators instead took at least 15 percent of the total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees. 

“Debt relief scams prey on vulnerable consumers trying to climb out of tough financial situations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Justice Department will continue to investigate those who take advantage of consumers facing hard times, and prosecute unlawful schemes that bleed desperate consumers of their remaining resources.”

“This scheme victimized people already in financial distress,” said U.S. Attorney Eileen M. Decker of the Central District of California.  “As today’s guilty plea shows, the Justice Department is committed to protecting consumers, particularly those who are vulnerable to fraud schemes designed to prey upon people already in perilous economic condition.”

“Protecting our customers from fraud is one of our agency’s biggest priorities,” said Acting Inspector in Charge Daniel Brubaker of the U.S. Postal Inspection Service.  “The U.S. Postal Inspection Service will continue to vigorously pursue those who use our nation’s mail system to commit fraud or other illegal activity.”

Jeremy Nelson’s scheme ran from February 2010 to September 2012.  Nelson admitted he changed the name of his company from Nelson Gamble to Jackson Hunter in 2011.  Nelson and his co-conspirators told victims that Nelson Gamble had gone bankrupt and that Jackson Hunter was an unrelated company that had taken over some of the accounts.  Nelson and his co-conspirators blamed past problems on Nelson Gamble and denied requests for refunds of money paid to Nelson Gamble.  Some victims who previously demanded refunds accepted the explanation that Nelson Gamble was bankrupt and did not pursue complaints against Jackson Hunter.

Nelson faces a statutory maximum penalty of 20 years in prison.  The court has not yet scheduled a sentencing date before U.S. District Judge Dale S. Fischer of the Central District of California in Los Angeles.

One of Nelson’s co-defendants, Elias Ponce, previously pleaded guilty in October 2015.  Two other defendants, Athena Maldonado and Christopher Harati, pleaded guilty in June 2015 in a related case.  Trial against the remaining defendant charged in the scheme, John Vartanian, is set for Sept. 13 in Los Angeles.

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

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

Failed to File Tax Returns for Four Years and Lied to the IRS about His Financial Condition

A former Russell Springs, Kentucky investigator and legal consultant, was sentenced to three years in prison and three years of supervised release, following his June 2015 conviction for tax fraud, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kerry B. Harvey for the Eastern District of Kentucky announced today.

James S. Faller II, 54, was convicted after a two-week jury trial of one count of corruptly endeavoring to obstruct the Internal Revenue Service (IRS), four counts of evading federal individual income taxes, one count of falsifying a document submitted to the IRS under penalties of perjury and four counts of failing to timely file his federal individual income tax returns.  In addition to his prison sentence, the court ordered restitution to be determined at a later date.

According to the evidence admitted at trial, from 2006 through 2009, Faller received annual income of approximately $126,000 to $289,000 per year from his work as a private investigator and legal consultant.  However, Faller did not timely file any individual income tax returns for that period.  Instead, Faller took steps to conceal his income from the IRS in several ways, including arranging for his income to be made payable to a nominee and using nominee bank accounts.  Faller owes additional federal income taxes of $112,065 for the 2006 through 2009 tax years.  

“When individuals submit false information in an effort to obstruct the IRS and evade the payment of tax due and in doing so, steal from the American public, the Tax Division stands ready to prosecute,” said Acting Assistant Attorney General Ciraolo. “Today’s sentence sends a message that this conduct will not be tolerated, and those lying to the IRS and hiding their income to avoid paying their tax liabilities will pay a heavy price.”

In March 2010, Faller 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.  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 this form, which the taxpayer signs under penalties of perjury, the taxpayer must disclose information about his income and expenses.  On the Form 433-A that Faller submitted to the IRS revenue officer, Faller falsely reported that he had no income even though he had earned $23,000 in the preceding month alone.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Harvey thanked special agents of the IRS Criminal Investigation, who investigated the case, and Trial Attorney Thomas Voracek of the Tax Division and Assistant U.S Attorney Thomas Lee Gentry of the Eastern District of Kentucky, who prosecuted the case.

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

Court Orders Nation Tax Services to Shut Down Immediately Based on a “Pattern of False Tax Returns”

A federal court in Orlando, Florida has preliminarily barred Jason Stinson from preparing federal tax returns for others and from operating a tax return preparation business, the Justice Department announced today.  The civil order, signed by Judge Anne C. Conway of the U.S. District Court for the Middle District of Florida, requires Stinson to “immediately close all tax return preparation stores that he currently owns.” 

According to the court’s order, Stinson owns a company that operates return preparer storefronts under the name “Nation Tax Services.”  According to the United States’ complaint, Stinson’s stores are in Alabama, Florida, Georgia and North Carolina.

The United States filed its civil injunction complaint against Stinson in September 2014.  The complaint alleged that return preparers in Stinson’s businesses targeted primarily low-income customers with deceptive and misleading advertisements, prepared and filed fraudulent tax returns to fraudulently increase their customers’ refunds and profited through unconscionable, exorbitant and often undisclosed fees—all at the expense of their customers and the United States Treasury. 

Trial in this case is scheduled for October.  To prevent the alleged fraud from continuing this tax filing season, the United States filed a motion for preliminary injunction to bar Stinson from operating his stores pending resolution of this case after trial.  Following a hearing on the motion, the court today found that the United States “presented enough evidence to show a pattern of false tax returns sufficient to prove it is likely to succeed on the merits” at trial.  The pattern of false returns alleged by the United States includes:

• Falsely claiming the Earned Income Tax Credit;
• Fabricating businesses and related business income and expenses;
• Fabricating Schedule A deductions for unreimbursed employee expenses, charitable deductions and medical and dental expenses; and
• Claiming false education credits.

The court found that the “falsely reported numbers are not merely oversight, or a computational error, because the errors are repeated and the amounts are significant.”  The court added that it was “most troubled that Stinson’s conduct has continued even after the commencement of this lawsuit in 2014.” 

The court also held that the “Government and Stinson’s customers will suffer irreparable harm if an injunction is not granted.”  The court emphasized “the harm that Stinson’s business causes his customers”:

Stinson’s customers are relying on his business to properly handle their taxes. In return, Stinson’s business exposes these primarily low-income customers to individual tax liability. Both the Government and Stinson’s customers will suffer irreparable harm if an injunction is not granted. Moreover, it is in the public’s best interest to protect vulnerable customers from the inaccurate preparation of their taxes, not to deplete Government resources, and to maintain the public trust in the tax system.

Return preparer fraud is one of the Internal Revenue Service’s (IRS) Dirty Dozen Tax Scams. 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.

Defendant Traveled to Somalia to Join Foreign Fighter Corps

Mahdi Hashi, 26, a Somali national, was sentenced to nine years in prison by U.S. District Judge John Gleeson of the Eastern District of New York for conspiring to provide material support to al-Shabaab, a designated foreign terrorist organization.  The defendant traveled from the United Kingdom to Somalia to join the terrorist group.  While in Somalia, the defendant was affiliated with the American jihadist Omar Hamami and his band of American fighters, as well as individuals associated with al-Shabaab’s suicide bomber program. 

The sentence was announced by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Robert L. Capers of the Eastern District of New York and Assistant Director in Charge Diego Rodriguez of the FBI’s New York Field Office.

As stated in court today and according to court documents, between approximately December 2009 and August 2012, the defendant served as a member of al-Shabaab in Somalia where he conspired to support al-Shabaab and its violent extremist agenda.   In August 2012, the defendant was apprehended with others by local authorities in East Africa after he left Somalia, and then lawfully deported to the Eastern District of New York for prosecution in November 2012.

On Nov. 14, 2012, the FBI took custody of the defendant and brought him to the Eastern District of New York for prosecution.  He, along with two codefendants, pleaded guilty on May 12, 2015.

“Hashi travelled to Somalia to join and fight on behalf of al-Shabaab in their foreign terrorist fighter ranks,” said Assistant Attorney General Carlin.  “The National Security Division remains committed to detecting, thwarting and bringing to justice those who seek to provide material support to and fight on behalf of designated foreign terrorist organizations.”

“This defendant left his family and his adopted home in the United Kingdom behind so he could offer himself in support of al-Shabaab, a violent terrorist organization that has demonstrated its capabilities and motives in numerous terrorist attacks and that has publicly called for attacks against the United States,” said U.S. Attorney Capers.  “Today’s sentence should serve as a warning to others who offer support to terrorist groups that pose a threat to the United States and our allies around the world.”

“Mahdi Hashi joined a foreign terrorist organization to be part of a group utilizing violence to fulfill their agenda,” said Assistant Director in Charge Rodriguez.  “He now finds himself isolated behind bars due to the criminality of his activities.  Through today’s sentence, we hope he can no longer be in a position to inflict, or support those who inflict, harm on others.  The FBI, in cooperation with our JTTF partners, will continue to work to identify and interrupt those engaged in terrorist activities globally, and bring them to justice in the U.S.”

During the time of the charged conspiracy and thereafter, al-Shabaab successfully recruited individuals from around the world, including Hashi, to come to Somalia and join the organization.  These individuals, known within al-Shabaab as “foreign fighters,” lived, trained and often fought alongside native Somali fighters.  Al-Shabaab frequently made Western foreign fighters the face of its fundraising and propaganda efforts as part of a broader strategy emphasizing that the conflict in Somalia was part of a global jihad aimed at creating an Islamic caliphate.  In addition, al-Shabaab assesses that Westerners have the potential to more easily cross certain international borders.  Because al-Shabaab frequently employs suicide bombings, as it did in the Kampala, Uganda, attacks in 2010 resulting in 74 deaths, freedom of travel was and is particularly crucial to al-Shabaab’s external terror operations.

Assistant Attorney General Carlin joined U.S. Attorney Capers in thanking the federal, state and local law enforcement agencies who participate in the FBI’s Joint Terrorism Task Force in New York.

The government’s case is being handled by Assistant U.S. Attorneys Shreve Ariail, Seth D. DuCharme and Richard M. Tucker of the Eastern District of New York, along with Trial Attorney Annamartine Salick of the National Security Division’s Counterterrorism Section.  The Department of Justice’s Office of International Affairs also provided invaluable assistance.

A retired U.S. Air Force Master Sergeant was sentenced today in the U.S. District Court for the Southern District of Florida to 18 months in prison following his guilty plea to unlawfully disclosing confidential procurement information and filing a false tax return, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

According to court documents, Trevor Smith retired from the U.S. Air Force in December 2012 at the rank of Master Sergeant.  From February 2009 through February 2010, Smith was deployed to Afghanistan, where he served as Supply Non-Commissioned Officer-In-Charge for the Operation Enduring Freedom/Combined Security Transition Command-Afghanistan NATO Training Mission.  In that capacity, Smith met a Fort Lauderdale-based government contractor.  As part of his plea, Smith admitted that he agreed to disclose confidential bid information on government contracts to the contractor in exchange for bribe payments.  Smith and the contractor agreed that Smith would receive two percent of all revenues on contracts that the contractor received as a result of Smith’s assistance.

In January 2010, the contractor wired $42,853.29 to Smith.  The two agreed to wait until Smith returned to the United States for more payments.  After returning to the United States, Smith set up a shell corporation called T Star Air Inc. to receive 23 additional payments totaling $220,600.  Smith also created and submitted phony invoices to conceal the scheme.  For tax years 2010 through 2012, Smith filed corporate tax returns for T Star Air that falsely claimed inflated expenses and deductions.

In addition to the prison term, U.S. District Judge Beth Bloom for the Southern District of Florida ordered Smith to pay restitution to the Internal Revenue Service (IRS) in the amount of $6,501.

Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, the U.S. Air Force’s Office of Special Investigations and the U.S. Department of Defense’s Office of the Inspector General, who investigated this case and Trial Attorneys Charles M. Edgar Jr. and Jason H. Poole of the Tax Division, who are prosecuting this case.

Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office of the Southern District of Florida for their substantial assistance.

The United States filed a complaint asking a federal court in Detroit to permanently bar a Liberty Tax Service franchise owner and his company from preparing federal tax returns for others, the Justice Department announced today.  The civil complaint against Craig M. Comer of Royal Oak, Michigan, and his business, Comer Inc., alleges that Comer operates five Liberty Tax Service franchise locations in the Detroit area.  

According to the complaint, the defendants prepare income tax returns for customers that fraudulently overstate refunds and claim refundable credits by, among other things, claiming false or inflated Schedule C income and expenses, bogus dependents, false filing statuses, improper education credits and false itemized deductions.  Based on audit adjustments the IRS has made to tax returns prepared and filed by the defendants for 2008 to 2013, the defendants’ conduct has cost the U.S. Treasury approximately $4.5 million for those years alone, according to the suit.

The complaint also alleges that in order to increase their fees, the defendants have altered completed tax returns already signed by the customers and forged customers’ signatures on returns.  Furthermore, the defendants have added false information to internal Liberty Tax Service documents to give the illusion that the franchises are properly verifying customer information when preparing customers’ tax returns, according to the complaint.

Return preparer fraud is one of the Internal Revenue Service’s (IRS)’s Dirty Dozen Tax Scams.  The IRS has some tips on their website for choosing a tax preparer.  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.      

A criminal Information was filed today in the U.S. District Court for the Northern District of Alabama against David Allen, former pharmacist-in-charge of the now-defunct compounding pharmacy Advanced Specialty Pharmacy doing business as “Meds IV,” and William Timothy Rogers, a pharmacist and the former president of Meds IV, the Department of Justice announced today.  Allen and Rogers were charged in connection with the distribution of adulterated drugs, which were compounded at the Meds IV facility and distributed to Birmingham, Alabama-area hospitals in 2011.

“The compounding of sterile drug products requires significant care, and the distribution of contaminated drug products can cause serious harm to patients,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “This criminal case demonstrates the Justice Department’s commitment to protecting consumers and patients, and making sure pharmaceutical drugs are safe and effective.” 

Allen, 60, of McCalla, Alabama, and Rogers, 48, of Hoover, Alabama, have signed plea agreements, in which both individuals have agreed to plead guilty to two misdemeanor violations of the federal Food, Drug and Cosmetic Act (FDCA) as charged in the Information.  Following today’s filing of the criminal charges; the U.S. District Court will schedule an arraignment, where the defendants will be formally advised of the charges against them.  Another hearing will then be set in which the defendants can enter their guilty pleas to the Court.

As alleged in the Information, Meds IV compounded various drugs for human use, including an intravenous drug known as Total Parenteral Nutrition (TPN).  TPN is liquid nutrition administered intravenously to patients who cannot or should not receive their nutrition through eating.  The information alleges that beginning in or around February 2011, Meds IV compounded its own amino acid solution, which it then mixed with other ingredients to form TPN. 

As charged in the information, amino acid used in compounding the TPN was adulterated in the following ways:  it consisted in whole or in part of a filthy, putrid, or decomposed substance, namely Serratia marcescens (S. marcescens) and it was prepared, packed, or held under insanitary conditions whereby it may have been contaminated with filth or rendered injurious to health.  S. marcescens is gram-negative bacteria that can cause bloodstream infections if introduced into the bloodstream through contaminated medications.  These infections can cause serious medical complications, including death, because S. marcescens is resistant to many antibiotics.

“Meds IV was in the business of compounding drugs and IV nutrition that was supposed to help patients heal,” said U.S. Attorney Joyce White Vance for the Northern District of Alabama.  “Instead, because of unsanitary procedures in the mixing of liquid nutrition, contaminated IV fluid was sent to Birmingham area hospitals and a number of patients developed serious bloodstream infections.  I thank the FDA and its Office of Criminal Investigations for their diligence in helping us prosecute those responsible for the failings at Meds IV which contributed to significant harm.”

According to the charging document, the amino acid was prepared by Meds IV outside a laminar airflow workbench and was kept unrefrigerated, in a room that was not sterile, in a large pot sitting on the floor, sometimes overnight, before it was sterilized and used. 

As alleged in the information, between March 5 and 15, 2011, nine patients at various Birmingham-area hospitals who developed bloodstream infections caused by S. marcescens died, and several other hospital patients developed S. marcescens bloodstream infections but survived.  According to the charges, all of these patients had been given TPN that was compounded and distributed by Meds IV.  As alleged in the information, while a number of the patients who died had underlying conditions which may have contributed to their deaths, medical records of some patients suggest that the S. marcescens bloodstream infections were also a significant factor.

According to the information, Meds IV was notified on March 14, 2011, by a hospital in the Birmingham area, that four patients receiving TPN had tested positive for S. marcescens.  The information alleges that the TPN was compounded and distributed by Meds IV and that this notification was the first time Meds IV was informed of a link between its TPN and patients testing positive for S. marcescens.  The information alleges that on or around March 16, 2011, Meds IV began notifying some customers that compounding of TPN was suspended until further notice.

As noted in the information, during an inspection at Meds IV starting on March 22, 2011, investigators from the U.S. Centers for Disease Control and Prevention (CDC) found S. marcescens that was indistinguishable to the outbreak strain on a tap-water faucet, in an open container of amino acid powder and on the surface of mixing equipment that had been used to make TPN.  According to the charging document, the U.S. Food and Drug Administration (FDA) and CDC investigators linked the S. marcescens to TPN that had been compounded by Meds IV.

“Americans expect and deserve drugs that are safe, effective, and that meet appropriate standards for quality, yet Meds IV contaminated and distributed drug products that resulted in serious harm to patients,” said Acting FDA Commissioner Stephen Ostroff, MD.  “Such conduct cannot be tolerated, and the FDA will continue to work with the Department of Justice to pursue aggressive enforcement actions against those who place American patients at risk.” 

As alleged in the Information, Allen supervised all compounding at Meds IV, was specifically responsible for reviewing and approving TPN formulations, and was also responsible for filling the individual prescriptions Meds IV received for patient-specific TPN products.  The information alleges that Rogers was ultimately responsible for overseeing all of the day-to-day operations of Meds IV.  Both defendants have agreed to plead guilty to two misdemeanor counts, representing the two lots of amino acid which were determined to be adulterated in violation of the FDCA.  For each count, the defendants face a statutory maximum sentence of up to one year in prison, a fine of up to $250,000, or both, and a term of supervised release after any imprisonment for up to one year.

The case is being prosecuted by Trial Attorney Heide L. Herrmann of the Justice Department’s Consumer Protection Branch and Assistant U.S. Attorney Henry Cornelius of the Northern District of Alabama.  They were assisted by Associate Chief Counsel Shannon M. Singleton of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services.  The case was investigated by the FDA’s Office of Criminal Investigations. 

A criminal Information is merely an allegation and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.

Filed 326 Fraudulent Tax Returns Seeking More than $450,000 in Tax Refunds

A Phenix City, Alabama resident was sentenced to serve 51 months in prison, followed by three years of supervised release and ordered to pay $116,636 in restitution for her role in a stolen identity refund fraud (SIRF) scheme, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama announced today.

“Prosecuting stolen identity refund fraud remains a top priority of the department,” said Assistant Attorney General Ciraolo.  “Individuals engaged in this criminal conduct not only cause millions of dollars in financial losses to the IRS, but inflict long-term economic and personal consequences on those US taxpayers whose private information is stolen.  The Tax Division will continue to work with its federal, state and local law enforcement partners to combat this serious fraud on the American public, and seek lengthy terms of incarceration for those responsible.” 

“My office will continue to work with the IRS to vigorously prosecute those people who steal an innocent person’s identity, just to file a false tax return and steal the tax refunds,” said U.S. Attorney Beck.  “These criminals need to be punished for the harm they cause to the person whose identity is stolen and the harm they cause to the U.S. taxpayer.”

According to court documents, during 2013, Benita E. Short, conspired with others to defraud the United States by filing false federal income tax returns using stolen identities.  Short obtained personal identifiable information, including names, social security numbers, addresses and dates of birth, without the individuals’ authorization.  A co-conspirator obtained the stolen personal identifiable information from an individual who had access to Alabama state databases and obtained Electronic Filing Identification Numbers (EFINs) in the names of several tax preparation businesses, and provided this information to Short. Short then used the stolen identities and EFINs to electronically file 326 fraudulent tax returns with the Internal Revenue Service (IRS), causing a tax loss of $456,853.  Short also caused income tax refund checks that were issued as a result of the fraudulent tax returns to be cashed at several businesses in Alabama and Georgia.  For her role in the conspiracy, Short pleaded guilty in October 2015 to conspiracy to defraud the United States and aggravated identity theft.

In March 2015, one of Short’s co-conspirators, Keshia Lanier, the ringleader of a $24 million SIRF conspiracy, also pleaded guilty to one count of wire fraud and one count of aggravated identity theft.  On Sept. 25, 2015, Lanier was sentenced to serve 15 years in prison to be followed by three years of supervised release and ordered to forfeit $5,811,406.

In addition to the prison term, U.S. District Judge Myron H. Thompson of the Middle District of Alabama ordered Short to serve three years of supervised release and pay $116,636 in restitution to the IRS.  Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck Jr. commended special agents of IRS Criminal Investigation, who investigated the case and Trial Attorneys Michael C. Boteler and Michael P. Hatzimichalis of the Tax Division and Assistant U.S. Attorney Jonathan Ross of the Middle District of Alabama, who are prosecuting the case.

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

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

A Subway franchisee and resident of Alexandria, Virginia pleaded guilty today to conspiracy to defraud the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente for the Eastern District of Virginia.

According to court documents, Obayedul Hoque, 49, owned and operated a gas station in Alexandria called Skyhill Shell and multiple Subway restaurant franchises in Alexandria, Arlington, Virginia and Washington, D.C.  Hoque admitted that between 2008 and 2014, he and his co-conspirators, who were managers of some of the Subway franchises and the gas station, conspired to defraud the United States for the purpose of obstructing the Internal Revenue Service (IRS) in the ascertainment and collection of individual and corporate income taxes.  Hoque and his co-conspirators did not deposit all of the gas station or the Subway franchises’ gross receipts into the corporate or partnership bank accounts.  Instead, Hoque and the managers retained a portion of the gross receipts for their personal benefit and failed to report those funds to the IRS.  For the Subway franchises that had no co-conspirator managers, Hoque retained all of the unreported gross receipts for himself. 

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

“As we start the 2016 filing season, this case serves as a reminder that the Justice Department, working with its partners at the IRS, remains committed to identifying, investigating and prosecuting businesses and individual taxpayers who willfully fail to file accurate tax returns and pay the taxes due,” said Acting Assistant Attorney General Ciraolo.  “Every taxpayer owes a duty to their fellow citizens to pay their fair share and those who choose not to do so will face the consequences.”

“Today’s plea of Obayedul Hoque for conspiracy to defraud the United States sends a clear message to would-be tax cheats,” said Chief Richard Weber of IRS-Criminal Investigation (CI). “Whether you fail to file and pay your corporate taxes or your personal income taxes, IRS-CI special agents work diligently to uncover all kinds of fraud and hold everyone accountable.  U.S. citizens expect and deserve a level playing field when it comes to paying taxes and there are no better financial investigators in the world when it comes to following the money.”

U.S. District Judge Liam O’Grady set sentencing for May 13 at 9:00 a.m. EST.  Hoque faces a statutory maximum prison term of five years and a fine of up to $250,000.  As part of his plea agreement, Hoque agreed to pay restitution to the IRS for tax liabilities for the years 2008 through 2013.

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

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

Attorney General Loretta E. Lynch spent the day in New Orleans participating in a roundtable on human trafficking with U.S. Attorney for the Eastern District of Louisiana Kenneth A. Polite; attending a roll call meeting with the New Orleans Police Department; and meeting with the family of Jefferson Parish, Louisiana Sheriff's Deputy Steven Arnold, who is being treated for injuries sustained in yesterday’s shooting.

The roundtable discussion on human trafficking was held at Covenant House in New Orleans and included representatives from Covenant House, Eden House, the Department of Homeland Security's Homeland Security Investigations, the Jefferson Parish Sheriff's Office as well as two human trafficking survivors.

Covenant House and the Jefferson Parish Sheriff's Office were the recipients of one of the Enhanced Collaborative Model (ECM) grants that are jointly administered by the Department of Justice's Bureau of Justice Assistance and the Office for Victims of Crime.  The ECM grants use a holistic approach to respond to human trafficking by supporting law enforcement entities that partner with victim service providers in order to improve services to human trafficking survivors and bring traffickers to justice through effective partnerships.

The discussion focused on the importance of a victim-focused, trauma-informed response to human trafficking and the importance of partnerships between law enforcement and victim service providers to ensure that survivors are able to effectively build new lives.

Today’s roundtable is one part of the department’s work to raise awareness during National Slavery and Human Trafficking Prevention Month.  Earlier this month, the Office for Victims of Crime released a video series and resource guide, The Faces of Human Trafficking, to raise awareness about the many forms of human trafficking in the United States.

Following the roundtable, Attorney General Lynch also attended a roll call meeting at the New Orleans Police Department’s 1st District Police Station with rank and file officers, Police Superintendent Michael Harrison and 1st District Commander Hans Ganthier.  The Attorney General expressed her continued support for the department, as well as her appreciation for their hard work in implementing the terms of the NOPD's consent decree agreement with the Justice Department, which she noted will lead to more effective policing in New Orleans.

Attorney General Lynch also met with the family of Jefferson Parish Sheriff's Deputy Steven Arnold at the LSU Medical Center.  During the meeting, she shared her best wishes for his swift recovery and her commitment to justice for his shooting.

Department’s Swiss Bank Program Imposed More Than $1.3 Billion in Penalties on 80 Banks, Which Continue to Cooperate with the Department

The Department of Justice announced today that it reached its final non-prosecution agreement under Category 2 of the Swiss Bank Program, with HSZH Verwaltungs AG (HSZH).  The department has executed agreements with 80 banks since March 30, 2015, when it announced the first Swiss Bank Program non-prosecution agreement with BSI SA.  The department has imposed a total of more than $1.36 billion in Swiss Bank penalties, including more than $49 million in penalties from HSZH.  Every bank in the program, including HSZH, is required to cooperate in any related criminal or civil proceedings, and that cooperation continues through 2016 and beyond.

“The Department of Justice is committed to aggressively pursuing tax evasion, and the Swiss Bank Program has been a central component of that effort,” said Attorney General Loretta E.  Lynch.  “Through this initiative, we have uncovered those who help facilitate evasion schemes and those who hide funds in secret offshore accounts.  We have improved our ability to return tax dollars to the United States.  And we have pursued investigations into banks and individuals.  I would like to thank the Swiss government for their cooperation in this effort, and I look forward to continuing our work together to root out fraud and corruption wherever it is found.”

“The department’s Swiss Bank Program has been a successful, innovative effort to get the financial institutions that facilitated fraud on the American tax system to come forward with information about their wrongdoing – and to ensure that they are held responsible for it,” said Acting Associate Attorney General Stuart F. Delery.  “As we have seen over the last year, Swiss banks are paying an appropriate penalty for their misconduct, and the information and continuing cooperation we have required the banks to provide in order to participate in the program is allowing us to systematically attack offshore tax avoidance schemes.”

“The completion of the agreements under Category 2 of the Swiss Bank Program represents a substantial milestone in the department’s ongoing efforts to combat offshore tax evasion, and we remain committed to holding financial institutions, professionals and individual taxpayers accountable for their respective roles in concealing foreign accounts and assets, and evading U.S. tax obligations,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “Using the flood of information flowing from various sources, the department is investigating this criminal conduct, referring appropriate matters to the Internal Revenue Service for civil enforcement and pursuing leads in jurisdictions well beyond Switzerland.  Individuals and entities engaged in offshore tax evasion are well advised to come forward now, because the window to get to us before we get to you is rapidly closing.”

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;

• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

• Cooperate in treaty requests for account information;

• Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;

• Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and

• Pay appropriate penalties.

Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

HSZH, the final bank to reach a non-prosecution agreement under Category 2 of the Swiss Bank Program, was previously known as Hyposwiss Privatbank AG.  HSZH was founded in 1889 in Solothurn, Switzerland.  In 1988, Schweizerische Bankgesellschaft AG, which was later merged into UBS AG, acquired the bank and renamed it Hyposwiss Privatbank AG.  Hyposwiss Privatbank AG increasingly focused on private banking activities, servicing both domestic and international clients, and at all times, HSZH solely operated on Swiss territory.  In 2002, the bank was acquired from UBS by St. Galler Kantonalbank (SGKB), the state-owned cantonal bank of St. Gallen.  In 2014, HSZH unwound its residual banking operations under the supervision of FINMA, the Swiss banking regulator.  On Jan. 6, 2014, and in connection with the wind-down, the bank changed its name to HSZH Verwaltungs AG.  HSZH returned its banking license, and FINMA released HSZH from its supervision on Nov. 27, 2014. 

Until 2013, HSZH conducted a U.S. cross-border banking business that aided and assisted certain of its U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts from the U.S. government.  Through its managers, employees and/or others, HSZH knew or had reason to know that some U.S. taxpayers who opened and maintained accounts at HSZH were not complying with their U.S. income tax and reporting obligations. 

HSZH and other banks operating in Switzerland have closely monitored the criminal investigations of UBS and other Swiss banks.  In 2008, UBS publicly announced that it was the target of a criminal investigation by the Internal Revenue Service (IRS) and the department and that it would be exiting and no longer accepting certain U.S. clients.  In February 2009, the department and UBS filed a deferred prosecution agreement, in which UBS admitted that its cross-border banking business used Swiss privacy law to aid and assist U.S. clients in opening and maintaining undeclared assets and income from the IRS.  Since UBS, several other Swiss banks have publicly announced that they were or are the targets of similar criminal investigations and that they would be exiting and not accepting certain U.S. clients.

The senior management of HSZH viewed the exit of U.S. clients by the targeted Swiss banks as a business opportunity to be seized immediately rather than a warning to be heeded.  In addition to 83 accounts opened through two pipelines of U.S. clients transferred from UBS, HSZH opened at least 275 accounts for U.S. clients after August 2008.  Internal bank notes indicate that in September and October 2008, certain external asset managers with whom HSZH entered into agreements were expected to have “many former UBS clients” and would introduce U.S. clients to HSZH.

The first pipeline of undeclared U.S. clients transferred from UBS was solicited by the CEO of HSZH (CEO #1) from a UBS private banker who was a former colleague of CEO #1.  On Aug. 15, 2008, the general counsel of HSZH sent CEO #1 an email containing his views on a new internal bank IRS Form W-9 policy for CEO #1’s review and discussion before sending to SGKB: “In my opinion this policy should be a clarification of the already existing practice in connection with U.S. persons.  The actual situation in the US (UBS, Birkenfeld, etc.) has nothing to do with [HSZH] [redacted] or SGKB.  . . .  Why should we freely throw away a good business opportunity?”  Between Sept. 19, 2008, and Jan. 26, 2009, HSZH knowingly opened six undeclared accounts for U.S. clients with an aggregate total of approximately $9.2 million in peak assets under management; all six undeclared U.S. clients had previously been with UBS. 

The second pipeline of undeclared U.S. clients predominantly from UBS were all introduced and managed by an external asset management firm in Zurich whose head of private banking was formerly in charge of UBS’s North America International business (EAM #1).  In June 2008, the head of HSZH’s EAM Desk provided EAM #1 with HSZH marketing materials, and the Executive Board of HSZH unanimously approved a new business relationship with EAM #1 on Sept. 24, 2008.  On Aug. 18, 2009, HSZH opened the last EAM #1 pipeline account.  On Aug. 20, 2009, the head of private banking for EAM #1 was indicted by the U.S. Attorney’s Office of the Southern District of Florida.

Meetings between HSZH private bankers and U.S. clients took place in multiple locations within the United States, including in Florida, New York, Pennsylvania, Virginia and Washington, D.C.  Some U.S. clients asked for cash on a regular basis, so at times, the HSZH private banker for such clients would personally deliver cash to the clients in the United States in amounts below $10,000 to avoid the reporting requirements. 

HSZH private bankers also met with U.S. clients outside of the United States to provide banking services and investment advice related to their accounts, which included undeclared accounts.  For example, one U.S. client resided in the United States and had assets of more than $90 million in an account at HSZH held by a Liechtenstein foundation.  An HSZH private banker regularly met with this U.S. client in a Swiss hotel, at HSZH or in London.  When meeting in London, the HSZH private banker usually delivered cash amounts of 10,000 to 50,000 Swiss francs or U.S. dollars to the U.S. client, who had a preference to receive used U.S. dollar banknotes.  The funds were wired to the custodian bank for HSZH in London, where the HSZH private banker would withdraw the cash and personally deliver it to the U.S. client in a London hotel. 

HSZH processed significant cash and precious metals withdrawals for U.S.-related accounts at or around the time the clients’ accounts were closed, even though HSZH knew, or had reason to know, that some of the accounts contained undeclared assets.  For example, a U.S. couple that owned more than $24 million in assets in an account nominally held by a Liechtenstein foundation, and known by HSZH to be undeclared, regularly withdrew cash amounts between $10,000 and $30,000 – they requested used bank notes – and repeatedly withdrew gold bars. Five instances in 2010 involved 15 kilograms of gold bars.  When this U.S. couple closed their HSZH account in 2012, they withdrew large cash amounts totaling more than 19 million Swiss francs, as well as 55 kilograms in gold bars during five visits to HSZH.

HSZH serviced approximately 103 U.S. clients who structured their accounts so that they appeared as if they were held by a non-U.S. legal structure, such as an offshore corporation or trust, which aided and abetted the clients’ ability to conceal their accounts from the IRS.  While HSZH did not provide direct structuring services to U.S. clients, HSZH private bankers and members of HSZH’s management suggested the use of structures in some instances for U.S. clients and provided referrals to third-party service providers.  In addition, at least two HSZH private bankers served as board members for structures with U.S. beneficial owners maintained at HSZH.  Despite the decision in 2009 by HSZH to stop this practice due to the risk of conflicts of interest, one HSZH private banker remained a member of an offshore foundation’s board until 2011.  External trust companies created and administered offshore structures incorporated or based in offshore locations such as the British Virgin Islands, Liechtenstein and Panama.

HSZH assisted at least two U.S. taxpayers in further concealing their undeclared funds from the IRS by transferring those funds from UBS in August 2010 through an HSZH account held by a Swiss attorney to an HSZH account held by a sham entity domiciled in Panama that was beneficially owned by the two U.S. taxpayers.  In connection with this transfer, HSZH received a revised Form A from the Swiss attorney listing the two U.S. taxpayers as beneficial owners for one transaction only along with instructions from the Swiss attorney to HSZH that his clients’ funds should be transferred from UBS to HSZH through his account, due to the “understandable interests of his clients, that the target account would not be visible.”  HSZH’s anti-money laundering documentation dated one day after this August 2010 transfer states: “Since this [sic] are U.S. clients, the transfer was made over the account holder’s account due to understandable reasons.  Sender and recipient are identical.”

During the period since Aug. 1, 2008, HSZH held a total of 605 U.S.-related accounts, both declared and undeclared, with an aggregate peak of approximately $1.12 billion in assets under management.  HSZH will pay a penalty of $49.757 million.

In accordance with the terms of the Swiss Bank Program, HSZH mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at HSZH who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of this non-prosecution agreement, noncompliant U.S. accountholders at HSZH must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

“Today’s resolution with HSZH Verwaltungs AG brings to a close this phase of DOJ’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International Division. “The comprehensive success of this program sends a powerful message to those who might think they can evade their tax obligations by going offshore. A whole sector of financial institutions, 80 banks in all, has been held accountable for aiding the use of secret accounts and circumventing U.S. law. In addition to the more than $1.3 billion in penalties from these resolutions, more than 54,000 taxpayers have come forward to the IRS to pay more than $8 billion in taxes, interest and penalties.”

“The bank agreement with HSZH announced today may bring an end to one phase of the Swiss Bank Program, but more importantly it brings us closer to our overall goal of compliance and accountability for financial institutions and U.S. taxpayers,” said Chief Richard Weber of IRS-Criminal Investigation. “The data received from each agreement on the accounts, schemes and linkages is extremely valuable in combating international tax evasion.  I could not be more proud of the effort of our special agents who worked tirelessly to make this program a success in coordination with the Department of Justice.”

Acting Assistant Attorney General Ciraolo thanked the IRS and in particular, IRS-Criminal Investigation and the IRS Large Business & International Division for their substantial assistance.  Acting Assistant Attorney General Ciraolo also thanked Kimberle E. Dodd, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer and Senior Litigation Counsel Nanette L. Davis of the Tax Division.

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

A grand jury sitting in Cedar Rapids, Iowa returned an indictment on Jan. 21, unsealed yesterday after their initial court appearances, charging two Iowa businessmen with federal employment tax violations, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kevin W. Techau of the Northern District of Iowa announced today.

Randy Less, 48, of Hopkinton, Iowa, and Darrell Smith, 59, of Forest City, Iowa, are each charged with multiple counts of willfully failing to truthfully account for, and pay over federal income, social security and Medicare taxes that were withheld from the wages of the employees of Permeate Refining Inc., which was in the business of ethanol production.

According to the allegations in the indictment, Less was the majority owner, a general partner and the general manager of Permeate Refining Inc. in Hopkinton.  In those roles, Less had the responsibility to collect, truthfully account for and pay over to the Internal Revenue Service (IRS) federal income, social security and Medicare taxes withheld from the wages of his employees.  From approximately the fourth quarter of 2009 and continuing through the fourth quarter of 2010, Less is alleged to have willfully failed to pay over to the IRS more than $116,000 in withheld taxes.

The indictment further alleges that a company called Algae Energae purchased an ownership interest in Permeate in September 2009.  After that purchase, it is alleged that Smith, a corporate officer and manager of Algae Energae, also had the responsibility to collect, truthfully account for and pay over to the IRS taxes withheld from the wages of Permeate’s employees.  From approximately the first quarter of 2011 and continuing through the third quarter of 2012, both Less and Smith are alleged to have willfully failed to pay over to the IRS more than $307,000 in withheld taxes.

If convicted, the defendants face a statutory maximum sentence of five years in prison and a $250,000 fine for each count.

An indictment is not a finding of guilt.  Individuals charged in indictments are presumed innocent until proven guilty beyond a reasonable doubt.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Techau thanked special agents of IRS Criminal Investigation, the FBI, the U.S. Postal Inspection Service and the U.S. Environmental Protection Agency, who investigated the case and Assistant U.S. Attorney Tim Vavricek of the Northern District of Iowa and Trial Attorney Matthew Hoffman of the Tax Division, who are prosecuting the case.

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

A federal court has ordered a San Diego, California provider of collection services to pay its payroll taxes as they become due, the Justice Department announced today.  Judge Larry Alan Burns of the U.S. District Court for the Southern District of California entered a permanent injunction requiring Prolien Services LLC and its owner, Albert F. Quintrall, to pay Prolien’s federal payroll tax liabilities as they become due and owing.

The defendants agreed to entry of the injunction and admitted the allegations in the government’s complaint.  Prolien has repeatedly failed to make sufficient federal employment tax deposits since 2009 and has amassed substantial employment tax liabilities. 

Under the terms of the injunction, the business must deposit its payroll taxes and file its employment tax returns on a timely basis.  The defendants are also required to notify the Internal Revenue Service (IRS) that the required tax deposits have been made and tell the IRS if they begin operating any new business.  The defendants are precluded from assigning property or making any payments to other creditors until the employment tax liabilities are paid.  The injunction is effective immediately.

Acting Assistant Attorney General Caroline D. Ciraolo of the Tax Division thanked the revenue officer of IRS Field Collection for investigating and preparing the civil case and the attorneys who handled the litigation.

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