District Not Recorded

Attorney General Loretta E. Lynch announced today the hiring of Gary Simpson to serve as the new CEO of Federal Prison Industries (FPI).

“Today, Federal Prison Industries remains the Bureau of Prisons’ largest and most successful reentry program, helping men and women find a new sense of purpose and develop concrete skills that they can bring back to their communities,” said Attorney General Loretta Lynch. “I am pleased to welcome its new CEO, Gary Simpson – an expert in manufacturing operations with 28 years of experience.  Over the next few years, Gary will spearhead a business transformation plan to expand FPI’s activities – using a business model that results in no costs to the taxpayers – to ensure that more incarcerated individuals can take advantage of this vital program.”

Gary Simpson comes to FPI with over 28 years of experience in manufacturing operations at Procter and Gamble.  Simpson is an expert in the areas of cost effective product launches, operational turnarounds and sourcing optimization. He will use these skills to lead FPI’s business transformation plan.

“I’m honored for the opportunity to lead Federal Prisons Industries through this transformative period,” Simpson said. “For more than 80 years, FPI has provided job skills training to federal inmates and helped prepare them to return to their respective communities. This program has been and will continue to be, a vital part of the Department of Justice’s reentry initiatives.” 

FPI is a voluntary industrial work program that operates as a wholly owned government corporation.  It is the largest reentry program within the Bureau of Prisons (BOP), providing job skills training to almost 12,000 federal inmates.  FPI operates without any appropriations from Congress and instead primarily relies on proceeds generated from the sale of inmate-produced goods to federal agencies, with the Department of Defense being the chief source of business.

FPI benefits not only those within the federal prison system, but society as a whole.  Research has shown that participants in the program are 24 percent less likely to reoffend and are 14 percent more likely to obtain employment upon release from custody.  In Fiscal Year 2014, $1 million of earnings from FPI helped inmates contribute to financial obligations including court-ordered fines, restitution and familial support.

The hiring of Simpson is one of the steps the department is taking to ensure that FPI remains a viable program in which federal offenders become productive, law-abiding citizens. 

A Columbus, Georgia resident was sentenced to serve 21 months in prison, followed by three years of supervised release and ordered to forfeit $1,357,476.18 for operating an unlicensed money transmitting business, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and Acting U.S. Attorney G.F. “Pete” Peterman III for the Middle District of Georgia announced today.

According to court documents, between February 2013 and March 2014, Sawan Shah aka Sunny, owned, operated and managed several money transmitting companies in the Columbus area.  Shah offered check cashing services to the public, including cashing of checks that exceeded $1,000.  Shah knew that he and his companies were required to be registered with Financial Crimes Enforcement Network (FinCEN) and with the State of Georgia.  Neither Shah nor any of the businesses he controlled were registered with FinCEN or the State of Georgia as a money transmitting business or as a check cashier.

As part of his plea, the defendant admitted that several individuals approached him about cashing tax refund checks that were issued in the names of other individuals.  Shah agreed to do so and did not require proof of identification for the individuals listed on the checks.  Shah charged fees of between 10 and 30 percent of the value of the check, due to his knowledge that the checks were involved in tax fraud.  In 2013 and 2014, Shah cashed approximately 567 federal tax refund checks that totaled $1,357,476.18.  Shah admitted in plea documents that those checks were the result of fraudulent claims for income tax refunds submitted in the names of stolen identities. 

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

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

Filed More than 860 False Tax Returns Seeking Over $1 Million in Tax Refunds

Two Miami, Florida residents were sentenced to prison for their role in a stolen identity tax refund fraud scheme, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida and Special Agent in Charge Kelly R. Jackson of the Internal Revenue Service (IRS) Criminal Investigation announced today.

Roland Alexis, 34, was sentenced today to 42 months in prison followed by three years of supervised release.  Alexis’s co-conspirator, Jim Joseph, 31, was previously sentenced to 42 months in prison followed by three years of supervised release on Jan. 20.

“Identity theft and filing false tax returns are serious crimes that inflict tremendous damage on innocent victims,” said Acting Assistant Attorney General Ciraolo.  “We will continue to work with our federal and state law enforcement partners to aggressively investigate and prosecute these crimes and, where appropriate, seek the maximum sentence available to punish the perpetrators, deter others from engaging in such behavior, and seek justice for the victims.”         

According to the indictment and information disclosed in court proceedings, Joseph and Alexis conspired to file more than 860 false income tax returns claiming more than $1 million in refunds from the IRS.  Alexis’s conduct resulted in a tax loss of $1.8 million; Joseph’s conduct resulted in a tax loss of $1.2 million.  Joseph and Alexis each pleaded guilty in November 2015 to one count of a multi-object conspiracy to defraud the IRS, commit wire fraud and commit aggravated identity theft, as well as one count of aggravated identity theft.

Between 2007 and July 2014, Joseph, Alexis and others filed false federal income tax returns using stolen identities.  Joseph and Alexis obtained the personal identification information including names, social security numbers, addresses and dates of birth, without the individuals’ authorization. Much of the stolen personal identification information belonged to prisoners and deceased individuals.  Joseph, Alexis and others recruited knowing co-conspirators and unknowing victims to obtain Electronic Filing Identification Numbers (EFINs) in their names through which fraudulent income tax returns would be filed.  In late 2009, Alexis and Joseph, along with a co-conspirator, formed Worldwide Income Tax Multi-Services LLC and North Miami Income Tax Services.  The companies were created with the intended purpose of filing fraudulent tax returns using stolen identities.  Worldwide Income Tax Multi-Services was located in Miramar, Florida and listed Alexis as President and Joseph as Vice-President.  North Miami Income Tax Services was set up in Miami and listed Alexis as Registered Agent.  Joseph, Alexis and others then used the stolen identities and EFINs to electronically file fraudulent tax returns.

In addition to the prison term, U.S. District Judge William Zloch for the Southern District of Florida ordered Joseph to pay $1,225,686.12 in restitution to the IRS.  Alexis was also ordered to pay $1,805,332.71 in restitution, forfeit two single family owned properties in Miami and $369,776.18 in proceeds held in a bank account.

Acting Assistant Attorney General Ciraolo, U.S. Attorney Ferrer and Special Agent in Charge Jackson commended special agents of IRS Criminal Investigation and Homeland Security Investigations, who investigated the case and Assistant Chief Gregory E. Tortella of the Tax Division and Assistant U.S. Attorney Neil Karadbil of the Southern District of Florida, who prosecuted the case.

The Department of Justice announced today that Leodan Privatbank AG (Leodan), reached a resolution under the department’s Swiss Bank Program. 

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.

According to the terms of Leodan’s non-prosecution agreement, Leodan agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a penalty in return for the department’s agreement not to prosecute Leodan for tax-related criminal offenses.

Leodan, which is organized as a corporation owned by private shareholders, is a small private bank that commenced doing business in September 2009.  Leodan previously was known as PHZ Privat- und Handelsbank Zürich AG until it changed its name in August 2015 as part of a new business strategy.   Leodan focuses on asset management, which encompasses advisory, brokerage and custodial services, for private and institutional clients.  Leodan’s sole office is in Zurich, Switzerland.  On Jan. 11, 2016, a meeting of Leodan’s shareholders was convened, and the shareholders voted to voluntarily wind-down Leodan’s banking operations.

Until June 2013, Leodan 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.  Six private bankers at Leodan, including the Chief Executive Officer, serviced the 44 U.S.-related accounts at the bank.  Leodan offered a variety of traditional Swiss banking services, including hold mail and code-name or numbered account services, that it knew could assist, and did in fact assist, U.S. clients in the concealment of assets and income from the Internal Revenue Service (IRS).  Leodan opened and maintained accounts belonging to U.S. taxpayers who had left other banks being investigated by the department without ensuring that each such account was compliant with U.S. tax law.  Leodan accepted instructions in connection with U.S.-related accounts not to invest in U.S. securities and not to disclose the names of U.S. clients to U.S. tax authorities, including the IRS. Leodan also processed significant securities or precious metals electronic transfers in relation to U.S.-related accounts at or around the time the clients’ accounts were closed, even though Leodan knew, or had reason to know, that some of the accounts contained undeclared assets.

Leodan opened and maintained undeclared accounts in the names of sham structures that were beneficially owned by U.S. taxpayers, while knowing, or having reason to know, that these structures were used by U.S. clients to help conceal their identities from the IRS.  These structured accounts were non-U.S. domiciled entities, such as an offshore corporation or trust, which aided and abetted the clients’ ability to conceal their undeclared accounts from the IRS.  These non-U.S. domiciled entities were established in the British Virgin Islands, Cyprus, Germany, Hong Kong, Liechtenstein and Panama.  Because Swiss law requires Leodan to identify the true beneficial owner of structures on a document called a Form A, it knew that these were U.S. client accounts.  Nonetheless, for certain U.S. client accounts, Leodan private bankers and other employees aided and assisted some of these U.S. clients in concealing these assets and income from the IRS.

On Dec. 22, 2010, the Chief Executive Officer and the Chief Operating Officer of Leodan met in the bank’s offices with an external asset manager (EAM #1) and two private bankers, who were not satisfied with their positions at UBS.  EAM #1 presented his company and proposed a business relationship.  During this meeting, EAM #1 informed Leodan’s management that he was under investigation in the United States.  Later that same month and viewing a potential relationship with EAM #1 as a business opportunity, Leodan made a decision to hire the two private bankers commencing May 2011 and to enter into a business relationship with EAM #1.

Leodan opened 19 U.S.-related accounts for 13 clients of EAM #1.  Of these 19 accounts, 16 were structured accounts held by non-U.S. domiciled entities.  EAM #1 served as a director of his 16 structured accounts at Leodan, and EAM #1 had a power of attorney for the non-U.S. domiciled entity that held the account in its name.  The relationship with EAM #1 brought more than 40 percent of the U.S.-related accounts to Leodan.  EAM #1 was later indicted in the United States for conspiring with U.S. taxpayers to help them evade their U.S. tax obligations.

Between May 2011 and October 2012, Leodan made no efforts to ascertain the status of the criminal investigation against EAM #1. On Oct. 16, 2012, representatives of Leodan’s Board of Directors and Management Board met with representatives of FINMA.  After discussing with FINMA the indictment of EAM #1, which had taken place more than 15 months earlier in July 2011, Leodan made the decision to terminate its relationship with EAM #1 and exit his clients.  Between November 2012 and January 2013, Leodan transferred the 19 U.S.-related accounts of EAM #1 to other banks.  The majority of the assets in these accounts were transferred per the clients’ instructions to one specific Swiss bank and two banks in Liechtenstein, and these transfers continued to aid some of those clients in evading their U.S. taxes.

During the period since Aug. 1, 2008, Leodan held a total of 44 U.S.-related accounts, which included both declared and undeclared accounts, with an aggregate peak of approximately $59.42 million in assets under management.  Leodan will pay a penalty of $500,000.

In accordance with the terms of the Swiss Bank Program, Leodan 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 Leodan 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 Leodan must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division 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.

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

An Atlanta, Georgia tax return preparer self-surrendered earlier today after being indicted by a federal grand jury on Dec. 1, 2015 for 10 counts of wire fraud, 10 counts of aggravated identity theft and 10 counts of filing false claims against the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney John A. Horn for the Northern District of Georgia. 

Cheryl Singleton, 28, owned and operated Advanced Tax Services, a tax return preparation business with multiple offices in the Atlanta area, according to the indictment and other information presented in court.  Singleton’s initial court appearance was earlier today in U.S. District Court for the Northern District of Georgia.  Beginning in 2012, Singleton is alleged to have participated in a scheme with others to obtain tax refunds by filing false federal income tax returns.  The indictment states that as part of this scheme, Singleton falsely advised individuals that they could apply for a government stimulus payment by providing their personal identification information to Advanced Tax Services.  Singleton and the other participants in the scheme are also accused of using this personal identification information to electronically file false income tax returns in those individuals’ names, without their knowledge or consent.  These tax returns each claimed fraudulent tax refunds of at least $1,000.

If convicted, Singleton faces a statutory maximum sentence of 20 years in prison for each wire fraud count, five years in prison for each false claims count and a mandatory minimum sentence of two years in prison for the aggravated identity theft counts, which will run consecutively to any other prison term she receives.  Singleton also faces substantial monetary penalties and restitution. 

Acting Assistant Attorney General Ciraolo and U.S. Attorney Horn commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorney Melanie A. Smith of the Tax Division and Assistant U.S. Attorney Thomas J. Krepp of the Northern District of Georgia, who are prosecuting the case.

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. 

A Former Franchisee of “LBS Tax Services” and Owner of “AWA Tax Services” Allegedly Operated Fraudulent Tax Preparation Businesses

A federal court in Miami, Florida, has permanently barred Wilfrid Antoine of Lake Worth, Florida, from preparing federal tax returns for others and from owning or operating a tax return preparation business, the Justice Department announced today. 

The civil injunction order, to which Antoine agreed, was signed by Judge Donald M. Middlebrooks of the U.S. District Court for the Southern District of Florida. 

The United States filed its civil injunction and disgorgement complaint against Antoine in September 2014.  The complaint alleged that return preparers in Antoine’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 U.S. Treasury.

According to the complaint, Antoine owned and operated AWA Tax Inc., a corporation that operated seven tax return preparation stores in Florida.  Those stores allegedly operated as “LBS Tax Services” in 2013 and began operating as “AWA Tax Services” in 2014.  The complaint alleged that Antoine’s preparers engaged in fraudulent activity, including:

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

According to the complaint, Antoine was a franchisee of LBS Tax Services.  Since September 2014, the United States has filed nine similar lawsuits in Florida against the former LBS Tax Services franchisor Walner Gachette and 12 former LBS franchisees and managers, many of whom rebranded and have continued to operate tax preparation businesses.  The franchisees and managers include Douglas Mesadieu, Jean Demesmin, Kerny Pierre-Louis, Demetrius Scott, Jason Stinson, Tonya Chambers, Jehoakim Victor, Lauri Rodriguez, Milot Odne, Alexander Baraz and Christopher Lawrence.  The United States has also sued Kenneth Aikens, who worked for Lawrence as a tax preparer and manager before Aikens assumed ownership of several tax return preparation stores.  In the complaint against Lawrence and Aikens, the government alleges that both men have taken steps to mask their ownership of the businesses.

To date, Jean Demesmin, Odne, Chambers, Scott, Pierre-Louis, Victor and Lauri Rodriguez have agreed to preliminary injunctions barring them from tax return preparation.  The U.S. District Court for the Central District of Florida, following a motion by the United States, entered a preliminary injunction barring Mesadieu from tax return preparation.  A preliminary injunction motion to bar Stinson from tax return preparation is pending. 

Return preparer fraud was one of the Internal Revenue Service’s (IRS) Dirty Dozen Tax Scams for 2015.  The IRS has some tips on their website for choosing a tax preparer, and has launched a free directory of federal tax preparers.  In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers.  Information about these cases is available on the Justice Department’s website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

Un tribunal federal de Nueva Jersey ha prohibido en forma permanente a una preparador de declaraciones de impuestos del Sur de Florida preparar declaraciones de impuestos a la renta federales para terceros, anunció hoy el Departamento de Justicia. 

La orden judicial civil también prohíbe a Felix Taveras Santos, individualmente y a través de su empresa Latino Tax LLC, realizar actividades de preparación de declaraciones de impuestos en el futuro.  Santos, quien actualmente vive en Doral, Florida, aceptó la presentación del mandamiento judicial; sin embargo, no admitió los alegatos de la demanda civil entablada en su contra.  

De acuerdo con la demanda, Santos y su empresa ubicada en Atlantic City, Nueva Jersey, prepararon declaraciones de impuestos falsas e improcedentes durante los períodos de presentación de declaraciones de 2010 a 2014.  El Servicio de Impuestos Internos [Internal Revenue Service (IRS)] auditó 43 declaraciones de impuestos federales preparadas por Santos o uno de sus empleados, y las auditorías resultaron en un ajuste del 80 por ciento de dichas declaraciones y un déficit total de impuesto a la renta de alrededor de $100.000, de acuerdo con la demanda.  La demanda alegó que Santos y sus empleados infravaloraron las obligaciones tributarias de sus clientes o exageraron sus reembolsos indebidamente al:

• reclamar créditos tributarios para hijos, incluyendo hijos que vivían fuera de los Estados Unidos;

• declarar exenciones por dependientes, por ejemplo, para clientes sin manera de comprobar que mantenían a sus hijos; y

• utilizar categorías incorrectas de declaración del contribuyente, tales como soltero o cabeza de familia para clientes casados.

El mandamiento judicial exige que Santos le entregue a los Estados Unidos una lista de sus clientes desde 2010 y envíe una copia del mandamiento judicial a todos los clientes para los que él y Latino Tax LLC prepararon declaraciones de impuestos a partir de 2010.

El fraude de preparación de declaraciones de impuestos es uno de los Doce ardides tributarios sucios de 2015 del IRS. En su portal en Internet, el IRS incluye algunos consejos para elegir un preparador de declaraciones de impuestos. En la última década, la División de Impuestos ha obtenido mandamientos judiciales contra cientos de preparadores de declaraciones de impuestos inescrupulosos y promotores de ardides tributarios.  Hay información disponible sobre estos casos en el portal del Departamento de Justicia. Se puede encontrar aquí una lista de personas prohibidas de preparar declaraciones de impuestos y personas que promovieron ardides tributarios. Si usted cree que alguna de las personas o empresas prohibidas podrían estar violando un mandamiento judicial, por favor comuníquese con la División de Impuestos para brindar información.

A federal court in New Jersey has permanently barred a South Florida man from preparing federal income tax returns for others, the Justice Department announced today. 

Felix Taveras Santos, of Doral, Florida, is prohibited individually and doing business as Latino Tax LLC, from operating a tax return preparation business in the future, pursuant to the civil injunction order.  Santos agreed to the entry of the injunction but did not admit to the allegations in the civil complaint against him.  

According to the complaint, Santos and his business, which was located in Atlantic City, New Jersey, prepared false and improper returns during the 2010 through 2014 filing seasons.  The Internal Revenue Service (IRS) audited 43 federal tax returns that Santos or one of his employees prepared, and the audits resulted in adjustment of 80 percent of those returns and a total income tax deficiency of approximately $100,000, according to the complaint.  The complaint alleged that Santos and his employees understated their customers’ tax liabilities or inflated their refunds by improperly:

• claiming child tax credits, including for children who lived outside of the United States;

• declaring dependency exemptions, for instance, for customers who had no proof that they supported the children; and

• using incorrect filing statuses, such as single or head-of-household for customers who were married.

The injunction order requires Santos to provide the United States with a list of his customers since 2010 and to send a copy of the court’s injunction order to all customers for whom he and Latino Tax LLC prepared returns starting in 2010.

Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2015.  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 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.  A list of persons enjoined from preparing returns and promoting tax schemes can be found here.  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 District of Delaware against Roos Foods Inc., charging the company with the distribution of adulterated cheese in interstate commerce, the Department of Justice announced today.   The company has signed a plea agreement in which it has agreed to plead guilty to a misdemeanor violation of the federal Food, Drug and Cosmetic Act (FDCA).  In addition to the company’s agreement to plead guilty, Roos, and its principals, Ana A. Roos and Virginia Mejia, have agreed to a proposed consent decree of permanent injunction. 

Roos Foods distributed several varieties of ready-to-eat cheese, including ricotta, queso fresco and fresh cheese curd and sold and distributed its products to wholesale customers in Maryland, New Jersey, Virginia and Washington D.C., according to the information.  A civil complaint along with the proposed consent decree was also filed in the U.S. District Court for the District of Delaware.  The criminal charge and civil complaint allege that Roos distributed cheese in interstate commerce connected to an outbreak of Listeria monocytogenes (L. mono) in early 2014. 

“We must work to ensure that the food we buy is free from dangerous bacteria and is safe to eat,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to work aggressively to combat and deter conduct leading to the distribution of adulterated food to consumers.”

“It is cases like this that demonstrate the need for government regulations concerning food safety, ” said U.S. Attorney Charles M. Oberly III for the District of Delaware. “Fortunately, there were no serious or permanent injuries as a result of the marketing of contaminated cheese. Manufacturers of our nation’s food supplies must comply with the law and when violators are found they should expect to be prosecuted and, if necessary, put out of business.”

The criminal information alleges that on Feb. 21, 2014, the Centers for Disease Control and Prevention (CDC) reported that a total of eight people (five adults and three newborns) in Maryland and California were infected with L. mono and according to the CDC, several of the Maryland patients reported having eaten soft or semi-soft cheeses in the month before becoming ill. 

L. mono is the bacterium that causes the disease listeriosis.  Listeriosis is most commonly contracted by eating food contaminated with L. mono.   Listeriosis can be serious, even fatal, for high-risk groups such as unborn babies, newborns and those with impaired immune systems. 

Unlike many other foodborne microbes, L. mono bacteria are capable of adapting and growing even at refrigerator temperatures.  Thus, the presence of L. mono in ready-to-eat foods is a particularly significant public health risk.

As alleged in the information, following a report that L. mono had been isolated from cheese manufactured by Roos Foods, the U.S. Food and Drug Administration (FDA) inspected the firm’s Kenton, Delaware, facility and established that ready-to-eat cheese products were adulterated in that they had been prepared, packed or held under insanitary conditions whereby they may have become contaminated with filth or rendered injurious to health.  As alleged, FDA found numerous failures to implement effective monitoring and sanitation controls in accordance with current Good Manufacturing Practices.

The information alleges that the FDA inspection revealed significant sanitation deficiencies, such as widespread roof leaks in the manufacturing area, including over open manufacturing equipment; rust flakes on the manufacturing equipment from corroded roof trusses and metal roofing; un-cleanable surfaces on walls, floors and ceilings and product residue on equipment that had purportedly been cleaned.  In addition, as alleged in the information, FDA collected environmental samples and found L. mono on 12 surfaces in the facility.

On March 11, 2014, FDA suspended the food facility registration of Roos Foods after determining there was a reasonable probability that food manufactured, processed, packed, or held by Roos Foods would cause serious adverse health consequences or death to humans.  A company without a food facility registration cannot distribute any food products.  Roos Foods has not reopened.

“The FDA will not tolerate food companies that fail to provide adequate safeguards and place the public health at risk by producing and shipping contaminated products,” said FDA’s Deputy Commissioner for Global Regulatory Operations and Policy Howard Sklamberg, J.D.  “We will continue to work with the Department of Justice to use the full force of our justice system against those that place profits over the health and safety of American consumers.”

The civil complaint alleges that Roos Foods and two individual defendants violated the FDCA by, among other things, introducing or delivering for introduction into interstate commerce articles of food that were adulterated in that the food was prepared, packed or held under insanitary conditions whereby it may have become contaminated with filth or rendered injurious to health.  The proposed consent decree of permanent injunction requires the defendants to cease receiving, preparing, processing, packing, holding and distributing all food products unless and until the defendants bring their operations into compliance with the FDCA and its implementing regulations.

The criminal case is being prosecuted by Trial Attorney Heide L. Herrmann of the Justice Department’s Consumer Protection Branch and Assistant U.S. Attorneys Jennifer Welsh and Edmond Falgowski of the District of Delaware.  They were assisted by Associate Chief Counsel Laura Pawloski 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.

The government is represented in the civil case by Trial Attorney Megan Englehart of the Justice Department’s Consumer Protection Branch and Assistant U.S. Attorney Patricia Hannigan of the District of Delaware, with the assistance of Associate Chief Counsel Shannon M. Singleton of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services.

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

A civil complaint is merely a set of allegations that, if the case were to proceed to trial, the government would need to prove by a preponderance of the evidence.

Big Brothers Big Sisters of America Corporation (Big Brothers) has agreed to pay the United States $1.6 million to resolve allegations of false claims for funds under Department of Justice grants awarded to help children at risk, the Justice Department announced today.  Big Brothers is a not-for-profit organization that provides mentoring services to boys and girls throughout the United States.  The organization, originally based in Philadelphia, Pennsylvania, is now headquartered in Tampa, Florida.

“Organizations such as Big Brothers do great work, but in carrying out their mission they also have an obligation to the populations they serve and to the taxpayer to ensure that government grant funds are used responsibly according to the rules,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The settlement announced today exemplifies the Department’s commitment to hold those who mishandle such funds accountable.”

“The U.S. Attorney’s office is committed to protecting federal grants and ensuring that the funds are appropriately spent,” said U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania. “Federal grant recipients must administer these grants with transparency and diligence, and the compliance measures implemented pursuant to this settlement agreement will help to achieve those goals.”

Big Brothers is a national organization that acts through approximately 300 independent affiliate agencies across the United States.  Since 2004, Big Brothers has received millions of dollars in grants from the Justice Department to support initiatives on behalf of children at risk.  As a condition of those grants, Big Brothers was required to maintain sound accounting and financial management systems in accordance with federal regulations and guidelines designed to ensure that grant funds would be properly accounted for and used only for appropriate purposes.

The United States alleges that Big Brothers violated these regulations and guidelines with respect to three grants awarded by the Justice Department from 2009 to 2011, by commingling the grant funds with general operating funds, failing to segregate expenditures to ensure that the funds were used as intended and failing to maintain internal financial controls to safeguard the proper use of those funds.  These allegations were the focus of a 2013 audit of the three grants performed by the Department of Justice Office of the Inspector General.  Since 2013, Big Brothers has replaced its management team and begun implementing policies governing the use of federal grant funds.

“We appreciate the support of the U.S. Attorney for the Eastern District of Pennsylvania and the Civil Division in working with us on these kinds of cases,” said Department of Justice Inspector General Michael E. Horowitz.  “The OIG’s auditors and investigators will continue to work with each other closely to uncover misuses of grant funds, and with our law enforcement partners to ensure that justice is served.”

In addition to paying the United States $1.6 million, and as part of the settlement, Big Brothers has agreed to institute a strict compliance program that requires the organization to engage in regular audits, both internally and by independent auditors; establish a compliance team, an employee code of conduct, whistleblower policies and a disciplinary policy for employees who engage in or fail to disclose abuses of federal grant funds; provide regular employee training on these policies; and employ risk assessment tools to detect abuses that might otherwise go undetected.

The settlement was the result of a coordinated effort between the U.S. Attorney’s Office for the Eastern District of Pennsylvania and the Civil Division’s Commercial Litigation Branch.  The Department of Justice Office of the Inspector General conducted the investigation. 

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

Worked with Others to Seek More Than $700,000 in Fraudulent Refunds

Two Maryland residents pleaded guilty today for their involvement in a far-reaching stolen identity refund fraud scheme in which they worked with others to seek over $700,000 in income tax refunds through the filing of fraudulent federal income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Channing D. Phillips of the District of Columbia, Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation (IRS-CI), Inspector in Charge Maria L. Kelokates of the U.S. Postal Inspection Service, Washington Division and Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of the Treasury.

Michael Whittaker, 31, of Cumberland, Maryland, and Wayne Gardner, 49, of Capitol Heights, Maryland, are among approximately 18 participants in this scheme who have pleaded guilty to charges in the U.S. District Court for the District of Columbia.  According to court documents, the overall case involves the filing of at least 12,000 fraudulent federal income tax returns that sought refunds of at least $42 million. The two men pleaded guilty to one count of conspiracy to commit theft of public money and one count of theft of public money.

The charges carry statutory maximum prison terms of five years and 10 years, respectively, as well as potential financial penalties.  As part of the plea agreements, Whittaker and Gardner agreed to pay restitution to the IRS in the amounts of $397,090 and $158.160, respectively, which represent that value of the U.S. Treasury checks that were negotiated as a result of their conduct.  U.S. District Judge Ellen S. Huvelle set sentencing for May 18.

According to the government’s evidence, Whittaker and Gardner participated in a massive and sophisticated stolen identity refund fraud scheme that involved an extensive network of more than 130 people, many of whom were receiving public assistance.  The refunds were sought for tax years 2005 through 2012, often in the names of people, whose identities had been stolen, including the elderly, people in assisted living facilities, drug addicts and incarcerated prisoners.  Returns were also filed in the names of, and refunds were issued to, people who were willing participants in the scheme.  The refunds listed more than 400 “taxpayer” addresses located in the District of Columbia, Maryland and Virginia.

According to documents filed with the court, Whittaker and Gardner obtained the means of identification of third parties, including names and social security numbers and provided them to a co-conspirator for use in the preparation of fraudulent income tax returns.  Whittaker admitted to providing 21 means of identification from August 2010 to May 2012.  He also permitted various residential addresses that he controlled to be used as purported taxpayer addresses for the delivery of tax refund checks and deposited U.S. Treasury checks that were received as part of this scheme into his bank accounts.  Gardner admitted to providing 65 means of identification to a co-conspirator between August and December 2010.  Whittaker admitted that he was involved in the filing of 135 fraudulent tax returns that sought refunds of approximately $494,902.  Gardner admitted that he was involved in the filing of 116 fraudulent tax returns that sought refunds of approximately $299,984.

The fraudulent tax returns that were filed as part of the scheme included Schedules C or C-EZ that falsely claimed that each “taxpayer” operated a business, such as “barber” or “childcare,” as a sole proprietorship.  The returns falsely stated that the “taxpayer” had gross receipts and two or more dependent children, when, in fact, the “taxpayer” was either a victim of identity theft, was misled into providing his or her identifying information, or was a willing participant in the scheme. 

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

An Austin, Texas, businessman was indicted by a federal grand jury for five counts of filing false tax returns and one count of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

According to the allegations in the superseding indictment, Victor Antolik owned and operated a commercial janitorial business in Austin, San Antonio and Houston, Texas, for which he used a variety of business names, including Diversified Building Services Inc., DBS Services Inc., Partners in Cleaning, PIC Building Services and BSI Industries.  Antolik also earned income as a real estate agent, real estate broker and property manager.  Antolik earned a portion of his real estate income through his companies SGN Realty Inc. and Signature Realty Services.  For the tax years 2004, 2007 and 2008, Antolik submitted to the Internal Revenue Service (IRS) a total of four false individual income tax returns on which he underreported his income.  In addition, between 1998 and 2014, Antolik attempted to obstruct the IRS by, among other things, attaching altered Forms W-2 and 1099 to his tax returns, providing false information to his accountants that was used to prepare both corporate and individual income tax returns on his behalf, and using nominees to conceal income and assets. 

If convicted, for each count, Antolik faces a statutory maximum sentence of three years in prison, a maximum fine of $250,000 and restitution to the IRS. 

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

Acting Assistant Attorney General Ciraolo thanked agents of the IRS-Criminal Investigation, who are investigating the case and Tax Division Trial Attorneys Robert A. Kemins and David Zisserson, who are prosecuting the case.  Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office for the Western District of Texas for their substantial assistance.    

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

Yesterday, a federal court in Rock Hill, South Carolina, ordered Tony McMillan and his trucking company, which he operated under the names T-N-T of York County Inc. and TM Trucking of the Carolinas LLC, to stop violating their employment tax reporting, deposit and payment obligations.  The Judgment and Permanent Injunction by Consent requires McMillan and the business to timely file all employment tax returns, to make all required deposits of employment and unemployment taxes and to certify to the Internal Revenue Service (IRS) that they have made these deposits.  The injunction also prohibits the defendants from making other disbursements if the business’s current employment taxes are not paid.  The injunction also requires McMillan to notify the IRS of any new company he owns, manages, or works for over the next five years.

The government’s complaint alleged that McMillan operated the trucking company since at least 2008 and was routinely late in filing its employment tax returns and paying its employment taxes, when he did so at all.  According to the complaint, McMillan also failed to pay over the taxes withheld from his employees’ paychecks.  By the time the complaint was filed in June 2015, T-N-T of York County and TM Trucking of the Carolinas together owed more than $2.7 million in federal employment and unemployment taxes for various periods from 2009 through 2014, the complaint stated.  The complaint alleged that this pyramiding of taxes had continued in spite of repeated efforts by the IRS to collect the tax and to help McMillan and the business cure the violations. 

Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division thanked IRS Field Collection and its revenue officer 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.

Criminals Received $16 Million in Refunds After Filing Bogus Tax Returns

Two brothers pleaded guilty today in the District of Maryland in a scheme in which they filed approximately 37 fraudulent tax returns seeking refunds of over $218 million.  The guilty plea was announced by Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Rod J. Rosenstein for the District of Maryland and Special Agent in Charge Thomas Jankowski of the Internal Revenue Service - Criminal Investigation (IRS-CI)., Washington, D.C. Field Office.

Sean Aude Gallman, 39, of Upper Marlboro, Maryland, and his brother Eric Maurice Gallman, 42, of Huntersville, North Carolina, pleaded guilty today to a conspiracy to commit mail and wire fraud, mail fraud and conspiracy to commit money laundering. Sean Gallman also pleaded guilty to aggravated identity theft and money laundering charges. 

“With the 2016 tax filing season officially underway today, taxpayers can take comfort that the Department of Justice and IRS are aggressively pursuing those who seek to defraud the government through the filing of false tax returns,” said Acting Assistant Attorney General Ciraolo.

“These two criminals filed bogus tax returns claiming ‘refunds’ that were not owed, and stole over $16 million from the IRS,” said U.S. Attorney Rosenstein.  “Federal agents and prosecutors have a duty to pursue perpetrators of such fraud schemes and try to recover money stolen from the U.S. Treasury.”

According to evidence the government would have used at trial to prove the criminal conduct, Sean and Eric Gallman established trusts and business entities and used mailboxes at numerous private commercial postal carrier stores in Maryland and North Carolina as the addresses for the trusts and business entities.  The defendants, acting as trustees and agents, mailed fraudulent tax returns to the IRS in the names of the trusts and businesses requesting refunds.

For example, in January 2013, Sean Gallman mailed to the IRS a fraudulent 2012 tax return in the name of the Gallman Charitable Trust, requesting a refund of $8,218,930.  Also around this time, the defendants mailed to the IRS a fraudulent 2012 tax return in the name of LEA Group Holdings Trust, requesting a refund of $8,293,562.  The defendants knew that the trusts were not entitled to the tax refunds.  After receiving refund checks in these amounts, on Feb. 15 and March 11, 2013, the defendants deposited the two refunds in bank accounts they controlled.  To hide their receipt of these refunds, the defendants used cashier’s checks and other financial instruments to transfer a portion of the money to third parties and other bank accounts.

Altogether, the Gallman brothers filed a total of approximately 37 fraudulent tax returns seeking refunds totaling $218,094,765, for which the IRS paid two refunds totaling $16,512,492.

The government seeks the forfeiture of the two refunds paid by the IRS, including $11,529,954 seized from numerous bank accounts; foreign currency and gold and silver coins, seized from a residence in Upper Marlboro; nine residential properties located in Upper Marlboro and Laurel, Maryland; North Carolina and South Carolina; and two Mercedes-Benz vehicles and a Hyundai vehicle.

The defendants face a statutory maximum sentence of 20 years in prison for conspiring to commit mail and wire fraud, conspiring to commit money laundering and mail fraud.  Sean Gallman also faces a statutory maximum sentence of 20 years in prison for an additional count for mail fraud and for money laundering; and a mandatory two years in prison consecutive to any other sentence imposed for aggravated identity theft. U.S. District Judge Paul W. Grimm has scheduled sentencing for May 17, 2016 at 10:00 a.m.

Acting Assistant Attorney General Ciraolo, U.S. Attorney Rosenstein and Special Agent in Charge Jankowski thanked special agents of IRS-Criminal Investigation, who investigated the case and Assistant U.S. Attorney Thomas P. Windom of the District of Maryland and Trial Attorney Erin Pulice of the Tax Division, who are prosecuting the case.

Attorney General Loretta E. Lynch announced today the release of a video series and resource guide to raise awareness about the many forms of human trafficking in the United States and to provide information on how to identify and serve its victims.  She also spoke with a group 20 survivors of human trafficking at a forum hosted by the Justice Department’s Office for Victims of Crime (OVC) to seek survivors’ input about how federal agencies can most effectively address the crime of human trafficking. 

“In an effort to bring human trafficking survivors’ voices to as many people as we can, we are proud to announce today the release of The Faces of Human Trafficking, a new video series sponsored by OVC,” said Attorney General Lynch.  “I applaud OVC and the producers for their work to present the strength and resilience of the survivors who were interviewed for the film, which will serve as an informative training, outreach and awareness tool for years to come.”

Created by OVC, the Faces of Human Trafficking multidisciplinary resource includes:

• Nine videos with Spanish subtitled versions;

• Public Service Announcements (PSAs) offered in Spanish, Thai, Hindi and Tagalog;

• Discussion guide;

• Four fact sheets; and

• Four posters

“Through heightened awareness, victim-centered services, and effective investigations and prosecutions, we can work together to fight the horrific crime of human trafficking and support survivors,” said Director Joye Frost of OVC.  “A crucial first step is to help everyone recognize the reality of trafficking in the United States, and we hope our new resource will do just that.”

The resource features voices of survivors of trafficking and is intended to educate service providers, law enforcement, prosecutors and others in the community about multidisciplinary approaches to serving victims of human trafficking, effective victim services and victims' legal needs.  It addresses the special considerations and needs of youth victims and describes promising practices for building effective collaborations among federal agencies to address human trafficking.  The posters are available for download and can be customized with information about training opportunities or local service providers.

For more information about OVC’s anti-human trafficking programs, please visit http://www.ovc.gov/trafficking.

Attorney General Loretta E. Lynch released the following statement on recent police officer shootings:

“I am appalled and deeply saddened by the recent shooting attacks against law enforcement officers in Danville, Ohio, and Holladay, Utah, in addition to an earlier ambush in Philadelphia, which left an officer injured.  These heinous assaults are reminders of the difficult jobs that our brave law enforcement officers perform every day and of the dangers that they willingly face in the service of their communities.  The Department of Justice is dedicated to supporting the courageous men and women who wear the badge and determined to do all that we can to keep them safe.  We stand ready to offer any and all appropriate resources to help hold accountable those who threaten our communities, attack our neighbors and seek to harm the peacekeepers within our nation.”

Below is a list of the seven defendants who either received pardons or commutations.

• Khosrow Afghahi – Southern District of Texas (Pardon)

Offenses: One count of conspiracy to violate the Iranian embargo and the Export Administration Regulations (EAR), one count of violating the Iranian embargo, one count of conspiracy to commit money laundering and one count of money laundering.

• Tooraj Faridi – Southern District of Texas (Pardon)

Offenses: One count of conspiracy to violate the Iranian embargo and the EAR, two counts of violating the Iranian embargo and one count of conspiracy to commit money laundering.

• Bahram Mechanic – Southern District of Texas (Pardon)

Offenses: One count of conspiracy to violate the Iranian embargo and the EAR, six counts of violating the Iranian embargo and the EAR, five counts of violating the Iranian embargo, one count of conspiracy to commit money laundering, eight counts money laundering and one count of failure to file Reports of Foreign Bank and Financial Accounts (FBARs).

• Nima Golestaneh – District of Vermont (Pardon)

Offenses: Four counts of wire fraud, one count each of conspiracy to access a computer without authorization and accessing a computer without authorization.

• Nader Modanlo, aka Modanlu and Modanlou – District of Maryland (Commutation)

Offenses: One count of conspiracy to violate the Iranian embargo, two counts of violating the Iranian embargo, one count each of money laundering and obstruction of bankruptcy proceedings.

• Arash Ghahreman – Southern District of California (Commutation)

Offenses: One count of conspiracy to violate the Iranian embargo, one count of conspiracy to smuggle goods from the United States, one count of attempting to violate the Iranian embargo, one count of smuggling, one count of conspiracy to money launder and two counts of money laundering.

• Ali Saboonchi – District of Maryland (Commutation)

Offenses: One count of conspiracy to violate the Iranian embargo and seven counts of violating the Iranian embargo.

Worked With Others to Obtain More Than $315,000 in Fraudulent Refunds

A resident of the District of Columbia was sentenced today to 18 months in prison for his involvement in a far-reaching stolen identity refund fraud scheme in which he worked with others to obtain over $315,000 in income tax refunds through the filing of fraudulent federal income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Channing D. Phillips of the District of Columbia, Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation (IRS-CI), Inspector in Charge Maria L. Kelokates of the U.S. Postal Inspection Service, Washington Division and Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of the Treasury.

Ezekiel Raspberry, 39, is among approximately 16 participants in this scheme who have pleaded guilty to charges in the U.S. District Court for the District of Columbia.  According to court documents, the overall case involves the filing of at least 12,000 fraudulent federal income tax returns that sought refunds of at least $42 million.  Raspberry pleaded guilty on Nov. 10, 2015, to conspiracy to defraud the United States with respect to claims.  Following his prison term, Raspberry will be placed on three years of supervised release. During that time, he must perform 100 hours of community service.  In addition, U.S. District Judge Ellen S. Huvelle of the District of Columbia ordered Raspberry to pay $315,076 in restitution to the IRS.        

According to the government’s evidence, Raspberry participated in a massive and sophisticated stolen identity refund fraud scheme that involved an extensive network of more than 130 people, many of whom were receiving public assistance.  The refunds were sought for tax years 2005 through 2012, often in the names of people, whose identities had been stolen, including the elderly, people in assisted living facilities, drug addicts and incarcerated prisoners.  In other cases, the refunds were sent to people who were willing participants in the scheme.  The refunds listed more than 400 “taxpayer” addresses located in the District of Columbia, Maryland and Virginia.

According to documents filed with the court, from September 2008 through November 2010, Raspberry and others conspired to defraud the IRS of approximately $315,076 through the filing of 145 fraudulent federal income tax returns.  Raspberry received refund checks from a co-conspirator and deposited them into his bank account.  He would then withdraw the funds and provide them to the co-conspirator, keeping a portion of the proceeds for himself.

The refund checks were generated by filing false federal income tax returns that included Schedules C or C-EZ that falsely claimed that each “taxpayer” operated a business, such as “barber” or “childcare,” as a sole proprietorship.  The returns falsely stated that the “taxpayer” had gross receipts and two or more dependent children, when, in fact, the “taxpayer” was either a victim of identity theft, was misled into providing his or her identifying information, or was a willing participant in the scheme.  The businesses listed on the Schedules C and C-EZ were entirely fictitious. 

In a related case this week, Rashida King, 41, of Savannah, Georgia, pleaded guilty on Jan. 14 to conspiracy to defraud the United States with respect to claims.  According to court documents, King deposited at least 33 fraudulently obtained U.S. Treasury checks into her back account.  A sentencing date has not yet been set.

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

Tri-City Medical Center, a hospital located in Oceanside, California, has agreed to pay $3,278,464 to resolve allegations that it violated the Stark Law and the False Claims Act by maintaining financial arrangements with community-based physicians and physician groups that violated the Medicare program’s prohibition on financial relationships between hospitals and referring physicians, the Justice Department announced today.

The Stark Law generally forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital unless that relationship falls within an enumerated exception.  The exceptions generally require, among other things, that the financial arrangements do not exceed fair market value, do not take into account the volume or value of any referrals and are commercially reasonable.  In addition, arrangements with physicians who are not hospital employees must be set out in writing and satisfy a number of other requirements.

“The settlement of this matter reflects not only our commitment to protect the integrity of the healthcare system through enforcement of the Stark Law, but also our willingness to work with providers who disclose their own misconduct,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.

The settlement announced today resolves allegations that Tri-City Medical Center maintained 97 financial arrangements with physicians and physician groups that did not comply with the Stark Law.  The hospital identified five arrangements with its former chief of staff from 2008 until 2011 that, in the aggregate, appeared not to be commercially reasonable or for fair market value.  The hospital also identified 92 financial arrangements with community-based physicians and practice groups that did not satisfy an exception to the Stark Law from 2009 until 2010 because, among other things, the written agreements were expired, missing signatures or could not be located.

“Patient referrals should be based on a physician’s medical judgment and a patient’s medical needs, not on a physician’s financial interests or a hospital’s business goals,” said U. S. Attorney Laura E. Duffy of the Southern District of California.  “This settlement reinforces that hospitals will face consequences when they enter into financial arrangements with physicians that do not comply with the law. We will continue to hold health care providers accountable when they shirk their legal responsibilities to the detriment of tax payer-funded health care programs.”

“Together with our law enforcement partners, our agency’s investigators and attorneys will continue to work with health care providers who use the self-disclosure protocol to resolve their billing misconduct,” said Special Agent in Charge Chris Schrank of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Los Angeles region.”

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $27.1 billion through False Claims Act cases, with more than $17.1 billion of that amount recovered in cases involving fraud against federal health care programs.

This matter was handled by the U.S. Attorney’s Office of the Southern District of California, the Civil Division’s Commercial Litigation Branch and HHS-OIG.  The claims settled by this agreement are allegations only, and there has been no determination of liability. 

Ciner Gemi Acente Isletni Sanayi Ve Ticaret S.A., a ship management company in Turkey, pleaded guilty and was sentenced in federal court in Baltimore, Maryland, for violating the Act to Prevent Pollution from Ships (APPS), announced Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division and U.S. Attorney Ron J. Rosenstein for the District of Maryland.

Ciner operated the M/V Artvin, a 44,635 ton bulk carrier ship that transported cargo to and from ports around the world, including the Port of Baltimore.  According to the plea agreement, from March 2014 until November 2014, oily waste water was routinely discharged from the vessel into the sea without the use of required pollution prevention equipment.  During that time, the crew intentionally covered up the illegal discharges of oil waste by falsifying the vessel’s oil record book. 

In previous proceedings, the chief engineer of the vessel, John C. Malaki, 56, of the Philippines, pleaded guilty to failing to maintain an accurate oil record book.  For his role, Malaki was sentenced to six months supervised probation and a $50,000 fine. The vessel’s second engineer, Ulyses A. Atabay, 46, also of the Philippines, pleaded guilty to aiding and abetting Malaki’s failure to maintain an accurate oil record book and received a sentence of one year of unsupervised probation. According to their plea agreements, Atabay directed members of the crew to discharge oily water from the waste oil tank into the sea without first using the vessel’s oil water separator, as required by law. Malaki did not stop the discharges and did not record them in the vessel’s oil record book, as he was required to do.

The court accepted the terms of the company’s plea agreement, and sentenced Ciner to pay an overall criminal penalty of $1.05 million, $150,000 of which will be in the form of an organizational community service payment to the National Marine Sanctuary Foundation and used to fund projects aimed at the restoration of marine and aquatic resources in the District of Maryland.  Ciner will also be required to implement an environmental compliance plan, which will ensure that any ship operated by Ciner complies with all maritime environmental requirements established under applicable international, flag state and port state laws.  The plan ensures that Ciner’s employees and the crew of any vessel operated by Ciner are properly trained in preventing maritime pollution.  An independent monitor will report to the court about Ciner’s compliance with its obligations during the period of probation.

This case was investigated by the U.S. Coast Guard Investigative Service.  The case was prosecuted by Michael Cunningham from the U.S. Attorney’s Office of the District of Maryland and by Thomas Franzinger of the Environmental Crimes Section of the Environment and Natural Resources Division of the Department of Justice.

Second Individual to Agree to Plead Guilty in Ongoing Investigation

The owner and President of a Massachusetts-based heir location services provider has agreed to plead guilty to allocating customers with another heir location services firm, the Department of Justice announced today.

Richard A. Blake Jr. will plead guilty to conspiring to eliminate competition in the heir location services industry between 1999 and 2014.  Heir location services firms identify people who may be entitled to an inheritance from the estate of a relative who died without a will.  The heir location services firms then help heirs secure their inheritances in exchange for a contingency fee paid out of the inheritances they are due to receive. 

“Here the death of a relative was used by heir location service firms to line their pockets at the expense of their clients,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “This announcement is another step in bringing to justice those who conspired to cheat heirs of those who died without a will.” 

Under the plea agreement, Blake and the department have jointly agreed to allow the court to determine an appropriate criminal sentence.  In addition, Blake has agreed to assist the government in its ongoing investigation.  The charge was filed today in the U.S. District Court for the Northern District of Illinois.  The terms of the plea agreement are subject to approval of the court.

The charge against Blake is the result of the division’s ongoing federal antitrust investigation into customer allocation, price fixing, bid rigging and other anticompetitive conduct in the heir location services industry being conducted by the Antitrust Division’s Chicago Office and the FBI’s Salt Lake City Division, with assistance from the U.S. Attorney’s Office of the Northern District of Illinois. 

Anyone with information concerning the focus of this investigation should contact the Antitrust Division’s Chicago Office at 312-984-7200, visit www.justice.gov/atr/contact/newcase.html, or call the FBI’s Salt Lake City office at 801-579-1400.

Richard A. Blake Jr. Information (718.67 KB)

The Justice Department announced today that U.S. Bureau of Prisons (BOP) Correction Officers (CO) William Houghton, 32, and Eddie Rodas-Castro, 32, have pleaded guilty in connection with the beating of a federal inmate and the subsequent submission of false reports.

Houghton pleaded guilty to violating the civil rights of an inmate inside the Coleman Correctional Facility in Coleman, Florida, by striking the inmate repeatedly in the head and face on March 22, 2014.  Houghton also pleaded guilty to submitting two false reports in connection with the incident, falsely stating the inmate had attempted to assault him and omitting the fact that Houghton had repeatedly punched the inmate.

Rodas-Castro pleaded guilty to one count of falsifying official reports, for his role in submitting a false report in an effort to cover up Houghton’s abuse.

“Conduct by corrections officers who abuse their power to violate the civil rights of those in their custody and lie about their actions undermines our criminal justice system,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “The Justice Department is committed to holding officers who engage in such criminal acts accountable.”

The defendants were both indicted on June 17, 2015.  Sentencing for both defendants will be scheduled at a later date.  Houghton faces a maximum sentence of three years in federal prison.  Rodas-Castro faces a maximum sentence of one year in federal prison.

This case is being investigated by the FBI and the Department of Justice Office of the Inspector General, and prosecuted by Trial Attorneys Jared Fishman and Maura White of the Civil Right Division’s Criminal Section.

Houghton Plea Agreement

Rodas-Castro Plea Agreement

Patrick Sheridan, an Irish national, was sentenced in federal court in Waco, Texas, today to 12 months in prison for conspiracy to violate the Lacey Act in relation to illegal rhinoceros horn trafficking, announced Assistant Attorney General John C. Cruden for the Environment and Natural Resources Division of the Department of Justice  and U.S. Attorney Richard L. Durbin Jr. for the Western District of Texas and Director Dan Ashe of the U.S. Fish and Wildlife Service.

Sheridan was arrested by United Kingdom law enforcement on Jan. 9, 2015, at Holyhead Sea Port in the United Kingdom as he disembarked a ferry from Dublin, Ireland.  The arrest was made pursuant to a request for his provisional arrest by the United States and in September 2015 Sheridan was extradited to the United States .  Sheridan’s arrest and subsequent extradition were part of “Operation Crash,” a nation-wide crackdown in the illegal trafficking in rhinoceros horns.  Sheridan was sentenced by U.S. District Court Judge Walter S. Smith Jr.

In May 2014, a federal grand jury sitting in Waco, Texas, returned an indictment charging Sheridan and a co-defendant with conspiring to traffic in horns from black rhinoceros.  In addition to conspiracy, the indictment charges substantive violations of the Lacey Act for wildlife trafficking and making a false wildlife document.  According to the indictment, Sheridan, along with John Slattery aka John Flynn and Michael Slattery Jr., used a “straw buyer” to purchase two black rhinoceros horns from a taxidermist in Texas, which the group then transported to New York, where they sold the horns along with two additional horns that the group also illegally purchased in Texas.  In January 2014, Michael Slattery Jr. pleaded guilty in federal court in Brooklyn and was sentenced to 14-months in prison for his role in the conspiracy.  In addition to the trafficking, the indictment also charged Sheridan and his co-defendant with making a fictitious and fraudulent Bill of Sale in connection with the rhinoceros horns, in an attempt to make their illegal purchase of the horns appear legal.

“We will hold wildlife traffickers fully accountable for these crimes, which are – transaction by transaction – robbing from our children and grandchildren the great diversity of life on our planet,” said Assistant Attorney Cruden. “This case shows the global reach and demand of a trade that is literally driving the black rhino closer to becoming a relic of the past, but it also shows the tireless work of investigators and prosecutors to give it a fighting chance at survival.”

“The slaughter of incredible animals like the rhino driven by poaching and illegal wildlife trafficking is a global scourge, requiring global enforcement,” said Director Ashe.  “Working with law enforcement in countries across the world, we’re tracking, apprehending and extraditing criminals like Patrick Sheridan and his co-conspirators, no matter where they operate.  Today’s sentencing demonstrates that criminals who contribute to the slaughter of rhinos and other protected wildlife have nowhere to hide, and will inexorably face justice in the United States."

According to the information, plea agreement and statements made during court proceedings: In China and Vietnam, rhinoceros horns are highly prized because they are believed to have medicinal value.  The escalating value of the horns has resulted in an increased demand that has helped fuel a thriving black market.    

In pleading guilty, Sheridan admitted to participating in a conspiracy to travel to and within the United States to purchase rhinoceros horns, which he, along with others, then resold to private individuals or consigned to auction houses in the United States, knowing that the interstate purchase and sale of the horns was illegal.  Due to their dwindling populations, all rhinoceros species are protected under international trade agreements.  

Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth.  They have no known predators other than humans.  All species of rhinoceros are protected under United States and international law.  Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by over 170 countries around the world to protect fish, wildlife and plants that are or may become imperiled due to the demands of international markets. 

Operation Crash is a continuing investigation being conducted by the Department of the Interior’s Fish and Wildlife Service (FWS), in coordination with other federal and local law enforcement agencies including U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.  A “crash” is the term for a herd of rhinoceros.  Operation Crash is an ongoing effort to detect, deter and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns.

The investigation by was handled by the U.S. Fish & Wildlife Service, with assistance from Ireland's An Garda Síochána (Irish National Police Service) and the Durham Constabulary Police Force in the United Kingdom.   The prosecution was handled by the U.S. Attorney’s Office for the Western District of Texas and the Justice Department’s Environmental Crimes Section, with assistance from the Justice Department’s Office of International Affairs.  Assistant U.S. Attorney Greg Gloff and Trial Attorney Gary N. Donner of the Justice Department’s Environmental Crimes Section are in charge of the prosecution. 

In the days immediately following the State of the Union, Cabinet officials are embarking on the “State of the Union: Cabinet In Your Community” road tour to engage Americans in small towns, big cities and Indian country about the advancements the Administration has made on the most important issues facing the American people, as well as the opportunities and challenges that lie ahead. The President will make clear in his State of the Union address that the true test is not the challenges we face, but how we approach those challenges. That’s why he and his Cabinet will keep their feet on the gas in this final stretch to continue driving toward solutions that will move this country forward for generations to come, while highlighting the progress that has been made over the past seven years.

***

The Department of Justice has taken major steps during the Obama Administration to make our criminal justice system more just, fair, and effective at reducing recidivism and promoting successful reintegration into society.  Our ultimate aim has been to break the cycle of poverty, criminality, and incarceration that grips too many of our communities, and to ensure that each component of our justice system is more closely aligned with our fundamental belief in opportunity and justice for all.  A vital part of that task involves examining what happens to our fellow Americans when they exit prison and return to our communities, and addressing the obstacles to successful reentry is a top priority for the Justice Department and the Obama Administration. 

More than 600,000 individuals are released from federal and state prisons each year, and 11.4 million cycle through local jails annually.  In addition, a broader population – some one in four Americans – has an arrest record, mostly for relatively minor, non-violent offenses, sometimes from decades in the past.  The long-term-- sometimes lifelong-- impact of a criminal record keeps many people from obtaining employment and accessing housing, higher education, loans, and credit – even if they have paid their debt to society, turned their lives around, are qualified, and are unlikely to reoffend.  At the same time, research shows that people who stay out of trouble for just a few years are largely indistinguishable from the general population in terms of their odds of another arrest. 

The Justice Department is committed to breaking the cycle of incarceration and improving reentry outcomes by reducing barriers to education, employment, housing and civic engagement, and by instituting various reforms at the federal Bureau of Prisons that are designed to improve the reentry success of those returning from incarceration in federal prisons. 

Today, following President Obama’s 2016 State of the Union, Attorney General Lynch traveled to Boston, Massachusetts to speak with incarcerated and formerly incarcerated individuals, corrections and law enforcement partners, and service providers.  She is visiting the Boston Reentry Initiative – a program proven to reduce recidivism – and other innovative programs that prepare people for their return to the community.  The Justice Department’s first-ever Second Chance Fellow, Daryl Atkinson, is accompanying the Attorney General and participating in a roundtable at the South Bay House of Correction in Suffolk County, MA.  The visit highlights the Department’s committed actions on this issue, including the following recent and ongoing efforts:

• The Federal Interagency Reentry Council, chaired by Attorney General Lynch, brings together the efforts of more than 20 federal agencies to reduce recidivism and improve employment, education, housing, health, and child welfare outcomes.Recent policy actions championed by the Reentry Council include “banning the box” in federal employment to delay inquiries into criminal history until later in the hiring process.  The Department of Housing and Urban Development (HUD) issued guidance to reduce barriers to HUD-assisted housing, and the Department of Education launched a Second Chance Pell initiative, providing a limited waiver of the statutory ban to help pay for postsecondary education and training programs.  And the Departments of Labor and Justice are establishing a National Clean Slate Clearinghouse that will provide local jurisdictions technical assistance to help with record-cleaning and expungement.

• The Federal Bureau of Prisons embraces a corrections philosophy that “reentry begins on day one.”Accordingly, the Bureau has made significant strides to better prepare inmates for successful reentry while they are still incarcerated.Under the Obama Administration, the Bureau created the Reentry Services Division, which has expanded mental health and substance abuse treatment programs, improved work and educational opportunities inside prison, and better equipped inmates with the tools necessary for success outside the prison walls.Recognizing that education reduces the risk of recidivism, the Bureau has also launched a comprehensive assessment of its education program and identified opportunities for improvement across its 122 correctional institutions.  This focused evaluation will increase the Bureau’s capacity to provide high quality education services to inmates with special learning and literacy needs.  To date, these ongoing efforts have enabled the Bureau to more effectively identify and serve inmates between the ages of 18 and 21 who require learning accommodations to successfully engage in education programming, and to pilot a specialized curriculum using education technology for individuals requiring instruction at grade levels Pre-K through 5.

• The Justice Department is encouraged by, and strongly supportive of, the bipartisan efforts in Congress

These efforts build on achievements by the Justice Department under the leadership of President Obama:

• Since 2009, the Justice Department’s Office of Justice Programs has made close to 750 Second Chance Act grants totaling more than $400 million.These grants are being used for the full range of reentry assistance, focusing on populations at moderate and high risk of recidivism.The programs offer a range of resources and support, including substance abuse and mental health treatment; job training; expansion of services to children of incarcerated parents; and help to secure driver’s licenses, modify child support orders, and expunge criminal and juvenile records.They also support states designing recidivism reduction strategies as well as new interagency reentry grants to expand access to education for juveniles, permanent supportive housing for those at risk of homelessness, and records expungement for youth in public housing.In addition, Second Chance funds support the National Reentry Resource Center, a one-stop resource for reentry-related research, best practices, and technical assistance managed by the Council of State Governments Justice Center.

• The Department is committed to strengthening and supporting Federal Prison Industries (FPI or trade name UNICOR).Founded in 1934, FPI is a voluntary industrial work program that provides federal inmates with work experience, job training, and life skills, thereby increasing the likelihood they will find meaningful employment upon release and become productive citizens.FPI is the Bureau’s largest and most effective reentry program, employing over 12,000 inmates nationwide.Research has shown that participating inmates are 24 percent less likely to be rearrested or returned to custody.As a result of new authorities granted to FPI in 2012, FPI launched approximately 45 new repatriation projects and employed more than 1,000 inmates who manufacture items that would otherwise be made outside of the United States.In 2016, FPI will welcome a new Chief Executive Officer who will oversee further expansion of this critical recidivism-reducing program.

For more information, please visit https://www.whitehouse.gov/sotu.

Second Assumption of Federal Jurisdiction under Historic Tribal Law and Order Act

The Department of Justice has granted a request by the Mille Lacs Band of Ojibwe for the United States to assume concurrent criminal jurisdiction on the tribe’s reservation in central Minnesota, Deputy Attorney General Sally Quillian Yates announced today.

The decision was the second assumption of jurisdiction granted by the Department of Justice under the landmark Tribal Law and Order Act of 2010 (TLOA), which gave the department discretion to accept concurrent federal jurisdiction to prosecute violations of the General Crimes Act and the Major Crimes Act within areas of Indian country that are also subject to state criminal jurisdiction under Public Law 280.  Public Law 280 is the 1953 law that mandated the transfer of federal law enforcement jurisdiction for certain tribes to six states, including Minnesota.  The first assumption of federal jurisdiction took place on Minnesota’s White Earth Reservation in March 2013.

The decision will take effect on Jan. 1, 2017.  Tribal, state and county prosecutors and law enforcement agencies will also continue to have criminal jurisdiction on the reservation.  

“We believe this decision – made after a careful review of the tribe’s application and the facts on the ground – will strengthen public safety and the criminal justice system serving the Mille Lacs Band of Ojibwe,” said Deputy Attorney General Yates.  “This is another step forward in the Justice Department’s commitment to serve and protect American Indian and Alaska Native communities, to deal with them on a government-to-government basis and to fulfill the historic promise of the Tribal Law and Order Act.  Strong law enforcement partnerships with the Tribe, as well as state and local counterparts, will be essential to the success of this effort.”

“We want to make certain that the outcome of this decision will benefit the residents of the Mille Lacs Band and improve the safety of the community,” said U.S. Attorney Andrew M. Luger of the District of Minnesota.  “As we work towards full implementation, we will work to strengthen the bonds between our tribal and local partners in pursuit of our common goal of providing a safe environment where this community can thrive.”

The Department of Justice already has jurisdiction to prosecute certain crimes, such as drug trafficking, wherever they occur in the United States – including on the Mille Lacs Reservation.  The change announced today will expand this existing jurisdiction to allow federal prosecution of major crimes such as murder, rape, felony assault and felony child abuse.

The decision followed careful consideration of the request and information provided by the Mille Lacs Band Tribal government, as well as by the Justice Department’s Office of Tribal Justice, the Executive Office for U.S. Attorneys, the U.S. Attorney's Office for the District of Minnesota, the Federal Bureau of Investigation, the U.S. District Court, state and local law enforcement partners and other sources.

A federal grand jury sitting in Atlanta, Georgia, returned an indictment, which was unsealed today, against three residents of an Atlanta suburb for conspiracy to commit money laundering, money laundering, access device fraud, aggravated identity theft and structuring, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney John A. Horn of the Northern District of Georgia.

Anthony Alika, his wife, Sonia Alika and Rapheal Atebefia, residents of Austell, Georgia, conspired together to launder the proceeds from a stolen identity refund fraud scheme, according to allegations in the indictment.  It is alleged that the defendants and others obtained means of identification of actual individuals, including their names and social security numbers and used this information to access the Internal Revenue Service’s (IRS) “Get Transcript” database.  Anthony Alika, Atebefia and others are also alleged to have obtained prepaid debit cards from stores located in multiple states, registered the cards in the names of the stolen identities and then filed false income tax returns using the stolen identities and directed the IRS to deposit the tax refunds onto these cards.  To conceal their fraud, Anthony Alika, Atebefia and others allegedly used the prepaid debit cards to purchase money orders, which Anthony Alika, Sonia Alika and Atebefia deposited into bank accounts and then structured cash withdrawals of the proceeds in order to prevent the bank from filing Currency Transaction Reports.   

If convicted, the defendants face a statutory maximum sentence of 20 years in prison for each count of money laundering, 10 years in prison for each count of access device fraud, 10 years in prison for structuring more than $100,000 or five years in prison for structuring less than $100,000 and a mandatory sentence of two years in prison for aggravated identity theft, which will run consecutive to any other prison term they receive.  They also face substantial monetary penalties, restitution and forfeiture.

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

An indictment merely alleges that crimes have been committed.  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.

Earlier today, Attorney General Loretta Lynch hosted Sue Ellen Allen, Mayor of Shelby County, Tennessee, Mark Luttrell, and Seattle Police Chief Kathy O’Toole for a conversation about criminal justice reform. They were joined by Deputy Attorney General Sally Yates. Ms. Allen, Mayor Luttrell and Chief O’Toole will be seated in the box with First Lady Michelle Obama, Dr. Jill Biden and Valerie Jarrett during the State of the Union Address tonight.  Their conversation focused on the importance of investing in rehabilitation and reentry programs that can reduce the likelihood of recidivism, supporting vulnerable communities to prevent them from being caught up in the criminal justice system and the collaborative work that can be done on criminal justice reform when officials from the federal, state, and local level work with community leaders.

Sue Ellen Allen

Sue Ellen Allen knows the difficulties that formerly incarcerated individuals face after prison – both as the co-founder of a nonprofit helping inmates reenter society and as a former inmate starting over after her release in 2009. Her organization, Gina’s Team, supports women in Arizona prisons and upon release, gives them the resources they need and teaches them how give back to the community. Named for her cellmate in prison who died in incarceration, Sue Ellen started Gina’s Team with Gina’s parents in an effort to provide women a path out of prison, back into the community and out of additional trouble with the law. She wrote the President to thank him for the launch of a new pilot program that enables incarcerated Americans to receive Pell Grants and to encourage a national dialog that includes women in prison reform. Sue Ellen is proud to be accompanied to Washington by Gina’s mother, Diane, whose daughter gave her a renewed purpose in life.

Mayor Mark Luttrell

Throughout his career in public service, Republican Mayor Mark Luttrell has built partnerships with local, state and federal agencies, and his unique background has focused him on criminal justice reform. As mayor of Shelby County, Tennessee, he helped create specialty courts for drug, mental health, and veterans’ cases to provide resources for effective rehabilitation instead of ineffectual incarceration. The county also put in place measures to reduce recidivism by streamlining and pooling resources to better provide formerly incarcerated individuals with the tools they need to re-enter society. Afterward, he was appointed as Director of Corrections for Shelby County, Tennessee and served there until he was elected Sheriff in 2002 and subsequently as Mayor in 2010. Mayor Lutrell and his wife, Pat, have three children and six grandchildren.

Chief Kathleen O’Toole

Since 2014, Chief Kathleen O’Toole has led the Seattle Police Department in developing its approach to community policing, and her focus on improving officer morale, implementing new policies and optimizing department resources has received national attention. Under her leadership, the department tested a six-month pilot program for body-worn police cameras focused on public transparency, and the Department of Justice awarded the department a $600,000 grant to expand the program. Last year, the Seattle Police Department presented its policies at the White House Police Data Initiative as part of its renewed emphasis on accountability and transparency. Prior to Kathleen’s role as Chief, she served as Chief Inspector of the Gardia Síochána Inspectorate in Ireland, responsible for developing best practices of the Irish police service and rose the ranks of Massachusetts law enforcement, finishing as the first female Boston police commissioner in 2004. Chief O’Toole is married to a retired police detective, Dan O’Toole, and they have a daughter, Meghan.

Four Nursing Homes Using Kindred/RehabCare to Pay an Additional $8.225 Million

Contract therapy providers RehabCare Group Inc., RehabCare Group East Inc. and their parent, Kindred Healthcare Inc., have agreed to pay $125 million to resolve a government lawsuit alleging that they violated the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit false claims to Medicare for rehabilitation therapy services that were not reasonable, necessary and skilled, or that never occurred, the Department of Justice announced today.

RehabCare Group Inc. and RehabCare Group East Inc. were purchased by the Louisville, Kentucky-based Kindred Healthcare Inc. in 2011 and they now operate under the name RehabCare as a division of Kindred.  RehabCare is the largest provider of therapy in the nation, contracting with more than 1,000 SNFs in 44 states to provide rehabilitation therapy to their patients.

“Medicare beneficiaries are entitled to receive care that is dictated by their clinical needs rather than the fiscal interests of healthcare providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “All providers, whether contractors or direct billers of taxpayer-funded federal healthcare programs, will be held accountable when their actions cause false claims for unnecessary services.”

The government’s complaint alleged that RehabCare’s policies and practices, including setting unrealistic financial goals and scheduling therapy to achieve the highest reimbursement level regardless of the clinical needs of its patients, resulted in Rehabcare providing unreasonable and unnecessary services to Medicare patients and led its SNF customers to submit artificially and improperly inflated bills to Medicare that included those services.  Specifically, the government’s complaint alleged that RehabCare’s schemes included the following:

• Presumptively placing patients in the highest therapy reimbursement level, rather than relying on individualized evaluations to determine the level of care most suitable for each patient’s clinical needs;
• During the period prior to Oct. 1, 2011, boosting the amount of reported therapy during “assessment reference periods,” thereby causing and enabling SNFs to bill for the care of their Medicare patients at the highest therapy reimbursement level, while providing materially less therapy to those same patients outside the assessment reference periods, when the SNFs were not required to report to Medicare the amount of therapy RehabCare was providing to their patients (a practice known as “ramping”);
• Scheduling and reporting the provision of therapy to patients even after the patients’ treating therapists had recommended that they be discharged from therapy;
• Arbitrarily shifting the number of minutes of planned therapy among different therapy disciplines (i.e., physical, occupational and speech therapy) to ensure targeted therapy reimbursement levels were achieved, regardless of the clinical need for the therapy;
• Especially after Oct. 1, 2011 and continuing through Sept. 30, 2013, providing significantly higher amounts of therapy at the very end of a therapy measurement period not due to medical necessity but rather to reach the minimum time threshold for the highest therapy reimbursement level, to enable SNFs to bill for the care of their Medicare patients accordingly, even though the patients were receiving materially less therapy on preceding days;
• Inflating initial reimbursement levels by reporting time spent on initial evaluations as therapy time rather than evaluation time;
• Reporting that skilled therapy had been provided to patients when in fact the patients were asleep or otherwise unable to undergo or benefit from skilled therapy (e.g., when a patient had been transitioned to palliative end-of-life care); and
• Reporting estimated or rounded minutes instead of reporting the actual minutes of therapy provided.

“This False Claim Act settlement addresses allegations that RehabCare and its nursing facility customers engaged in a systematic and broad-ranging scheme to increase profits by delivering, or purporting to deliver, therapy in a manner that was focused on increasing Medicare reimbursement rather than on the clinical needs of patients,” said U.S. Attorney Carmen M. Ortiz for the District of Massachusetts.  “The complaint outlines the extent and sophistication of this fraud, and the government’s continuing work to ensure that the provision of care in skilled nursing facilities is based on patients’ clinical needs.”

“Health providers seeking to increase Medicare profits, rather than providing suitable, high-quality care, will be investigated and prosecuted,” said Inspector General Daniel R. Levinson for the U.S. Department of Health and Human Services (HHS).  “Under our robust compliance agreement, an outside review organization will scrutinize a random sample of medical records annually to assess the medical necessity and reasonableness of therapy services provided by RehabCare.”

In addition to RehabCare, the Department of Justice also announced settlements today with four SNFs for their role in submitting claims to Medicare that were false because they were based in part on therapy provided by RehabCare that was not reasonable, necessary and skilled, or that did not occur.  These settlements include:  A $3.9 million settlement with Wingate Healthcare Inc. and 16 of its facilities in Massachusetts and New York; A $2.2 million settlement with THI of Pennsylvania at Broomall LLC and THI of Texas at Fort Worth LLC; A $1.375 million settlement with Essex Group Management and two of its Massachusetts facilities, Brandon Woods of Dartmouth and Blaire House of Milford and a $750,000 settlement with Frederick County, Maryland, which formerly operated the Citizens Care skilled nursing facility.  The department had previously reached settlements with a number of other SNFs for similar conduct.  See http://www.justice.gov/opa/pr/two-companies-pay-375-million-allegedly-causing-submission-claims-unreasonable-or-unnecessary; http://www.justice.gov/opa/pr/episcopal-ministries-aging-inc-pay-13-million-allegedly-causing-submission-claims; http://www.justice.gov/usao-ma/pr/new-york-catholic-nursing-chain-pay-35-million-resolve-allegations-concerning-claims; http://www.justice.gov/usao-ma/pr/maine-nursing-home-pay-12-million-resolve-allegations-concerning-rehabilitation-therapy. 

The settlement with RehabCare resolves allegations originally brought in a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act by Janet Halpin, a physical therapist and former rehabilitation manager for RehabCare and Shawn Fahey, an occupational therapist who worked for RehabCare.  The act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery.  The government may intervene and file its own complaint in such a lawsuit, as it has done in this case.  The whistleblowers will receive nearly $24 million as their share of the recovery from RehabCare.

The settlements announced today illustrate the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $27.1 billion through False Claims Act cases, with more than $17.1 billion of that amount recovered in cases involving fraud against federal health care programs.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, including the conduct described in the United States’ complaint, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

This matter was handled by the Civil Division’s Commercial Litigation Branch; the U.S. Attorney’s Office for the District of Massachusetts; HHS Office of Inspector General and the FBI.

The case is captioned United States ex rel. Halpin and Fahey v. Kindred Healthcare, Inc., et al., Case No. 1:11cv12139-RGS (D. Mass.).

The claims settled are allegations only, and there has been no determination of liability.

Recruited Straw Buyers to Purchase Homes and Submit Fraudulent Mortgage Applications

Five residents of the Detroit, Michigan, area were sentenced to prison this week for their roles in a multi-year mortgage fraud conspiracy, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division announced today.

Between January 2006 and December 2008, the perpetrators of the scheme purchased single-family homes in Detroit for approximately $5,000 to $40,000 each and re-sold the homes to third party individuals, referred to as “straw buyers,” that they recruited.  The co-conspirators then caused fraudulent mortgage loan applications in the names of the straw buyers to be submitted to financial institutions.   

On July 16, 2014, a grand jury returned a superseding indictment charging seven defendants with conspiracy to commit bank fraud, bank fraud, aiding and assisting in the filing of false tax returns and bankruptcy fraud.  All of the defendants named in the superseding indictment pleaded guilty to conspiracy to commit bank fraud for their role in the scheme.

On Jan. 11 and 12, U.S. District Judge Bernard A. Friedman of the Eastern District of Michigan announced the following sentences:

• Jason Najor, 39, of West Bloomfield Township, Michigan, was sentenced to 16 months in prison, followed by four years of supervised release, and ordered to pay restitution to the affected financial institutions in the amount of $705,900.

• Jeffrey Najor, 32, of Wixom, Michigan, was sentenced to 24 months in prison, followed by four years of supervised release, and ordered to pay restitution to the affected financial institutions in the amount of $1,707,200.

• Suhail Hallak, 59, of Oak Park, Michigan, was sentenced to 15 months in prison, followed by three years of supervised release, and ordered to pay restitution to the affected financial institutions in the amount of $759,804.

• Joey Murad, 37, of Old Shelby Township, Michigan, was sentenced to 33 months in prison, followed by four years of supervised release, and ordered to pay restitution to the affected financial institutions in the amount of $188,904.

• Al Karana, 46, of Old Sterling Heights, Michigan, was sentenced to one day in jail, followed by three years of supervised release to include one year of home confinement, and ordered to pay restitution to the affected financial institutions in the amount of $204,600.

Two of the defendants named in the superseding indictment were previously sentenced to prison.  In January 2015, Wasseem Shamoun, 50, of Northville, Michigan, was sentenced to 15 months in prison and ordered to pay restitution to the in the amount of $394,000, following his plea of guilty to conspiracy to commit bank fraud.  In September 2014, Peter Allen, 44, of Southfield, Michigan, was sentenced to 21 months in prison and ordered to pay restitution in the amount of $194,300, for his role in the bank fraud scheme. 

In addition to the seven defendants named in the superseding indictment, two other individuals connected to the scheme have pleaded guilty and been sentenced to prison.  In September 2015, Mary Ann Paschal, who served as a straw buyer for multiple properties and received substantial fees for her participation, was sentenced to one year and one day in prison and ordered to pay restitution in the amount of $523,750.  Also in September 2015, Shawn Alexander Reed, a mortgage broker who assisted in the preparation of false mortgage loan applications, pleaded guilty and was sentenced to 15 months in prison.  

Acting Assistant Attorney General Ciraolo thanked special agents of the FBI, Internal Revenue Service-Criminal Investigation and the Drug Enforcement Administration, who investigated the case and Senior Litigation Counsel Corey Smith and Trial Attorney Mark McDonald of the Tax Division, who prosecuted the case.

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

FRESNO, Calif. – Un escrito de acusación se ha abierto hoy, acusando legalmente a un hombre de Los Ángeles de estar involucrado en una trama que estafaba a propietarios de viviendas que se encontraban en procesos de aperturas de juicios hipotecarios, anunció el Procurador de los Estados Unidos Benjamín B. Wagner.

El 31 de diciembre de 2015 un gran jurado federal dictó un escrito de acusación acusando legalmente a Martin Calzada, de 28 años de edad, y residente de Los Ángeles de conspirar a cometer fraude de correo y fraude de correo.   

Según documentos del tribunal, entre agosto de 2010 y octubre de 2011, Calzada y otros empleados de la empresa Star Reliable Mortgage, que tenía oficinas en Bakersfield, Visalia y Salinas se dirigían a propietarios de viviendas afligidos con una estafa fraudulenta para “eliminar préstamos.” Star Reliable cobraba a sus clientes de entrada una cuota que oscilaba entre los $2,500 y los $4,500 dólares – como también cuotas mensuales, basándose en la promesa falsa de que los clientes podrían ver sus viviendas liberadas “de toda deuda” como resultado de los servicios prestados de Star Reliable. Para fomentar aún más la estafa, Calzada y otros empleados presentaban documentos fraudulentos en las oficinas de registros de propiedad del condado de parte de los propietarios-clientes en los que se pretendía reemplazar a los administradores legítimos de las propiedades con compañías fiduciarias ficticias asociadas con Calzada y Star Reliable; todo en un intento de “opacar el título” e impedir o atrasar el proceso judicial hipotecario. Además, Calzada y otros empleados que trabajaban bajo su dirección, dijeron a sus clientes que dejaran de pagar sus hipotecas. También expresaron falsamente que cada cliente tenía un millón de dólares en una cuenta del gobierno de los Estados Unidos que podía ser utilizada para terminar de pagar las hipotecas de cada uno de los propietarios.        

                En lugar de liberar “de toda deuda” sus viviendas, muchos de los clientes de Star Reliable perdieron sus viviendas en juicios hipotecarios. La estafa ocasionó que más de 100 propietarios-clientes pagaran aproximadamente $875, 000 dólares a Star Reliable y que las entidades de crédito perdieran más de $4 millones de dólares. Por lo menos unos $270,000 dólares del dinero pagado a Star Reliable por los propietarios-clientes fueron canalizados de vuelta a Calzada.

Este caso es el producto de una investigación llevada a cabo por la Oficina Federal de Investigaciones (FBI) y la Oficina del Fiscal del Distrito del Condado de Tulare. El Procurador Federal Auxiliar Patrick R. Delahunty está procesando el caso.

Si es declarado culpable, Calzada se enfrentaría a una pena máxima establecida por la ley de 30 años de prisión y una multa de $1 millón de dólares. Sin embargo, cualquier sentencia sería determinada a la discreción del tribunal después de considerar cualquier factor aplicable establecido por la ley y por las Normas para Sentenciar Federales. Los cargos son solo alegaciones; el demandado es presunto inocente hasta y a menos que sea comprobado culpable sin duda razonable.

Un tribunal federal ha prohibido en forma permanente a un hombre de Colorado y su empresa preparar declaraciones de impuestos federales, anunció hoy el Departamento de Justicia.  Los Estados Unidos entablaron una demanda civil contra Gerardo Herrera y su empresa, El Lobo Multiservicios Profesionales Inc., en la que alega que redujeron las obligaciones tributarias de sus clientes fraudulentamente al declarar dependientes adicionales y reclamar deducciones de impuestos falsas.  Después de que los demandados dejaron de contestar la demanda, el 7 de enero de 2016 el Juez John L. Kane emitió una orden prohibiendo a Herrera preparar declaraciones de impuestos en forma permanente.

De acuerdo con la demanda civil entablada por el gobierno, Herrera y su personal declararon repetidamente a miembros de la familia extendida de sus clientes como dependientes de los mismos, a pesar de que no cumplían los requisitos para dependientes según la ley federal, y solicitaron indebidamente deducciones por gastos personales como teléfonos celulares y seguro de automóvil.  Además, de acuerdo con la demanda, las auditorías realizadas indicaron que Herrera y sus empleados exageraron deducciones, solicitaron deducciones fraudulentas por contribuciones caritativas y declararon indebidamente estado de jefe de familia.  La demanda alega que el Servicio de Impuestos Internos [Internal Revenue Service (IRS)] auditó más de 200 formularios de declaración de impuestos preparados por la empresa de Herrera y encontró declaraciones falsas en más del 99 por ciento de las mismas.

El fraude cometido por preparadores de declaraciones de impuestos es uno de los Doce principales ardides tributarios del IRS de 2015.  El portal del IRS incluye algunos consejos para la elección de un preparador de declaraciones de impuestos.  En la última década, la División de Impuestos ha obtenido interdictos contra cientos de preparadores de impuestos fraudulentos.  Se puede encontrar información sobre estos casos en el portal del Departamento de Justicia.  Se encuentra una lista alfabética de personas prohibidas de preparar declaraciones de impuestos y promover ardides tributarios en esta página.  Si usted cree que una de las personas o empresas bajo prohibición puede estar violando un interdicto, por favor comuníquese con la División de Impuestos para proveer detalles.

The former president and majority stockholder of a construction company was sentenced to five years in prison today following her plea of guilty to filing a false tax return and her conviction by a jury of conspiracy to defraud the United States, wire fraud, mail fraud, false statements, interstate transportation of property taken by fraud, conspiracy to obstruct justice and obstruction of justice, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Wendy J. Olson for the District of Idaho.

Elaine Martin, 69, of Meridian, Idaho, was the president of MarCon Inc., a construction company based in Meridian.  In September 2013, after a 26-day jury trial, Martin was convicted of tax and fraud charges and sentenced to 84 months in prison.  In August 2015, the U.S. Court of Appeals for the Ninth Circuit vacated Martin’s sentence and her tax conviction and remanded for resentencing and further proceedings on the tax charge.  Today, Martin pleaded guilty to filing a false tax return and U.S. District Judge B. Lynn Winmill of the District of Idaho sentenced her to 60 months in prison on both the tax and fraud charges.  In addition to the prison term, Judge Winmill ordered Martin to pay restitution to the Internal Revenue Service (IRS) and Idaho Department of Transportation in the amount of $131,400.48, costs of prosecution in the amount of $22,859.60 and a forfeiture money judgment of $3,084,038.05, amounts Martin previously paid.    

In the plea agreement, Martin admitted that she willfully signed false and fraudulent corporate income tax returns for Marcon Inc. for tax years 2005 and 2006.  Martin also admitted that she caused these tax returns to be false and fraudulent by keeping the unreported income off of the books and that she falsely told an IRS revenue agent, who was conducting a civil audit of Marcon, that all of Marcon’s gross receipts were deposited into its Wells Fargo operating account, when in fact, Martin was diverting and depositing gross receipts into Marcon’s Bank of Cascades account.  Martin withheld the records for Marcon’s Bank of Cascades from the individual who prepared her and Marcon’s tax returns for tax years 2005 and 2006.  Martin admitted that the total tax loss was $73,678.

Martin also admitted to conspiring to defraud the SBA 8(a) Program and the U.S. Department of Transportation, Disadvantaged Business Enterprise (DBE) Program, by submitting fraudulent tax returns and making false statements concerning her finances that caused Marcon to qualify and/or remain eligible for these programs.  Martin further admitted that her behavior affected the award of contracts pursuant to the 8(a) Program and DBE Programs.  For example, Marcon’s status as an Idaho DBE affected how and what DBE goals were set for particular construction projects and helped Marcon maintain a virtual monopoly in its geographic region between 2000 and 2006.  Marcon participated in the SBA 8(a) Program pursuant to direct negotiations with the awarding agency, rather than through fair and open competition.  Martin admitted that during the relevant time period, she would not have been awarded the 33 contracts at issue in the case but for the fraud.

As part of the plea agreement that Martin entered into today, she waived her right to further appeal.

Assistant Attorney General Ciraolo and U.S. Attorney Olson thanked special agents of IRS-Criminal Investigation, the FBI, the Office of Inspector General for the U.S. Small Business Administration and the Office of Inspector General for the U.S. Department of Transportation, who investigated the case and Trial Attorney Gregory Bernstein and former Trial Attorney Katherine Wong of the Tax Division and Assistant U.S. Attorney Raymond Patrico of the District of Idaho, who prosecuted the case.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 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’s 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.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants.  For more information on the task force, visit www.stopfraud.gov.

A federal court has permanently barred a Colorado man and his tax preparation business from preparing federal tax returns, the Justice Department announced today.  The United States filed a civil complaint against Gerardo Herrera and his business, El Lobo Multiservicios Professionales Inc., contending that they fraudulently reduced their customers’ tax liabilities by reporting extra dependents and claiming bogus deductions.  After the defendants failed to respond to the complaint, on Jan. 7, 2016, Judge John L. Kane entered an order permanently banning Herrera from preparing returns.

According to the government’s civil complaint, Herrera and his staff repeatedly claimed their customers’ extended family members as dependents, even though they do not qualify for dependent status under federal law, and have improperly claimed deductions for personal expenses like cell phones and car insurance.  In addition, according to the complaint, audits have shown that Herrera and his workers exaggerated deductions, reported fraudulent charitable contribution deductions and claimed improper head of household filing status.  The complaint alleges that the Internal Revenue Service (IRS) audited more than 200 returns prepared by Herrera’s business and found misrepresentations on more than 99 percent of them.

Return-preparer fraud is one of the IRS’ Dirty Dozen Tax Scams for 2015.  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 fraudulent tax preparers.  Information about these cases is available on the Justice Department website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

The U.S. District Court for the Northern District of Texas entered a consent decree for permanent injunction against Downing Labs LLC, Ashley Michelle Downing, Christopher Van Downing and Roger E. Mansfield to prevent them from distributing adulterated drugs in interstate commerce, the Department of Justice announced today.

The department filed a complaint in the U.S. District Court for the Northern District of Texas on Jan. 4, 2016, at the request of the U.S. Food and Drug Administration (FDA).  According to the complaint, Downing Labs manufactures, packs, labels and distributes drugs in interstate commerce.  As noted in the complaint, Downing Labs has been engaged in manufacturing drugs that, by virtue of their labeling and/or route of administration, purport to be or are intended to be sterile.  The complaint alleges that Downing Labs has a long history of manufacturing drug products under conditions that fall short of the minimum requirements to ensure safety and quality. 

“The permanent injunction requires Downing Labs and the individual defendants to bring their processes into compliance with the law, which is essential to ensuring that Downing Labs’  drug products are safe for the American public,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will remain vigilant in protecting consumers from pharmaceutical drugs that do not meet the safety protections provided under federal law.”

The federal Food, Drug, and Cosmetic Act defines adulterated drugs as those that are prepared or held under conditions where the drugs may become contaminated with filth or may become injurious to health.  The Act also defines drugs as adulterated if the facilities or controls used for the drugs’ manufacture are not in conformity with current good manufacturing practices (CGMP). 

The complaint alleges, among other things, that Downing Labs, its owners - Ashley and Christopher Downing - and pharmacist-in-charge, Roger E. Mansfield, violate the Act by introducing or delivering for introduction into interstate commerce sterile drugs that are adulterated in that they are prepared, packed, or held under insanitary conditions whereby they may have been contaminated with filth and/or rendered injurious to health.  The complaint also alleges that defendants violate the Act by introducing or delivering for introduction into interstate commerce drugs that are adulterated in that the methods used in, or the facilities or controls used for, their preparation do not comply with CGMP requirements.

According to the complaint, the FDA conducted multiple inspections of Downing Labs and its predecessor, NuVision Pharmacy Inc. (NuVision), during the past three years.  These inspections revealed numerous deficiencies, many of which had to do with the firm’s sterile drug production.  The complaint alleges, for example, that test records obtained from the company pursuant to a September to October 2015 inspection showed excessively high levels of endotoxins in recently manufactured drug products.  These products were not distributed.  Endotoxins are substances found in certain bacteria that can cause a wide variety of serious reactions in humans, including high fever and shock.   

FDA identified additional sterility problems during inspections in 2013 and 2014, according to the complaint.  In 2014, Downing Labs’ records showed that 19 lots of supposedly sterile drugs had tested positive for various microorganisms, including the pathogens Staphylococcus haemolyticus, which can cause septicemia, peritonitis and urinary tract infections and Nocardia nova, which can cause pneumonia, sinusitis and skin infections.  These products were not distributed.  According to the complaint, however, FDA found that the company had failed to adequately investigate the cause of the sterility problems in the 19 lots.

According to the complaint, Downing Labs was formed in December 2013, purchased NuVision in January 2014 and obtained its pharmacy license from the state of Texas in June 2014.  Defendant Ashley Michelle Downing serves as Downing Labs’ director and vice-president.  She is responsible for all operations of the company.  She previously held several positions at NuVision, including director, production manager, and quality manager.  Defendant Christopher Van Downing, husband of Ashley Michelle Downing, is Downing Labs’ president, with responsibilities that include overall business management and compliance.  Defendant Roger E. Mansfield became the pharmacist-in-charge at Downing Labs on Dec. 30, 2014, and is responsible for all pharmacy operations, including sterile drug production and oversight.  He was a staff pharmacist at Downing Labs prior to becoming the pharmacist-in-charge.

The permanent injunction entered by U.S. District Judge Sam A. Lindsay for the Northern District of Texas enjoins the defendants from manufacturing, holding, or distributing drugs manufactured at or from their McEwen Road facility (located at 4001McEwen Road, Suite 110, Dallas, Texas) unless the defendants comply with the Act and associated drug manufacturing regulations.  Under the injunction, Downing Labs will need to stop manufacturing, holding or distributing human drugs from its McEwen Road facility until it complies with the Act and regulations and the Decree.  In addition, the permanent injunction authorizes the FDA to order Downing Labs to stop drug manufacturing should FDA determine that Downing Labs has violated the terms of the decree.  The decree also authorizes the FDA to order Downing Labs to recall drugs that have been distributed by the firm or to destroy drugs that are in the process of being manufactured.  Certain provisions of the injunction do not apply to drugs that defendants manufacture, hold, and/or distribute for animal use.

The government is represented by Trial Attorneys David A. Frank and Raquel Toledo of the Civil Division’s Consumer Protection Branch, with assistance of Associate Chief Counsel Michael D. Shane of the Department of Health and Human Services’ Office of General Counsel-Food and Drug Division and Assistant U.S. Attorney Mary M. (Marti) Cherry of the Northern District of Texas.

Agencies Submit Joint Statement Regarding Proposed Legislation Addressing the State’s Certificate-of-Need Laws

The Department of Justice’s Antitrust Division and the Federal Trade Commission (FTC) have recommended that South Carolina repeal its laws regulating the building of hospitals and other health care facilities and the provision of health care services.

In response to a request by South Carolina Governor Nikki R. Haley for views on South Carolina House Bill 3250, which would narrow the application of and ultimately repeal South Carolina’s certificate-of-need (CON) laws, the joint statement suggests the state consider whether its CON program best serves the needs of its citizens.

“South Carolina lawmakers have the opportunity to help health care consumers in the state,” said Assistant Attorney General Bill Baer of the Antitrust Division.  “CON laws raise the cost of investment in new health care services and can shield incumbents from competition that would benefit consumers and lower costs.  Repeal of South Carolina’s CON laws could invigorate competition in this important sector, to the benefit of patients, employers and other health care consumers.” 

Although CON laws vary considerably by state, these laws, including South Carolina’s CON laws, typically require certain health care providers to obtain state approval before expanding, establishing new facilities or services or making certain large capital expenditures.

According to the joint statement, the Justice Department and FTC historically have urged states to consider repeal or reform of their CON laws because they can prevent the efficient functioning of health care markets and thereby harm consumers.  CON laws can create barriers to entry and expansion, limit consumer choice, deny consumers the benefit of an effective remedy for antitrust violations, facilitate anticompetitive agreements, and stifle innovation. 

SC CON Letter to Governor Haley (279.77 KB)

Joseph Furando, 50, of Montvale, New Jersey, was sentenced yesterday in Indianapolis, Indiana, to 20 years in prison, three years of supervised release and to pay more than $56 million in restitution for his role in an elaborate scheme to defraud biodiesel buyers and United States taxpayers by fraudulently selling biodiesel incentives, announced Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division and U.S. Attorney Josh J. Minkler for the Southern District of Indiana.

“Programs like the Renewable Fuel Standard and the Blender’s Tax Credit open the path toward energy independence and curbing the impact of climate change,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “When people approach these programs with bad faith and seek to exploit them, these purposes are blocked, American businesses are hurt and the treasury of the United States is depleted.  This significant prison sentence sends the right message that such fraud will not be tolerated.”

“Joseph Furando used fraud to spin biodiesel programs into a million-dollar home, high-end cars, expensive jewelry and watches and any other luxury that pleased him,” said U.S. Attorney Minkler.  “He did so through threats, bullying, and intimidation.  With the court’s sentence, all of that unraveled. The agencies and prosecutors who unraveled his schemes have shown how foolish it is to try to prey on these programs.”

“Fraud in the renewable fuels program compromises our ability to fight climate change and reduce dependence on foreign oil,” said Assistant Administrator Cynthia Giles for Enforcement and Compliance Assurance at EPA.  “Yesterday’s sentencing puts a check on illegal behavior and sends a clear message that EPA and its partners will prosecute serious offenders.  We are committed to upholding program integrity and protecting responsible companies that play by the rules.”  

“We are proud to work with our federal partners to identify and investigate groups that manipulate and utilize federal government programs to line their pockets by fraud,” said Special Agent in Charge W. Jay Abbott of the Indianapolis Office of the FBI.  “In doing so, they deceive their customers, their shareholders and the American public.  The FBI will continue the fight against this dishonest and fraudulent behavior which harms the American people and the American economy.”

“Federal government tax credits and incentives are put in place to assist the American people,” said Acting Special Agent in Charge David Talcott of the IRS-Criminal Investigation.  “The harm is felt by all American taxpayers and our economy when individuals manipulate and take advantage of federal programs.  Mr. Furando perpetrated this egregious fraud for his own personal gain.  IRS-Criminal Investigation will continue to protect American taxpayers and our economy by vigorously pursuing individuals who prey upon the integrity of our great country.”

During yesterday’s sentencing hearing, Judge Sarah Evans Barker ordered Furando to pay more than $56 million in restitution, jointly and severally with other defendants.  That amount reflects the losses Furando and his co-conspirators imposed on fraud victims and United States taxpayers.

Under the terms of a plea agreement, Furando is obligated to forfeit the fruits of his crime, which include a Ferrari, other cars, a million-dollar home, artwork, a piano and two biodiesel powered motorcycles.

Furando’s scheme may be summarized as follows: From 2007 through 2012, Indiana-based E‑biofuels owned a biodiesel manufacturing plant in Middletown, Indiana.  Biodiesel is a fuel that can be used in diesel engines and that is made from renewable resources, including soybean oil and waste grease from restaurants.  Under the Energy Independence and Security Act, properly manufactured biodiesel was eligible for a dollar per gallon tax credit as well as another valuable credit, called a Renewable Identification Number (RIN) that petroleum refiners and importers could use to demonstrate compliance with federal renewable fuel obligations.  These incentives can be claimed once and only once for any given volume of biodiesel.

Furando admitted that sometime in late 2009, he and his companies, New Jersey-based defendants Caravan Trading Company and CIMA Green, began supplying E‑biofuels with biodiesel that was actually made by other companies and had already been used to claim tax credits and RINs.  Because these incentives had already been claimed, Furando could purchase the biodiesel at much lower prices, sometimes for more than two dollars per gallon less than biodiesel that was still eligible for the credits.  The conspiracy functioned as follows: Furando supplied the product to E‑biofuels and his co-conspirators would claim that E-biofuels made the fuel and then they would illegally re-certify the fuel and sell it at the much higher market price for incentivized biodiesel, known as B100 with RINs.  Within the circle of those he trusted, Furando referred to this fraud scheme as “Alchemy.”

Furando, his New Jersey-based companies and his Indiana-based co-defendants realized huge per gallon profits through this scheme, sometimes in excess of $15,000 per truckload.  Furando realized his profits through the prices he charged E‑biofuels.  Over the course of approximately two years, the defendants fraudulently sold more than 35 million gallons of fuel for a total cost of over $145.5 million.  The defendants realized more than $55 million in gross profits, at the expense of their customers and U.S. taxpayers.

In separate hearings yesterday, three corporations at the heart of the scheme were also sentenced for their joint liability in the scheme. Furando’s companies, CIMA Green LLC, and Caravan Trading LLC, were both sentenced to pay $56 million in restitution and million dollar fines. The companies, which are largely defunct, must serve two years’ probation to ensure that what assets remain are properly directed toward victims.  Toward that end, the court imposed, but suspended, the fines.  The third company, E‑biofuels LLC, operated by Furando’s co-defendants Craig Ducey, Chad Ducey and Chris Ducey, was also sentenced to pay the $56 million in restitution.  E-biofuels is in bankruptcy and its few remaining assets are being distributed to creditors and victims through the bankruptcy process.

The case is being prosecuted by Senior Litigation Counsel Steven D. DeBrota of the U.S. Attorney’s Office, Assistant Chief Thomas T. Ballantine of the Environmental Crimes Section in the Department of Justice’s Environment and Natural Resources Division and Jake Schmidt, a Special Assistant U.S. Attorney of the U.S. Attorney’s Office and Senior Attorney for the Securities and Exchange Commission.

The collaborative investigation that brought this case to fruition is the result of work by EPA’s Criminal Investigation Division, IRS-Criminal Investigation, the FBI and the Securities and Exchange Commission, with assistance during the investigation by the U.S. Secret Service and the U.S. Department of Agriculture’s Office of Inspector General-Investigations.

All of the other defendants in this case have pled guilty and are awaiting sentencing.  Another co-conspirator, Brian Carmichael, was charged in a separate case.  Carmichael cooperated with the government before the criminal cases were filed.  In December 2015, he received a sentence of five years of imprisonment.

Dr. David G. Bostwick has agreed to pay the United States up to $3.75 million to resolve alleged violations of the False Claims Act for billing Medicare and Medicaid for medically unnecessary cancer detection tests and offering incentives to physicians to obtain Medicare and Medicaid business, the Department of Justice announced today.  Dr. Bostwick was the founder, owner and chief executive officer of Bostwick Laboratories Inc. from 1999 to 2011.  Bostwick Laboratories is a pathology laboratory headquartered in Glen Allen, Virginia. 

“The Department of Justice is committed to ensuring that every laboratory test ordered is based on the medical needs of the patient and not just to increase physician and laboratory profits,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “This case shows that the Department will not hesitate to hold accountable both the companies and the individuals who order or perform excessive, non-patient specific tests and provide inducements to physicians that lead to unnecessary costs being imposed upon our nation’s health care programs.”

The settlement announced today resolves claims that, from 2006 to 2011, Dr. Bostwick allegedly directed Bostwick Laboratories to bill Medicare and Medicaid for expensive cancer detection tests known as Fluorescent In Situ Hybridization (FISH) tests, as well as other tests, that were not medically necessary and were performed without the treating physicians’ consent or order.  FISH tests are used to detect bladder cancer.  During the time period covered by the settlement, Medicare reimbursement for FISH tests ranged from $456 to $966 per test. 

The settlement also resolves allegations that Dr. Bostwick, through Bostwick Laboratories, offered various discounts and billing arrangements to treating physicians to induce physicians to refer business to Bostwick Laboratories in violation of the federal Anti-Kickback Statute.  The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federally funded programs.  The Anti-Kickback Statute is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.

“We will continue to combat fraud against federal health care programs through actions against health care providers and by seeking accountability from responsible individuals,” said U.S. Attorney Carter M. Stewart for the Southern District of Ohio.  “We are dedicated to holding accountable those who manipulate the health care system to collect money to which they are not entitled.”

Under the settlement announced today, Dr. Bostwick has agreed to pay over $2.6 million plus an additional $1.125 million if certain financial contingencies occur within the next five years - for a total potential payment of up to $3.75 million.  On Aug. 28, 2014, Bostwick Laboratories previously agreed to pay over $6.5 million to resolve the allegations in this lawsuit.    

The allegations resolved by these settlements were originally brought by whistleblower Michael Daugherty, who works in the industry, under the qui tam provisions of the False Claims Act.  The act permits private citizens to sue on behalf of the government those who falsely claim federal funds.  The act allows the whistleblower to receive a share of any funds recovered through the lawsuit.  Daugherty will receive over $2.5 million from the government’s settlements with Dr. Bostwick and Bostwick Laboratories.

The government’s pursuit of the claims resolved by the settlements illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $27.1 billion through False Claims Act cases, with more than $17.1 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlements were the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Southern District of Ohio, and the U.S. Department of Health and Human Services, Office of Inspector General.

The case is captioned, United States ex rel. Daugherty v. Bostwick Laboratories, Inc. and David Bostwick, Civil Action No. 1:08-cv-354 (S.D. Ohio).  The claims resolved by the government are allegations only; there has been no determination of liability.

Since the White House Summit on Countering Violent Extremism (CVE) last February, the U.S. government has focused on strengthening our effort to prevent extremists from radicalizing and mobilizing recruits, especially here at home.  Advancing this effort means working as effectively as possible across the U.S. government, which is why we are forming the CVE Task Force. 

“The federal government’s top priority is protecting the American people from all forms of violent extremism,” said Attorney General Loretta E. Lynch.  “By bringing together agencies from across the Executive Branch, this innovative task force will allow us to more efficiently and effectively support local efforts to counter violent extremism.  The Department of Justice looks forward to joining the Department of Homeland Security in leading this new initiative, which represents an important step in our ongoing work to keep our communities safe and our country strong.”

“Countering violent extremism has become a homeland security imperative, and it is a mission to which I am personally committed,” said Secretary of Homeland Security Jeh Johnson.  “At the Department of Homeland Security, our Office of Community Partnerships – which I established last year to take the Department’s CVE efforts to the next level – has been working to build relationships and promote trust with communities across the country, and to find innovative ways to support those who seek to discourage violent extremism and undercut terrorist narratives.  The interagency CVE Task Force that we are announcing today, and which will be hosted by the Department of Homeland Security, will bring together the best resources and personnel from across the executive branch to ensure that we face the challenge of violent extremism in a unified and coordinated way.”

Since the Strategy to Empower Local Partners to Prevent Violent Extremism in the United States was issued in 2011, many federal, state, local and tribal governments have contributed meaningfully to the CVE effort.  However, the efforts of ISIL and other groups to radicalize American citizens has required the U.S. government to update the efforts that began five years ago.  Beginning in the summer of 2015, representatives from 11 departments and agencies reviewed our current structure, strategy and programs and made concrete recommendations for improvement.  The review validated the objectives of the 2011 strategy but identified gaps in its implementation.  The new task force will coordinate government efforts and partnerships to prevent violent extremism in the United States.

The review team identified four key needs:

• An infrastructure to coordinate and prioritize CVE activities;
• Clear responsibility, accountability and communication across government and with the public;
• Participation of relevant departments and agencies outside of national security lanes; and
• A process to assess, prioritize and allocate resources to maximize impact.

The CVE Task Force will be a permanent interagency task force hosted by the Department of Homeland Security (DHS) with overall leadership provided by DHS and the Department of Justice, with additional staffing provided by representatives from the FBI, National Counterterrorism Center and other supporting departments and agencies.  The task force will be administratively housed at DHS.  The CVE Task Force will address the gaps identified in the review by (1) synchronizing and integrating whole-of-government CVE programs and activities; (2) leveraging new CVE efforts, for example those of the DHS Office for Community Partnerships; (3) conducting ongoing strategic planning; and (4) assessing and evaluating CVE programs and activities.

The CVE Task Force will organize federal efforts into several areas, including: 

• Research and Analysis.  The Task Force will coordinate federal support for ongoing and future CVE research and establish feedback mechanisms for CVE findings, thus cultivating CVE programming that incorporates sound results. 
• Engagements and Technical Assistance.  The Task Force will synchronize Federal Government outreach to and engagement with CVE stakeholders and will coordinate technical assistance to CVE practitioners.   
• Communications.  The Task Force will manage CVE communications, including media inquiries, and leverage digital technologies to engage, empower and connect CVE stakeholders. 
• Interventions.  The Task Force will work with CVE stakeholders to develop multidisciplinary intervention programs. 

Today, Attorney General Loretta E. Lynch released the following statement on the capture of Joaquin ‘Chapo’ Guzman Loera:

“Today’s capture of Joaquin ‘Chapo’ Guzman Loera by Mexican authorities is a blow to the international drug-trafficking syndicate he is alleged to have led, a victory for the citizens of both Mexico and the United States, and a vindication of the rule of law in our countries.  Guzman’s latest attempt to escape has failed, and he will now have to answer for his alleged crimes, which have resulted in significant violence, suffering and corruption on multiple continents.  I commend the Government of Mexico for this arrest, and I salute the Mexican law enforcement and military personnel who have worked tirelessly in recent months to bring Guzman to justice.  The U.S. Department of Justice is proud to maintain a close and effective relationship with our Mexican counterparts, and we look forward to continuing our work together to ensure the safety and security of all our people.”

The Department of Justice announced today that it has entered into a consent decree with Niagara County, New York, resolving allegations that the county discriminated against Corrections Officer Carisa Boddecker because of her sex and pregnancy. 

The consent decree, entered today by the U.S. District Court for the Western District of New York, resolves the United States’ complaint filed on May 13, 2013, that the Niagara County Sheriff’s Office (NCSO) discriminated against Boddecker when it revoked her restricted duty assignment and forced her to take an extended leave of absence during her pregnancy, although she was able to work.  The complaint alleged that NCSO violated Title VII by refusing to let Boddecker do the same sort of work while pregnant that it allowed for other non-pregnant employees with temporary medical conditions.  Title VII is a federal statute that prohibits employment discrimination on the basis of sex, including pregnancy, as well as race, color, national origin and religion.

“It takes the strength and determination of women like Carisa Boddecker to stand up and speak out against sex-based discrimination,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “The Department of Justice remains firmly committed to ensuring that public employers do not discriminate against employees because of their pregnancies.”

Under the terms of the consent decree, NCSO must review its existing anti-discrimination policies and procedures and adopt and implement new policies to protect its employees from discrimination on the basis of sex, including pregnancy.  The consent decree requires NCSO to conduct training of its employees to ensure that any future complaints of discrimination are handled properly.  NCSO also has agreed to offer Boddecker $94,000 in back pay, compensatory damages and attorney’s fees, as well as restore the seniority and pension benefits that she lost as a result of her forced leave of absence.

The case was prosecuted by Trial Attorneys Elizabeth Banaszak and Kathleen Lawrence of the Civil Rights Division. 

The continued enforcement of Title VII remains a priority of the Justice Department’s Civil Rights Division.  More information about Title VII and other federal employment laws is available on the Civil Rights Division’s Employment Litigation Section (website).

Niagara County Consent Decree

Niagara County Order Approving Stipulated Consent Decree with Modification

Diverted More than $2 Million from Company to Fund Lavish Lifestyle

A Honolulu County businessman was sentenced to prison yesterday for corruptly endeavoring to obstruct the Internal Revenue Service (IRS) and filing false tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Florence T. Nakakuni of the District of Hawaii.

Albert S.N. Hee, 61, of Kailua, Hawaii, was sentenced by Senior U.S. District Judge Susan Oki Mollway of the District of Hawaii to serve 46 months in prison, to be followed by one year of supervised release.  Hee was also ordered to pay a fine of $10,000 and  restitution to the IRS in the amount of $431,793.  In July following an 11-day jury trial, Hee was convicted of one count of corruptly endeavoring to obstruct the IRS and six counts of filing false individual income tax returns for the years 2007 to 2012. 

According to court documents and the evidence introduced at trial, Hee owned Waimana Enterprises Inc., a telecommunications holding company based in Honolulu.  Between 2002 and 2012, Hee caused Waimana to pay more than $2 million of his personal expenses.  Hee then falsely characterized these personal expenditures as business expenses on Waimana’s corporate income tax returns.  Hee also filed false individual income tax returns for 2002 to 2012 on which he failed to report the expenditures as income.  Hee’s lavish spending included more than $90,000 for personal massages, which he deducted on the corporate tax returns as “consulting fees,” full-time salaries and benefits for his wife and children even though they performed little to no work for the company and more than $736,900 in college tuition, housing and other expenses for his children. 

In 2008, Hee purchased a $1.3 million home in Santa Clara, California, with corporate money and told his accountants that the property would be used by Waimana employees.  Instead, from 2008 through 2012, Hee’s children lived in the home during and after they attended college in Santa Clara.  At trial, Hee’s children testified that they indeed lived at the home and did not pay any rent to Waimana for their use of the property.  Hee’s children also testified that the house was within walking and skateboarding distance of the college campus and that they rented out other rooms in the house to their college friends and collected rent from their roommates, which they kept rather than remit to Waimana.

Waimana financed Hee’s and his family’s trips to Disney World, Tahiti, France and Switzerland.  Hee also used company funds to pay for a $17,000, five-day family vacation at the Mauna Lani resort on the Big Island of Hawaii, which Hee falsely characterized as a “stockholder’s meeting” even though he was the only shareholder of the company at that time.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Nakakuni commended the special agents of IRS-Criminal Investigation, who investigated the case, Assistant U.S. Attorney Larry Tong and Trial Attorney Quinn P. Harrington 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.

URS E & C Holdings Inc., a successor in interest to the global design and construction company Washington Group International Inc. (WGI), has agreed to pay $9 million to settle allegations that WGI submitted false claims in connection with United States Agency for International Development (USAID) contracts, the Justice Department announced today.

“Contractors who misrepresent their eligibility for government contracts undermine the government procurement process,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Justice Department will take action to protect that process and to ensure that taxpayer funds are not misused.”

“Government contractors must be honest and forthright,” said U.S. Attorney Wendy J. Olson for the District of Idaho.  “This settlement protects the integrity of the federal procurement process.  Whether a situation involves procurement fraud, as in this case, or healthcare fraud or any other type of fraud and dishonesty, the U.S. Attorney’s Office for the District of Idaho seeks to hold those obtaining public funds accountable.”

The settlement concerns USAID-funded contracts for the construction of water and wastewater infrastructure projects in the Arab Republic of Egypt in the 1990s.  The contracts were awarded to a joint venture partnership between WGI, Contrack International Inc. (Contrack) and Misr Sons Development S.A.E. (HAS), an Egyptian company.  The United States filed suit under the False Claims Act and the Foreign Assistance Act, alleging that prior to the award of those contracts, the joint venture partners concealed from USAID that Contrack and HAS were partners in the venture, thus preventing USAID from evaluating their qualifications and eligibility, which was a precondition to contract award.  As a result, WGI and its partners allegedly received USAID-funded contracts for which they were ineligible.  The settlement resolves only WGI’s liability.  The United States previously settled with Contrack and is continuing to pursue its claims against HAS.

This settlement was the result of a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the District of Idaho; and the USAID Office of Inspector General.

The case is United States v. Washington Group International Inc. f/k/a/ Morrison Knudsen, Corporation, Contrack International, Inc.; and Misr Sons Development S.A.E. a/k/a Hassan Allam Sons, No. 04-555 (D. Idaho).  The claims resolved by this settlement are allegations only and there has been no determination of liability.

The Department of Justice announced today that Union Bancaire Privée, UBP SA (UBP), reached a resolution under the department’s Swiss Bank Program.  UBP will pay a penalty of more than $187 million.

“Today’s agreement marks the final resolution with UBP, which acknowledges its role in conspiring with U.S. taxpayers to evade U.S. tax through an array of sham entities, structured transactions, nominees and bank services designed to disguise the true ownership of foreign accounts and other assets,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “Under the terms of the agreement, UBP pays a heavy price for its criminal conduct and must cooperate fully in all matters relating to the conduct described in the agreement until all civil or criminal examinations, investigations or proceedings are concluded.”

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.

According to the terms of the non-prosecution agreement signed today, UBP agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a penalty in return for the department’s agreement not to prosecute UBP for tax-related criminal offenses.

UBP is a corporation organized under the laws of Switzerland with its headquarters in Geneva, Switzerland.  It was originally founded in 1969 under the name Compagnie de Banque et d’Investissements CBI.  In 1990, CBI merged with TBD-American Express Bank.  The merged entity was re-named UBP.  UBP operates a financial services business in Geneva, Zurich, Basel and Lugano, Switzerland.  It primarily offers private banking and wealth management services for individual clients around the world, including U.S. citizens, legal permanent residents and resident aliens.  However, UBP also provides investment management and hedge fund services with a focus on institutional clients.

Over the past two decades, UBP has made a number of acquisitions, including NordFinanz Bank (1995), Discount Bank and Trust (2002), ABN AMRO (Switzerland) AG (2011), a portion of the assets associated with Banco Santander (Switzerland) SA’s private banking business (2012), Nexar Capital Group (Luxembourg) (2012), the assets associated with Lloyds Banking Group’s international private banking business (2013) and the assets associated with Coutts’s Swiss private banking activities (2015).

For decades prior to and through 2013, UBP aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts.  Over 200 private bankers were responsible for managing at least one U.S. client account during the period since Aug. 1, 2008.  These private bankers, referred to as relationship managers, served as the points of contact for U.S. clients at UBP and were responsible for opening and servicing U.S. client accounts at UBP.  Certain relationship managers assisted or otherwise facilitated some U.S. individual taxpayers in establishing and maintaining undeclared accounts in a manner that concealed the U.S. taxpayers’ ownership or beneficial interest in said accounts.

UBP assisted U.S. clients with undeclared accounts at UBP by placing and maintaining their assets in the names of non-U.S. structures, rather than the actual beneficial owner of the funds.  During the period since Aug. 1, 2008, UBP held 502 U.S.-related accounts in the names of non-U.S. structures formed in jurisdictions such as the British Virgin Islands, the Cayman Islands, Liechtenstein and Panama.  Because Swiss law requires UBP to identify the true beneficial owner of structures on a document called a Form A, it knew or should have known that these were U.S. clients. Nonetheless, UBP accepted and included in UBP’s account records Internal Revenue Service (IRS) Forms W-8BEN (or UBP’s substitute forms) provided by the directors of the offshore companies that falsely stated under penalty of perjury or implied that such companies were the beneficial owners of the assets in the UBP accounts for U.S. federal income tax purposes.  This aided and assisted the U.S. clients in concealing these assets and income from the IRS.

Prior to UBP’s acquisition, former ABN AMRO employees advised U.S. clients to conceal their U.S. nexuses from bank documentation.  For example, in September 2011, one relationship manager sent an email to a client with dual U.S. citizenship, while she was completing her account opening documents, recommending that the client provide her non-U.S. passport and not her U.S. passport.  In another instance in September 2008, a relationship manager instructed a U.S. resident client to sign bank documents using a non-U.S. place and date and to provide a utility bill reflecting a non-U.S. residence.

Prior to 2001, UBP provided formation and administration services for offshore structures through a Geneva-based affiliate.  However, in 2001, UBP formed an internal Wealth and Estate Planning unit (WEP Unit) and transferred the administration of these structures to the WEP Unit.  The WEP Unit did not form structures but did administer them by liaising with entity agents such as foreign law firms, paying administrative fees and keeping corporate documents up-to-date.  UBP coordinated with external trust companies and attorneys to form and administer offshore structures for U.S. clients, for example, with a Geneva-based consultant, a Geneva-based law firm and a Zurich-based individual company.  These companies opened numerous accounts for U.S. clients at UBP in the names of offshore structures.  For those potential and current U.S. clients interested in creating nominee offshore entities, UBP employees contacted and/or referred U.S. clients to these companies.

UBP maintained undeclared accounts at UBP for U.S. clients in the nominee names of non-U.S. insurance companies.  Such accounts, known commonly as insurance wrappers, were titled in the names of insurance companies but were funded with assets that were transferred to the accounts for the beneficial owners of the insurance products.  Insurance wrappers were marketed to Swiss Banks by third-party providers in the wake of the UBS investigation as a means of disguising the beneficial ownership of U.S. clients.  For example, in November 2009, UBP worked with a third-party service provider to assist a U.S. beneficial owner in restructuring three existing accounts he held at UBP in the names of nominee Panamanian entities into three accounts owned by the insurance company.

UBP employees assisted numerous U.S. clients in concealing their undeclared account funds by making fictitious donations to other accounts at UBP controlled in whole or in part by the U.S. client but held by non-U.S. persons.  Typically, the former U.S. customers either maintained signature authority over the donee’s account or had the funds returned to them in the future.  For example, in December 2009, the U.S. beneficial owners of a UBP bank account informed UBP of their intent to donate their assets to the remaining non-U.S. beneficial owner of their account.  UBP executed a new Form A reflecting sole ownership by the remaining non-U.S. person.  However, when the non-U.S. person closed the account in 2012, UBP executed a $491,000 transfer to the personal bank account of the former U.S. beneficial owners at another bank.

UBP offered a variety of other traditional Swiss banking services, including hold mail and code name or numbered accounts, that it knew could assist, and did in fact assist U.S. clients in concealing assets and income from the IRS.  UBP used or accepted the use of a variety of other means to assist U.S. clients in concealing their undeclared accounts, including by assisting U.S. clients to repatriate undeclared funds via fictitious donations, by making remote debit or credit card withdrawals, by converting the account funds into precious metals, through nominees, or by structuring transfers of funds from undeclared accounts to evade currency transaction reporting requirements.

Effective January 2001, UBP entered into a Qualified Intermediary (QI) Agreement with the IRS.  The QI Agreement was designed to help ensure that, with respect to U.S. securities held in an account with UBP, non-U.S. persons were subject to the proper U.S. withholding tax rates and U.S. persons were properly paying U.S. tax.  As a consequence of UBP entering into a QI Agreement with the IRS, UBP allowed U.S. clients to create and open accounts in the name of sham offshore entities and insurance wrappers.  Certain UBP employees caused UBP to certify compliance with the QI Agreement event though the true beneficial owners were not reflected in the IRS Forms W-8BEN in the account files.  UBP also divested U.S. securities from its undeclared U.S. accounts for the purpose of subverting its QI Agreement.

During the period since Aug. 1, 2008, UBP held and managed approximately 2,919 U.S.-related accounts, which included both declared and undeclared accounts, with aggregate peak of assets under management of $4.895 billion.  However, 1,282 of the 2,919 U.S.-related Accounts were acquired through the acquisitions of other banks, including ABN AMRO, and bank assets.  UBP will pay a penalty of $187.767 million.

In accordance with the terms of the Swiss Bank Program, UBP 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 these banks 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 UBP must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

“Today’s agreement is significant on several fronts,” said Chief Richard Weber of IRS-Criminal Investigation.  “UBP, as one of the largest private banks in Switzerland, held nearly 3,000 U.S related accounts.  This agreement will have far-reaching implications, expanding our understanding about the depth, breadth, tactics and techniques employed by the UBP private bankers and external asset managers who assisted U.S. taxpayers to conceal assets not only in Switzerland, but in other jurisdictions as well.”

“Today’s resolution with Union Bancaire Privée, UBP SA, reflects the effectiveness of the Department of Justice’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International Division.  “Financial institutions are being held accountable for their past actions and are now cooperating by providing us information that will let us track and pursue those who have not complied with the law.  U.S. taxpayers who have failed to report their foreign accounts and pay their income taxes need to resolve this non-compliance or face the consequences.”

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 Kevin F. Sweeney, 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, Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.

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

The Department of Justice announced today that Wisconsin-based Novum Structures LLC (Novum) has agreed to enter a guilty plea and pay $3 million to resolve its criminal and civil liability arising from its improper use of foreign materials on construction projects involving federal funds.  This use was in violation of contractual provisions implementing various domestic preference statutes, often referred to colloquially as the “Buy America” requirements.  Novum specializes in the design and construction of glass space frames often used in roofs and atrium enclosures.  

The agreement announced today resolves a criminal Information alleging that Novum repackaged materials and falsified documents relating to some federally funded construction projects in order to hide that it was using noncompliant foreign materials.  According to an agreement reached with the government, Novum will plead guilty to one count of concealing a material fact, in violation of 18 U.S.C. § 1001, and pay a $500,000 criminal fine. 

“When taxpayer dollars are provided for construction projects, the government expects contractors to comply with all requirements, including ones that ensure the money remains in the U.S. economy,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “This settlement shows that the Department of Justice is committed to pursuing claims against contractors that put financial gain ahead of complying with the law.”  

“Domestic preference statutes are designed to promote American businesses and to protect U.S. economic interests,” said Acting U.S. Attorney Gregory J. Haanstad for the Eastern District of Wisconsin.  “When companies subvert those interests by violating ‘Buy American’ provisions – and when they undertake efforts to conceal that they have done so – all in an effort to improperly advance their own private financial interests, the U.S. Attorney’s Office will pursue all appropriate criminal and civil sanctions.”

In addition to the criminal fine, Novum has agreed to pay $2.5 million to resolve civil allegations under the False Claims Act that its conduct caused the submission of false claims for payment.  Specifically, the civil settlement resolves allegations that Novum caused false claims by knowingly – and in violation of its contractual obligations – using noncompliant foreign materials on several federally funded construction projects from Jan. 1, 2004 through July 11, 2013.

Construction projects funded by the U.S. government are generally subject to laws requiring the use of domestic materials, such as the Buy American Act; the Federal Transit Administration’s Buy America provision; and § 1605 of the American Recovery and Reinvestment Act.  The contracts involved in this case covered both government buildings and transit projects partially paid for with federal funds.

As part of the settlement agreement, Novum has agreed not to contest debarment from federally funded projects.

Secretary of Transportation Anthony Foxx stated, “The U.S. Department of Transportation considers compliance with Buy America to be a fundamental requirement when a company is involved in federal projects.  As we work to be good stewards of limited federal resources, the department applauds the Department of Justice and our own Office of Inspector General for the successful prosecution of this case.”

“Contractors must follow all federal contracting rules when doing business with the United States,” said General Services Administration Inspector General Carol Fortine Ochoa.

“The settlement agreement entered into by Novum Structures LLC is a positive step following the company’s disregard of its obligations to comply with the clear legal requirements of the Buy America Act designed to spur domestic economic investments and job opportunities in transportation infrastructure projects,” said Regional Special Agent in Charge Thomas Ullom Department of Transportation’s Office of Inspector General.   

The allegations resolved by the civil settlement were originally brought by whistleblower Brenda King under the qui tam, or whistleblower, provisions of the False Claims Act.  The act permits private parties to sue on behalf of the government those who falsely claim federal funds.  The act also allows the whistleblower to receive a share of any funds recovered through the lawsuit.  King will receive approximately $400,000 as her share of the civil settlement.

The U.S. Attorney’s Office for the Eastern District of Wisconsin prosecuted the criminal case, and also jointly handled the civil lawsuit with the Civil Division’s Commercial Litigation Branch.  Investigative assistance was provided by the Department of Transportation’s Office of Inspector General, the General Services Administration’s Office of Inspector General and the Defense Criminal Investigative Service, with additional support from other agencies. 

The lawsuit is captioned United States ex rel. King v. Novum Structures, LLC, Case No. 12-cv-860 (E.D. Wis.).  The claims resolved by the civil settlement are allegations only; there has been no determination of liability except to the extent admitted in Novum’s plea agreement. 

SACRAMENTO, Calif. – Un gran jurado federal emitió una acusación formal el jueves, 17 de diciembre de 2015 contra Nelli Kesoyan, de 43 años y residente de Rancho Cordova, acusándola de hacer inscripciones e informes falsos, anunció el Procurador Federal Benjamín B. Wagner.

Según documentos del tribunal, Kesoyan fue empleada por la Administración de la Seguridad Social como asesora de reclamos. El 10 de octubre de 2014, ella hizo inscripciones falsas en los registros de la Administración de la Seguridad Social para engañar y despistar a los funcionarios de los Estados Unidos que estaban gestionando el proceso de ciudadanía para otro individuo.

La acusación formal se abrió el lunes y Kesoyan fue citada para comparecer el lunes por la tarde. Ella se declaró inocente. Se ha dispuesto una conferencia de estado para el 26 de enero de 2016, a las 09:15 AM en la Sala de Tribunal 6 ante el Juez Federal del Distrito John A. Méndez.

Este caso es el producto de una investigación de la Oficina del Inspector General de la Administración de la Seguridad Social, la Oficina Federal de Investigaciones (FBI) y las Investigaciones Criminales de Hacienda. Los Procuradores Federales Auxiliares Jeremy Kelley y Jared Dolan están procesando el caso.

Si es declarada culpable, Kesoyan se enfrentaría a una pena máxima establecida por la ley de 10 años de prisión y una multa de $250,000 dólares. No obstante, cualquier sentencia será determinada a la discreción del tribunal después de considerar cualquier factor aplicable establecido por la ley y las Normas para Sentenciar Federales que toman en cuenta una cantidad de variables. Los cargos son solo alegaciones; la demandada es presunta inocente hasta que y a menos que sea comprobada culpable sin duda razonable.

FRESNO, Calif. – El martes, 15 de diciembre del 2015, Jesús Flores Buenrostro de 36 años de edad y residente de California, fue extraditado a México por orden judicial donde es requerido para ser llevado a juicio por el presunto asesinato en el 2007 de un hombre en Sahuayo de Morales, Michoacán, anunció el Procurador Federal Benjamín B. Wagner.

Según la petición para la extradición presentada por México, Jesús Flores Buenrostro es acusado de homicidio después de haber presuntamente disparado a un hombre el 30 de abril del 2007. Según las declaraciones de testigos presénciales, Jesús Flores Buenrostro y unos compañeros fueron a una plaza en el pueblo por la tarde donde horas antes se había desatado una pelea callejera. Cuando llegaron a la plaza, Jesús Flores Buenrostro y sus compañeros se encontraron con un grupo de hombres. Jesús Flores Buenrostro cargó un arma de fuego y disparó dos veces contra el grupo de hombres. La víctima fue alcanzada dos veces por los disparos y falleció a causa de las heridas. Jesús Flores Buenrostro, de ciudadanía Americana, huyó a los Estados Unidos.

El Servicio del Mariscal de los Estados Unidos arrestó a Jesús Flores Buenrostro en Kern County en julio del 2015. El 15 de diciembre del 2015, después de los trámites legales llevados a cabo por el tribunal federal de Fresno, el tribunal certificó su capacidad de ser extraditado a México.     

“Al igual que nosotros pedimos la cooperación de México para la extradición de aquellos que violan nuestras leyes, ese país busca al nuestro para la extradición de aquellos que violan sus leyes,” declaró el Procurador Federal Wagner. “Tenemos el interés mutuo de asegurar que ninguno de los países sea un refugio seguro para aquellos que estén huyendo de la justicia hacia el otro.”

Este caso ha sido despachado por el Procurador Federal Auxiliar Daniel Griffin del Distrito Este de California, la Oficina de Asuntos Internacionales de la División Criminal del Departamento de Justicia y el Servicio del Mariscal de los Estados Unidos. 

Stole Identities from D.C. Government Agency for Use in Filing False Tax Returns

A resident of Bowie, Maryland, pleaded guilty today to federal charges for his involvement in a far-reaching identity theft and tax fraud scheme in which he assisted in the filing of fraudulent federal income tax returns seeking more than $4.4 million in refunds, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Channing D. Phillips for the District of Columbia, Special Agent in Charge Thomas Jankowski of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI), Inspector in Charge David G. Bowers of the U.S. Postal Inspection Service’s (USPIS) Washington, D.C., Division and Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of the Treasury.

Marc A. Bell, 49, admitted taking part in a massive and sophisticated identity theft and false tax return scheme that involved an extensive network of more than 130 people, many of whom were receiving public assistance.  According to court documents, the scheme involved the filing of at least 12,000 fraudulent federal income tax returns that sought refunds of at least $40 million from the U.S. Treasury.  The false tax returns sought refunds for tax years 2005 through 2013 and were often filed in the names of people whose identities had been stolen, including the elderly, people in assisted living facilities, drug addicts and incarcerated prisoners.  In other cases, the refunds were sent to people who were willing participants in the scheme.  The refunds listed more than 400 “taxpayer” addresses located in the District of Columbia, Maryland and Virginia.  Bell is one of approximately 15 people who have pleaded guilty in the U.S. District Court for the District of Columbia for their role in this scheme.

“The prosecution of Stolen Identity Refund Fraud is one of the Tax Division’s top priorities,” said Acting Assistant Attorney General Ciraolo.  “In addition to costing taxpayers millions of dollars in fraudulent refund claims each year, the perpetrators of these crimes often prey on our country’s most vulnerable citizens.  This case is a prime example of the concerted and coordinated efforts of the department, the Internal Revenue Service, the Taxpayer Inspector General for Tax Administration, and our other federal and state law enforcement partners that are essential to combatting this epidemic of fraud.” 

“This investigation has successfully targeted two serious crimes that cause great financial harm: identity theft and tax fraud,” said U.S. Attorney Phillips. “This defendant abused his position as a government employee to steal identifying information from young people who had no idea that their names were being used on fraudulent income tax returns. Like the many others prosecuted in this case, he was apprehended by law enforcement and brought to justice.” 

“Mr. Bell was a public servant who was trusted to serve the taxpayers of the District of Columbia,” said Special Agent in Charge Jankowski. “He violated that trust by stealing the identities of at least 645 youth and then passing the information to his partners in crime who filed over 12,000 federal income tax returns claiming refunds of over $40 million. Aside from the terrible harm done to the Government by receiving over $4 million in refunds before the scam was stopped, Mr. Bell has caused immeasurable harm to the financial well-being of the youth whose identities he stole.  IRS-Criminal Investigation will continue to relentlessly pursue those who prey on innocent taxpayers to satisfy their greed and cheat the honest taxpayers who comply with the tax laws of our nation.”

“Identity theft is an increasing problem,” said Inspector in Charge Bowers. “The U.S. Postal Inspection Service aggressively investigates this type of criminal conduct, especially when it involves the U.S. Mail, and it will not be ignored.  This case serves as another example of the significant results of collaborating with our law enforcement partners to achieve justice.”

“This plea agreement reinforces the commitment of Treasury’s Office of Inspector General and its law enforcement partners to pursue criminal charges against individuals and groups that prey on the public by stealing identities and fraud committed against the U.S. taxpayer and Treasury Department in their criminal schemes,” said Assistant Inspector General Phillips.

According to documents filed with the court, from 2005 to 2013, Bell was employed as a program manager, program officer, or placement expeditor at the District of Columbia’s Department of Youth Rehabilitation Services (DYRS).  The agency is responsible for the supervision, custody and care of young people charged with a delinquent act in the District of Columbia and either detained in a DYRS facility while awaiting adjudication or committed to DYRS by a District of Columbia Family Court judge following adjudication.  In his various capacities at DYRS, Bell had access to the agency’s database system, which contained the personal identifying information of DYRS youth, including their names and social security numbers.  Bell admitted that between approximately May 2010 and April 2013, he used his computer access to obtain the personal identifying information of at least 645 then-current and former DYRS youth.  Bell admitted that he provided this information to other scheme participants, who used the names and Social Security numbers to file at least 1,160 fraudulent federal income tax returns that claimed refunds of approximately $4,441,194.  The IRS issued approximately 700 U.S. Treasury checks, totaling approximately $2,422,211, in the names of the DYRS youth in whose names the tax returns were filed.  Bell received financial compensation from co-conspirators for providing the stolen identities.

For his role in the scheme, Bell pleaded guilty to three charges: conspiracy to defraud the government with respect to claims; aiding and abetting in the filing of fictitious or false claims; and aiding and abetting fraud and related activity in connection with identification documents.  U.S. District Judge Ellen S. Huvelle set sentencing for April 20.   Bell faces a statutory maximum sentence of up to 10 years in prison for the conspiracy charge, up to five years in prison for the false claims charge and up to 15 years in prison for the charge of fraud related to identification documents.  As part of his plea agreement, Bell has also agreed to pay restitution to the IRS in the amount of $1,972,710.

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

Sacramento, Calif. – Hoy, el Procurador Federal Benjamín B. Wagner ha anunciado que la selección de Sacramento en el Distrito Este de California, como una de solo seis ubicaciones de todo los Estados Unidos, ha sido designada para formar parte de los nuevos destacamentos especiales federales de la Iniciativa del Equipo de Coordinación Anti-Tráfico o ACTeam, una iniciativa en la que participarán varias agencias que aplicarán la ley federal con el fin de optimizar la investigación y el procesamiento de los delitos federales del tráfico humano.

Las declaraciones del Procurador Federal Wagner siguen a las declaraciones conjuntas de hoy de la Procuradora General Loretta E. Lynch, el Secretario de Seguridad Nacional Jeh Johnson y el Secretario de Trabajo Thomas E. Pérez en las que se designa a las ciudades de: Cleveland, Ohio; Minneapolis, Minnesota; Newark, New Jersey; Portland, Maine; Portland, Oregón y Sacramento, California como los lugares para efectuar la Fase II del ACTeam. Sacramento fue seleccionada en base a su compromiso en la identificación, la investigación y el procesamiento en los casos de trabajo forzado, de tráfico de sexo internacional y de tráfico de sexo entre adultos; también por la prevalencia o la sospechada prevalencia de este tipo de tráfico en la área de Sacramento; y por los niveles de cooperación que existen entre las diversas agencias que aplican la ley y por la Oficina del Procurador Federal para combatir el tráfico humano.

El Procurador Federal Wagner dijo que, “De acuerdo con la dirección proporcionada por la Procuradora General, la investigación y el procesamiento de todo tipo de tráfico humano es una máxima prioridad para nuestra oficina. Estamos orgullosos de nuestra excelente trayectoria en el procesamiento de varios delitos sobre a la explotación infantil y estamos comprometidos en el continuar y mejorar nuestro trabajo crítico de identificar y procesar delitos relacionados al trabajo forzado, al tráfico internacional de sexo y al tráfico de sexo entre adultos. Me alegro de nuestra selección como ubicación para el ACTeam porque refleja el trabajo intenso que ya hemos realizado en esta área y porque esto nos asistirá en hacer incluso más.”

Los equipos ACTeam se proponen a desarrollar la investigación y el procesamiento del tráfico humano de alto impacto asociado al trabajo forzado, tráfico de sexo internacional y tráfico de sexo entre adultos por fuerza, fraude y por coerción y así complementando tanto el Proyecto para una Infancia Segura (Project Safe Childhood) como otros esfuerzos que van dirigidos a combatir la explotación sexual infantil e incluso el tráfico de sexo infantil. Los equipos ACTeam reúnen a procuradores y agentes federales de múltiples agencias investigadoras federales en estrecha coordinación para desarrollar e implementar métodos proactivos contra el tráfico para identificar, investigar y formar estrategias de procesamiento para los casos y cuentan con expertos nacionales en materia relacionada al tráfico. Se espera que en los próximos dos años los equipos desarrollen investigaciones y procesamientos federales de alto impacto, que desmantelen redes de tráfico humano, que vindiquen los derechos de las víctimas del tráfico humano y que traigan a los traficantes ante la justicia. El nuevo equipo EDCA consistirá de personal proveniente de la Oficina Federal de Investigaciones (FBI), del Cuerpo de Aduanas e Inmigración de los Estados Unidos (ICE), de Investigación para la Seguridad Nacional (HSI) y del Departamento de Trabajo de los Estados Unidos.

Durante la Fase I de la Iniciativa ACTeam, los Equipos Piloto de la Fase I fueron convocados en Atlanta, Georgia; El Paso, Texas; Kansas City, Missouri; Los Ángeles, California; Memphis, Tennessee y Miami, Florida. La Fase I obtuvo mucho éxito y en los distritos donde actuaba el ACTeam se incrementaron colectivamente los procesamientos en un 119 por ciento en comparación al 35 por ciento nacional dentro del mismo periodo en los dos años.

En base a los excelentes resultados de la Fase I, la Procuradora General Lynch, el Secretario de la Seguridad Nacional Johnson y el Secretario de Trabajo Pérez lanzaron la Fase II el 25 de junio de 2015 por medio de una petición conjunta a las Oficinas de los Procuradores Federales y a sus socios federales dedicados a la aplicación de la ley de todo el país.

Las ubicaciones para la Fase II fueron seleccionadas por consenso unánime del Grupo Laboral de Aplicación Federal (Federal Enforcement Working Group) después de un riguroso y competitivo proceso de selección a escala nacional. El grupo consta de expertos en la materia del Departamento de Justicia (incluyendo la Unidad de Procesamiento del Tráfico Humano de la División de los Derechos Civiles, la Oficina Ejecutiva de Procuradores Federales y la Unidad de Derechos Civiles de la Oficina Federal de Investigaciones (FBI), el Departamento de Seguridad Nacional (incluyendo el Cuerpo de Aduanas e Inmigración de los Estados Unidos (ICE) y la Unidad de Contrabando y Tráfico Humano de las Investigaciones de la Seguridad Nacional) y el Departamento de Trabajo (incluyendo la Oficina del Inspector General y la División de Salarios y Horarios).

En sus declaraciones la Procuradora General ha destacado que los esfuerzos para traer a los traficantes de humanos ante la justicia y el restaurar las vidas de los sobrevivientes del tráfico humano deben estar entre las máximas prioridades del Departamento de Justicia. 

El Distrito Este de California tiene una lograda historia de procesamientos de casos relacionados al tráfico de sexo de menores. La evolución reciente de dichos casos incluyen los siguientes acontecimientos: El 14 de diciembre de 2015, Tyrell Richmond, de 33 años de edad y residente de Visalia, se declaró culpable de tráfico de sexo de un menor. El 10 de septiembre de 2015, un gran jurado federal en Sacramento acusó a Jeremy Ray Warren, de 22 años de edad y residente de Vallejo, y a Alyssa Tegan Brulez, de 22 años de edad y residente de Vacaville, de traficar con niños y se presentó una imputación por separado acusando a Jarrail Lamont Smith, de 23 años de edad y residente de Cleveland, Ohio, de transportar menores con el intento de inmiscuir en la prostitución. El 24 de agosto de 2015, Javier Solís, de 30 años de edad y residente de Fresno, fue sentenciado a 11 años y nueve meses de prisión por el tráfico de sexo de un menor. El 18 de agosto de 2015, Michael Anthony Andrade, de 35 años de edad y residente de Fresno, fue sentenciado a 12 años y siete meses de prisión por el tráfico de sexo de un menor.

The Department of Justice, on behalf of the Environmental Protection Agency (EPA), today filed a civil complaint in federal court in Detroit, Michigan, against Volkswagen AG, Audi AG, Volkswagen Group of America Inc., Volkswagen Group of America Chattanooga Operations LLC, Porsche AG and Porsche Cars North America Inc. (collectively referred to as Volkswagen).  The complaint alleges that nearly 600,000 diesel engine vehicles had illegal defeat devices installed that impair their emission control systems and cause emissions to exceed EPA’s standards, resulting in harmful air pollution.  The complaint further alleges that Volkswagen violated the Clean Air Act by selling, introducing into commerce, or importing into the United States motor vehicles that are designed differently from what Volkswagen had stated in applications for certification to EPA and the California Air Resources Board (CARB).

“Car manufacturers that fail to properly certify their cars and that defeat emission control systems breach the public trust, endanger public health and disadvantage competitors,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “The United States will pursue all appropriate remedies against Volkswagen to redress the violations of our nation’s clean air laws alleged in the complaint.”

“With today’s filing, we take an important step to protect public health by seeking to hold Volkswagen accountable for any unlawful air pollution, setting us on a path to resolution,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance.  “So far, recall discussions with the company have not produced an acceptable way forward.  These discussions will continue in parallel with the federal court action.”

“Today’s complaint is the first stage in bringing Volkswagen to justice for failing to disclose the defeat device while seeking certification for its diesel vehicles from EPA’s Office of Transportation and Air Quality in Ann Arbor, Michigan,” said U.S. Attorney Barbara L. McQuade for the Eastern District of Michigan.  “The alleged misrepresentations allowed almost 600,000 diesel engines to emit excessive air pollution across the country, harming our health and cheating consumers.”

Consistent with EPA’s Notices of Violation, issued on Sept. 18, 2015, for 2.0 liter engines and Nov. 2, 2015 for certain 3.0 liter engines, the complaint alleges that the defeat devices cause emissions to exceed EPA’s standards during normal driving conditions.  The Clean Air Act requires vehicle manufacturers to certify to EPA that their products will meet applicable federal emission standards to control air pollution.  Motor vehicles equipped with illegal defeat devices cannot be certified.

The complaint alleges that Volkswagen equipped certain 2.0 liter vehicles with software that detects when the car is being tested for compliance with EPA emissions standards and turns on full emissions controls only during that testing process.  During normal driving situations the effectiveness of the emissions control devices is greatly reduced.  This results in cars that meet emissions standards in the laboratory and at the test site, but during normal on-road driving emit oxides of nitrogen (NOx) at levels up to 40 times the EPA compliance level.  In total, the complaint covers approximately 499,000 2.0 liter diesel vehicles sold in the United States since the 2009 model year.

The complaint further alleges that Volkswagen also equipped certain 3.0 liter vehicles with software that senses when the vehicle is undergoing federal emissions testing.  When the vehicle senses the test procedure, it operates in a “temperature conditioning” mode and meets emissions standards.  At all other times, including during normal vehicle operation, the vehicles operate in a “normal mode” that permits NOx emissions of up to nine times the federal standard.  In total, the complaint covers approximately 85,000 3.0 liter diesel vehicles sold in the United States since the 2009 model year.

NOx pollution contributes to harmful ground-level ozone and fine particulate matter.  These pollutants are linked with asthma and other serious respiratory illnesses.  Exposure to ozone and particulate matter is also associated with premature death due to respiratory-related or cardiovascular-related effects.  Children, the elderly and people with pre-existing respiratory disease are particularly at risk of health effects from exposure to these pollutants.  Recent studies indicate that the direct health effects of NOx are worse than previously understood, including respiratory problems, damage to lung tissue and premature death.

Today’s filing of a civil complaint under Sections 204 and 205 of the Clean Air Act seeks injunctive relief and the assessment of civil penalties.  A civil complaint does not preclude the government from seeking other legal remedies.  The United States will seek to transfer its case and fully participate in the pretrial proceedings now initiated in the related multi-district litigation in the Northern District of California.  The United States’ investigation is ongoing, in close coordination with CARB.  EPA and CARB have been in active discussion with Volkswagen about potential remedies and recalls to address the noncompliance, and those discussions are ongoing. 

Affected 2.0 liter diesel models and model years include:

• Jetta (2009-2015)
• Jetta Sportwagen (2009-2014)
• Beetle (2013-2015)
• Beetle Convertible (2013-2015)
• Audi A3 (2010-2015)
• Golf (2010-2015)
• Golf Sportwagen (2015)
• Passat (2012-2015)

Affected 3.0 liter diesel models and model years include:

• Volkswagen Touareg (2009-2016)
• Porsche Cayenne (2013-2016)
• Audi A6 Quattro (2014-2016)
• Audi A7 Quattro (2014-2016)
• Audi A8 (2014 – 2016)
• Audi A8L (2014-2016)
• Audi Q5 (2014-2016)
• Audi Q7 (2009-2015)

The 11th and 12th Defendants Charged in Ongoing Investigation

Two Georgia real estate investors pleaded guilty today for their roles in bid-rigging and mail fraud conspiracies at public real estate foreclosure auctions in Georgia.  Paul Chen and Ira Eisenberg each admitted that they agreed not to bid against others at certain public real estate foreclosure auctions and that they conspired to defraud mortgage holders and homeowners using the mail system. 

“These individuals unlawfully rigged home foreclosure auctions, and then used payoffs and private side auctions to divide among themselves money that should have gone to mortgage holders and homeowners,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “Together with our FBI colleagues, the division will bring to justice unscrupulous investors who scheme to rob unsuspecting mortgage holders and homeowners.”

“Incidents of bid rigging at public real estate auctions continue to be an issue in Georgia and elsewhere in the United States, and the FBI would like to remind the public that such matters are violations of federal law,” said Special Agent in Charge J. Britt Johnson of the FBI’s Atlanta Field Office.  “The FBI will continue to work with the U.S. Department of Justice’s Antitrust Division in identifying, investigating and prosecuting those individuals engaged in such activities.”

Chen admitted to participating in the conspiracy in Fulton County, Georgia, from as early as February 2009 until at least March 2010, and Eisenberg admitted to participating from as early as August 2009 until at least February 2011.  Additionally, Chen admitted to participating in the DeKalb County, Georgia, conspiracy from as early as November 2009 until at least September 2011.  According to documents filed with the court, the purpose of the conspiracies was to suppress and restrain competition and divert money to the conspirators that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties and, in some cases, the defaulting homeowner.

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 task force was established 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.