District Not Recorded

Bollinger Shipyards will pay the United States $8.5 million and release contract claims to settle a False Claims Act action filed against it in the Eastern District of Louisiana, the Department of Justice announced today.  The False Claims Act suit alleges that Bollinger misrepresented the longitudinal strength of patrol boats it delivered to the Coast Guard that resulted in the boats buckling and failing once they were put into service.  Bollinger Shipyards is located in Lockport, Louisiana.

“Those who expect to do business with the government must do so fairly and honestly,” said Principal Deputy Assistant Attorney General Benjamin Mizer, head of the Justice Department’s Civil Division.  “We expect the utmost integrity and reliability from the contractors that design and build equipment that is essential to public safety and our national defense.”

In 2002, the U.S. Coast Guard contracted to lengthen the Coast Guard’s existing fleet of 110-foot patrol boats to 123 feet and to make other modifications.  Bollinger was the subcontractor that performed the 123-foot patrol boat design and conversion work.  An essential element of the conversion was that the modified boats have sufficient longitudinal strength to meet the performance requirements set forth in the contract.  The United States alleged Bollinger provided the Coast Guard with engineering calculations that falsely represented the longitudinal strength of the boats and was two times greater than their actual longitudinal strength.  The United States alleged Bollinger ran the calculations three times and only provided the Coast Guard with the highest and most inaccurate, of the three calculations.  The United States further alleged Bollinger also failed to follow the quality control procedures that were mandated by the contract that would have ensured against such engineering miscalculations.                 

The case was handled jointly by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office of the Eastern District of Louisiana. 

The case is captioned United States v. Bollinger Shipyards, et al. Case No. 2:12cv-00920 (E.D. La.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

The Department of Justice filed a complaint in the U.S. District Court for the District of Vermont seeking a permanent injunction against the Correia Farm Limited Partnership d/b/a Wynsum Holsteins, a dairy farm located in West Addison, Vermont, and its co-owners Anthony and Barbara Correia and their son and limited partner Stephen Correia, to prevent violations of the federal Food, Drug and Cosmetic Act (FDCA). 

According to the complaint, which was filed by the Department of Justice’s Consumer Protection Branch and the U.S. Attorney’s Office for the District of Vermont on behalf of the U.S. Food and Drug Administration (FDA), the farm and individual defendants violated the FDCA by unlawfully administering new animal drugs for uses not approved by the FDA and unlawfully selling livestock for slaughter and human consumption despite the presence of unsafe drug residues in the animals’ edible tissues.  The complaint states that previous inspections of the farm by the FDA and lab tests performed by the U.S. Department of Agriculture found recurring FDCA violations of the same nature, which the defendants failed to correct despite FDA warnings.

“When farms fail to implement and maintain appropriate controls for the administration of antibiotics and other drugs to food-producing animals, they jeopardize public health,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to work with the FDA to try to make sure that consumers are getting safe food.”

In conjunction with the filing of the complaint, the defendants have agreed to settle the litigation and be bound by a consent decree of permanent injunction that prohibits them from violating the FDCA.  The consent decree subjects the defendants to heightened FDA oversight and requires them to cease all operations until the defendants implement a number of new record-keeping and operational protocols designed to ensure consumer safety.  In order for the defendants to resume food production, the FDA first must determine that their manufacturing practices have come into compliance with the law.  The proposed decree is currently awaiting judicial approval.

This matter was handled by Trial Attorney Megan Englehart of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Ben Weathers-Lowin of the District of Vermont, with assistance from Yen Hoang of the FDA’s Office of the Chief Counsel.

A 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.

The Department of Justice announced today that Aargauische Kantonalbank (AKB) 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 the non-prosecution agreement signed today, AKB 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 this bank for tax-related criminal offenses.

AKB was founded in 1912 and is headquartered in Aarau, Switzerland.  The canton of Aargau owns 100 percent of AKB and guarantees its deposits.

AKB offered a variety of traditional Swiss banking services that it knew could assist, and did assist, U.S. taxpayers in concealing their identity from the Internal Revenue Service (IRS) by minimizing the paper trail associated with their undeclared assets and income.  AKB offered to identify accounts only by number and agreed not to send any mail to U.S. resident clients, which ensured that documents acknowledging the existence of the accounts remained outside of the United States and beyond the reach of U.S. tax authorities.  AKB accepted some former UBS clients following the U.S. investigation of untaxed assets and opened accounts for foundations and other entities that hid their U.S. ownership.

As early as 2008, AKB knew that some U.S.-related accounts held untaxed funds, which were described within AKB in one instance as “Schwarzgeld” or “black money.”  AKB knew that U.S. persons had a duty under U.S. law to report their income to the IRS and to pay taxes on that income, including all income earned in accounts maintained by AKB in Switzerland. Despite this knowledge, AKB opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the U.S. Department of the Treasury as U.S. law required.

AKB clients who lived in the United States engaged in a pattern of cash withdrawals.  For instance, one client personally came to AKB and, over the counter, withdrew large amounts of cash from her account – over 100,000 Swiss francs in 2009 and over 180,000 Swiss francs in 2010.  AKB also assisted its U.S. clients in sending money to themselves, relatives, business partners or other businesses in the United States by issuing checks drawn on one of AKB’s bank accounts.  Because these checks listed only AKB as the accountholder, they did not reveal that the funds were ultimately paid out of the U.S. clients’ Swiss bank account.  U.S. clients were thus able to utilize this technique to conceal their ownership of a Swiss account.

In 2009, responding to what AKB considered “astonishing and alarming” international pressure to lift Switzerland’s longstanding client-bank confidentiality for tax-offending foreign clients, AKB decided to start dealing with “openly declared black money and domiciliary companies.”  The latter situation, where the domiciliary company was in truth a nominee or sham entity, was one AKB knew its employees either “knew or should expect” to involve tax evasion. 

From at least 2008 through 2014, AKB maintained and serviced 454 U.S.-related accounts having a maximum aggregate value of more than $639 million.  AKB will pay a penalty of $1.983 million.       

In accordance with the terms of the Swiss Bank Program, AKB 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 AKB 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 AKB 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 Brian D. Bailey, 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.

Attorney General Loretta E. Lynch announced today that the Justice Department has opened a civil pattern or practice investigation into Chicago Police Department (CPD), pursuant to the Violent Crime Control and Law Enforcement Act of 1994.  The department’s investigation of CPD will seek to determine whether there are systemic violations of the Constitution or federal law by officers of CPD.  The investigation will focus on CPD’s use of force, including racial, ethnic and other disparities in use of force, and its systems of accountability.

“Building trust between law enforcement officers and the communities they serve is one of my highest priorities as Attorney General,” said Attorney General Lynch.  “The Department of Justice intends to do everything we can to foster those bonds and create safer and fairer communities across the country.  And regardless of the findings in this investigation, we will seek to work with local officials, residents, and law enforcement officers alike to ensure that the people of Chicago have the world-class police department they deserve.”

During the course of the investigation, the Justice Department will consider all relevant information, particularly the CPD’s policies, training and practices related to using, reporting, investigating and reviewing force.  The Justice Department will also look into CPD’s practices related to disciplinary and other corrective action; and its practices related to intake and handling of allegations of misconduct.

"The Justice Department's investigation – opened with currently available, preliminary information – seeks to determine whether the Chicago Police Department's use of force practices and accountability systems comply with constitutional standards necessary to effectively serve its community and productively support its police officers,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  ”In the coming months, we look forward to engaging directly with all stakeholders in Chicago – including the city's residents, law enforcement officers and public officials – as part of our fact-driven and thorough review.”

“Today's launch of this investigation marks an important and positive opportunity for Chicago and its police department," said U.S. Attorney Zachary T. Fardon for the Northern District of Illinois.  “The U.S. Attorney's Office is fully committed to doing everything in our power, in partnership with our colleagues in the Civil Rights Division, to ensure that this process is a success.”

As part of the investigation the department will gather information directly from police officers and local officials; community members, and other criminal justice stake holders, such as public defenders and prosecutors.  The department will also observe officer activities through ride-alongs and other means; as well as review documents and specific incidents that are relevant to the investigation.  Pattern or practice investigations of police departments do not assess individual cases for potential criminal violations; instead they look at incidents for patterns created by systems and practices. 

The Justice Department has taken similar steps involving a variety of state and local law enforcement agencies, both large and small, in jurisdictions throughout the United States.  When investigations result in findings of systemic violations of federal law and the Constitution they have in many instances resulted in comprehensive, court-overseen agreements to fundamentally change the law enforcement agency’s police practices.  When the department’s investigations do not result in findings of violations of federal law and the Constitution the department will close the investigation without an agreement.

This matter is being investigated by attorneys and staff from the Civil Rights Division with assistance from the U.S. Attorney’s Office for the Northern District of Illinois.  They will be assisted by experienced law enforcement experts.  The department welcomes the views of anyone wishing to provide relevant information. 

Police Reform and Accountability Fact Sheet

How P&P Investigations Work

Deputy Attorney General Sally Quillian Yates announced today that the Justice Department will, within the next five years, require department-run forensic labs to obtain and maintain accreditation and require all department prosecutors to use accredited labs to process forensic evidence when practicable. Additionally, the department has decided to use its grant funding mechanisms to encourage other labs around the country to pursue accreditation.

The new policies arose out of recommendations made by the National Commission of Forensic Science (NCFS), which was established to advance the field of forensic science and make suggestions to the Attorney General on how to ensure that reliable and scientifically valid evidence is used when solving crimes. The Attorney General made the decision to implement several of the commission’s recommendations last week and the Deputy Attorney General, who serves as co-chair of the NCFS, announced their adoption at a meeting of the commission today.

“The department believes that accreditation is one of the most important tools for ensuring that forensic science is practiced in a reliable, scientifically rigorous way,” said Deputy Attorney General Yates.  “Accreditation provides valuable oversight by ensuring that someone outside the participating laboratory has confirmed that the lab is following their required procedures. We support accreditation and we want to expand accreditation as widely as possible.”

Though department forensic labs at ATF, DEA and FBI are already accredited, the new policy will ensure that, by 2020, those labs will have to maintain that accreditation.  Also by 2020, department prosecutors will be required to use accredited forensic labs when it is practicable.  The Executive Office for U.S. Attorneys (EOUSA) has been directed to develop guidance that will ensure the successful implementation of this new policy in the field.

The new policy does not apply to digital forensic labs. Instead, the Deputy Attorney General has asked the NCFS to develop separate recommendations on accrediting of labs that conduct digital forensic work, given the difference in the practices of forensic analysis of digital evidence. 

As a result of the commission’s recommendations, the Attorney General also has directed two changes to the department’s grant funding in an effort to encourage and support state and local forensic labs in the process of becoming accredited.  First, solicitations for both Edward Byrne Memorial Justice Assistance Grant funding and Paul Coverdell Forensic Science Improvement Grant funding will be re-drafted to make clear that applicants can use this money to seek accreditation, because labs have not always used these funds to seek accreditation. Second, relevant discretionary grant programs at the Office of Justice Programs will be modified to give preferences to labs that will use the money to obtain accreditation.  These applicants will get a “plus factor,” increasing their likelihood of getting the money they need.

Accreditation assesses a forensic lab’s capacity to generate and interpret results in a particular forensic discipline and helps to ensure an ongoing compliance to industry and applicable international standards.  An independent accrediting body assesses and monitors the quality of the lab’s management system by examining factors that include staff competence; method validation; appropriateness of test methods; calibration and maintenance of test equipment; testing environment and quality assurance data.  Accreditation is one way to increase the quality of work and reducing the likelihood of errors.

Based on further recommendations by the NCFS, the Deputy Attorney General also announced that the department will help to establish an interagency working group aimed at bringing higher levels of scientific rigor and reliability to the field of medico-legal death investigation (MDI).  The department has asked the White House’s Office of Science and Technology Policy to help convene the working group, which would focus on a broad range of MDI issues.  Though the department does not conduct its own MDI– which is typically handled by state and local agencies – it believes an interagency group will help accomplish the goals of the NCFS in strengthening the MDI field.

Electrolux and General Electric Company announced today the termination of the agreement under which Electrolux was to purchase General Electric’s appliance business.

The department brought suit on July 1, 2015, to challenge the $3.3 billion acquisition because it would combine two of the leading manufacturers of ranges, cooktops and wall ovens sold in the United States, eliminating competition that benefits American consumers and home builders through lower prices and more options.  Trial before the Honorable Emmet G. Sullivan began on Nov. 9 in the U.S. District Court for the District of Columbia.

“In the courtroom, facts matter,” said Deputy Assistant Attorney General David I. Gelfand of the Justice Department’s Antitrust Division.  “Rhetoric does not.  This deal was bad for the millions of consumers who buy cooking appliances every year.  Electrolux and General Electric could not overcome that reality at trial.  The American public has been very well-served by the outstanding work of the trial team in this case, led by Ethan Glass.  The abandonment of the transaction is a testament to their tremendous dedication and the thoroughness with which they presented the evidence to the Court.”

Electrolux makes and sells major appliances under the brand names Frigidaire, Tappan and Electrolux.  Its annual major-appliance sales in the United States total approximately $2.6 billion.  Electrolux North America Inc. is a wholly owned subsidiary of defendant AB Electrolux.

General Electric also makes and sells major appliances, including those under the brand names GE Monogram, GE Café, GE Profile, GE, GE Artistry and Hotpoint.  In the United States, General Electric’s annual major appliance sales total approximately $3.4 billion.

SAIPAN, CNMI – ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands (NMI), announced that on Friday, December 4, 2015, the NMI U.S. District Court Chief Judge Ramona V. Manglona sentenced Randy A. Igisomar, age 23, to 46 months in prison followed by three years of supervised release for perjury.  Igisomar pleaded guilty on November 26, 2014.

          During his sentencing hearing, Igisomar addressed Judge Manglona in open court and admitted he had lied during his testimony at the trial of Raymond Borja Roberto, who had been charged with three counts of enticement of a minor and one count of witness tampering, and was acquitted on all counts by a jury on September 29, 2014. 

          Following the sentencing, United States Attorney for the Districts of Guam and the Northern Mariana Islands, Alicia A.G. Limtiaco, stated, “The Defendant's perjured testimony was an affront to our system of justice.  The United States Attorney’s Office, together with its federal law enforcement partners, will continue in its efforts to ensure that those who obstruct justice are held accountable and prosecuted for their crimes.”

            The case was investigated by the Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorneys Ross K. Naughton and Garth R. Backe.  

          ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands (NMI), together with Michael Puralewski, Resident Agent in Charge of the Drug Enforcement Administration (DEA), and Assistant U.S. Attorney (AUSA) Clyde Lemons, attended the 2015 Pacific Region OCDETF Advisory Council Meeting on December 3, 2015, in San Francisco, California. 

          OCDETF (Organized Crime Drug Enforcement Task Force) is a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state and local law enforcement agencies.  The participants of the OCDETF Program include the 94 U.S. Attorneys’ Offices, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the DEA, the Federal Bureau of Investigation (FBI), the Internal Revenue Service (IRS), the U.S. Coast Guard, the U.S. Immigration and Customs Enforcement (ICE), the U.S. Marshals Service, the Criminal and Tax Divisions of the U.S. Department of Justice and numerous state and local agencies.

          The 2015 Pacific Region OCDETF Advisory Council Meeting was attended by United States Attorneys, Lead OCDETF AUSAs, Special Agents in Charge of DEA, and U.S. Marshals in the Pacific Region.  The Pacific Region encompasses Guam, the Commonwealth of the Northern Mariana Islands, Hawaii, California, Washington, Nevada, Oregon, Idaho and Alaska.  The meeting covered the state of the OCDETF Program, Pacific Region district updates and a review of the Pacific Region Drug Threat Assessment. 

A federal grand jury sitting in Boston returned an indictment yesterday, which was unsealed today, charging two Massachusetts residents with conspiracy to defraud the United States, theft of government property, access device fraud and aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Carmen M. Ortiz for the District of Massachusetts, and Special Agent in Charge William Offord of Internal Revenue Service-Criminal Investigation (IRS-CI), Boston Field Office.

Furvio Flete-Garcia, 42, and Juan Santiago, 36, both of Lawrence, Massachusetts and nationals of the Dominican Republic, are alleged to have participated in a scheme to prepare and file fraudulent federal income tax returns using stolen identities for the purpose of obtaining U.S. Treasury tax refund checks.  According to the indictment, during 2013 and 2014, Flete-Garcia and Santiago possessed more than 800 names and social security numbers of U.S. citizens including Puerto Rican residents, which Santiago sold to another individual for the purpose of using those identities to prepare and file fraudulent federal income tax returns.  The indictment further alleges that Flete-Garcia and Santiago sold more than 16 U.S. Treasury tax refund checks with a total face value of more than $100,000 to the same individual.  These tax refund checks were issued by the IRS as a result of the fraudulent income tax returns that were filed using the stolen identities.   

Acting Assistant Attorney General Ciraolo, U.S. Attorney Ortiz and Special Agent in Charge Offord thanked agents of IRS-CI, Homeland Security Investigations, U.S. Secret Service and the Social Security Administration’s Office of the Inspector General, who investigated the case and Senior Litigation Counsel Corey J. Smith of the Tax Division, who is prosecuting the case.

A 92-count superseding indictment was unsealed earlier today in federal court in Brooklyn, New York, charging an additional 16 defendants with racketeering, wire fraud and money laundering conspiracies, among other offenses, in connection with their participation in a 24-year scheme to enrich themselves through the corruption of international soccer. The superseding indictment also includes additional charges for seven of the defendants still pending extradition following the return of the original indictment last May. The guilty pleas of eight defendants – including Jeffrey Webb, Alejandro Burzaco and José Margulies, three of the defendants indicted last May – were also announced today.

The new defendants charged in the superseding indictment include high-ranking officials of FIFA, the organization responsible for the regulation and promotion of soccer worldwide, as well as high-ranking officials of other soccer governing bodies that operate under the FIFA umbrella. Alfredo Hawit and Juan Ángel Napout – the current presidents of CONCACAF and CONMEBOL, as well as current FIFA vice presidents and executive committee members – are among the 16 additional soccer officials charged with racketeering and bribery offenses. CONCACAF and CONMEBOL are two of FIFA’s six continental confederations. The new defendants also include Marco Polo del Nero and Ricardo Teixeira, the current and former presidents of the Brazilian soccer federation, both of whom are also former members of the FIFA executive committee, as well as José Luís Meiszner and Eduardo Deluca, the current and former general secretaries of CONMEBOL. Within UNCAF, the Central American regional soccer union operating within CONCACAF, the charges in the superseding indictment name the current and/or former presidents of nearly every country in the region: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. Taken together, the 27 defendants in the superseding indictment are alleged to have engaged in a number of schemes all designed to solicit and receive well over $200 million in bribes and kickbacks to sell lucrative media and marketing rights to international soccer tournaments and matches, among other valuable rights and properties.

The charges were announced by Attorney General Loretta E. Lynch, FBI Director James B. Comey, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI’s New York Field Office, Chief Richard Weber of Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Erick Martinez of the IRS-CI Los Angeles Field Office.

Early this morning, Swiss authorities in Zurich arrested two of the defendants charged in the superseding indictment – Hawit and Napout – at the request of the United States. Also this morning, a search warrant was executed at Media World, a sports marketing company based in Miami.

The new charges unsealed today bring the total number of individuals and entities charged to date to 41. Of those, 12 individuals and two sports marketing companies have already been convicted as a result of the ongoing investigation. The convicted defendants have agreed to pay more than $190 million in forfeiture. In addition, more than $100 million has been restrained in the United States and abroad in connection with the alleged criminal activity. The United States has issued mutual legal assistance requests seeking the restraint of assets located in 13 countries around the world.

“The Department of Justice is committed to ending the rampant corruption we have alleged amidst the leadership of international soccer – not only because of the scale of the schemes, or the brazenness and breadth of the operation required to sustain such corruption, but also because of the affront to international principles that this behavior represents,” said Attorney General Lynch. “The message from this announcement should be clear to every culpable individual who remains in the shadows, hoping to evade our investigation: You will not wait us out. You will not escape our focus.” Attorney General Lynch extended her grateful appreciation to the authorities of the government of Switzerland for their continuing outstanding assistance and collaboration in this investigation, and to the authorities in a number of other countries, including Brazil and Colombia, for their assistance as well.

“For decades, these defendants used their power as the leaders of soccer federations throughout the world to create a web of corruption and greed that compromises the integrity of the beautiful game,” said Director Comey. “I want to thank all the agencies for their hard work and for showing the world that we do not tolerate this criminal activity.”

“The charges unsealed today send a clear message to those who corrupted a sport beloved by millions to satisfy their own greed: We are determined to put a stop to bribery and corruption in international soccer and to make room for a new era of integrity and reform,” said U.S. Attorney Capers. “This indictment is the latest step in that effort, but our work is not done. While our investigation continues at home, we also look forward to continuing our collaboration with our international partners, including in particular the Swiss authorities, because there is so much yet to be done.” Mr. Capers extended his thanks to the agents, analysts, and other investigative personnel with the FBI New York Eurasian Joint Organized Crime Squad and the IRS-CI Los Angeles Field Office, as well as their colleagues in the United States and abroad, for their continuing tremendous effort in this case. Mr. Capers also thanked the U.S. Marshals Service for its continuing assistance.

“The brazenness with which the individuals indicted today breached the integrity of the U.S. financial system to promote and conceal their criminal schemes is quite alarming,” said Chief Weber. “While it is one of the most complex worldwide financial investigations ever conducted, it is also an eye opener to everyone that such greed and corruption could be hiding in plain sight within the world’s most popular sport. By conspiring to enrich themselves through bribery and kickback schemes relating to media and marketing rights, the defendants undermined the process of fair and open competition, corrupting the beautiful game for their own personal gain.”

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

Overview of the Superseding Indictment

As alleged in the superseding indictment, FIFA and its six continental confederations – including CONCACAF, headquartered in the United States, and CONMEBOL, the confederation headquartered in South America – together with affiliated regional federations, national member associations and sports marketing companies, constitute an enterprise of legal entities associated in fact for purposes of the federal racketeering laws. The principal – and entirely legitimate – purpose of the enterprise is to regulate and promote the sport of soccer worldwide.

As in the original indictment, the superseding indictment alleges that, between 1991 and the present, the defendants and their co-conspirators corrupted the enterprise by engaging in various criminal activities, including fraud, bribery and money laundering. Two generations of soccer officials abused their positions of trust for personal gain, frequently through an alliance with unscrupulous sports marketing executives who shut out competitors and kept highly lucrative contracts for themselves through the systematic payment of bribes and kickbacks. All told, the soccer officials are charged with conspiring to solicit and receive more than $200 million in bribes and kickbacks in exchange for their official support of the sports marketing executives who agreed to make the unlawful payments.

The schemes alleged in the original indictment related to the solicitation and receipt of bribes and kickbacks by soccer officials from sports marketing executives in connection with the commercialization of the media and marketing rights associated with various soccer matches and tournaments, as well as schemes related to the payment and receipt of bribes and kickbacks in connection with the sponsorship of the Brazilian soccer federation by a major U.S. sportswear company, the selection of the host country for the 2010 World Cup and the 2011 FIFA presidential election.

The new allegations in the superseding indictment relate to a series of bribery schemes in connection with multiple cycles of FIFA World Cup qualifiers and international friendly matches involving six Central American member associations within UNCAF; a bribery scheme implicating many top CONMEBOL officials relating to the sale of broadcasting rights to the CONMEBOL Copa Libertadores over an extended period; and a scheme by an Argentinian sports marketing company to obtain various rights properties from CONCACAF by paying bribes to three Central American soccer officials to cause them to exert their influence in favor of the company.

The 16 New Defendants

As set forth in the superseding indictment, the 16 newly indicted defendants are all current or former soccer officials who acted at various times in a fiduciary capacity within FIFA and one or more of its constituent organizations:

CONCACAF Region Officials

• Alfredo Hawit: Current FIFA vice president and Executive Committee member and CONCACAF president. Former CONCACAF vice president and Honduran soccer federation president.
• Ariel Alvarado: Current member of the FIFA Disciplinary Committee. Former CONCACAF Executive Committee member and Panamanian soccer federation president.
• Rafael Callejas: Current member of the FIFA Television and Marketing Committee. Former Honduran soccer federation president and President of the Republic of Honduras.
• Brayan Jiménez: Current Guatemalan soccer federation president and member of the FIFA Committee for Fair Play and Social Responsibility.
• Rafael Salguero: Former FIFA Executive Committee member and Guatemalan soccer federation president.
• Héctor Trujillo: Current Guatemalan soccer federation general secretary and judge on the Constitutional Court of Guatemala.
• Reynaldo Vasquez: Former Salvadoran soccer federation president.

CONMEBOL Region Officials

• Juan Ángel Napout: Current FIFA vice president and Executive Committee member and CONCACAF president. Former Paraguayan soccer federation president.
• Manuel Burga: Current member of the FIFA Development Committee. Former Peruvian soccer federation president.
• Carlos Chávez: Current CONMEBOL treasurer. Former Bolivian soccer federation president.
• Luís Chiriboga: Current Ecuadorian soccer federation president and member of the CONMEBOL executive committee.
• Marco Polo del Nero: Current president of the Brazilian soccer federation. Announced resignation from FIFA Executive Committee on Nov. 26, 2015.
• Eduardo Deluca: Former CONMEBOL general secretary.
• José Luis Meiszner: Current CONMEBOL general secretary.
• Romer Osuna: Current member of the FIFA Audit and Compliance Committee. Former CONMEBOL treasurer.
• Ricardo Teixeira: Former Brazilian soccer federation president and FIFA Executive Committee member.

The Convicted Defendants

The following defendants pleaded guilty under seal and agreed to forfeit more than $40 million:

On May 26, 2015, Zorana Danis, the co-founder and owner of International Soccer Marketing Inc., a New Jersey-based sports marketing company, waived indictment and pleaded guilty to a two-count information charging her with wire fraud conspiracy and filing false tax returns. As part of her plea, Danis agreed to forfeit $2 million.

On Nov. 9, 2015, Fabio Tordin, the former CEO of Traffic Sports USA Inc. and currently an executive with Media World LLC, a Miami-based sports marketing company, waived indictment and pleaded guilty to a four-count information charging him with three counts of wire fraud conspiracy and tax evasion. As part of his plea, Tordin agreed to forfeit more than $600,000.

On Nov. 12, 2015, Luis Bedoya, a member of the FIFA Executive Committee, a CONMEBOL vice president and, until last month, the president of the Federación Colombiana de Fútbol, the Colombian soccer federation, waived indictment and pleaded guilty to a two-count information charging him with racketeering conspiracy and wire fraud conspiracy. As part of his plea, Bedoya agreed to forfeit all funds on deposit in his Swiss bank account, among other funds.

On Nov. 16, 2015, Alejandro Burzaco, the former general manager and chairman of the board of Torneos y Competencias S.A., an Argentinian sports marketing company, pleaded guilty to racketeering conspiracy, wire fraud conspiracy, and money laundering conspiracy. As part of his plea, Burzaco agreed to forfeit more than $21.6 million.

On Nov. 17, 2015, Roger Huguet, the CEO of Media World and its parent company, waived indictment and pleaded guilty to two counts of wire fraud conspiracy and one count of money laundering conspiracy. As part of his plea, Huguet agreed to forfeit over $600,000.

On Nov. 23, 2015, Jeffrey Webb, a former FIFA vice president and Executive Committee member, CONCACAF president, Caribbean Football Union Executive Committee member and Cayman Islands Football Association president, pleaded guilty to racketeering conspiracy, three counts of wire fraud conspiracy and three counts of money laundering conspiracy. As part of his plea, Webb agreed to forfeit more than $6.7 million.

On Nov. 23, 2015, Sergio Jadue, a vice president of CONMEBOL and, until last month, the president of the Asociación Nacional de Fútbol Profesional de Chile, the Chilean soccer federation, waived indictment and pleaded guilty to a two-count information charging him with racketeering conspiracy and wire fraud conspiracy. As part of his plea, Jadue agreed to forfeit all funds on deposit in his U.S. bank account, among other funds.

On Nov. 25, 2015, José Margulies, the controlling principal of Valente Corp. and Somerton Ltd, who served as an intermediary who facilitated illicit payments between sports marketing executives and soccer officials, pleaded guilty to racketeering conspiracy, wire fraud conspiracy and two counts of money laundering conspiracy. As part of his plea, Margulies agreed to forfeit more than $9.2 million.

As announced last May, all money forfeited by the defendants is being held in reserve to ensure its availability to satisfy any order of restitution entered at sentencing for the benefit of any individuals or entities that qualify as victims of the defendants’ crimes under federal law.

* * *

The indicted and convicted defendants face maximum terms of incarceration of 20 years for the Racketeer Influenced and Corrupt Organizations Act (RICO) conspiracy, wire fraud conspiracy, wire fraud, money laundering conspiracy, money laundering and obstruction of justice charges. In addition, Tordin and Danis face maximum terms of five and three years in prison, respectively, for the tax charges. Each defendant also faces mandatory restitution, forfeiture and a fine.

The superseding indictment and guilty pleas unsealed today are assigned to the U.S. District Judge Raymond J. Dearie of the Eastern District of New York.

The government’s investigation is ongoing.

The charges and guilty pleas announced today are part of an investigation into corruption in international soccer being led by the U.S. Attorney’s Office of the Eastern District of New York, the FBI’s New York Field Office and the IRS-CI Los Angeles Field Office. The work in the U.S. Attorney’s Office involves prosecutors from the National Security and Cybercrime Section, the Organized Crime and Gang Section, the Business and Securities Fraud Section and the Public Integrity Section. The prosecutors in Brooklyn are receiving considerable assistance from attorneys in various parts of the Justice Department’s Criminal Division in Washington, D.C., including the Office of International Affairs, the Organized Crime and Gang Section, the Asset Forfeiture and Money Laundering Section and the Fraud Section, as well as from INTERPOL Washington.

The charges and guilty pleas announced today are being prosecuted by Assistant United States Attorneys Evan M. Norris, Amanda Hector, Darren A. LaVerne, Samuel P. Nitze, M. Kristin Mace, Paul Tuchmann, Keith D. Edelman, Tanya Hajjar and Brian D. Morris of the Eastern District of New York.

The Newly-Indicted Defendants:

ARIEL ALVARADO

Age: 56

Nationality: Panama

MANUEL BURGA

Age: 58

Nationality: Peru

RAFAEL CALLEJAS

Age: 72

Nationality: Honduras

CARLOS CHÁVEZ

Age: 57

Nationality: Bolivia

LUÍS CHIRIBOGA

Age: 69

Nationality: Ecuador

MARCO POLO DEL NERO

Age: 74

Nationality: Brazil

EDUARDO DELUCA

Age: 75

Nationality: ARGENTINA

ALFREDO HAWIT

Age: 64

Nationality: Honduras

BRAYAN JIMÉNEZ

Age: 61

Nationality: Guatemala

JOSÉ LUÍS MEISZNER

Age: 69

Nationality: Argentina

JUAN ÁNGEL NAPOUT

Age: 57

Nationality: Paraguay

ROMER OSUNA

Age: 72

Nationality: Bolivia

RAFAEL SALGUERO

Age: 70

Nationality: Guatemala

RICARDO TEIXEIRA

Age: 68

Nationality: Brazil

HÉCTOR TRUJILLO

Age: 62

Nationality: Guatemala

REYNALDO VASQUEZ

Age: 59

Nationality: El Salvador

The Convicted Defendants:

LUIS BEDOYA

Age: 56

Nationality: Colombia

ALEJANDRO BURZACO

Age: 51

Nationality: Argentina

ZORANA DANIS

Age: 52

Nationality: Belgium

ROGER HUGUET

Age: 52

Nationality: USA, Spain

SERGIO JADUE

Age: 36

Nationality: Chile

JOSÉ MARGULIES

Age: 76

Nationality: Brazil

FABIO TORDIN

Age: 50

Nationality: Brazil

JEFFREY WEBB

Age: 51

Nationality: Cayman Islands

E.D.N.Y. Docket Numbers:

United States v. Zorana Danis, 15 Cr. 240 (RJD)

United States v. Jeffrey Webb et al., 15 Cr. 252 (RJD)

United States v. Fabio Tordin, 15 Cr. 564 (RJD)

United States v. Luis Bedoya, 15 Cr. 569 (RJD)

United States v. Sergio Jadue, 15 Cr. 570 (RJD)

United States v. Roger Huguet, 15 Cr. 585 (RJD)

Today, the Justice Department and the Republic of Ecuador established a formal partnership to fight employment discrimination based on citizenship, immigration status and national origin.  Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division, and Ecuadorean Ambassador Francisco Borja Cevallos signed a Memorandum of Understanding (MOU) creating a partnership between the embassy and its consulates, and the Civil Rights Division’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC).  The Immigration and Nationality Act’s (INA) anti-discrimination provision prohibits employers in the United States from discriminating in hiring, firing, recruiting or verifying a worker’s employment eligibility because of citizenship, immigration status or national origin. 

The MOU seeks to empower work-authorized Ecuadorians in the United States by educating them about their rights and providing them with the resources needed to protect those rights.  The MOU will also promote training for employers on their responsibilities under the anti-discrimination provision of the INA, which prohibits employment discrimination because of citizenship, immigration status and national origin.  Specifically, the MOU provides that:

• OSC will help train Ecuadorean consular staff on the anti-discrimination provision of the INA, participate in events organized by Ecuadorean consulates to educate workers and employers and distribute educational materials to the embassy and its consulates.

• The embassy will establish a system for referring discrimination claims from the embassy and consulates to OSC.

“The signing of today’s historic MOU marks a critical stride of progress in the dynamic partnership between our countries,” said Principal Deputy Assistant Attorney General Gupta.  “Together, we will continue to advance our shared commitment to empowering workers, combating unlawful discrimination and protecting the rights of our people.”

“These agreements are vital to ensure that the Ecuadorian community in the United States is informed of its rights and the different resources that the Department of Justice provides through its offices and phone support lines,” said Ambassador Borja Cevallos.  “Our goal is to make sure that the rights of Ecuadorian immigrants are respected.”

Today’s agreement builds on the joint outreach to immigrant communities already underway between OSC and Ecuador’s embassy and consulates.

OSC is responsible for enforcing the anti-discrimination provision of the INA.  Among other things, this law prohibits discrimination based on citizenship status and or national origin discrimination in hiring, firing or recruitment or referral for a fee; discrimination in the employment eligibility verification process; retaliation; and intimidation.  In addition to its enforcement work, OSC educates the public on rights and responsibilities under the INA’s anti-discrimination provision.  More information on OSC is available at www.justice.gov/crt/about/osc.

For more information about protections against employment discrimination under immigration laws, call OSC’s worker hotline at 1-800-255-7688 (1-800-237-2515, TTY for hearing impaired); call OSC’s employer hotline at 1-800-255-8155 (1-800-237-2515, TTY for hearing impaired); sign up for a free webinar at www.justice.gov/crt/about/osc/webinars.php; email osccrt@usdoj.gov; or visit OSC’s website at www.justice.gov/crt/about/osc. 

Ecuador MOU

WASHINGTON – El Departamento de Justicia de los Estados Unidos y la República del Ecuador firmaron hoy un acuerdo de asociación formal para combatir la discriminación en el empleo por motivos de ciudadanía, estatus migratorio o nacionalidad de origen. Secretaria de Justicia Auxiliar Adjunta Principal Vanita Gupta, Jefa de la División de Derechos Civiles, y el embajador ecuatoriano Francisco Borja Cevallos firmaron un memorándum de entendimiento (MOU, por sus siglas en inglés) que establece una asociación entre la embajada y sus consulados y la Oficina del Consejero Especial para Prácticas Injustas en el Empleo Relacionadas a Inmigración (OSC, por sus siglas en inglés), de la División de Derechos Civiles. La disposición antidiscriminatoria de la INA prohíbe que empleadores en los Estados Unidos discriminen durante la contratación, el despido, el reclutamiento o la verificación de la elegibilidad de empleo de un trabajador por motivos de ciudadanía, estatus migratorio o nacionalidad de origen.

El propósito del MOU es habilitar a los ecuatorianos con autorización para trabajar en los Estados Unidos al educarles en cuanto a sus derechos y brindarles los recursos que necesitan para proteger dichos derechos. Asimismo, el MOU promoverá la capacitación de empleadores con respecto a sus responsabilidades en virtud de la disposición antidiscriminatoria de la ley de Inmigración y Nacionalidad (INA, por sus siglas en inglés), la cual prohíbe la discriminación en el empleo por motivos de ciudadanía, estatus migratorio o nacionalidad de origen. En concreto, el MOU dispone que:

• La OSC ayudará a capacitar al personal consular ecuatoriano en cuanto a la disposición antidiscriminatoria de la INA, participará en eventos organizados por los consulados ecuatorianos para educar a los trabajadores y empleadores y distribuirá materiales educativos a la embajada y sus consulados.

• La embajada establecerá un sistema para transferir denuncias de discriminación de la embajada y sus consulados a la OSC.

“La ratificación hoy de este MOU histórico representa un avance crítico en la asociación dinámica entre nuestro dos países,” declaró Secretaria de Justicia Auxiliar Adjunta Principal Gupta.  “Juntos, seguiremos promoviendo nuestro compromiso compartido de habilitar a los trabajadores, combatir la discriminación ilegal y proteger los derechos de nuestra gente.”

“Estos acuerdos son vitales para asegurar que la comunidad ecuatoriana en los Estados Unidos esté informada de sus derechos y los diferentes recursos que el Departamento de Justicia ofrece a través de sus oficinas y líneas de ayudas, así como de la ayuda que la Embajada ecuatoriana y sus consulados pueden proveer para asegurar que los derechos de los  inmigrantes ecuatorianos sean respetados,” dijo el Embajador Borja Cevallos.

El acuerdo de hoy aprovecha el trabajo conjunto de educación de la comunidad ya en curso entre la OSC y la Embajada del Ecuador y sus consulados.

La OSC es responsable de aplicar la disposición antidiscriminatoria de la INA. Entre otras cosas, esta ley prohíbe la discriminación por motivos de estatus de ciudadanía o nacionalidad de origen en la contratación, el despido o el reclutamiento o la recomendación por comisión; la discriminación en el proceso de verificación de la elegibilidad de empleo; las represalias y la intimidación. Además de sus esfuerzos por aplicar la ley, la OSC se dedica a educar al público acerca de sus derechos y responsabilidades de acuerdo con la disposición antidiscriminatoria de la INA. Más información sobre la OSC se encuentra disponible en www.justice.gov/crt/about/osc.

Para más información sobre las protecciones contra la discriminación en el empleo en virtud de las leyes migratorias, llame a la línea directa de la OSC para trabajadores al 1-800-255-7688 (1‑800-237-2515, TTY para personas con discapacidades auditivas); llame a la línea directa de la OSC para empleadores al 1-800-255-8155 (1-800-237-2515, TTY para personas con discapacidades auditivas); matricúlese para un seminario en línea gratuito en www.justice.gov/crt/about/osc/webinars.php; mande un correo electrónico a osccrt@usdoj.gov o visite la página web de la OSC en www.justice.gov/crt/about/osc.  

Ecuador Memorandum de Entendimiento

A one-count indictment was unsealed yesterday in the U.S. District Court for the Northern District of California in San Francisco against Daniel William Aston and his company, Trod Ltd. (doing business as Buy 4 Less, Buy For Less, and Buy-For-Less-Online), a U.K. company headquartered in Birmingham, England.  According to the felony charges, Aston, a director and part owner of Trod, and his co-conspirators fixed the price of certain posters sold online through Amazon Marketplace from as early as September 2013 to in or about January 2014.  Today’s announcement comes after U.K. law enforcement and the FBI successfully conducted searches of Trod Ltd.’s headquarters and Aston’s residence in West Midlands, U.K.

“U.S. consumers deserve competitive markets when they shop online.” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “This company and its owner conspired to fix the prices for poster art and consumers unknowingly suffered the consequences.  It doesn’t matter whether price-fixers operate from an office in California or a warehouse in England.  We will continue to prosecute conspiracies that subvert online competition.” 

According to the charge, Aston and his co-conspirators discussed the prices of certain posters sold in the United States through Amazon Marketplace and agreed to adopt specific pricing algorithms for the sale of certain posters, with the goal of offering online shoppers the same price for the same product and coordinating changes to their respective prices.

Aston is charged with price fixing in violation of the Sherman Act, which carries a maximum sentence for individuals of 10 years and a fine of $1 million.  Trod Ltd. is charged with one count of price fixing in violation of the Sherman Act, which carries a maximum penalty of a $100 million criminal fine for corporations.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

The Justice Department expresses its appreciation for the assistance provided by various enforcement agencies in the United States and the United Kingdom.

This prosecution arose from an ongoing federal antitrust investigation into price fixing in the online wall décor industry, which is being conducted by the Antitrust Division’s San Francisco Office with the assistance of the FBI’s San Francisco Division.  Anyone with information on price fixing or other anticompetitive conduct related to other products in the wall décor industry should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258 or visit www.justice.gov/atr/contact/newcase.html.

Construction Company Owner Pleads Guilty to Tax Violation

Law enforcement agencies conducting a joint federal and state investigation into bid-rigging, fraud and tax-related offenses in the award of contracts by the New York Power Authority announced today that a construction company owner from Orangeburg, New York, has pleaded guilty to filing a false tax return.  This is the second guilty plea in the investigation, which was initiated by the New York State Inspector General.

According to the one-count felony charge filed in the U.S. District Court for the Southern District of New York, in White Plains, New York, Peter Shine filed a Form 1040 for the tax year 2013 that substantially understated his taxable income.  Shine pleaded guilty to subscribing to a false tax return, which carries a maximum penalty of three years in prison and a $250,000 fine. 

“Business owners who willfully do not report their true income and expenses potentially expose themselves to criminal investigation and the ensuing consequences,” said Special Agent in Charge Shantelle P. Kitchen of the IRS Criminal Investigation’s New York Field Office.  “IRS Criminal Investigation is committed to ensuring that everyone pays his or her fair share.”

“Shine essentially siphoned funds he was not entitled to and sidestepped his responsibility to pay taxes on underreported income,” said Assistant Director in Charge Diego G. Rodriguez of the FBI’s New York Field Office.  “This guilty plea is proof of the FBI’s continued determination to work with our partners in rooting out those who engage in unlawful schemes for profit.”

“This guilty plea originates from a bid rigging investigation begun at the state level and clearly demonstrates the commitment of my office, and that of my federal law enforcement partners, to follow the evidence wherever it may lead,” said New York State Inspector General Catherine Leahy Scott.

“The division will continue to work with our law enforcement partners to ensure that any crimes uncovered during our investigations will be prosecuted,” ‎ said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.    

The investigation is being conducted by the Antitrust Division’s New York Office with the assistance of the FBI, IRS Criminal Investigation and the New York State Office of the Inspector General.  NYPA is cooperating with the investigation.  Anyone with information on bid rigging or other anticompetitive conducted related to the award or performance of municipal and state contracts should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258 or visit http://www.justice.gov/atr/contact/newcase.html.

Recoveries Exceed $3.5 Billion for Fourth Consecutive Year

The Department of Justice obtained more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, announced today.  This is the fourth year in a row that the department has exceeded $3.5 billion in cases under the False Claims Act, and brings total recoveries from January 2009 to the end of the fiscal year to $26.4 billion.

“The False Claims Act has again proven to be the government’s most effective civil tool to ferret out fraud and return billions to taxpayer-funded programs,” said Mizer.  “The recoveries announced today help preserve the integrity of vital government programs that provide health care to the elderly and low income families, ensure our national security and defense, and enable countless Americans to purchase homes.”

Of the $3.5 billion recovered last year, $1.9 billion came from companies and individuals in the health care industry for allegedly providing unnecessary or inadequate care, paying kickbacks to health care providers to induce the use of certain goods and services, or overcharging for goods and services paid for by Medicare, Medicaid, and other federal health care programs.  The $1.9 billion reflects federal losses only.  In many of these cases, the department was instrumental in recovering additional millions of dollars for consumers and state Medicaid programs.  

The next largest recoveries were made in connection with government contracts.  The government depends on contractors to feed, clothe, and equip our troops for combat; for the military aircraft, ships, and weapons systems that keep our nation secure; as well as to provide everything that is needed to fund myriad programs at home.  Settlements and judgments in cases alleging false claims for payment under government contracts totaled $1.1 billion in fiscal year 2015.   

The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts, including national security and defense contracts, as well as under government programs as varied as Medicare, veterans’ benefits, federally insured loans and mortgages, highway funds, research grants, agricultural supports, school lunches, and disaster assistance.  In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government.

Most false claims actions are filed under the Act’s whistleblower, or qui tam, provisions that allow individuals to file lawsuits alleging false claims on behalf of the government.  If the government prevails in the action, the whistleblower, also known as the relator, receives up to 30 percent of the recovery.  Whistleblowers filed 638 qui tam suits in fiscal year 2015 and the department recovered $2.8 billion in these and earlier filed suits this past year.  Whistleblower awards during the same period totaled $597 million. 

Health Care Fraud

Including this past year’s $1.9 billion, the department has recovered nearly $16.5 billion in health care fraud since January 2009 to the end of fiscal year 2015 – more than half the health care fraud dollars recovered since the 1986 amendments to the False Claims Act.   These recoveries restore valuable assets to federally funded programs such as Medicare, Medicaid, and TRICARE – the health care program for the military.  But just as important, the department’s vigorous pursuit of health care fraud prevents billions more in losses by deterring others who might otherwise try to cheat the system for their own gain.  The department’s success is a direct result of the high priority the Obama Administration has placed on fighting health care fraud.  In 2009, the Attorney General and the Secretary of the Department of Health and Human Services, the department that administers Medicare and Medicaid, announced the creation of an interagency task force called the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement.  Additional information on the government’s efforts in this area is available at StopMedicareFraud.gov, a webpage jointly established by the Departments of Justice and Health and Human Services.

Two of the largest health care recoveries this past year were from DaVita Healthcare Partners, Inc., the leading provider of dialysis services in the United States.  DaVita paid $450 million to resolve allegations that it knowingly generated unnecessary waste in administering the drugs Zemplar and Venofer to dialysis patients, and then billed the government for costs that could have been avoided.  DaVita paid an additional $350 million to resolve claims that it violated the False Claims Act by paying kickbacks to physicians to induce patient referrals to its clinics.  DaVita is headquartered in Denver, Colorado, and has dialysis clinics in 46 states and the District of Columbia.

Hospitals were involved in nearly $330 million in settlements and judgments this past year.  A cardiac nurse and a health care reimbursement consultant filed a qui tam suit against hundreds of hospitals that were allegedly implanting cardiac devices in Medicare patients contrary to criteria established by the Centers for Medicare and Medicaid Services in consultation with cardiologists, professional cardiology societies, cardiac device manufacturers, and patient advocates.  The department settled with nearly 500 of these hospitals for a total of $250 million, including $216 million recovered in the past fiscal year.  For details, see 500 Hospitals.

Several settlements involved violations of the Stark Law.  The Stark Statute prohibits certain financial relationships between hospitals and doctors that could improperly influence patient referrals.  Services provided in violation of the Stark Statute are not reimbursable by Medicare or Medicaid.  Hospitals settling false claims involving Stark violations include Adventist Health System for $115 million, an organization that operates hospitals and other health care facilities in 10 states; North Broward  Hospital District for $69.5 million, a special taxing district of Florida that operates hospitals and other health care facilities in Broward County, Florida; and Georgia hospital system Columbus Regional Healthcare System and Dr. Andrew Pippas for $25 million plus contingent payments up to an additional $10 million.  The Adventist settlement also involved allegations of miscoding claims to obtain higher reimbursements for services than allowed by Medicare and Medicaid.

Claims involving the pharmaceutical industry accounted for $96 million in settlements and judgments.  Daiichi Sankyo Inc., a global pharmaceutical company with its U.S. headquarters in New Jersey, paid $39 million to resolve allegations of false claims against the United States and state Medicaid programs.  Daiichi allegedly paid kickbacks to physicians to induce them to prescribe Daiichi drugs, including Azor, Benicar, Tribenzor and Welchol.  Medicare and Medicaid prohibit reimbursement for drugs involved in kickback schemes.  AstraZeneca LP and Cephalon Inc. paid the United States $26.7 million and $4.3 million, respectively, in separate settlements for allegedly underpaying rebates owed under the Medicaid Drug Rebate Program.  As part of those settlements, the two drug manufacturers agreed to pay an additional $23 million to state Medicaid programs for their losses.  And in another settlement, PharMerica Corp., the nation’s second largest nursing home pharmacy, agreed to pay the United States $9.25 million to resolve allegations that it solicited and received kickbacks from pharmaceutical manufacturer Abbott Laboratories in exchange for promoting the drug Depakote for nursing home patients.  PharMerica is headquartered in Louisville, Kentucky.

Skilled nursing homes and rehabilitation facilities have also been fertile ground for civil fraud and false claims actions.  In the largest failure of care settlement with a skilled nursing home chain in the department’s history, Extendicare Health Services Inc. and its subsidiary, Progressive Step Corporation, agreed to pay the United States $32.3 million to resolve allegations that Extendicare billed Medicare and Medicaid for deficient nursing services and billed Medicare for medically unreasonable and unnecessary rehabilitation therapy services.  Extendicare and Pro-Step paid an additional $5.7 million to eight states for their Medicaid losses.  The department has ongoing litigation against additional nursing home chains and rehabilitation centers based on similar allegations of false claims for medically unreasonable or unnecessary rehabilitation therapy.  For example, see HCR ManorCare.

Housing and Mortgage Fraud

The department has recovered over $5 billion in housing and mortgage fraud from January 2009 to the end of fiscal year 2015, including this past year’s recoveries of $365 million.  Notable recoveries this past year include a $212.5 million settlement with First Tennessee Bank N.A.  First Tennessee admitted that from 2006 to 2008, through its subsidiary, First Horizon Home Loans Corporation, it originated and endorsed mortgages for federal insurance by the Federal Housing Administration (FHA) that did not meet eligibility requirements.  First Tennessee also admitted failing to report such deficiencies to the authorities as required under the program despite widespread knowledge by its senior managers by early 2008.  In August 2008, First Tennessee sold First Horizon to MetLife Bank N.A., a wholly-owned subsidiary of MetLife Inc.  Metlife admitted similar misconduct regarding the loans it originated and endorsed from September 2008 to March 2012.  MetLife paid the United States $123.5 million to resolve liability under the False Claims Act arising from its misconduct in endorsing mortgagees for FHA insurance.

The department also settled claims against Walter Investment Management Corp. for $29.63 million.  The government alleged that the company, through subsidiaries Reverse Mortgage Solution Inc., REO Management Solutions LLC, and RMS Asset Management Solutions LLC, caused false claims for fees and other costs in servicing reverse mortgages under the Department of Housing and Urban Development’s (HUD’s) Home Equity Conversion Mortgages (HECM) program.  Reverse mortgage loans allow elderly people to access the equity in their homes.  The loans provide monthly payments that enable the elderly to meet their day-to-day living expenses while remaining in their homes.  To encourage these loans, HUD insures banks and other institutions that service the mortgages against loss, providing the institution complies with requirements to ensure the quality of such loans.  Walter Investment allegedly failed to comply with these requirements.

These recoveries are part of the broader enforcement efforts by President Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency task force in 2009, to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.  For more information about the task force, visit www.stopfraud.gov. 

Government Contracts

Government contracts and federal procurement accounted for $1.1 billion in fraud settlements and judgments in fiscal year 2015, bringing procurement fraud totals to nearly $4 billion from January 2009 to the end of the fiscal year.  Significant cases include a $146 million settlement with Supreme Group B.V. and several of its subsidiaries for alleged false claims to the Department of Defense (DoD) for food, water, fuel, and transportation of cargo for American soldiers in Afghanistan.  Supreme Group is based in Dubai, United Arab Emirates (UAE).  In addition, Supreme Group affiliates Supreme Foodservice GmbH, a privately held Swiss company, and Supreme Foodservice FZE, a privately-held UAE company, pleaded guilty to related criminal violations and paid more than $288 million in criminal fines.

In two other defense contract settlements, Lockheed Martin Integrated Systems, a subsidiary of aerospace giant Lockheed Martin Inc., paid $27.5 million and DRS Technical Services Inc. paid $13.7 million to resolve allegations that their employees lacked required job qualifications while the companies charged for the higher level, qualified employees required under contracts with U.S. Army Communication and Electronics Command (CECOM).  The CECOM contracts were designed to give the Army rapid access to products and services for operations in Iraq and Afghanistan. 

In a pair of cases involving contracts with the General Services Administration, VMware Inc. and Carahsoft Technology Corporation paid the United States $75.5 million and Iron Mountain Companies paid $44.5 million to settle their respective liability under the False Claims Act.  The government alleged that California-based VMware and Virginia-based Carahsoft misrepresented their commercial sales practices, which resulted in overcharging government agencies for their software products and services sold through GSA’s Multiple Award Schedule.  Similarly, Iron Mountain, a records storage company headquartered in Massachusetts, misrepresented its commercial sales practices to GSA and failed to give certain discounts given to its commercial customers, as required to gain access to the vast federal marketplace available to contractors through the Multiple Award Schedule.

The department settled allegations that private contractor U.S. Investigations Services Inc. (USIS) violated the False Claims Act in performing a contract with the Office of Personnel Management (OPM) to perform background investigations of federal employees and those applying for federal service.  The government alleged that USIS took shortcuts that compromised its contractually-required quality review and that, had the government known, it would not have paid for the services.  USIS agreed to forego at least $30 million in payments legitimately owed to the company to settle the government’s allegations.      

Other Fraud Recoveries and Actions

Although health care, mortgage, and government contract fraud dominated fiscal year 2015 recoveries, the department has aggressively pursued fraud wherever it is found in federal programs.  For example, the department recovered $44 million from Fireman’s Fund Insurance Company for alleged fraud under the U.S. Department of Agriculture’s federal crop insurance program.  The United States alleged that Fireman’s Fund knowingly issued federally reinsured crop insurance policies that were ineligible for federal reinsurance.  Specifically, Fireman’s Fund allegedly backdated policies, forged farmers’ signatures, accepted late and altered documents, whited-out dates and signatures, and signed documents after relevant deadlines.  The policies were issued by Fireman’s Fund offices in California, Kansas, Mississippi, North Dakota, Texas, and Washington.

The department also recovered $13 million from Education Affiliates, a for-profit education company based in White Marsh, Maryland, for alleged false claims to the Department of Education for student aid for students whose qualifications for admission were falsified to get them enrolled so they could receive aid which would be paid to the school.  Education Affiliates operates 50 campuses throughout the United States under various trade names.

In other actions, the department filed lawsuits to recover funds disbursed under the Troubled Asset Relief Program (TARP) and payments made under contracts awarded to benefit disadvantaged populations identified under the Small Business Administration’s set-aside programs.  In one action, the department sued the estate and trusts of the late Layton P. Stuart, former owner and president of One Financial Corporation, and its operating subsidiary, One Bank & Trust N.A., both based in Arkansas, alleging that Stuart made misrepresentations to induce the Department of the Treasury to invest TARP funds in One Financial as part of Treasury’s Capital Purchase Program.  The department recently settled with the Stuart estate and trusts for $4 million, but claims remain pending against One Financial Corporation. 

In a second action, the department filed suit against Florida-based Air Ideal Inc. and its owner, Kim Amkraut.  The government alleged that Air Ideal and Amkraut falsely certified that the company qualified for preferences given to small businesses located in a Historically Underutilized Business Zone (HUBZone) when Air Ideal’s HUBZone location was no more than a virtual office and its principal place of business was in a non-HUBZone location.  The government further alleged that Air Ideal used its fraudulently-procured HUBZone certification to obtain contracts from the Coast Guard, Army, Army Corps of Engineers, and Department of the Interior that were worth millions of dollars.  The department settled with Air Ideal and Amkraut for $250,000 plus five percent of Air Ideal’s gross revenues for five years. 

These suits and settlements illustrate the diversity of cases pursued by the department and the department’s quest to root out fraud and false claims against the government wherever it may be found.

Holding Individuals Accountable    

On Sept. 9, Deputy Attorney General Sally Quillian Yates issued a memorandum on individual accountability for corporate wrongdoing.  This memorandum reinforced the department’s commitment to use the False Claims Act and other civil enforcement tools to deter and redress fraud by individuals as well as corporations. 

In addition to those suits involving individuals described above, the department settled or filed suit against individuals in an array of cases.  For example, Two Florida couples agreed to pay the United States $1.137 million collectively, to resolve allegations that they accepted kickbacks in exchange for home health care referrals to A Plus Home Health Care Inc.  The United States previously settled with A Plus, its owner Tracy Nemerofsky, and five other couples that allegedly accepted payments from A Plus.  Dr. Charles Denham, of Laguna Beach, California, paid the United States $1 million to settle allegations that he solicited and accepted kickbacks from CareFusion in return for promoting a CareFusion product and influencing recommendations by the National Quality Forum.  Denham was a patient safety consultant who co-chaired a National Quality Forum Committee. After settling with two cardiovascular testing laboratories for $48.5 million - Health Diagnostics Laboratory Inc. (HDL) and Singulex Inc., the department intervened in three qui tam suits against another laboratory, Berkeley HeartLab Inc., a marketing company, BlueWave Healthcare Consultants Inc. and three individuals – BlueWave’s owners, Floyd Calhoun Dent III and Robert Bradley Johnson and HDL’s co-founder and former chief executive officer, LaTonya Mallory.  The department also intervened in two qui tam suits against Florida cardiologist Dr. Asad Qamar and his practice, the Institute for Cardiovascular Excellence PLLC, alleging that Qamar and his practice billed Medicare for medically unnecessary peripheral artery procedures and interventions and paid kickbacks to patients by waiving Medicare copayments irrespective of financial hardship.  The department also filed a complaint against H. Ted Cain, Julie Cain, Corporate Management Inc. and Stone County Hospital Inc. for false claims for Medicare reimbursement.  The government alleged that Ted and Julie Cain, the hospital and hospital management company owned and controlled by Ted Cain, claimed reimbursement for the hospital’s costs at inflated rates and for ineligible expenses.  These matters are ongoing.

Outside the health care arena, EDF Resource Capital Inc. agreed to transfer assets worth $5.8 million to the United States, and its chief executive officer, Frank Dinsmore, agreed to pay $200,000 to the United States, to settle allegations that they violated the False Claims Act in failing to remit payments to the Small Business Administration under the 504 loan program.  The 504 loan program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.  The program operates through local lenders like EDF, who reap benefits from the program in return for shouldering certain financial obligations which Dinsmore and EDF allegedly ignored.  The department also entered settlements with two individuals for evasion of Customs duties owed on imports of aluminum extrusions from the People’s Republic of China (PRC).  Robert Wingfield, the U.S. sales representative of a Chinese manufacturer, and Bill Ma, owner of an ostensible importer, allegedly misrepresented the country of origin of goods to avoid steep antidumping and countervailing duties imposed by the Department of Commerce and collected by U.S. Customs and Border Protection on imports of aluminum extrusions from the PRC to protect domestic manufacturers from unfair foreign pricing practices.  The government previously settled related allegations with four importers, bringing total settlements in the case to $4.6 million, including the $435,000 from Wingfield and Ma.       

Recoveries in Whistleblower Suits

Of the $3.5 billion the government recovered in fiscal year 2015, more than $2.8 billion related to lawsuits filed under the qui tam provisions of the False Claims Act.  During the same period, the government paid out $597 million to the individuals who exposed fraud and false claims by filing a qui tam complaint, often at great risk to their careers. 

The number of lawsuits filed under the qui tam provisions of the Act has grown significantly since 1986, with 638 qui tam suits filed this past year.  The growing number of qui tam lawsuits, particularly since 2009, has led to increased recoveries.  From January 2009 to the end of fiscal year 2015, the government recovered $19.4 billion in settlements and judgments related to qui tam suits and paid whistleblower awards of $3 billion during the same period.

“Many of the recoveries obtained under the False Claims Act result from courageous men and women who come forward to blow the whistle on fraud they are often uniquely positioned to expose,” said Principal Deputy Assistant Attorney General Mizer.   

In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud.  In 2009, Senator Patrick J. Leahy, along with Senator Grassley and Representative Berman, championed the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes.  And in 2010, the passage of the Affordable Care Act provided additional inducements and protections for whistleblowers and strengthened the provisions of the federal health care Anti-Kickback Statute.

Principal Deputy Assistant Attorney General Mizer also expressed his deep appreciation for the many dedicated public servants who investigated and pursued these cases – the attorneys, investigators, auditors and other agency personnel throughout the Department of Justice’s Civil Division and the U.S. Attorneys’ Offices, as well as the agency Offices of Inspector General and the many federal and state agencies that contributed to the department’s recoveries this past fiscal year. 

“The department’s lawyers and staff, together with our law enforcement partners in federal and state governments, work tirelessly and often overcome daunting challenges to achieve these successes on behalf of the taxpayers,” said Principal Deputy Assistant Attorney General Mizer. 

The government’s claims in the matters described above are allegations only; except where indicated, there has been no determination of liability.  

The Justice Department yesterday filed a lawsuit against the city of Lubbock, Texas, alleging that the city’s police department engaged in a pattern or practice of employment discrimination against Hispanics and women in violation of Title VII of the Civil Rights Act of 1964. 

The lawsuit, filed in the U.S. District Court for the Northern District of Texas, alleges that the Lubbock Police Department’s (LPD) written and physical fitness examinations had the effect of excluding Hispanic and female applicants from consideration for hire as entry-level police officers without a showing that these tests screened candidates for skills that are required for the job.

“We share with Lubbock the goal of hiring qualified applicants to perform critical public safety functions,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “Federal law prohibits employers from using discriminatory employment practices that do not meaningfully evaluate one’s ability to perform a given job.  The Department of Justice will ensure that the city eliminates the use of these unlawful tests and we hope to work cooperatively with the city to create new selection procedures that do not unlawfully discriminate.”

This lawsuit seeks a court order requiring LPD to stop using the challenged examinations, develop selection procedures for entry-level police officer positions at LPD that comply with Title VII and provide make-whole relief including, where appropriate, offers of hire, back pay and retroactive seniority, to qualified Hispanics and women who have been or will be harmed as a result of LPD’s use of the challenged examinations. 

The enforcement of federal employment discrimination laws is a top priority for the Justice Department.  Additional information about Title VII and other federal employment laws is available on the Civil Rights Division’s website at http://www.justice.gov/crt/.

Lubbock Complaint

Attorney General Loretta E. Lynch announced today that the Justice Department collected $23.1 billion in civil and criminal actions in the fiscal year (FY) ending Sept. 30, 2015.  Collections in FY 2015 represent more than seven and a half times the approximately $2.93 billion of the Justice Department’s combined appropriations for the 94 U.S. Attorneys’ offices and the main litigating divisions in that same period.

“The Department of Justice is committed to upholding the rule of law, safeguarding taxpayer resources and protecting the American people from exploitation and abuse,” said Attorney General Lynch.  “The collections we are announcing today demonstrate not only the strength of that commitment, but also the significant return on public investment that our actions deliver.  I want to thank the prosecutors and trial attorneys who made this achievement possible, and to reiterate our dedication to this ongoing work.”

The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud or other misconduct or collected fines imposed on individuals and/or corporations for violations of federal financial, health, safety, civil rights and environmental laws.  In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, Internal Revenue Service, Small Business Administration and Department of Education.

The total includes all monies collected as a result of Justice Department-led enforcement actions and negotiated civil settlements.  It includes more than $16.2 billion in payments made directly to the Justice Department and more than $6.8 billion in indirect payments made to other federal agencies, states and other designated recipients.

In measuring collections recovered in FY 2015, this figure necessarily includes some cases that were resolved in previous years but the proceeds of which were collected in FY 2015.

Among the top 20 debt collections, the largest came from financial institutions whose risky practices led up to the 2008 financial crisis and collapse of the U.S. housing market, including $8.2 billion of the settlement in August 2014 with Bank of America Corporation, which included $5 billion in penalties for claims under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) – the largest FIRREA penalty ever  – and $687 million from the February 2015 settlement with McGraw Hill Financial Inc. and Standard  & Poor’s Financial Services LLC.

The department continued to make polluters pay to safeguard the environment and the taxpayer, collecting $1.8 billion of the total $5.1 billion settlement of the Tronox Inc. bankruptcy in January 2015, the majority of which is being used for cleanups of Kerr-McGee sites, including on tribal lands and in low-income communities across the United States.  From the November 2014 settlement with Hyundai and Kia, the automakers paid $93.6 million to the United States, of a $100 million civil penalty owed to the United States and the California Air Resources Board, to resolve violations concerning the testing and certification of vehicles sold in America.

As in previous years, recoveries for health care fraud were among the largest, including $807 million from DaVita Healthcare Partners to settle two False Claims Act cases which involved kickback schemes and fraudulent billing of the federal government.

Growing out of the international scheme to manipulate the London Interbank Offer Rate (LIBOR), the department obtained resolutions from several banks.  Notably, Deutsche Bank entered into a deferred prosecution agreement in which it admitted its role in fraud and price-fixing conspiracies by rigging Yen LIBOR contributions with other banks and paid $625 million in penalties, in addition to regulatory penalties and disgorgements imposed by other agencies.  A Deutsche Bank subsidiary in the United Kingdom also pleaded guilty for its role in the rate manipulation.

Additionally, in March, Commerzbank AG, agreed to pay a $79 million fine to the department, in addition to a $563 million forfeiture, as part of a global settlement of charges for violating the International Emergency Economic Powers Act and the Bank Secrecy Act.  For six years Commerzbank knowingly and willfully moved approximately $263 million through the U.S. financial system on behalf of sanctioned entities in Iran and Sudan.

The Swiss Bank Program yielded more than $350 million in penalties from dozens of Swiss banks that reached non-prosecution agreements with the department in FY 2015.

The department collected hundreds of millions of dollars in criminal fines and penalties from companies involved in conspiracies to subvert competitive markets.  Over the last year, the department collected fines greater than $10 million from nine companies involved in price-fixing conspiracies, including more than $200 million from auto parts suppliers and over $100 million from ocean freight companies.  The department has also brought civil suits to stop anticompetitive behavior and collected civil penalties and disgorgement that deprived companies of the proceeds of illegal pre-merger coordination.

The Department of Justice announced today that EFG Bank European Financial Group SA, Geneva (EFG Group), and EFG Bank AG (EFG Bank) reached a joint resolution under the department’s Swiss Bank Program.  EFG Group and EFG Bank (collectively EFG) will pay a penalty of more than $29 million.

“The Tax Division continues to receive detailed information regarding U.S. accountholders, the methods they used to conceal their foreign accounts and the individuals and entities that assisted in this criminal conduct,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Today’s agreement makes clear that our focus extends well beyond Switzerland, and to those who fled Swiss accounts to hide in other foreign financial institutions – we are right on your trail.”

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, EFG 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 this bank for tax-related criminal offenses.

EFG Group is a holding company and Swiss bank based in Geneva, Switzerland, which is owned by European Financial Group EFG (Luxembourg) SA.  EFG Group is the direct and controlling shareholder of EFG International AG, which is a holding company.  EFG Bank, which is headquartered in Zurich, Switzerland, and has another Swiss office in Geneva, is the main Swiss private banking subsidiary of EFG International AG.  EFG Bank also has representative offices and branches in Asia and the Americas.  In 2003, EFG Bank acquired the Geneva-based bank Banque Édouard Constant (BEC).  While EFG Group and EFG Bank are participating jointly in the Swiss Bank Program, these two EFG banks are separate legal entities with distinct management and board control.

Until 2013, EFG 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.  EFG offered a variety of traditional Swiss banking services that it knew could assist, and did in fact assist, U.S. clients in the concealment of assets and income from the IRS. 

Certain EFG Bank private bankers based in Switzerland traveled to the United States approximately two to three times per year until July 2008.  At least 72 business trips to the United States took place in connection with seven EFG Bank private bankers between 2005 and 2013.  Private bankers from EFG Bank conducted meetings with clients in the United States in Arizona, California, Connecticut, Florida, Georgia, Illinois, Massachusetts, Nevada, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, Rhode Island, Texas, Washington, Wisconsin and Washington, D.C.

One EFG Bank private banker had an established third-party client referral model for U.S. clients that involved two lawyers in the United States, one U.S. accountant and one Swiss fiduciary company.  At least one member of EFG’s senior management approved and supported this private banker’s relationship with one of the two U.S. lawyers.  This same U.S. lawyer asked the EFG private banker not to travel into the United States with a computer and requested that they communicate about U.S. taxpayer clients through faxes rather than email.  The EFG private banker responded, “[R]ight – next travel I travel will take no computer with me – I will then buy me one at BestBuy and leave it there for use when I am travelling. So I never will cary [sic] a computer over the border.”

In 2001, EFG entered into a Qualified Intermediary Agreement (QI Agreement) with the Internal Revenue Service (IRS).  The Qualified Intermediary regime provided a comprehensive framework for U.S. information reporting and tax withholding by a non-U.S. financial institution with respect to U.S. securities.  The QI Agreement required EFG to obtain IRS Forms W-9 and to undertake IRS Form 1099 reporting for new and existing U.S. clients engaged in U.S. securities transactions.  Notwithstanding this requirement, EFG chose to continue to service U.S. clients without disclosing their identity to the IRS.  In September 2009, a member of EFG Bank’s management discussing its decision to require Forms W-9 from its U.S. clients said that “[t]he intention of the Bank is to cover its back with the IRS, but when clients remitted their W9, I was told that [EFG private bankers] comforted clients by telling them that the Bank will not declare anything systematically to the IRS.”  Until June 2013, EFG requested but did not require all of its U.S. clients to provide a signed IRS Form W-9 and to confirm whether their accounts were disclosed to the IRS.

In EFG’s view, the QI Agreement did not apply to accountholders who were not trading in U.S.-based securities or to accounts that were nominally structured in the name of a non-U.S.-based entity.  For example, when asked in July 2007 whether an account should be considered a U.S. account if the new corporate account is in the name of a Panama company that was in reality beneficially owned by a U.S. resident, a manager advised that the “account is non-us [sic] for withholding tax QI purposes.”  The same manager was asked in March 2008 by an EFG Bank private banker what could be offered to a U.S. couple residing in Mississippi who wanted to open two accounts for $1 million each, and the manager responded, “[i]f they’re declared, they can open in their name and sign W9. If not, suggest they use a pic [private investment company].”

While EFG did not provide direct structuring services to U.S. clients, EFG private bankers and members of EFG’s management suggested the use of structures for EFG’s U.S. clients and provided referrals to third-party service providers.  External trust companies created and administered offshore structures incorporated or based in offshore locations such as the British Virgin Islands, Panama and Liechtenstein for certain of EFG’s U.S. clients.

EFG also serviced certain U.S. clients with undeclared accounts held in the names of insurance companies and not the actual beneficial owner of the funds, known colloquially as an insurance wrapper.  Insurance wrappers were marketed by third-party providers in the wake of the UBS investigation as a means of disguising the beneficial ownership of U.S. clients.  These particular accounts were all held in the name of insurance providers.  By the operation of Swiss bank secrecy laws, the U.S. client’s ownership would not be disclosed to U.S. authorities, including the IRS. 

In connection with some of the accounts that U.S. clients created and opened in the name of sham offshore entities and insurance wrappers, certain EFG employees suggested, accepted and included in EFG’s account records IRS Forms W-8BEN (or EFG’s substitute forms) provided by the directors of the offshore companies that falsely represented under penalty of perjury that such companies were the beneficial owners, for U.S. federal income tax purposes, of the assets in the accounts.  These false Forms W-8BEN were maintained in EFG’s files at the same time as the Swiss Forms A that accurately and truthfully represented the true beneficial owners of the assets in the accounts.

Certain accounts were closed at EFG, since Aug. 1, 2008, in such a way that EFG assisted its U.S. clients in continuing to conceal the assets and income they held at EFG in Switzerland from the IRS.  EFG, including senior management in certain instances, assisted U.S. clients with retaining undeclared assets at EFG and allowed undeclared U.S. clients whose accounts were being closed to transfer their assets to non-U.S. accounts at EFG, including accounts held by relatives.

With respect to assets transferred to accounts in countries other than the United States and Switzerland upon account closure, significant amounts were transferred to numerous other jurisdictions.  For example, the following amounts were transferred in connection with the closure of U.S.-related accounts:

• At least $12,680,000 was transferred to Bermuda;

• At least $12,460,000 was transferred to Guernsey;

• At least $25,200,000 was transferred to Liechtenstein;

• At least $12,260,000 was transferred to Monaco;

• At least $25,000,000 was transferred to Luxembourg; and

• At least $33,550,000 was transferred to Hong Kong.

In connection with the closure of U.S.-related accounts, significant amounts also were transferred to the Bahamas, the British Virgin Islands, the Cayman Islands, Cyprus, Israel, Panama, Singapore and the United Arab Emirates.

EFG has cooperated with the department and provided timely and comprehensive information to the U.S. government about its cross-border business with U.S.-related accounts.  Among other things, EFG provided detailed information concerning the operation of its U.S. cross-border business that included misconduct committed by EFG; names of those private bankers who serviced U.S. clients; and names of those members of management who supervised private bankers servicing U.S. clients, including those private bankers who committed misconduct.  EFG also provided responsive, specific and actionable information to the department concerning associated persons, entities and areas of concern for use in other ongoing and potential department investigations.

Since Aug. 1, 2008, EFG held a total of 919 U.S.-related accounts, which included both declared and undeclared accounts, with an aggregate peak of approximately $1.58 billion in assets under management.  Of EFG’s 919 U.S.-related accounts, approximately 12 percent were timely disclosed to the IRS through Form 1099 reporting.  EFG will pay a penalty of $29.988 million.        

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

“Today’s resolution with EFG Bank European Financial Group SA, Geneva and EFG Bank AG reflects the continued progress of the Department of Justice’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International (LB&I) Division.  “In resolving these matters, large and small financial institutions are putting their non-compliance behind them and providing information that will lead us to those U.S. taxpayers who have failed to report their foreign accounts and pay their income taxes.”

“The data we’ve collected to date through the agreements as part of the Swiss Bank Program has already uncovered more banks, more facilitators and more account holders,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “Noncompliant account holders who believe their funds are still hidden will find that simply is not true. With each agreement signed, the probability that these criminals will be found grows even more certain.  CI and our partners will vigorously pursue those who hide offshore accounts and those who aided this illegal activity.”

Acting Assistant Attorney General Ciraolo of the Justice Department’s Tax Division thanked the IRS and in particular, IRS-CI and the IRS LB&I 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.

The Department of Justice and the Environmental Protection Agency (EPA) today announced a settlement with the J.R. Simplot Company that resolves alleged Clean Air Act violations related to modifications made at Simplot’s five sulfuric acid plants near Lathrop, California, Pocatello, Idaho, and Rock Springs, Wyoming. Under the settlement, Simplot will spend an estimated $42 million on pollution controls that will significantly cut sulfur dioxide (SO2) emissions at all five plants and fund a wood stove replacement project in the area surrounding the Lathrop plant.  Simplot’s Pocatello plant will receive $15 million in pollution control upgrades.

Once fully implemented, the settlement will reduce SO2 emissions from Simplot’s five sulfuric acid plants by more than 50 percent for approximately 2,540 tons per year of reductions (825 tons per year of which will be at the Pocatello plant).  Simplot will implement a plan to monitor SO2 emissions continuously at all five plants and pay an $899,000 civil penalty. Additionally, Simplot will spend $200,000 on a wood stove replacement mitigation project in the San Joaquin Valley, the location of Simplot’s Lathrop facility, to reduce emissions of fine particulate matter (PM2.5), as well as emissions of volatile organic compounds (VOCs), carbon monoxide (CO) and hazardous air pollutants (HAPs).

“Under this proposed settlement, Simplot must upgrade its pollution controls and cut harmful air pollution in half at its acid plants, bringing lasting benefits to communities in three states,” said Principal Deputy Assistant Attorney General Sam Hirsch for the Justice Department’s Environment and Natural Resources Division.  “The Justice Department will continue to vigorously enforce the Clean Air Act, which protects public health and air quality for Americans each and every day.”

“This settlement helps address public health risks for local communities in California, Idaho and Wyoming, and furthers EPA’s commitment to reduce harmful air pollution from the largest sources,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “The system-wide pollution controls Simplot will install will significantly reduce sulfur dioxide emissions, which can cause serious respiratory problems and exacerbate asthma.”

“The people of southeastern Idaho will receive significant benefits from the cleaner air and better health produced by this settlement,” said U.S. Attorney Wendy J. Olson for the District of Idaho.  “I am pleased that the federal government and the J.R. Simplot Company are able to reach this agreement that serves Idahoans so well.”

The Department of Justice and EPA alleged that Simplot made modifications at its five sulfuric acid plants without applying for or obtaining the necessary Clean Air Act permits and obtaining “best available control technology” limits for SO2, as well as for sulfuric acid mist and PM2.5 at one of the sulfuric acid plants in Pocatello.

Short-term exposures to SO2 can lead to serious respiratory problems, including constriction of airways in the lungs and increased asthma symptoms.  Additionally, SO2 is a precursor to the formation of PM2.5, which causes a wide variety of health and environmental impacts, including asthma attacks, reduced lung function and aggravation of existing heart disease. Simplot’s Lathrop sulfuric acid plant is located in the San Joaquin Valley in California, which is currently classified as nonattainment for the PM2.5 National Ambient Air Quality Standards and has some of the most difficult challenges meeting those standards in the country.  SO2 is a precursor for the formation of fine particulates, so both the SO2 emission reductions from Simplot’s Lathrop plant and the wood stove replacement mitigation project will help reduce PM2.5 emissions in the San Joaquin Valley. 

The state of Idaho on behalf of its Department of Environmental Quality and the San Joaquin Valley Unified Air Pollution Control District are parties to the proposed settlement.

This settlement is part of EPA’s national enforcement initiative to control harmful emissions from large sources of pollution, which includes acid plants, under the Clean Air Act’s Prevention of Significant Deterioration requirements.  The emission rates secured in this settlement will result in the best-controlled, system-wide emissions achieved in any sulfuric acid plant settlement to-date.

The consent decree formalizing the settlement was lodged with the U.S. District Court in the District of Idaho and is subject to a 30-day public comment period and final court approval. The proposed consent decree can be viewed at: http://www.justice.gov/enrd/consent-decrees.

The General Electric Company (GE) has agreed to pay a $2.25 million civil penalty to resolve a complaint alleging violations of federal and state environmental  laws in connection with GE’s use of an incinerator at a manufacturing facility that it once owned and operated in Waterford, New York, announced the Department of Justice, the U.S. Attorney’s Office for the Northern District of New York and , the Environmental Protection Agency (EPA), the New York State Attorney General’s Office and the New York State Department of Environmental Conservation (DEC).  Both the complaint and the settlement agreement were filed today in U.S. District Court in Albany.

According to allegations in the complaint, GE owned the Waterford facility from 1947 through 2006 and continued to operate it through early 2007.  GE manufactured various products at the facility, including sealants made of silicone.  The silicone manufacturing process generated hazardous waste.  GE sought and received permits from DEC to dispose of the hazardous waste onsite, subject to compliance with the Clean Air Act (CAA) and the Resource Conservation and Recovery Act (RCRA).

GE disposed of hazardous waste in a rotary kiln incinerator that included an automatic waste feed cut-off system designed to shut down the incinerator if GE deviated from operating parameters designed to ensure compliance with the CAA and RCRA.  Unbeknownst to federal and state authorities, GE used a computer program to override the incinerator’s automatic waste feed cut-off system, allowing GE to continue to burn hazardous waste in the incinerator in violation of its CAA and RCRA permits.  On at least 1,859 occasions during the period of September 2006 until February 2007, GE employees manually overrode the automatic waste feed cut-off system, thereby potentially exposing the public and the environment to harmful hazardous air pollutants, such as carbon monoxide, dioxins and furans.  Though its employees were violating federal and state law, GE submitted routine compliance reports to the United States and the state of New York falsely attesting to compliance with RCRA, the CAA and permits issued pursuant to those statutes.

“GE violated the nation’s and New York’s bedrock environmental laws that were put in place to protect the American public and the environment from harmful air pollution and hazardous materials,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “This settlement penalizes GE for these violations of law, and represents the combined efforts of the federal government and the state of New York to uphold the law and protect public health.”

“By operating a system to bypass safety controls, GE put the public and the environment in harm’s way,” said First Assistant U.S. Attorney Grant C. Jaquith for the Northern District of New York “This office will continue to pursue vigorously companies that thwart laws designed to protect public health, safety, and our environment.”

“GE overrode a system designed to deal with dangerous air pollutants from a hazardous waste incinerator,” said Regional Administrator Judith A. Enck for EPA.  “By overriding the system, GE allowed the hazardous waste to continue to be fed into the incinerator, leading to levels of carbon monoxide that exceeded the permit limits.”

“Violations of New York State’s environmental laws and regulations are serious offenses, which carry serious consequences,” said Acting Commissioner Basil Seggos for DEC. “This fine is the result of the collaborative efforts of state and federal partners working together to accomplish a shared mission to protect our citizens and communities and should send a strong message that New York State has zero tolerance for those who shirk environmental policies and procedures put in place as protections.  I commend DEC’s Law Enforcement Officers for their determined vigilance in this investigation.  This is a great example of the important work they perform in the course of their sworn duty to protect the citizens of New York and the environment.”

This case was investigated by EPA and DEC, and is being handled by Assistant U.S. Attorneys Thomas Spina Jr. and Adam J. Katz and Assistant Attorneys General Maureen F. Leary and James C. Woods.

Cashed More than 361 Fraudulent Tax Refund Checks

A Columbus, Georgia resident pleaded guilty today to one count of conspiracy to commit theft of public money, announced 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.

According to court documents, Vicky Wheeler, 54, worked as a bank teller at a Suntrust Bank branch in Columbus.  Between February 2013 and May 2014, Wheeler cashed fraudulent tax refund checks at the request of several individuals in exchange for a fee.  These individuals informed Wheeler that the tax refund checks were generated from tax returns filed using stolen identities.  To disguise the fraudulent nature of the checks, Wheeler made false entries on the face of the checks to make it appear as if she received identification when the checks were cashed.  Wheeler never received any forms of identification.  In total, Wheeler received and cashed approximately 361 fraudulent tax refund checks that claimed $780,760.17 in tax refunds.   

Sentencing is scheduled for April 12, 2016.   Wheeler faces a maximum sentence of five years in prison and a fine of up to $250,000, or twice the loss from the offense.  As per the plea agreement, Wheeler agreed to pay restitution in the amount of $780,760.17.

Acting Assistant Attorney General Ciraolo and Acting U.S. Attorney Peterman commended special agents of Internal Revenue Service-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 are prosecuting the case.

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

On Dec. 2, 2015, the Justice Department hosted a convening to address the effect and fairness of fees and fines.  The department convened judges, academics and practitioners to develop a research and policy agenda that will inform jurisdictions in their efforts to reform court practices.  On Dec. 3, the White House and the department co-sponsored an event called, “A Cycle of Incarceration:  Prison, Debt and Bail Practices,” to bring public attention to the connection between poverty and the criminal justice system and highlight state reform efforts.  The White House Council of Economic Advisers also released an issue brief exploring the economic inefficiency of fines, fees and bail and their disproportionate impact on the poor.

THE JUSTICE DEPARTMENT’S COMMITMENT TO FAIRNESS IN THE CRIMINAL JUSTICE SYSTEM

• Criminal justice reform is a top priority for the administration and specifically for the Justice Department.  The department has taken significant steps to prevent vulnerable communities from becoming justice-involved, and to promote initiatives that reduce the likelihood of recidivism. 

• The department’s efforts also include addressing problems that obstruct opportunity, such as poverty, since those who are economically disadvantaged are more easily caught up in the criminal justice system and face greater barriers to reentry.  Among these efforts are numerous diversion and reentry programs, as well as the White House Legal Aid Interagency Roundtable, which works to improve federal anti-poverty programs by providing access to legal aid.

• The department is particularly concerned about criminal justice system practices that perpetuate and exacerbate poverty by imposing unnecessary and exorbitant fees and fines, unjust collection practices, unwarranted suspension of drivers' licenses and other legal obligations. Such penalties may appear small in isolation, but in the obligations can easily and rapidly add up.

• These and other practices are not only unwise and harmful, but also inconsistent with constitutional mandates.  For example, people are routinely assessed fines that they cannot afford and then jailed for nonpayment without any inquiry into their ability to pay, as required by the Constitution.

• These harms are most frequently felt by the most vulnerable members of our communities, and often in cases involving minor offenses, such as traffic citations.  Fees and fines have significant consequences.  Individuals face repeated, unnecessary incarceration in already overcrowded jails, lose their jobs and their housing, face escalating debt and often become trapped in cycles of poverty that can be nearly impossible to escape. 

JUSTICE DEPARTMENT’S REFORM EFFORTS

• Ferguson Report:  In March 2015, the Civil Rights Division released its report on the investigation of the Ferguson, Missouri, Police Department.  In addition to finding a series of unconstitutional police practices, the investigation found that the city focused its municipal court operations on revenue generation rather than public safety, resulting in practices that violate the constitutional rights of area residents.  The investigation found that courts routinely imposed excessive fines; ordered the arrest of low-income residents for failure to appear or make payments, despite inadequate notice and without inquiring into their ability to pay; and used unlawful bail practices resulting in unnecessary incarceration.  Many of these practices disproportionately impacted African Americans.  The department is committed to systemic reform in Ferguson including ensuring a court system that respects peoples’ constitutional rights and avoids unnecessary incarceration.

• Statements of Interest and Amicus Briefs:  The Civil Rights Division and the Office for Access to Justice have filed a number of briefs in courts to protect the rights of the indigent in criminal proceedings, on a range of topics, including unconstitutional bail practices, meaningful right to counsel under the Sixth Amendment and the criminalization of homelessness.

• Assistance to States and Localities:Through the Office of Justice Programs (OJP), the department will make funding available to support innovative approaches and alternatives to criminal justice fees, fines and other legal financial obligations that contribute to the cycle of incarceration and poverty.  OJP’s Office of Civil Rights is also evaluating discrimination complaints against several court systems to determine whether their pretrial and bail policies violate federal laws.  Following the convening, the OJP Diagnostic Center will prepare a report to outline a research and policy agenda that will help advance the conversation about criminal justice reform.

COUNCIL OF ECONOMIC ADVISERS ISSUE BRIEF

• Increasing Use of Fines, Fees and Bail:As higher levels of incarceration and law enforcement have placed budgetary pressure on states and local governments, they have increasingly turned to criminal justice payments as a source of additional revenue.  Available data suggests that about two-thirds of all prison inmates have criminal justice debts, and rising use of bail payments has contributed to a 60 percent increase in the number of un-convicted inmates in jails between 1996 and 2014.

• Disproportionate Impact on the Poor:  Because fines and fees do not take into account the defendants’ ability to pay, they place a disproportionate burden on lower-income defendants and create a highly regressive system of raising revenue and paying for criminal justice operations.  Low-income individuals with criminal justice debts may face difficult tradeoffs between paying their debt and purchasing other necessities, and those unable to pay can face incarceration, demonstrating the large human cost of these policies as well.  Bail payments set without consideration of financial circumstances can also result in detaining the poorest defendants rather than the most dangerous.  For example, in New York City in 2010, nearly 80 percent of arrestees failed to make bail at arraignment for bail amounts less than $500.

• Economic Inefficiency:  Assigning fines and fees to low-income offenders represents a highly inefficient way to raise revenue, as these individuals likely do not have the means to pay.  Some states are able to collect less than 20 percent of some types of fees, and the low rate of collection sometimes means that the cost of operating the program exceeds the revenue collected.  Incarcerating individuals for failure to pay only furthers this problem, with the cost of incarceration alone sometimes exceeding the debt owed.

Thai Union Group P.C.L., owner of Tri-Union Seafoods LLC, d/b/a Chicken of the Sea International, and Bumble Bee Foods LLC abandoned their plans to merge after the Department of Justice informed the companies it had serious concerns that the proposed transaction would harm competition.

Thai Union’s proposed acquisition of Bumble Bee would have combined the second and third largest sellers of shelf-stable tuna in the United States in a market long dominated by three major brands, as well as combined the first and second largest domestic sellers of other shelf-stable seafood products.

“Consumers are better off without this deal,” said Assistant Attorney General Bill Baer of the department’s Antitrust Division.  “Our investigation convinced us – and the parties knew or should have known from the get go – that the market is not functioning competitively today, and further consolidation would only make things worse.”

Thai Union, a publicly-held Thai corporation headquartered in Samutsakhon, Thailand, is the largest global producer of shelf-stable tuna and also offers other shelf-stable and frozen seafood products globally.  Thai Union’s Chicken of the Sea subsidiary is headquartered in San Diego, California.  Chicken of the Sea sells shelf-stable seafood products under the brand names “Chicken of the Sea,” “Van Camps,” “Genova,” “Pacific Pearl,” and “Ace of Diamonds.”  In 2013, Chicken of the Sea earned over $400 million in U.S. revenues. 

Bumble Bee is also headquartered in San Diego.  Bumble Bee sells shelf-stable seafood products under the brand names “Bumble Bee,” “Wild Selections,” “Beach Cliff,” “Brunswick,” and “Snow’s.”  Bumble Bee is wholly owned by privately-held Lion Capital LLP.

Franklin American Mortgage Company has agreed to pay the United States $70 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements, the Justice Department announced today.  Franklin American is headquartered in Franklin, Tennessee.

“This settlement is another step forward in the government’s efforts to hold lenders accountable for the harm caused by years of improper and inadequate underwriting of mortgages insured by the federal government,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “As this settlement makes clear, we will hold accountable anyone whose conduct results in loss to the government, whether it is a large bank or a smaller mortgage lender.”

“Franklin promised that its loans met HUD’s quality standards in order to obtain HUD insurance, but ignored widespread, systemic defects in those loans,” said U.S. Attorney John F. Walsh of the District of Colorado.  “This case is the latest step in our ongoing effort to hold lenders accountable for fraudulent conduct that wreaked havoc on our housing market.”

During the time period covered by the settlement, Franklin American participated as a direct endorsement lender (DEL) in the FHA insurance program.  A DEL has the authority to originate, underwrite and endorse mortgages for FHA insurance.  If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, the FHA’s parent agency, for the losses resulting from the defaulted loan.  Under the DEL program, neither the FHA nor HUD reviews a loan before it is endorsed for FHA insurance.  DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance; to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices; and to self-report any deficient loans identified by their quality control program.

The settlement announced today resolves allegations that Franklin American failed to comply with certain FHA origination, underwriting and quality control requirements.  As part of the settlement, Franklin American admitted to the following facts: between Jan. 1, 2006, and March 31, 2012, it certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements.  Franklin American’s FHA loan production grew substantially from 2006 until 2010.  During this time, Franklin American employed unqualified junior underwriters to perform important underwriting functions.  Franklin American also set high quotas for its underwriters and subjected underwriters to discipline if they did not meet their quotas.  The company also sought to incentivize the production of loans by offering bonuses to its FHA underwriters.  Loans underwritten by Franklin American were later reviewed in post-close audits.  Oftentimes, those audits did not satisfy HUD’s requirements.  Nevertheless, the audits identified substantial percentages of seriously deficient loans underwritten by Franklin American.  Although these deficient loans were shared with management, Franklin American reported very few deficiencies to HUD.  Franklin American’s conduct caused the FHA to insure hundreds of loans that were not eligible and, as a result, the FHA suffered substantial losses when it later paid insurance claims on those loans.

“The resolution of this matter against Franklin American reflects that all loan originators, whether large or small, receive the same scrutiny of their FHA loan underwriting practices,” said Inspector General David A. Montoya of the HUD Office of Inspector General (OIG).  “The FHA program depends on the good faith and utmost integrity of the participants in the program and we will continue to devote substantial resources to identify instances in which participants in the FHA program fail to meet those standards.”

“Today’s settlement demonstrates HUD’s commitment to hold lenders accountable for serious violations of FHA requirements,” said General Counsel Helen R. Kanovsky of HUD’s Office of General Counsel.  “We’re pleased that Franklin American accepted financial responsibility for its actions, which will restore funds to FHA.”

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

An Indiana resident was sentenced to more than two years in prison for filing false federal income tax returns and perjury, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Jared E. Hochstedler, 40, of Fort Wayne, Indiana, was sentenced to 27 months in prison, one year of supervised release and ordered to pay $1,232,739 in restitution to the Internal Revenue Service (IRS).  According to court documents, Hochstedler pleaded guilty on Feb. 26 to two counts of willfully filing false income tax returns for 2008 and 2009 and one count of committing perjury during a deposition conducted by the U.S. Securities and Exchange Commission (SEC).

Hochstedler owned Enzyme Environmental Solutions (EESO), a company focused on creating cleaning products using enzymes.  As the owner of EESO, Hochstedler participated in stock exchanges of EESO stock with third party companies for which he received more than $2.8 million.  Hochstedler failed to report these funds as income on his 2008 and 2009 individual income tax returns.  In addition, Hochstedler received loans from these third party companies which he did not repay.  Hochstedler used a substantial portion of the loan proceeds for personal expenditures and failed to report that income on his tax returns.  In 2009, Hochstedler also sold stock in another company for more than $1 million and failed to report the full amount of the proceeds as a capital gain on his 2009 tax return. 

In June 2009, in the course of an investigation, the SEC deposed Hochstedler under oath regarding the stock transactions he executed with the third parties.  During the deposition, the SEC inquired about the details of the transactions and Hochstedler lied about the nature of the transactions and the amount of money he received.

Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Richard M. Rolwing and Christopher P. O’Donnell of the Tax Division, who prosecuted the case.  Acting Assistant Attorney General Ciraolo also commended the SEC for its work on the related civil matter, prior to the initiation of this criminal case.

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

On Dec. 1, 2015, in Washington, D.C., Attorney General Loretta E. Lynch and Department of Homeland Security Secretary Jeh Johnson, together with Chinese State Councilor Guo Shengkun, co-chaired the first U.S.-China High-Level Joint Dialogue on Cybercrime and Related Issues.  Under the commitments made by U.S. President Barack Obama and Chinese President Xi Jinping during the state visit in September 2015, the primary objectives of the dialogue were to review the timeliness and quality of responses to requests for information and assistance with respect to cybercrime or other malicious cyber activities and to enhance cooperation between the United States and China on cybercrime and related issues.  In addition to members of the Departments of Justice and Homeland Security, representatives from the Department of State, National Security Council and Intelligence Community participated for the United States, while the Chinese delegation included representatives from the Committee of Political and Legal Affairs of CPC Central Committee, the Ministry of Public Security, the Ministry of Foreign Affairs, the Ministry of Industry and Information Technology, the Ministry of State Security, the Ministry of Justice and the State Internet Information Office.

During the dialogue, both countries discussed ways to enhance cooperation within the bounds of each nation’s legal framework and assessed progress made on cases identified during their discussions in September 2015.  They reached the following specific outcomes:

1. Guidelines for Combatting Cybercrime and Related Issues.  Attorney General Lynch, Secretary Johnson and State Councilor Guo reached agreement on a document establishing guidelines for requesting assistance on cybercrime or other malicious cyber activities and for responding to such requests.  These guidelines will establish common understanding and expectations regarding the information to be included in such requests and the timeliness of responses.

2.Tabletop Exercise.  Both sides decided to conduct a tabletop exercise in the spring of 2016 on agreed-upon cybercrime, malicious cyber activity and network protection scenarios to increase mutual understanding regarding their respective authorities, processes and procedures.  During the tabletop exercise, both sides will assess China’s proposal for a seminar on combatting terrorist misuse of technology and communications, and will consider the U.S.’s proposal on inviting experts to conduct network protection exchanges.   

3. Hotline Mechanism.  Pursuant to the commitment between the two presidents to establish a hotline for escalation of issues that may arise in the course of responding to cybercrime and other malicious cyber activities, both sides decided to develop the scope, goals and procedures for use of the hotline before the next High-Level Dialogue. 

4. Enhance Cooperation on Combatting Cyber-Enabled Crime and Related Issues.  Both sides decided to further develop case cooperation on combatting cyber-enabled crimes, including child exploitation, theft of trade secrets, fraud and misuse of technology and communications for terrorist activities, and to enhance exchanges on network protection.  Both sides decided to improve cooperation among the relevant agencies, within the framework of the high-level dialogue, on network protection issues. U.S. and Chinese cyber incident and network protection experts will meet on Dec. 3, 2015, and will continue to meet regularly during future dialogues.  

5. Second U.S.-China High-Level Joint Dialogue on Cybercrime and Related Issues.  Attorney General Lynch, Secretary Johnson and State Councilor Guo decided to schedule the second U.S.-China High-Level Dialogue on Combatting Cybercrime and Related Issues in June 2016.  The dialogue will take place in Beijing, China. 

The Department of Justice announced today that a Livingston, Montana resident pleaded guilty to selling dietary supplements in violation of two court orders. 

Toby McAdam, 57, pleaded guilty before U.S. District Judge Susan P. Watters in the District of Montana to one count of criminal contempt of court.  McAdam was immediately sentenced to four months in prison. He was ordered to pay $80,000 in liquidated damages and $4,936.48 in attorney's fees.

“The Department of Justice will use all available tools to ensure that dietary supplement and drug manufacturers obey court orders,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “As demonstrated by our recently announced dietary supplements sweep, the Consumer Protection Branch will aggressively pursue those who distribute these products in violation of the law.”

The criminal contempt action arose out of a prior civil action the Department filed in 2010 against McAdam, who was the owner and operator of Risingsun Health, based in Livingston.  According to court documents, McAdam sold misbranded and adulterated dietary supplements and drugs that made unsupported claims to cure cancer, ADD/ADHD, epilepsy and intestinal parasites, among other things.  McAdam agreed to close his business until the U.S. Food and Drug Administration (FDA) authorized him to return to business.  No such authorization was given and McAdam was later held in civil contempt for violation of the consent decree.  The Ninth Circuit Court of Appeals later upheld the order of civil contempt against McAdam.

The criminal contempt charges against McAdam alleged that he violated a 2010 court order and an order of civil contempt issued in 2013, which prohibit him from selling dietary supplements.  McAdam admitted to continuing to sell both supplements and drugs and failed to close down his business and online sites.

Principal Deputy Assistant Attorney General Mizer commended the efforts of the U.S. Postal Inspection Service and FDA for the investigation.  The matter was handled by Trial Attorney David Sullivan of the Department’s Consumer Protection Branch.

ALICIA A.G. LIMTIACO, U.S. Attorney for the Districts of Guam and the Northern Mariana Islands (NMI), was invited to speak at the University of Guam (UOG) School of Business and Public Administration’s Conference on November 25, 2015.  The School of Business and Public Administration’s purpose for the conference was to “explore the role of government and business leaders in tackling the challenges of corruption, gaining the trust of the community to preserve confidence in our administration of government, and identifying strategies and courses of action to eliminate corruption.”  The conference included sessions on improving public policy, recommending policy solutions and strategically planning for the future.

Attorney General Loretta E. Lynch released the following statement on yesterday’s attack in Colorado Springs, Colorado:

“This unconscionable attack was not only a crime against the Colorado Springs community, but a crime against women receiving healthcare services at Planned Parenthood, law enforcement seeking to protect and serve, and other innocent people.  It was also an assault on the rule of law, and an attack on all Americans' right to safety and security.  Justice Department attorneys, the FBI, and the ATF are on the scene to offer assistance and review the situation.

“We stand ready to offer any and all assistance to the District Attorney and state and local law enforcement as they move forward with their investigation.  And in the days ahead, our thoughts and prayers will be with the victims of this horrific attack – including Officer Garrett Swasey, who gave his life in order to keep others safe.  We wish a speedy recovery for those who were injured, and peace and strength for the loved ones of the fallen.”

          ALICIA A.G. LIMTIACO, U.S. Attorney for the Districts of Guam and the Northern Mariana Islands (NMI), attended the National Heroin Conference held on November 18-19, 2015, in Atlanta, Georgia.  The conference was sponsored by the Organized Crime Drug Enforcement Task Force (OCDETF).

          OCDETF is a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state and local law enforcement agencies.  The participants of the OCDETF Program include the 94 U.S. Attorneys’ Offices, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the DEA, the Federal Bureau of Investigation (FBI), the Internal Revenue Service (IRS), the U.S. Coast Guard, the U.S. Immigration and Customs Enforcement (ICE), the U.S. Marshals Service, the Criminal and Tax Divisions of the U.S. Department of Justice and numerous State and local agencies.

          The OCDETF-Sponsored National Heroin Conference was attended by DEA heads, OCDETF Coordinators and U.S. Attorneys from U.S. Attorney’s Offices.  The purpose of the conference was to collaborate to combat the growing epidemic of heroin and opioid abuse in the United States.

A Fort Lauderdale, Florida based government contractor pleaded guilty today in the U.S. District Court for the Southern District of Florida to filing a false income tax return, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division announced.

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

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

At his Feb. 2, 2016 sentencing, Silinsky faces a statutory maximum sentence of three years in prison, a fine of up to $250,000, or twice the loss caused by the offense and restitution to the IRS.

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

Additional information about the Tax Division and its enforcement efforts against stolen identity tax refund fraud may be found on the division’s website. 

Two North Carolina businessmen pleaded guilty in the U.S. District Court in the Middle District of North Carolina to conspiracy to defraud the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Ripley Rand of the Middle District of North Carolina.

Kenneth Dale Stainback, 61, of Burlington, North Carolina, pleaded guilty on Nov. 24 and Stephen Ray Smith, 60, of Mebane, North Carolina pleaded guilty on November 23.  According to court documents and statements in court, Stainback and Smith conspired to defraud the United States by filing false corporate tax returns for McClure Funeral Service (McClure).  Stainback, Smith and another co-conspirator bought McClure in 2004 and began diverting gross receipts from the business and omitting that income from the corporation’s tax returns.  The co-conspirators opened a checking account at Mid-Carolina Bank for the purpose of diverting funds from McClure, including commission checks from insurance providers and checks from clients for payment of services.  The co-conspirators wrote checks to themselves from this account, with Stainback and Smith receiving the vast majority of the diverted funds.  Stainback also opened another bank account at SunTrust Bank, which he used to divert additional funds from McClure without the knowledge of his co-conspirators.  Finally, the co-conspirators also pocketed cash payments from clients of McClure.  In order to conceal discovery of their scheme, the co-conspirators deleted and altered invoices in the business’s accounting system.  Stainback and Smith also closed their bank account at Mid-Carolina bank after being contacted by the Internal Revenue Service (IRS) regarding the corporate tax returns.

During the 2009 through 2012 fiscal years, Stainback, Smith and the other co-conspirator diverted more than $419,000 from McClure.  These diverted funds were not reported on McClure’s corporate tax returns, which resulted in a corporate tax loss of $158,530.11.  Stainback and Smith also failed to report the diverted funds on their individual income tax returns.

In addition to owning McClure, Stainback also serves as the President of the North Carolina Board of Funeral Service. 

Stainback and Smith each face a statutory maximum sentence of five years in prison, a $250,000 fine and restitution to the IRS.  The court set sentencing for Smith and Stainback on March 24, 2016.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Rand commended special agents of IRS – Criminal Investigation who investigated the case and Assistant U.S. Attorney Clifton T. Barrett of the Middle District of North Carolina and Trial Attorney Kathryn A. Kimball of the Justice Department’s Tax Division, who prosecuted the case.

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

The United States filed a civil injunction suit seeking to bar James Tarpey, a Montana-based attorney, Project Philanthropy, Inc. (a District of Columbia corporation which does business as Donate for a Cause) and Timeshare Closings, Inc. (a Colorado corporation which does business as Resort Closings, Inc.) from promoting an allegedly abusive timeshare donation scheme, the Justice Department announced today.  The United States also filed suit against three of Tarpey’s associates – Ron Broyles of California, Curt Thor of Washington and Suzanne Crowson of Montana – all of whom, according to the complaint, assisted Tarpey in facilitating the timeshare donation scheme.

According to the complaint, which was filed in the U.S. District Court for the District of Montana, the timeshare donation scheme encourages timeshare owners to donate their unwanted timeshares to Donate for a Cause, a tax-exempt entity organized and operated by Tarpey.  The complaint states that customers are falsely promised “generous” tax savings and that the defendants purportedly determine the “fair market value” of the timeshare by selecting an independent, third-party appraiser.  The United States further alleged that Tarpey’s customers (the timeshare owners) pay significant processing fees to Resort Closings, Inc. to transfer the timeshares to Donate for a Cause.  According to the complaint, Tarpey, Broyles, Thor and Crowson appraise the customers’ timeshares in a manner which does not comply with the law and which significantly overvalues the timeshares.  According to the complaint, the appraisals fail to comply with regulations governing appraisals submitted with federal tax returns, contain substantive errors and omissions, fail to comply with generally accepted appraisal standards and grossly overvalue the timeshares.  In addition, Tarpey, Broyles, Thor and Crowson are legally prohibited from appraising the timeshares for which their customers claimed federal tax deductions because they are too closely affiliated with Donate for a Cause, the complaint alleges.

Finally, as stated in the complaint, Tarpey’s customers then claim improper and grossly inflated charitable contribution deductions on their tax returns for both the overvalued timeshares and the processing fees paid to Resort Closings, Inc.  The complaint alleges that Donate for a Cause is simply used as a conduit to briefly hold title to timeshares before they are sold for a fraction of the appraised amount.  For example, the complaint alleges that one customer transferred a timeshare to Donate for a Cause that had originally been purchased for $10,597.50.  Donate for a Cause used eBay’s charity platform to sell that timeshare to a third party for only $81, yet Tarpey appraised that timeshare for $8,740, the complaint states.

According to the complaint, the timeshare donation scheme was aggressively marketed via the Internet and through national and local media outlets, including ABC 7 News in Los Angeles, California; Fox 10 News in Phoenix, Arizona; the TODAY Show and Fox 4 News in Kansas City, Missouri. Clips of these news-based promotions are posted on the front page of the Donate for a Cause website.

In the past decade, the Tax Division has obtained injunctions against hundreds of tax return preparer and tax fraud promoters.  Information about these cases is available on the Justice Department website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

The Department of Justice announced today that Privatbank IHAG Zürich AG (IHAG) reached a resolution under the department’s Swiss Bank Program.  IHAG will pay a penalty of more than $7 million.

“Through the information provided by IHAG and other Swiss banks in the Program, the department has unraveled the various schemes and identified the foreign jurisdictions used by U.S. taxpayers to conceal their foreign accounts,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “Foreign financial institutions and other entities that facilitated U.S. tax evasion should come forward and cooperate now, before time runs out.”

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, IHAG 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 this bank for tax-related criminal offenses.

IHAG, a private bank established in 1949 and based in Zurich, Switzerland, is part of a privately-owned and diversified group of companies of which the top holding company is IHAG Holding AG (IHAG Holding).  IHAG formerly maintained a branch office in Lugano, Switzerland, which closed in 2009. 

Despite understanding that U.S. taxpayers had a legal duty to report to the Internal Revenue Service (IRS) and pay taxes on the basis of all their income, including income earned in accounts maintained at IHAG, IHAG intentionally opened and maintained accounts that were undeclared with the knowledge that, by doing so, IHAG was helping these U.S. taxpayers violate their legal duties.

In a few instances, IHAG assisted certain recalcitrant U.S. persons in further concealing undisclosed accounts by moving the funds to another jurisdiction and returning the funds to IHAG in a different name in order to conceal the U.S. persons’ ownership of the assets and enable the recalcitrant accountholders to continue to maintain undeclared accounts at IHAG.  For example, a family of U.S. persons held assets at IHAG in the name of a Liechtenstein foundation, and another unrelated U.S. person held funds in the name of a Panama foundation.  These foundation structures were designed to conceal the true beneficial ownership of the assets.  In the case of the Panama foundation, IHAG assisted the U.S. person in creating the foundation.  The value of the assets in the two accounts together totaled approximately $63 million.

To assist these U.S. clients in further concealing their assets and evading U.S. taxes, in order to maintain these recalcitrant individuals as IHAG clients, IHAG personnel – with the assistance of an unaffiliated fiduciary services firm in Zurich and with the knowledge and approval of bank management – moved assets from the two foundation accounts to an unaffiliated bank in Hong Kong. The funds then returned to IHAG under the name of a Singapore entity wholly owned by IHAG’s parent company, IHAG Holding, so that the accounts would bear no trace of the U.S. persons’ beneficial interest in the assets held in the accounts.  The multi-step scheme also involved an entity in Hong Kong in which IHAG Holding owned a minority interest.

This scheme enabled the assets to be stripped of any indicia of U.S. ownership.  In effectuating this scheme, IHAG took advantage of Swiss law, which allowed IHAG in these circumstances to treat the accounts as if know-your-customer review of the accounts had occurred in Singapore.  Accordingly, IHAG did not apply Swiss know-your-customer requirements when the accounts returned to IHAG under a different name.  IHAG’s files for the accounts deliberately did not contain any documentation of the U.S. persons’ interest in the assets in the accounts.  IHAG knowingly and willfully committed tax fraud with respect to those accounts. 

In a few other instances, IHAG assisted clients in establishing foundations used to hold their assets at IHAG.  The U.S. persons who were the beneficial owners of the foundation accounts were properly identified as beneficial owners of the foundations on certain forms pursuant to Swiss know-your-customer rules.  However, the foundations were identified as the beneficial owner on IRS Forms W-8BEN, thereby masking the true beneficial ownership of the accounts by U.S. persons. 

For example, in 2006, an account held in the name of a Panama company was opened.  In connection with the opening of the account, bank documents identified a U.S. person as the beneficial owner of the assets.  However, a Form W-8BEN signed by two Swiss citizens and a citizen of Liechtenstein falsely declared that the Panama company was the beneficial owner.  The U.S. person instructed IHAG not to communicate with him by phone and insisted on using code names when communicating with IHAG. 

IHAG also offered a variety of traditional Swiss banking services that it knew could assist, and that did assist, U.S. taxpayers in concealing assets and income from the IRS.  These services included hold mail, as well as accounts opened in the name of pseudonyms.

Since Aug. 1, 2008, IHAG held a total of 182 U.S.-related accounts with a high value of approximately $791 million.  IHAG will pay a penalty of $7.453 million.         

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

“The signing of these agreements is not only significant for the banks and for IRS-Criminal Investigation, but also for the thousands of accountholders who used these banks to hide their money offshore to criminally defraud the United States tax system,” said Chief Richard Weber of IRS-Criminal Investigation. “As we delve into the details provided by these agreements, we learn more about who they are and how they hid their money from the government.  Those who circumvent offshore disclosure laws no longer have room to hide.”

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 Kathleen E. Lyon, 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 Deutsche Bank (Suisse) SA (Deutsche Bank Suisse) reached a resolution under the department’s Swiss Bank Program.  Deutsche Bank Suisse will pay a penalty of more than $31 million.

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, Deutsche Bank Suisse 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 this bank for tax-related criminal offenses.

Deutsche Bank Suisse is headquartered in Geneva, Switzerland, with additional offices in Zurich and Lugano, Switzerland and is part of the Deutsche Bank Group.  From at least August 2008 through August 2013, Deutsche Bank Suisse enabled some U.S. taxpayers to evade their U.S. tax and filing obligations, resulting in the filing of false income tax returns with the Internal Revenue Service (IRS) and allowing U.S. taxpayers to hide offshore assets from the IRS.

Deutsche Bank Suisse offered a variety of services and permitted some practices that it knew could and did assist U.S. taxpayers in concealing assets and income from the IRS.  Deutsche Bank Suisse offered hold mail services, and notes written by Deutsche Bank Suisse employees on some hold mail forms explained that the client’s mail was not delivered or picked up because the client resided in the United States and his or her account was “not declared.” Deutsche Bank Suisse also provided U.S. beneficial owners with debit cards linked to accounts held at Deutsche Bank Suisse or credit cards whose balances the U.S. beneficial owners instructed Deutsche Bank Suisse to pay from accounts held at the bank. Use of these cards by U.S. taxpayers facilitated their access to or use of undeclared funds on deposit at Deutsche Bank Suisse.  Deutsche Bank Suisse processed standing orders for checks in amounts less than $10,000 to be sent on a monthly basis into the United States, and in at least two instances those checks were issued to the U.S. beneficial owners from accounts held in the name of Liechtenstein foundations.

In 2001, Deutsche Bank Suisse entered into a Qualified Intermediary (QI) Agreement with the IRS.  Under a QI Agreement, if an accountholder wished to trade in U.S. securities without being subjected to mandatory U.S. tax withholding, the accountholder’s bank was required to obtain the consent of the accountholder to disclose his or her identity to the IRS.  However, after signing its QI Agreement, Deutsche Bank Suisse continued to service certain U.S. customers without disclosing their identity to the IRS and without regard for the impact of U.S. criminal law on that decision.

Prior to October 2008, Deutsche Bank Suisse’s position was that it could service a U.S. client without reporting the U.S. taxpayer’s interest in the account to the IRS so long as it prohibited the accountholder from trading in U.S. securities or the account was an account nominally structured in the name of a non-U.S. entity accompanied by an IRS Form W-8BEN or equivalent bank document. In the latter circumstances, U.S. clients, with the assistance of their external advisors, would create an entity, such as a Liechtenstein foundation, Panamanian corporation or British Virgin Islands corporation, and pay a fee to third parties to act as corporate directors. Those third parties, at the direction of the U.S. client, would then open a bank account at Deutsche Bank Suisse in the name of the entity or transfer funds from a pre- existing account from another bank. Deutsche Bank Suisse employees provided prospective U.S. clients with referrals to external advisors who could assist with the creation and management of such an entity. In some instances, Deutsche Bank Suisse made insufficient efforts to determine whether such an entity was valid for U.S. tax purposes.

Deutsche Bank Suisse maintained and serviced accounts beneficially owned by U.S. taxpayers that were held by entities created in countries such as Liechtenstein, Liberia, Panama and the British Virgin Islands, some of which were operated by the U.S. beneficial owners in violation of corporate governance provisions.  In certain cases involving a non-U.S. entity, Deutsche Bank Suisse was aware that a U.S. client was the true beneficial owner of the account. Despite this, Deutsche Bank Suisse would sometimes obtain from the entity’s directors a Form W-8BEN or equivalent bank document that falsely declared that the beneficial owner was not a U.S. taxpayer. In some of these cases, Deutsche Bank Suisse permitted the accounts to trade in U.S. securities without reporting account earnings or transmitting withholding taxes to the IRS, as required by the QI Agreement.

Deutsche Bank Suisse has cooperated fully with the department during its participation in the Swiss Bank Program.  Deutsche Bank Suisse conducted an internal investigation that included interviews of relationship managers and members of management; review of account files; review of emails; and review of applicable policies, procedures and compliance training materials.  Deutsche Bank Suisse provided a comprehensive and detailed in-person presentation to the department, with accompanying documentation, regarding the findings of its internal investigation and how it structured, operated and supervised its cross-border business. Deutsche Bank Suisse assisted and agreed to continue to assist U.S. authorities in preparing treaty requests to the Swiss competent authority for account records of U.S. clients, including by identifying accounts that may meet the standard for information exchange under an applicable treaty. On a rolling basis and prior to the execution of its non-prosecution agreement, Deutsche Bank Suisse also provided aggregate and account-level information regarding U.S.-related accounts that were closed since Aug. 1, 2008.

Since Aug. 1, 2008, Deutsche Bank Suisse had 1,072 U.S.-related accounts with an aggregate maximum value of approximately $7.65 billion.  Deutsche Bank Suisse will pay a penalty of $31.026 million.         

In accordance with the terms of the Swiss Bank Program, Deutsche Bank Suisse 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 Deutsche Bank Suisse 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 Deutsche Bank Suisse 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 John E. Sullivan and Thomas G. Voracek, 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 Justice Department reached an agreement today with Sunny Grove  Landscaping & Nursery Inc. (Sunny Grove), a landscaping company  in Ft. Myers, Florida.  The settlement resolves the department’s investigation of Sunny Grove for discrimination against work-authorized non-U.S. citizens in violation of the Immigration and Nationality Act (INA).

Under the settlement agreement, Sunny Grove will pay $7,500 in civil penalties to the United States and undergo department-provided training on the anti-discrimination provision of the INA.  Sunny Grove will be subject to departmental monitoring and reporting requirements.

“The Civil Rights Division is committed to protecting work-authorized individuals from discriminatory practices in the employment eligibility verification process,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “We commend Sunny Grove for working cooperatively with the division to resolve this matter.”

The investigation found that Sunny Grove discriminated against lawful permanent residents by requiring them to produce permanent resident cards to prove their work authorization, whereas U.S. citizens were permitted to choose whatever valid documentation they wanted to prove their work authorization.  Lawful permanent residents do not have to show their permanent resident cards when they start working.  Like all workers, they can choose whatever valid documentation they want to establish their employment authorization, and many lawful permanent residents have the same work authorization documents as U.S. citizens. 

The Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) is responsible for enforcing the anti-discrimination provision of the INA.  The statute prohibits, among other things, citizenship status and national origin discrimination in hiring, firing or recruitment or referral for a fee; document abuse; retaliation; and intimidation.

For more information about protections against employment discrimination under immigration laws, call OSC’s worker hotline at 1-800-255-7688 (1-800-237-2515, TTY for hearing impaired); call OSC’s employer hotline at 1-800-255-8155 (1-800-237-2515, TTY for hearing impaired); sign up for a free webinar at www.justice.gov/crt/about/osc/webinars.php, email osccrt@usdoj.gov; or visit OSC’s website at www.justice.gov/crt/about/osc.

Applicants or employees who believe they were subjected to: different documentary requirements based on their citizenship status, immigration status or national origin; or discrimination based on their citizenship status, immigration status or national origin in hiring, firing, or recruitment or referral, should contact OSC’s worker hotline for assistance.

Sunny Grove Settlement Agreement

Two Utah companies are running a nationwide abusive scheme that purports to use false tax deductions and claims of the solar energy credit to reduce their customers’ federal income tax liability, according to a complaint filed today by the Justice Department.  The United States’ complaint seeks to stop Utah companies RaPower-3 LLC and International Automated Systems Inc.; Utah residents R. Gregory Shepard and Neldon Johnson; Nevada company LTB1 LLC and Oregon resident Roger Freeborn, from facilitating and promoting the allegedly abusive tax scheme.

According to the complaint filed in the U.S. District Court for the District of Utah, the defendants promote an abusive tax scheme based on a purported solar energy generation facility in Millard County, Utah.  The suit alleges that the defendants claim to own and operate technology that offers a “disruptive” and “revolutionary” approach to capturing and using solar energy.  But, according to the complaint, the defendants’ so-called technology is a sham.

“The Department of Justice and the IRS work aggressively to detect, investigate and shut down schemes that purport to allow others to avoid paying their proper federal income tax,” said Acting Assistant Attorney General Caroline D. Ciraolo for the Tax Division. “If a tax scheme sounds too good to be true, it probably is.”

The complaint alleges that the defendants purport to sell “solar thermal lenses” – component parts of their technology – to individual customers.  According to the complaint, the defendants claim that a customer who purportedly purchases a lens is entitled to claim depreciation and other business-related expenses and the solar energy credit on the customer’s individual income tax return.  Under the proper circumstances, the Internal Revenue Code allows a taxpayer engaged in a trade or business to take certain tax deductions for expenses the taxpayer incurs while generating income; likewise, if all of the requirements are met, the tax law allows an “energy credit” for certain “energy property.”  But there are specific requirements a taxpayer must meet in order to lawfully claim either kind of tax benefit.

According to the complaint, the defendants know, or have reason to know, that their statements to customers and potential customers about tax benefits in connection with promoting their solar energy scheme are false or fraudulent.  The complaint cites a number of reasons that the defendants allegedly know, or have reason to know, about the falsity of their statements, including that the lenses and the facility do not and will not produce solar energy that could be collected and used for any purpose that Congress intended to encourage through tax credits and that their customers are not engaged in any legitimate trade or business related to the scheme.

The complaint alleges that the Internal Revenue Service (IRS) has disallowed defendants’ customers’ claims of illegitimate tax benefits from the solar energy scheme.  According to the complaint, defendants’ customers, who reside around the country, have filed at least 70 cases which are currently pending in Tax Court.  The complaint estimates that the harm to the U.S. Treasury from those Tax Court cases alone is more than $4 million.

The government’s complaint further alleges that the defendants engaged in a multi-level marketing scheme to enrich themselves by encouraging customers to “sponsor” additional individuals to buy lenses.  According to the complaint, some of the defendants’ customers have recruited others to buy into the scheme, in exchange for a commission.  In addition to stopping the marketing of the alleged tax scheme, the complaint seeks disgorgement of all income that the defendants earned through the alleged scheme and to stop the defendants from preparing tax returns or other tax documents for anyone else.

Abusive tax structures and return preparer fraud are both among the IRS’ 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.  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.

WASHINGTON, D.C. – El Departamento de Justicia llegó a un acuerdo hoy con Sunny Grove Landscaping & Nursery Inc. (Sunny Grove), una compañía de paisajismo en Ft. Myers, Florida.  El acuerdo resuelve la investigación por parte del Departamento de Sunny Grove por motivos de las acusaciones de que este hubiese discriminado a individuos que no eran ciudadanos de los EE. UU. pero que tenían autorización para trabajar, en violación de la ley de Inmigración y Nacionalidad (INA, por sus siglas en inglés).

Conforme al acuerdo, Sunny Grove pagará 7.500 $ en sanciones civiles a los Estados Unidos y se someterá a capacitación dirigida por el departamento sobre la disposición antidiscriminatoria de la INA.  Sunny Grove quedará sujeto a los requisitos de supervisión y notificación del Departamento.

“La División de Derechos Civiles se compromete a proteger a los individuos con autorización para trabajar de prácticas discriminatorias en el proceso de verificación de elegibilidad de empleo,” declaró la Subprocuradora General Interina, Vanita Gupta, la Jefa de la División de Derechos Civiles.  “Aplaudimos a Sunny Grove por su cooperación con la División en la resolución de este asunto.”

La investigación encontró que Sunny Grove había discriminado a residentes permanentes legales al requerir que presentasen tarjetas de residencia permanente para demostrar su autorización para trabajar, mientras que a los ciudadanos de los EE. UU. se les permitió elegir los documentos válidos que querían mostrar para probar su autorización para trabajar.  Los residentes permanentes legales no tienen ninguna obligación de presentar sus tarjetas de residencia permanente al comenzar a trabajar.  Como todo trabajador, pueden usar los documentos válidos de su elección para establecer su autorización para trabajar, y en muchos casos, los documentos de autorización para trabajar que tienen los residentes permanentes legales son iguales a los que tienen los ciudadanos de los EE. UU.

La Oficina del Consejero Especial para Prácticas Injustas en el Empleo Relacionadas a Inmigración (OSC, por sus siglas en inglés) es responsable de aplicar la disposición antidiscriminatoria de la INA. Entre otras cosas, esta ley prohíbe la discriminación por motivos de estatus de ciudadanía y nacionalidad de origen en la contratación, el despido o el reclutamiento o la recomendación por comisión; el abuso documental; las represalias o la intimidación.

Para más información sobre las protecciones contra la discriminación en el empleo bajo las leyes migratorias, llame a la línea directa de la OSC para trabajadores al 1-800-255-7688 (1‑800-237-2515, TTY para personas con discapacidades auditivas); llame a la línea directa de la OSC para empleadores al 1-800-255-8155 (1-800-237-2515, TTY para personas con discapacidades auditivas); matricúlese para un seminario en línea gratuito en www.justice.gov/crt/about/osc/webinars.php; mande un correo electrónico a osccrt@usdoj.gov o visite la página web de la OSC en www.justice.gov/crt/about/osc.  

Los solicitantes  o empleados que creen que fueron sometidos a requerimientos discriminatorios (durante la verificación de elegibilidad de empleo) por motivo de su ciudadanía, estatus migratorio u origen nacional; o en discriminación basada en estatus de ciudadanía, estatus migratorio o en origen nacional en la contratación, el despido o el reclutamiento o referencia por comisión deberán llamar a la línea directa para trabajadores mencionada arriba y serán atendidos.

Conspired With Others to File False Tax Returns Using Stolen Names and Social Security Numbers

A Phenix City, Alabama woman was sentenced today to serve more than seven years in prison for her role in a stolen identity refund fraud (SIRF) conspiracy, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney George L. Beck, Jr. of the Middle District of Alabama announced today.

Talashia Hinton aka LayLay and LaLa, 24, was sentenced to 94 months in prison to be followed by three years of supervised release and ordered to pay restitution in the amount of $7,173,704. According to court documents and evidence presented at the sentencing hearing, Hinton participated in a large-scale SIRF scheme in which participants filed more than 8,000 false tax returns for 2012 and 2013 fraudulently claiming more than $20 million in federal income tax refunds from the Internal Revenue Service (IRS).  Hinton worked with Keshia Lanier, who supplied her with IRS Electronic Filing Identification Numbers (EFINs) in the names of sham tax preparation businesses and stolen personal information, including names and social security numbers. Hinton used the EFINs and stolen personal information to prepare and file false income tax returns that fraudulently claimed tax refunds.  At the direction of Lanier, Hinton also obtained stolen identities from Tamika Floyd, who stole names from a databases maintained by the state of Alabama.  Hinton used some of those names to file false returns, emailed some of the names to Lanier and delivered other names to another co-conspirator, Tracy Mitchell and her family, who used the names to file false returns.  Hinton then directed the IRS to pay the refunds by issuing U.S. Treasury checks and direct deposits onto prepaid debit cards.

Hinton pleaded guilty in August to conspiracy to defraud the government with respect to claims and aggravated identity theft. Lanier, Mitchell and Floyd also previously pleaded guilty for their roles in the SIRF scheme. In May, Tamika Floyd was sentenced to 87 months in prison; in August, Tracy Mitchell was sentenced to 159 months in prison and in September, Lanier was sentenced to 180 months in prison.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Michael C. Boteler and Gregory P. Bailey of the Tax Division and Assistant U.S. Attorney Jonathan Ross of the Middle District of Alabama, who prosecuted the case.

Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax.

The University of Florida (UF) has agreed to pay the United States $19.875 million to settle allegations that the university improperly charged the U.S. Department of Health and Human Services (HHS) for salary and administrative costs on hundreds of federal grants, the Department of Justice announced today.  The grants in question were administered from the UF campuses in Gainesville and Jacksonville, Florida.  

“The monies utilized by HHS to fund important medical research and clinical programs across the nation are both precious and limited,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates that the Department of Justice will pursue grantees that knowingly divert those funds from the projects for which they were provided.”

“As the U.S. Department of Health and Human Services (HHS) awards more grant dollars than any other government agency, prudent oversight of those funds is absolutely essential,” said HHS Regional Inspector General for Audit Lori S. Pilcher.  “Grantees must have internal controls promoting accountability and transparency,” she said.  “Taxpayers should expect nothing less.”          

The University of Florida receives millions of dollars in grant funding from HHS on hundreds of grants each year.  The settlement announced today resolves the alleged misuse of grant funds awarded by HHS to UF between 2005 and December 2010.  The United States contended that the university overcharged hundreds of grants for the salary costs of its employees, where it did not have documentation to support the level of effort claimed on the grants for those employees.  The government also contended that UF charged some of these grants for administrative costs for equipment and supplies when those items should not have been directly charged to the grants under federal regulations.  Lastly, UF allegedly inflated costs charged to HHS grants awarded at its Jacksonville campus for services performed by an affiliated entity, Jacksonville Healthcare Inc.

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 $26.5 billion through False Claims Act cases, with more than $16.7 billion of that amount recovered in cases involving fraud against federal health care programs.  

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch and the HHS Office of the Inspector General, Office of Audit Services and Office of Investigations.

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

A federal grand jury sitting in Eugene, Oregon, returned a superseding indictment yesterday against a couple previously residing in Coquille, Oregon, charging them with one count of conspiracy to file false retaliatory liens and four counts of filing false retaliatory liens against government employees for performing their official duties, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division announced.  The original indictment was returned on March 18.     

According to the superseding indictment, Ronald D. Joling and Dorothea Joling were convicted in October 2014 on various criminal charges related to their federal income taxes.  While on pretrial release in that case, the Jolings filed false retaliatory liens claiming that multiple federal employees each owed the Jolings $100.003 million.  The federal employees against whom these false liens were filed included two federal judges assigned to the criminal tax case, the clerk of the court for the U.S. District Court for the District of Oregon and the Assistant U.S. Attorney who prosecuted the criminal tax case.  The liens were publicly filed with the Secretary of State for the state of California. 

The Jolings were scheduled to be sentenced in the criminal tax case on April 22, but failed to appear in court.  They were fugitives until arrested on Oct. 5, in Flagstaff, Arizona.  The Jolings are currently in the custody of the U.S. Marshals Service.  Arraignment in the retaliatory lien case is scheduled for Nov. 23, before Judge Michael J. McShane.  Sentencing in the criminal tax case is scheduled for Dec. 10, before Chief Judge Ann L. Aiken. If convicted in the retaliatory liens case, the Jolings each face a statutory maximum sentence of 40 years in prison and a $1 million in fines. 

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

This case is being investigated by the Internal Revenue Service–Criminal Investigation, and prosecuted by Senior Litigation Counsel Jen E. Ihlo and Trial Attorney Thomas A. Agnello of the Tax Division.

Attached please find a PDF version of the petition for a writ of certiorari in State of Texas, et al vs. United States of America, et al filed Friday, November 20, 2015.

Attorney General Loretta E. Lynch released the following statement on today’s attack in Mali:

“The Department of Justice stands with our international partners in condemning the appalling attack in Mali.  This was a shameful assault on innocent people by terrorists intent on sowing panic and fear.  But I want to make clear to our enemies: fear will not take hold, nor will terror dictate our course, or that of our allies.  Instead, a tragedy like today’s reinforces our commitment to the values that separate us from the attackers, and serves to cement the ideals that make us who we are: freedom, opportunity, and justice.

“I understand that the State Department has now confirmed one American death in the attacks and I would like to send my condolences to the family and friends during this difficult time.

“In the days ahead, the Department of Justice and the Obama Administration will continue to coordinate with our allies around the world to bring terrorists to justice and to assist victims of terror in any way possible.  We will continue our work to protect the American people.  And we will continue to stand with all Americans in upholding the values that our nation represents.”

Black Elk Energy Offshore Operations LLC, Grand Isle Shipyards Inc., Wood Group PSN Inc., as well as Don Moss, 46, of Groves, Texas, Curtis Dantin, 50, of Cut-Off, Louisiana, and Christopher Srubar, 40, of Destrehan, Louisiana, have been charged with crimes for a November 2012 explosion on an oil production platform that resulted in the death of three workers, the injury of others and an oil spill, announced the Department of Justice’s Environment and Natural Resources Division and the U.S. Attorney’s Office for the Eastern District of Louisiana.

According to the indictment, the defendants were involved in different capacities while construction work was being done of the West Delta 32 platform when it exploded.  Black Elk Energy Offshore Operations LLC and Grand Isle Shipyards Inc. are charged with three counts of involuntary manslaughter, eight counts of failing to follow proper safety practices under the Outer Continental Shelf Lands Act (OCSLA) and one count of violating the Clean Water Act.  Wood Group PSN Inc., Moss, Dantin and  Srubar are charged with felony violations of OCSLA and the Clean Water Act.

“Workers lives can depend on their employer’s faithfulness to the law, not least of all those working in oil and gas production where safety must be a paramount concern,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and natural Resources Division.  “The Justice Department is committed to enforcing the nation’s bedrock environmental laws that protect the environment, and the health and safety of all Americans.”   

“The energy sector represents a vital industry in this region, but its work must be performed responsibly,” state U.S. Attorney Kenneth Polite for the Eastern District of Louisiana.  “Today’s indictment underscores that we will hold accountable all parties – both businesses and individuals – whose criminality jeopardizes our environment or risks the loss of life.”

“Developing domestic sources of energy must be done responsibly and safely,” said Assistant Special Agent in Charge Dan Pflaster of EPA’s Criminal Enforcement Program in Louisiana.  “EPA will continue to work with its law enforcement partners to hold companies fully accountable for illegal conduct and to assure compliance with laws that protect the public and the delicate Gulf Coast ecosystem from harm.”

The Outer Continental Shelf Lands Act and federal regulations govern welding and activities that generate heat or sparks, known as “hot work,” on oil production platforms in U.S. waters.  Because this work can be hazardous and cause explosions, regulations mandate specific precautions that must be taken before the work can commence.  For instance, before hot work can be performed, pipes and tanks that had contained hydrocarbons must be isolated from the work or purged of hydrocarbons.  Gas detectors and devices used to prevent gas from travelling through pipes must be used.  According to the Indictment, these safety precautions were not followed and an explosion causing the deaths of three men and a spill resulted

An indictment is only an allegation of wrongdoing and the defendants are presumed innocent unless proven guilty at trial.

The case was investigated by the U.S. Department of Interior Office of Inspector General and EPA’s Criminal Investigations Division.  The case is being prosecuted by Emily Greenfield of the U.S. Attorney’s Office for the Eastern District of Louisiana and by Kenneth E. Nelson of the Environmental Crimes Section of the Department of Justice.

In the continuing joint enforcement action by the U.S. Department of the Interior’s Bureau of Safety and Environmental Enforcement (BSEE) and the U.S. Environmental Protection Agency (EPA) and in a separate BSEE administrative action, ATP Oil & Gas Corp.  ATP has agreed to resolve actions under the Clean Water Act (CWA) and the Outer Continental Shelf Lands Act (OCSLA) concerning unauthorized discharges of oil and chemicals from a floating oil and gas production platform into the Gulf of Mexico, announced the Department of Justice, BSEE and EPA.  The two agreements impose a combined total of $41.85 million in judicial and administrative penalties for the violations. 

The first settlement agreement, lodged today in the U.S. District Court for the Eastern District of Louisiana, resolves all U.S. claims against ATP in a case filed in February 2013.  The United States alleges that ATP discharged oil and an unauthorized chemical dispersant into the Gulf of Mexico from ATP’s oil and gas production platform known as the ATP Innovator.  A BSEE inspection of the ATP Innovator in March 2012 revealed alleged unlawful discharges of oil and a piping configuration that routed an unpermitted dispersant – a chemical mixture to break up oil – into the facility’s wastewater discharge pipe to mask excess oil being discharged into the ocean.  At the time of the discovery, ATP was the operator of the facility and ATP Infrastructure Partners (ATP-IP) was the non-operating owner.  The ATP Innovator was operating in the Mississippi Canyon area of the Gulf of Mexico, approximately 45 nautical miles offshore of southeastern Louisiana.  The platform was removed from the deepwater production site in 2013 and towed to port in Corpus Christi, Texas.  ATP is going through a Chapter 7 bankruptcy proceeding and is no longer operating.  The penalty and injunctive relief claims against ATP-IP were settled last year and approved by the court in May of this year. 

The settlement agreement resolves the judicial claims against ATP by imposing a CWA civil penalty of $38 million.  Injunctive relief concerns related to the safe future operation of the ATP Innovator were addressed by ATP-IP in a prior settlement. 

A related settlement agreement approved today by the U.S. Bankruptcy Court for the Southern District of Texas resolves the U.S. claim for judicial and administrative penalties that was filed in the bankruptcy action.  Through the settlement, ATP agrees to an allowed unsecured claim of $38 million for the judicial civil penalty judgment specified in the District Court Settlement Agreement. 

In addition, ATP agrees in the Bankruptcy Settlement Agreement to an administrative penalty of $3.85 million for related violations of OCSLA regulations.  BSEE cited ATP for several violations of OCSLA related to the oil discharges and other improper operations on the platform that were identified during the March 2012 inspection and ATP appealed some of those citations to the Department of the Interior’s Board of Land Appeals (IBLA).  Through the Bankruptcy Settlement Agreement, the $3.85 million administrative penalty for the citations will be treated as a final allowed claim in the bankruptcy case.

“ATP’s illegal and unsafe actions in the Gulf of Mexico warrant this concerted enforcement effort to deter it and others in the oil and gas industry from committing similar misconduct,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “No operator should place oil production goals ahead of protection of its workers or the marine environment.”

“This case serves as a reminder that BSEE will thoroughly investigate illegal conduct in offshore oil and gas operations and will aggressively pursue enforcement actions where appropriate,” said Director Brian Salerno of BSEE.  “We will continue to work with the Department of Justice, the EPA and our other federal partners to bring these types of actions against companies that break the law and put their workers or the environment at risk.”

“Protecting the Gulf means protecting one of the nation’s most vital economic and ecologic resources,” said Regional Administrator Ron Curry, EPA.  “Companies operating in the Gulf must do their part in ensuring it remains as healthy and productive as possible.”

The proposed settlement agreement is subject to a 30-day public comment period and court review and approval.  A copy of the Settlement Agreement is available on the Department of Justice website at: www.justice.gov/enrd/consent-decrees.

The Justice Department announced today that it reached a settlement with McDonald’s USA LLC and its corporate affiliates and subsidiaries (McDonald’s) resolving allegations that McDonald’s discriminated against immigrant employees of McDonald’s-owned restaurants.

The department’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) opened its investigation based on information received on its worker hotline.  The investigation found that McDonald’s had a longstanding practice of requiring lawful permanent residents to show a new permanent resident card when their original document expired, even though the law prohibits this practice.  The investigation further found that the company did not make the equivalent request to its U.S. citizen employees who showed documents that later expired, and that those lawful permanent residents who were asked and could not provide a new card were not allowed to work, some even losing their jobs as a result.  This investigation and today’s settlement agreement only address actions by McDonald’s, not its franchises.

“Employers cannot hold lawful permanent residents to a higher standard by placing additional documentary burdens upon them during the employment eligibility verification process,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “Requiring unnecessary documentation of individuals based on their citizenship or immigration status is discriminatory, and the Department of Justice will not hesitate to enforce the law and protect the rights of work-authorized immigrants.  We commend McDonald’s for its cooperation throughout this investigation and for committing to compensate its current and former employees who lost wages due to these practices.”

Lawful permanent residents have authorization to live and work in the United States on a permanent basis.  As proof of that status, a lawful permanent resident receives a permanent resident card, commonly called a “Green Card,” but lawful permanent residents are eligible for multiple documents that show their eligibility to work.  Lawful permanent residents do not have to show their permanent resident cards when they start working.  Like all workers, they can choose whatever valid documentation they want to establish their employment authorization.  While most permanent resident cards contain an expiration date, as a general matter, card holders have permanent work authorization so the expiration of the card does not mean they lose their right to work or their status.  Lawful permanent residents who decide to show an unexpired permanent resident card are not required to present any additional documentation when their card expires, and employers cannot request additional documents from them.  Moreover, the anti-discrimination provision of the Immigration and Nationality Act (INA) prohibits employers from placing additional documentary burdens on work-authorized employees during the employment eligibility verification process because of their citizenship or immigration status.

Under the settlement agreement, McDonald’s will pay $355,000 in civil penalties to the United States, undergo monitoring for 20 months and train its employees on the INA’s anti-discrimination provision.

The settlement agreement also requires McDonald’s to compensate lawful permanent resident employees of McDonald’s-owned restaurants who lost work or lost their jobs due to these documentary practices.  Lawful permanent residents who worked for a corporate-owned McDonald’s location (not a franchise) between Sept. 23, 2012, and March 1, 2015, may be eligible for compensation if they were fired or forced to miss work because they could not show a new card when their permanent resident card was set to expire.  More information on the process for obtaining back wages is found in the settlement agreement’s claims procedure http://www.justice.gov/crt/united-states-department-justice-settlement-mcdonald-s-usa-llc.   

Current and former McDonald’s employees with questions about this matter may call 1-844-401-3737 or email OSC.McDonalds@usdoj.gov.     

OSC is responsible for enforcing the anti-discrimination provision of the INA.  Among other things, this law prohibits citizenship status and national origin discrimination in hiring, firing or recruitment or referral for a fee; discrimination in the employment eligibility verification process; retaliation; and intimidation.  Trial Attorneys Jennifer Deines and Silvia Dominguez-Reese and Equal Opportunity Specialist Joann Sazama of the Civil Rights Division worked on this case.

For more information about protections against employment discrimination under immigration laws, call OSC’s worker hotline at 1-800-255-7688 (1-800-237-2515, TTY for hearing impaired); call OSC’s employer hotline at 1-800-255-8155 (1-800-237-2515, TTY for hearing impaired); sign up for a free webinar at www.justice.gov/crt/about/osc/webinars.php, email osccrt@usdoj.gov; or visit OSC’s website at www.justice.gov/crt/about/osc.   

McDonald's Settlement Agreement

The Department of Justice announced today that BNP Paribas (Suisse) SA (BNPP), KBL (Switzerland) Ltd. (KBL Switzerland) and Bank CIC have reached resolutions under the department’s Swiss Bank Program.  These banks will collectively pay penalties totaling more than $81 million and continue to cooperate with the department.

“As reflected in today’s agreements, we continue to shine a bright light on the individuals and institutions that have used so-called ‘secret Swiss bank accounts’ to engage in and assist U.S. tax evasion,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “The department, working hand in hand with the IRS, is actively pursuing criminal and civil cases against those engaged in such conduct.”

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 agreements signed today, each bank 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 penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

BNPP has had a presence in Switzerland since 1872.  BNPP is headquartered in Geneva, Switzerland, and has branches in Zurich, Basel and Lugano, Switzerland.  In 2008, BNP Paribas Bank Group agreed to acquire the worldwide operations of Fortis Bank, which was at the time the largest bank in Belgium.  This merger closed in May 2010, and its terms required BNPP to absorb Fortis Banque (Suisse) SA.

BNPP opened and maintained accounts for U.S. taxpayers in the name of non-U.S. corporations, foundations, trusts or other legal entities, in which U.S. taxpayers concealed their beneficial ownership of the accounts.  BNPP readily accepted accounts in which external trust companies created and administered offshore structures incorporated or based in offshore locations such as the British Virgin Islands, Panama, Liechtenstein and Liberia, for certain of BNPP’s U.S. clients.  In certain instances, BNPP took instructions directly from U.S. beneficial owners with power of attorney over the account, including instructions for cash withdrawals, with the funds going directly to the true U.S. beneficial owner. 

BNPP also has a Corporate and Institutional Banking (CIB) business line.  CIB clients use the expertise of BNPP for specific commercial transactions, and CIB does not provide private banking services.  CIB maintained a small number of U.S.-related accounts.  In one case, a wealth management relationship manager omitted the existence of a CIB client’s U.S. passport in opening a wealth management account for that client.

Starting in 2003, BNPP issued a policy requiring U.S. residents opening new accounts to provide an IRS Form W-9 and certification that the person was aware of, and fully complied with, tax requirements pertaining to foreign accounts maintained by U.S. persons.  BNPP also held mandatory training sessions in 2005 and 2007 to ensure that wealth management employees were aware of and followed its policies for U.S. persons.  Despite these policies, BNPP disregarded evidence that many of the accounts were not in fact properly declared, facilitating the tax avoidance schemes of accountholders.

Certain employees of BNPP understood that certain U.S. taxpayers who maintained accounts at BNPP were not complying with their U.S. reporting obligations, and BNPP offered a variety of traditional Swiss banking services that it knew could assist, and did in fact assist, certain U.S. clients in the concealment of assets and income from the Internal Revenue Service (IRS).  For example, BNPP maintained 338 numbered accounts and agreed to hold bank statements and other mail.

BNPP also processed requests for cash withdrawals by U.S. taxpayers from accounts being closed.  For example, in early 2012, after part of an account was transferred to a bank in Malaysia, a BNPP employee gave instructions for the withdrawal of the balance of the account in the amount of 238,000 Swiss francs.  In November 2009, in light of BNPP’s policy that non-compliant U.S. accounts be closed, an accountholder received permission to withdraw $731,000 in cash, with several employees coordinating the withdrawal so that the accountholder need not “waste time at the cash desk.”  And in August and September of 2009, after a BNPP employee informed an accountholder that BNPP had adopted a new U.S.-related account policy, the employee and accountholder agreed that the client would come to BNPP before Sept. 5, 2009, to withdraw the remaining account balance and close the account. Instructions were given to allow the client to withdraw $255,838, as well as 49,233 euros.

Throughout its participation in the Swiss Bank Program, BNPP provided full cooperation to the department.  BNPP described in detail the structure of its U.S. cross-border business, including but not limited to the policies BNPP put in place to comply with U.S. law, a summary of the top 20 U.S.-related accounts by assets under management value, a redacted summary of external asset managers and relationship managers with U.S.-related accounts by assets under management and substantial information about U.S.-related accounts associated with external asset managers and relationship managers.  BNPP provided a list of the names and functions of all individuals who structured, operated or supervised the cross-border business at BNPP and also provided relevant information concerning its relationship managers.

Since Aug. 1, 2008, BNPP held and managed approximately 760 U.S.-related accounts with a peak value of approximately $1.2 billion in assets under management. BNPP will pay a penalty of $59.783 million.

KBL Switzerland is based in Geneva, with branches in Zurich and Lugano, Switzerland.  An additional branch located in Lausanne closed in 2014.  KBL Switzerland implemented a strategy from 2009 through May 2010 that substantially sought to increase KBL Switzerland’s assets under management and the business that KBL Switzerland did with external asset managers.  The implementation of this strategy led KBL Switzerland to open and maintain significant numbers of U.S.-related accounts, including some accounts for U.S. taxpayers who had been exited from UBS, Credit Suisse or other banks.

KBL Switzerland opened and maintained accounts for certain U.S. taxpayers in the names of corporations, foundations, trusts or other legal entities that were organized in non-U.S. jurisdictions, such as Panama, the British Virgin Islands or Liechtenstein.  For many of these accounts, KBL Switzerland accepted IRS Forms W-8BEN or substitute forms that falsely represented that the legal entities that owned the structured accounts had no U.S. taxpayer beneficial owners.  KBL Switzerland knew, or had reason to know, that the true beneficial owners of these accounts were U.S. taxpayers.  KBL Switzerland also knew, or had reason to know, that certain of these U.S. taxpayers were utilizing the accounts for personal purposes without formal corporate authorization.

In one instance, a KBL Switzerland relationship manager assured a U.S. taxpayer client, who had not provided a Form W-9, that KBL Switzerland would not reveal his identity to the United States.  In a separate instance, a different KBL Switzerland relationship manager assured a U.S. taxpayer client that, because of Swiss bank secrecy laws, Switzerland would not freely exchange account information with the United States.  And in at least one instance, a KBL Switzerland relationship manager advised a U.S. taxpayer client to avoid bringing account information into the United States.

On the instructions of the U.S. taxpayer clients, KBL Switzerland moved or restructured the assets of U.S.-related accounts in ways that concealed the U.S. nature of those accounts.  In late 2009 and early 2010, KBL Switzerland followed the instructions of two external asset managers, concerning four separate U.S.-related accounts that were directly held by U.S. taxpayer clients of KBL Switzerland, to restructure the assets of the accounts into new insurance-policy accounts.  These insurance wrapper accounts were titled in the name of a Liechtenstein insurance company for the benefit of the same underlying U.S. taxpayer clients with the same underlying assets.  Restructuring the form in which their assets were held at KBL Switzerland allowed these U.S. taxpayers to further hide their identities and undeclared accounts from the IRS and U.S. law enforcement. 

In 2012, KBL Switzerland briefly implemented a flawed account closing policy that had the unintended effect of closing a number of U.S.-related accounts through substantial and/or successive asset withdrawals.  In one of these instances, KBL Switzerland permitted a U.S. taxpayer client to close an account through a single cash withdrawal of nearly $2 million. In another one of these instances, KBL Switzerland allowed a U.S. taxpayer client to close a structured entity account by using assets in the account to purchase gold worth nearly $200,000, which the U.S. taxpayer client subsequently withdrew in closing the account.

On request of its clients, including undeclared U.S. taxpayers, KBL Switzerland provided Swiss travel cash cards issued by third parties.  KBL Switzerland would fund these travel-cash cards with assets maintained in accounts belonging to U.S. taxpayer clients, which enabled U.S. taxpayer clients to access the assets of undeclared accounts wherever they chose, including in the United States.  KBL Switzerland also permitted U.S. taxpayer clients to access and utilize the value of assets held in undeclared accounts through loans that were secured by their undeclared assets on deposit with KBL Switzerland.

KBL Switzerland committed to providing full cooperation to the U.S. government and has made timely and comprehensive disclosures regarding its U.S. cross-border business.  Among other things, KBL Switzerland has described in detail the structure of its cross-border business for U.S.-related accounts including, but not limited to:

• The policies and lack of oversight that contributed to the misconduct committed by KBL Switzerland relationship managers and their supervisors;

• Data on desks and employees with elevated concentrations of U.S.-related accounts;

• Information on key external asset managers that had significant involvement with U.S.-related accounts;

• The names and positions of compliance officers and senior managers; and

• Written narratives on its largest and most problematic U.S.-related accounts.

Since Aug. 1, 2008, KBL Switzerland maintained 277 U.S.-related accounts having a maximum aggregate dollar value in excess of $255 million. KBL Switzerland will pay a penalty of $18.792 million.

Bank CIC is a subsidiary of the French financial group Crédit Mutuel-CIC, one of the largest banking groups in France.  In addition to its main office in Basel, Bank CIC has eight branches, all in Switzerland: Lausanne, Zurich, Geneva, Lugano, Locarno, Neuchatel, Fribourg and Sion.

Although Bank CIC did not target U.S. taxpayer-clients, many of Bank CIC’s front-office personnel had some exposure to at least one or more U.S.-related accounts as part of their general client service functions. Periodically, U.S. clients were accepted as walk-ins or referred to Bank CIC by other clients.

Bank CIC offered a variety of traditional Swiss banking services, including hold mail and numbered accounts, that it knew or should have known could assist, and did in fact assist, U.S. clients in the concealment of assets and income from the IRS.  A Bank CIC manager or relationship manager communicated with a U.S. taxpayer client through methods such as facsimile and calling prepaid mobile phones at the U.S. taxpayer-client’s request.  Bank CIC also allowed accounts with U.S. beneficial owners to be held in the name of non-U.S. entities.

Since Aug. 1, 2008, Bank CIC had 261 U.S.-related accounts, comprising approximately $228 million in assets under management.  Bank CIC will pay a penalty of $3.281 million.

In accordance with the terms of the Swiss Bank Program, each bank 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 these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

“Today's resolutions with large and small financial institutions reflect the Swiss Bank Program’s continued success,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International Division (LB&I).  “Working with the Department of Justice, we will use the information received from these resolutions to track down U.S. taxpayers who sought to evade taxes by hiding their assets in offshore accounts.”

“The amount of money associated with each agreement is not insignificant, but even more significant is the amount of ‎data that we will receive as a result of the Swiss Bank Program,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “At this point, we’ve already learned so much about the formerly hidden world of offshore banking.  This information enables us to vigorously pursue noncompliant individual U.S. taxpayers and guides us in the development of innovative partnerships and methodologies to combat a wide variety of international tax evasion techniques.”

Acting Assistant Attorney General Ciraolo thanked the IRS and in particular, IRS-CI and IRS LB&I for their substantial assistance.  Ciraolo also thanked Carl D. Wasserman, Paul G. Galindo and Kaycee M. Sullivan, who served as counsel on these matters, 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.

Grants Available to Support Public Safety Projects in Indian Country

The U.S. Department of Justice today announced the opening of the grant solicitation period for comprehensive funding to American Indian and Alaska Native tribal governments and tribal consortia to support public safety, victim services and crime prevention improvements.  The department’s Fiscal Year (FY) 2016 Coordinated Tribal Assistance Solicitation (CTAS) posts today at /media/1097216/dl?inline.

“Since 2010, the CTAS program has helped tribes develop their own comprehensive approaches to making their communities safer and healthier,” said Acting Associate Attorney General Stuart F. Delery.  “CTAS grants have funded more than 1,400 programs to better serve crime victims, promote community policing and strengthen justice systems.

CTAS is administered by the Department of Justice’s Office of Justice Programs (OJP), including its Bureau of Justice Assistance (BJA), Office of Juvenile Justice and Delinquency Prevention (OJJDP) and the Office for Victims of Crime (OVC); and the Department of Jusitce’s Office of Community Oriented Policing Services (COPS) and Office on Violence Against Women (OVW).  The funding can be used to enhance law enforcement, bolster adult and juvenile justice systems, prevent and control juvenile delinquency, serve native victims of crime including, child abuse, sexual assault, domestic violence and elder abuse victims; and support other efforts to combat crime.

Applications for CTAS are submitted through the Department of Justice’s Grants Management System (GMS), which enables grantees to register and apply for CTAS online.  Applicants must register with GMS prior to submitting an application.  The application deadline is Feb. 23, 2016, at 9:00 P.M. EST.

The FY 2016 CTAS reflects improvements and refinements from earlier versions.  Feedback was provided to the department during tribal consultations and listening sessions, and survey assessments, which include tribal leaders’ requests to improve and simplify the department  grant-making process. Changes to department grant programs, enacted with the passage of the Tribal Law and Order Act, are incorporated into the CTAS solicitation and in the appropriate purpose areas.  More information about all changes to the FY 2016 CTAS Solicitation is available on the CTAS fact sheet at:  /media/1097226/dl?inline.

For the FY 2016 CTAS, a tribe or tribal consortium will submit a single application and select from any or all of the nine competitive grant programs referred to as “purpose areas.”  This approach allows the department’s grant-making components to consider the totality of a tribal nation’s overall public safety needs. 

The nine purpose areas (PA) are:

• PA1 - Public Safety and Community Policing (COPS)

• PA2 - Comprehensive Tribal Justice Systems Strategic Planning (BJA)

• PA3 - Justice Systems and Alcohol and Substance Abuse (BJA)

• PA4 - Corrections and Correctional Alternatives (BJA)

• PA5 - Violence Against Women Tribal Governments Program (OVW)

• PA6 - Children’s Justice Act Partnerships for Indian Communities (OVC)

• PA7 - Comprehensive Tribal Victim Assistance Program (OVC)

• PA8 - Juvenile Justice Wellness Courts (OJJDP)

• PA9 - Tribal Youth Program (OJJDP)

Tribes or tribal consortia may also be eligible for non-tribal, government-specific (non-CTAS) federal grant programs and are encouraged to explore other funding opportunities for which they may be eligible. Additional funding information may be found at the Department of Justice’s Tribal Justice and Safety website at www.justice.gov/tribal or the www.grants.gov website.

Today’s announcement is part of the Department of Justice’s ongoing initiative to increase engagement, coordination and action on public safety in tribal communities.

INOAC Corp. has agreed to plead guilty and to pay a $2.35 million criminal fine for its role in a conspiracy to fix prices and rig bids on certain plastic interior trim automotive parts installed in cars sold to U.S. consumers. 

According to the felony charge filed today in the U.S. District Court of the Eastern District of Kentucky, INOAC, based in Nagoya, Japan, and others conspired from as early as June 2004 until at least September 2012 to fix prices and rig bids on parts sold to Toyota Motor Corp., including certain of its subsidiaries and affiliates in the United States and elsewhere. 

“INOAC corrupted the competitive process by agreeing with its competitors to fix the prices of certain automotive parts installed in Toyota cars sold in the United States,” said Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division.  “Working with the FBI and our other law enforcement partners, the Antitrust Division will continue to protect American car buyers and hold automotive part suppliers accountable for their illegal conduct.”

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

Today’s plea is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by the Antitrust Division’s criminal enforcement sections and the FBI. 

Including INOAC, 38 companies and 58 executives have been charged in the division’s ongoing investigation and have agreed to pay a total of more than $2.6 billion in criminal fines.  INOAC is being prosecuted by the Antitrust Division’s Chicago Office and the FBI’s Louisville Field Office, Covington Resident Agency, with assistance from the U.S. Attorney’s Office of the Eastern District of Kentucky. 

Anyone with information on market allocation, price fixing, bid rigging and other anticompetitive conduct related to other products in the automotive parts industry should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Louisville Field Office at 502- 263-6000.

The Department of Justice and the U.S. Environment Protection Agency (EPA) today announced a settlement with HollyFrontier Corporation subsidiaries (HollyFrontier Refining & Marketing LLC, Frontier El Dorado Refining LLC, Holly Refining & Marketing Company—Woods Cross LLC and Navajo Refining Company LLC) that resolves alleged Clean Air Act violations regarding fuel quality emissions standards and testing requirements at three HollyFrontier facilities.  Under a consent decree lodged today in the U.S. District Court for the District of Columbia, HollyFrontier will implement a mitigation project at its refinery in Salt Lake City, Utah, to offset past emissions and pay to the United States a $1.2 million civil penalty.

“This agreement will benefit public health by requiring retrofits of storage tanks at HollyFrontier facilities that will reduce volatile organic compound emissions and use next generation technology to verify these reductions,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and natural Resources Division.  “This settlement shows that fuel refiners can and must meet the nation’s standards for controlling the emissions that cause ground level ozone and serious health problems for Americans.”

“Fuel emissions standards help safeguard our nation’s air quality and public health,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance.  “This settlement not only means cleaner air for communities in Salt Lake City, it helps ensure a level playing field for fuel refiners that follow the law.”

The Clean Air Act requires fuel refiners to ensure the conventional gasoline they produce meets volatility standards, referred to as Reid Vapor Pressure (RVP) standards.  As gasoline evaporates, volatile organic compounds (VOCs) are released, which react in sunlight to form low-level ozone.  Breathing ozone can trigger a variety of health problems including chest pain, coughing, throat irritation and congestion and can worsen bronchitis, emphysema and asthma.  VOCs also include a wide variety of hydrocarbons, some of which are hazardous air pollutants such as benzene, toluene, xylene and ethyl benzene.

HollyFrontier disclosed to the EPA that three of its refineries—the Navajo Refinery in Artesia, New Mexico, the Woods Cross Refinery in Woods Cross, Utah, and the El Dorado Refinery in El Dorado, Kansas—produced approximately 42 million gallons of gasoline that was introduced into commerce in the Utah, Texas, Arizona, New Mexico and Idaho markets that exceeded the applicable RVP standards.  HollyFrontier reported to the EPA that these violations are estimated to have resulted in about 10 excess tons of VOC emissions.

Under the settlement, HollyFrontier will install new equipment on two tanks at its Salt Lake refinery to reduce potentially-toxic VOC emissions by about 96 tons over the lifetime of the consent decree.  The company will be required to use next generation pollutant detection technology during the implementation of the mitigation projects and be required to hire a third party to verify its compliance status for the mitigation projects.  Due to the enduring nature of the projects, environmental benefits accruing as a result of these projects are anticipated to continue for many years. The facility where the pollution controls will be installed is located in an area that may present environmental justice concerns.

EPA’s Next Generation Compliance Strategy promotes advanced emissions and pollutant detection technology so that regulated entities, the government and the public can more easily see pollutant discharges, environmental conditions and noncompliance. 

More information about EPA’s Next Generation Compliance Strategy is available at: http://www2.epa.gov/compliance/next-generation-compliance.

For more information on the settlement or to read the consent decree, visit http://www.justice.gov/enrd/consent-decrees.