District Not Recorded

A federal court in Miami entered an order today authorizing the Internal Revenue Service (IRS) to serve a “John Doe” summons seeking information about U.S. taxpayers who may hold offshore accounts at Belize Bank International Limited (BBIL) or Belize Bank Limited (BBL), the Justice Department announced today.  The order, which was entered by U.S. District Judge Ursula Ungaro, granted the United States’ petition for permission to seek records of BBIL’s and BBL’s correspondent accounts at Bank of America, N.A. and Citibank, N.A.  Those records will allow the IRS to identify U.S. taxpayers who hold or held interests in financial accounts at BBIL and BBL, as well as other financial institutions that used the same correspondent accounts.

“The Department and the IRS are using every tool available to identify and investigate those individuals determined to evade their U.S. tax and reporting obligations through the use of offshore financial accounts and foreign entities,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “These John Doe summonses will provide detailed information about individuals using financial institutions in Belize and, to the extent funds were transferred, other jurisdictions.  But rest assured, we are receiving information from many sources regarding hidden foreign accounts and offshore schemes.  The time to come clean is now – before we knock on your door.”

“This court action further demonstrates our relentless efforts to pursue and catch those evading taxes with hidden offshore accounts no matter where they are or what structures are used to hide behind,” said Commissioner John Koskinen of the IRS.  “This court action also reinforces the ongoing importance of the John Doe summons in international tax enforcement.”

According to the IRS declaration, BBL is incorporated and based in Belize, and directly owns BBIL.  The IRS declaration further states that Belize Corporate Services (BCS) is incorporated and based in Belize and offers corporate services including the purchase of “shelf” Belizean international business companies.  BBL, BBIL and BCS are all corporate subsidiaries of BCB Holdings Limited, according to the declaration.  The declaration describes and IRS Revenue Agent’s review of information submitted by BBL and BBIL customers who disclosed their foreign accounts through the IRS offshore voluntary disclosure programs.  The customers in the “John Doe” class may have failed to report income, evaded income taxes, or otherwise violated the internal revenue laws of the United States, according the declaration.

The IRS uses what are known as “John Doe” summonses to obtain information about possible violations of internal revenue laws by individuals whose identities are unknown.  The John Doe summonses approved today direct Citibank and Bank of America to produce records identifying U.S. taxpayers with accounts at Belize Bank International Limited, Belize Bank Limited, or their affiliates, including other foreign banks that used BBIL and BBL’s correspondent accounts to service U.S. clients.  The court also granted the IRS permission to seek records related to Citibank’s and Bank of America’s correspondent accounts for BCS and information related to BCS’s deposit accounts at Bank of America. 

A correspondent account is a bank account that one bank maintains for another bank.  Financial transactions involving U.S. dollars flow through U.S. banks; therefore, foreign banks that do business in U.S. dollars, but do not have an office in the United States, obtain a correspondent account in order to reach U.S. customers.  Transactions in the correspondent account leave a trail in the United States that the IRS can follow, including by using a John Doe summons.  The John Doe summons can let the IRS obtain records of money deposited, paid out through checks, and moved through the correspondent account through wire transfers.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide.  U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year.  Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.  Individuals wishing to learn more about the IRS offshore voluntary disclosure programs should visit http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program or http://www.irs.gov/Individuals/International-Taxpayers/Options-Available-For-U-S--Taxpayers-with-Undisclosed-Foreign-Financial-Assets.

The Justice Department has previously obtained similar orders from the U.S. District Court of the Southern District of New York, permitting a John Doe summons on UBS AG for records of Swiss bank Wegelin & Co.’s correspondent account at UBS and from the U.S. District Court of the Northern District of California, permitting a John Doe summons on Wells Fargo, N.A., for records of the Barbados-based Canadian Imperial Bank of Commerce FirstCaribbean International Bank (FCIB).

For further information about the Department of Justice’s offshore compliance initiatives, please visit: http://www.justice.gov/tax/offshore-compliance-initiative. 

A Nashville, Tennessee, resident pleaded guilty to filing a false claim with the U.S. government, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney David Rivera of the Middle District of Tennessee. 

According to court documents and statements at the plea hearing, Karen Liane Miller, 60, admitted that from in or about August 2008 until in or about July 2009, she knowingly prepared and submitted to the Internal Revenue Service (IRS) multiple false federal income tax returns on behalf of her friends, family and herself.  The returns reported false amounts of taxable income on attached Forms 1099-OID (Original Issue Discount) and Forms 1099-A that Miller created and fraudulently represented to have been issued by financial institutions.  The returns also reported identical or near-identical false amounts of federal income tax withheld from the fictitious income to generate claims for tax refunds that were significantly higher than what the taxpayers were entitled to receive.  Miller filed 48 fraudulent tax returns that falsely claimed more than $19.8 million in refunds.  The IRS issued $1,003,238 in refunds for eight of the 48 fraudulent returns.

The sentencing hearing is set for Jan. 8, 2016.  Pursuant to the plea agreement, Miller faces a potential statutory maximum sentence of five years in prison, restitution in the amount of $1,003,328 to the IRS and a fine.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Rivera commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Alexander R. Effendi and Nathan P. Brooks of the Tax Division and Assistant U.S. Attorney Carrie Daughtrey, who are prosecuting the case.

Speaking today at the French American Foundation, Assistant Attorney General for National Security John P. Carlin called for French and European cooperation on combating nation state-sponsored theft of intellectual property, as well as destructive cyber-attacks.

Carlin highlighted the recent massive cyberattack by purported jihadis on French TV5Monde to illustrate a common purpose.  “It’s not a matter of whether a nation will fall prey to a cyber-attack, but when,” said Carlin.  He stressed the importance of global cooperation to increase the cost of hacking.  “It’s about deterrence.  Until nation states and terrorists stop stealing and committing bullying, destructive cyber-attacks, we must increase the cost.  Whether you are the Syrian Electronic Army, ISIL or a state-sponsored hacker, we can and will find you.  And when we do, there will be consequences.  Prosecution, sanctions, diplomacy and designations are just some of the many options we have.  Together, we will find the right tool, or right combination of tools, to make this activity very, very costly.”  Carlin committed to playing the long game, saying, “As international partners, we need to keep at it, keep applying that pressure.  That’s how you change behavior.  It will not happen overnight.”

Carlin has long stressed the need for global responsibility.  He told today’s attendees, including French and U.S. government officials, think tanks, private industry, academia and security and insurance professionals, “It was true when we said it in May 2014 following the PLA indictment, and it remains true today: we are aware of no nation that publicly states that theft of information for commercial gain is acceptable.  It is time for us to, once and for all, come to a common agreement about acceptable state behavior in cyberspace.”

Carlin also addressed the importance of executive involvement in cybersecurity and managing cyber risk: 

“These are C-suite decisions.  You cannot manage your corporate cyber risk if you do not understand and prioritize it.  You must make cyber defense a key component of your business strategy, and then invest in it.  Also consider cyber insurance to protect your bottom line and – most important from my vantage point – do not go it alone.  The Justice Department is here to help you when you encounter cyber threats.”

Carlin also highlighted the need for nations to apply the lessons learned in counterterrorism to emerging threats in cyberspace.  He closed his remarks by saying: 

France is one of America’s oldest and closet allies, and has long stood with us in our efforts to combat terrorism.  When nations band together to combat terrorism, as we did following the brutal attack at the offices of the Charlie Hebdo magazine, we are strong and we will win.  But that principle is not limited to terrorism – it extends to all threats to our nations’ security.  We are in this fight together, and we have to learn from one another, so that the same actors, using the same tools and signatures, cannot simply move from one country’s network to another, targeting our intellectual property and innovation or damaging our networks.  Digital security is vital to national security.

PENSACOLA, FLORIDA – Shawn P. Caldwell, 36, a registered sex offender who resides in Pensacola, Florida, was sentenced to 240 months in prison yesterday for receipt of child pornography.  The sentence was announced by Christopher P. Canova, Acting United States Attorney for the Northern District of Florida.

During an undercover operation, law enforcement officers discovered Caldwell was in possession of 76 child pornography files at his Pensacola residence.  At his plea hearing on June 24, 2015, Caldwell admitted that, between April 2011 and April 2015, he received child pornography images and videos from the internet, which he downloaded from several peer-to-peer programs.  A forensic review of Caldwell’s electronic devices revealed approximately 263 videos and more than 1,000 images of child pornography, including images of children under the age of 12.

The charges were the result of an investigation by the Federal Bureau of Investigation, the Florida Department of Law Enforcement, and the Pensacola Police Department.  The case was prosecuted by Assistant United States Attorney Jeffrey Tharp.

The United States Attorney's Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General.  The office strives to protect and serve the citizens of the Northern District of Florida through the ethical, vigorous, and impartial enforcement of the laws of the United States, to defend the national security, to improve the safety and quality of life in our communities through the protection of civil rights, and to protect the public funds and financial assets of the United States.  To access public court documents online, please visit the U.S. District Court for the Northern District of Florida website.  For more information about the United States Attorney’s Office, Northern District of Florida, visit http://www.justice.gov/usao/fln/index.html.

For more information, contact: Amy Alexander, Public Information Officer
(850) 216-3854, amy.alexander@usdoj.gov

PENSACOLA, FLORIDA – Timothy S. Faircloth, 44, a registered sex offender who resides in Pace, Florida, was sentenced to 180 months in prison yesterday for receipt of child pornography.  The sentence was announced by Christopher P. Canova, Acting United States Attorney for the Northern District of Florida.

During an online investigation, federal agents discovered that, on 40 occasions between March 8, 2014, and January 27, 2015, Faircloth received or attempted to receive child pornography images and videos.  At his plea hearing on June 17, 2015, Faircloth admitted that, between March 2014 and January 2015, he received child pornography images and videos from the internet as charged in the Indictment.  A forensic review of Faircloth’s desktop and laptop computers revealed approximately 30 child pornography images, including images of children under the age of 12.

The charges were investigated by the U.S. Immigration and Customs Enforcement Homeland Security Investigations.  The case was prosecuted by Assistant United States Attorney Jeffrey Tharp.

The United States Attorney's Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General.  The office strives to protect and serve the citizens of the Northern District of Florida through the ethical, vigorous, and impartial enforcement of the laws of the United States, to defend the national security, to improve the safety and quality of life in our communities through the protection of civil rights, and to protect the public funds and financial assets of the United States.  To access public court documents online, please visit the U.S. District Court for the Northern District of Florida website.  For more information about the United States Attorney’s Office, Northern District of Florida, visit http://www.justice.gov/usao/fln/index.html.

For more information, contact: Amy Alexander, Public Information Office: (850) 216-3854, amy.alexander@usdoj.gov

PENSACOLA, FLORIDA – Dr. Sheila Mohammed, 55, of Pace, Florida, was sentenced yesterday afternoon to 12 months and one day in prison for seven counts of submitting false tax returns, followed by two years of supervised release, and ordered to pay $255,158 in restitution to the Internal Revenue Service.  The sentence was announced by Christopher P. Canova, Acting United States Attorney for the Northern District of Florida.

Mohammed pled guilty on April 22, 2015, to the seven-count Indictment returned earlier this year.  During her plea, Dr. Mohammed admitted she signed and caused to be filed, false personal tax returns that grossly underreported her total income for tax years 2010 through 2013.  In addition, Dr. Mohammed admitted that, as president and owner of The Industrial Medicine Institute Inc., a medical practice in Pace, Florida, she signed and caused to be filed, false corporate tax returns for The Industrial Medicine Institute Inc., for the years 2010 through 2012.

At Mohammed’s sentencing hearing, the government showed that, between February 2010 and June 2014, Mohammed used the money she failed to disclose to the Internal Revenue Service, totaling approximately $1,166,632, to purchase vehicles and properties located in Pensacola, Pace, and Destin, Florida, and Hawaii and New Mexico.

The charges were the result of an investigation by the Internal Revenue Service – Criminal Investigation, with assistance from the Santa Rosa County Sheriff’s Office.  The case was prosecuted by Assistant United States Attorney Tiffany H. Eggers.

The United States Attorney's Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General.  The office strives to protect and serve the citizens of the Northern District of Florida through the ethical, vigorous, and impartial enforcement of the laws of the United States, to defend the national security, to improve the safety and quality of life in our communities through the protection of civil rights, and to protect the public funds and financial assets of the United States.  To access public court documents online, please visit the U.S. District Court for the Northern District of Florida website.   For more information about the United States Attorney’s Office, Northern

District of Florida, visit http://www.justice.gov/usao/fln/index.html.

For more information, contact: Amy Alexander, Public Information Officer
(850) 216-3854, amy.alexander@usdoj.gov

A resident of Hammond, Louisiana, was sentenced today to serve 33 months in prison to be followed by three years of supervised release for his role in a triple-object conspiracy to defraud the United States, to commit theft of public money, and mail fraud, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kenneth A. Polite of the Eastern District of Louisiana.

Cedrick Mitchell, aka Skeet, 40, pleaded guilty on June 17 to one count of a triple-object conspiracy to defraud the United States, to commit theft of public money, and mail fraud.  U.S. District Judge Jay C. Zainey of the Eastern District of Louisiana imposed today’s sentence and set a later date to determine Mitchell’s the restitution amount that Mitchell will have to pay to the Internal Revenue Service (IRS).

According to court documents, Mitchell and his co-defendants conspired to file false federal income tax returns using stolen identities.  The conspirators used stolen names and social security numbers to prepare false tax returns that claimed tax refunds.  The refund checks were mailed to addresses in Louisiana, including to post office boxes that were opened and controlled by the conspirators.  The conspirators then falsely endorsed and cashed the checks.  Mitchell also deposited refund checks from the U.S. Treasury into a bank account under his control.

The indictment also charged Corey Lewis, aka Coco, 37; Angela Chaney, 43; Craig Lewis, 40; Brad Lewis, aka Bird, 32; Thaddeus Richardson, 49; and Martin Jackson Sr., 48, with conspiracy.  In addition, Corey Lewis, Chaney, Richardson and Jackson Sr. were charged with various counts of theft of public money.  Chaney was also charged with six counts of mail fraud and five counts of aggravated identity theft.  Corey Lewis was additionally charged with three counts of aggravated identity theft.  All of the defendants in this case have pleaded guilty to various charges and are awaiting sentencing.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Polite commended special agents of IRS-Criminal Investigation and the U.S. Postal Inspection Service, who investigated the case, and Assistant U.S. Attorneys Hayden Brockett and Dall Kammer and Trial Attorney Lauren Castaldi of the Tax Division, who are prosecuting the case.

Under a settlement with the Department of Justice and the Environmental Protection Agency (EPA), the Puerto Rico Aqueduct and Sewer Authority (PRASA) has agreed to make major upgrades, improve inspections and cleaning of existing facilities within the Puerto Nuevo system and continue improvements to its systems island-wide.  The Puerto Nuevo sewer system serves the municipalities of San Juan, Trujillo Alto, and portions of Bayamón, Guaynabo and Carolina.  The settlement updates and expands upon legal settlement agreements reached with PRASA in 2004, 2006 and 2010.  The improvements will supplement projects already being implemented under the previous settlements and PRASA’s Capital Improvement Program, which includes construction of necessary infrastructure at wastewater treatment plants and sludge treatment systems, as well as the Puerto Nuevo collection system.  Under this agreement, PRASA will prioritize island-wide capital improvement projects and take into consideration the effect of each requirement on population served.  In recognition of the financial conditions in Puerto Rico, the U.S. government waived the payment of civil penalties associated with violations alleged in the complaint filed today.

“These upgrades are urgently needed to reduce the public’s exposure to serious health risks posed by untreated sewage,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “The United States has taken Puerto Rico’s financial hardship into account by prioritizing the most critical projects first, and allowing a phased in approach in other areas, but let me be clear that these requirements are necessary for the long-term health and safety of San Juan area residents.”

“This agreement will reduce the massive amount of untreated sewage and other pollutants that harm major waterways in the San Juan area, improving water quality and public health conditions for thousands of people,” said Regional Administrator Judith A. Enck for EPA.

PRASA’s violations include releases of untreated sewage and other pollutants into waterways in the San Juan area including the San Juan Bay, Condado Lagoon, Martín Peña Canal and the Atlantic Ocean.  These releases have been in violation of PRASA’s National Pollutant Discharge Elimination System (NPDES) permits and the Clean Water Act.  PRASA also violated its NPDES permit by failing to report discharges in the Puerto Nuevo collection system and by failing to meet effluent limitations and operations and maintenance obligations at numerous facilities island-wide.

Under the agreement, PRASA will spend approximately $1.5 billion to make necessary improvements.  PRASA will undertake a comprehensive operation and maintenance program in the Puerto Nuevo sanitary sewer system, including conducting a comprehensive analysis of the system to determine whether subsequent investments must be made to ensure the system is brought into legal compliance and to conduct immediate repairs at specific areas of concern.

PRASA has also agreed to invest $120 million to construct sanitary sewers that will serve communities surrounding the Martín Peña Canal, a project that will benefit approximately 20,000 people.  For decades, the Martín Peña communities have struggled with poverty and environmental degradation.  This project, which will begin after other infrastructure improvements near the canal are completed, will greatly reduce the amount of untreated sewage and other contaminants entering the canal.

The terms and conditions of the settlement announced today will update, replace and supersede the three existing consent decrees between the United States and PRASA.  In recognition of PRASA’s financial challenges, many of the provisions of the agreement have been tailored to focus on the most critical problems first, giving more time to address the less critical problems over time.  Additionally, certain projects required under the 2006 and 2010 agreements were found to no longer be necessary, as the population has declined and they have been eliminated under this agreement.

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

North Broward Hospital District, a special taxing district of the state of Florida that operates hospitals and other health care facilities in the Broward County, Florida, area, has agreed to pay the United States $69.5 million to settle allegations that it violated the False Claims Act by engaging in improper financial relationships with referring physicians, the Justice Department announced today.

“The Department of Justice has long-standing concerns about improper financial relationships between health care providers and their referral sources, because those relationships can alter a physician’s judgment about the patient’s true health care needs and drive up health care costs for everybody,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “In addition to yielding a recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable.”

“Our citizens deserve medical treatment uncorrupted by excessive salaries paid to physicians as a reward for the referral of business rather than the provision of the highest quality healthcare,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.  “This office will be steadfast in continuing to devote all necessary resources to ensure that anyone rendering medical care does so for the sole benefit of the patient and in compliance with the law.”

“Improper financial rewards  given to physicians in exchange for patient referrals corrupts medical decision making and inflates health care costs,” said Special Agent in Charge Shimon R. Richmond of the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG).  “Our agency will continue to root out such behavior from our health care system.”

The settlement announced today resolved allegations that the hospital district provided compensation to nine employed physicians that exceeded the fair market value of their services.  The United States contended that these agreements violated the Stark Statute and the False Claims Act.  The Stark Statute restricts the financial relationships that hospitals may have with doctors who refer patients to them.

The allegations settled today arose from a lawsuit filed by a whistleblower, Dr. Michael Reilly, under the qui tam provisions of the False Claims Act.  Under the act, private citizens can bring suit on behalf of the government for false claims and share in any recovery.  Dr. Reilly will receive $12,045,655.51 from the recovery announced today.

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 $25 billion through False Claims Act cases, with more than $16 billion of that amount recovered in cases involving fraud against federal health care programs.

The case, United States ex rel. Reilly v. North Broward Hospital District, et al., Case No. 10-60590 (S.D. Fla.), was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Southern District of Florida and the HHS-OIG.  The claims settled by this agreement are allegations only, and there has been no determination of liability.

TALLAHASSEE, FLORIDA – A federal grand jury returned an indictment charging Michael Daniel Rubens, 30, formerly of Tallahassee, with seven counts of cyberstalking, five counts of unauthorized access to a protected computer, and one count of aggravated identity theft.  Rubens was arraigned yesterday in the U.S. District Court in Tallahassee.  The indictment was announced by Christopher P. Canova, Acting United States Attorney for the Northern District of Florida.

The 13-count indictment alleges that, between January 2012 and January 2015, in the Northern District of Florida, Rubens used interactive computer services, such as social media accounts, to engage in conduct causing emotional distress to multiple women.  Rubens is also charged with hacking into various online accounts of multiple women to obtain information about them.  The trial is scheduled for November 16, 2015.

This case resulted from investigations by the United States Immigration and Customs Enforcement Homeland Security Investigations, the Florida State University Police Department, and the Leon County Sheriff’s Office.  It is being prosecuted by Assistant United States Attorney Jason S. Beaton.

An indictment is merely an allegation by a grand jury that a defendant has committed a violation of federal criminal law and is not evidence of guilt.  All defendants are presumed innocent and entitled to a fair trial, during which it will be the government’s burden to prove guilt beyond a reasonable doubt at trial.

The United States Attorney's Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General.  The office strives to protect and serve the citizens of the Northern District of Florida through the ethical, vigorous, and impartial enforcement of the laws of the United States, to defend the national security, to improve the safety and quality of life in our communities through the protection of civil rights, and to protect the public funds and financial assets of the United States.  To access public court documents online, please visit the U.S. District Court for the Northern District of Florida website.  For more information about the United States Attorney’s Office, Northern District of Florida, visit http://www.justice.gov/usao/fln/index.html.

For more information, contact: Amy Alexander, Public Information Officer
(850) 216-3854, amy.alexander@usdoj.gov

The Department of Justice announced today that Bank La Roche & Co AG has reached a resolution under the department’s Swiss Bank Program.

“Today’s agreement is yet another example of a foreign financial institution coming forward, acknowledging its criminal conduct, taking the necessary steps to resolve its criminal exposure, cooperating with the department’s ongoing investigations and paying appropriate penalties,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “The continued success of the program is evident from the 35 agreements signed to date, and the treasure trove of information provided regarding U.S. accountholders, the foreign and domestic facilitators who assisted in the concealment of U.S- related accounts and the various entities and institutions that played critical roles in these schemes.”

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, La Roche 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 this bank for tax-related criminal offenses.

La Roche was founded in 1787 and is based in Basel, Switzerland, with offices in Olten and Bern, Switzerland.  In 2011, La Roche closed a Hong Kong asset management subsidiary that opened in 2008.  On Feb. 13, 2015, La Roche sold its business to Notenstein Privatbank AG.  Most of La Roche’s employees and the clients of La Roche, with the exception of U.S. taxpayers and a few other clients, will be transferred to Notenstein Privatbank AG.  The transaction is expected to close in October 2015.  Thereafter, La Roche intends to wind down its remaining business and relinquish its banking license.

La Roche assisted some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income the clients held in their accounts from the Internal Revenue Service (IRS).  La Roche used a variety of means to assist some U.S. clients in concealing the assets and income the clients held in their La Roche undeclared accounts, including by:

• providing numbered accounts for 70 U.S. taxpayers;

• holding bank statements and other mail relating to 66 U.S.-related numbered accounts, as well as 20 named accounts of U.S. taxpayers domiciled in the United States;

• allowing substantial cash and precious metal withdrawals in connection with the closures of 27 U.S. taxpayers’ accounts for a total amount of $11.6 million;

• maintaining records in which certain U.S. taxpayers expressly instructed La Roche not to disclose their names to the IRS;

• providing travel cash cards to five U.S. taxpayers upon their request; and

• opening an account in June 2010 for a U.S. taxpayer who left UBS and who transferred $126,000 from UBS to the La Roche account.

In 51 instances, La Roche maintained accounts for U.S. taxpayers as beneficial owners of accounts held by non-U.S. corporations, foundations or other entities, some of which were sham entities, that concealed the beneficial ownership of the U.S. taxpayers.  These entities included Liechtenstein foundations, two of which were established or administered by a Liechtenstein trust company, whose manager and director had a long-standing personal relationship with La Roche.

Due in part to the assistance of La Roche and its personnel, and with the knowledge that Swiss banking secrecy laws would prevent La Roche from disclosing their identities to the IRS, some U.S. clients of La Roche filed false and fraudulent U.S. Individual Income Tax Returns (IRS Forms 1040), which failed to report their interests in their undeclared accounts and the related income.  Some of La Roche’s U.S. clients also failed to file and otherwise report their undeclared accounts on Reports of Foreign Bank and Financial Accounts (FBARs).

As part of its participation in the Swiss Bank Program, La Roche provided information concerning 10 U.S. client accounts held at La Roche in Switzerland since August 2008 sufficient to make treaty requests to the Swiss competent authority for U.S. client account records.  It also provided a list of the names and functions of individuals who structured, operated or supervised the cross-border business at La Roche.

Since Aug. 1, 2008, La Roche maintained 201 U.S.-related accounts with a maximum aggregate value of approximately $193.9 million.  136 of these accounts were beneficially owned by U.S. clients domiciled in the United States, 36 of which were maintained in the names of entities.  La Roche will pay a penalty of $9.296 million.

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

“With each agreement signed under the Swiss Bank Program, we gather more specific information about the schemes used to hide assets overseas,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “The sheer magnitude of information collected as a result of these agreements will be used to pursue tax evaders around the world and will have profound ramifications in developing innovative international tax compliance strategies in the future.”

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

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

A former FBI special agent was sentenced today to serve five years in prison, to be served consecutively with a 10 year federal sentence imposed on him previously in the District of Utah, for accepting and soliciting bribes in exchange for providing internal law enforcement documents and other confidential information about a prominent citizen of Bangladesh for use by a political rival. 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Inspector General Michael E. Horowitz of the Department of Justice made the announcement.

Robert Lustyik, 53, of Westchester County, New York, pleaded guilty on Dec. 23, 2014, to all five counts in the indictment against him, including conspiracy to engage in a bribery scheme, soliciting bribes by a public official, conspiracy to defraud the citizens of the United States and the FBI, theft of government property and unauthorized disclosure of a Suspicious Activity Report.  Lustyik separately was sentenced on March 30, 2015, in the District of Utah to 10 years imprisonment for soliciting and accepting bribes in exchange for taking official actions in his capacity as an FBI special agent.

Lustyik was an FBI special agent who worked on the counterintelligence squad in the White Plains Resident Agency.  Johannes Thaler was Lustyik’s friend and Rizve Ahmed, aka Caesar, was an acquaintance of Thaler.  According to court records, from September 2011 through March 2012, Lustyik, Thaler and Ahmed engaged in a scheme in which Lustyik and Thaler solicited bribe payments from Ahmed in exchange for Lustyik’s agreement to provide confidential documents and information pertaining to a prominent citizen of Bangladesh whom Ahmed perceived to be a political rival, and whom Ahmed sought to locate and harm.  Lustyik had access to the confidential documents and information through his position as an FBI special agent.       

As part of the scheme, Lustyik and Thaler exchanged text messages, including messages about how to pressure Ahmed to pay them additional money in exchange for confidential information.  For example, in late December 2011 and early January 2012, Lustyik texted Thaler, “we need to push [Ahmed] for this meeting and get that 40 gs quick . . . . I will talk us into getting the cash . . . . I will work my magic . . . . We r sooooooo close.”  Thaler responded, “I know.  It’s all right there in front of us.  Pretty soon we’ll be having lunch in our oceanfront restaurant . . . .” 

Thaler and Ahmed previously pleaded guilty to bribery and conspiracy to commit fraud and were sentenced on March 5, 2015, to serve 30 months and 42 months in prison, respectively. 

The case was investigated by the Department of Justice’s Office of the Inspector General, and prosecuted by Trial Attorney Emily Rae Woods of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Benjamin Allee of the Southern District of New York.

PAE Government Services Inc. (PAE) and RM Asia (HK) Limited (RM Asia) have agreed to pay the United States $1.45 million to resolve allegations that they engaged in a bid-rigging scheme that resulted in false claims for payment under a U.S. Army contract for services in Afghanistan, the Justice Department announced today.  PAE, headquartered in Arlington, Virginia, provides integrated global mission services.  RM Asia, located in Hong Kong, provides motor vehicle parts and supplies.

“Our national security and those of our allies depend on quality goods and services delivered at a fair price,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates our continuing vigilance to ensure that those doing business with the government do not engage in bidrigging or other anticompetitive conduct.”

In 2007, the Army awarded PAE a contract to provide vehicle maintenance capabilities and training services for the Afghanistan National Army at multiple sites across Afghanistan.  PAE partnered with RM Asia to supply and warehouse vehicle parts.  The government alleged that former managers of PAE and RM Asia funneled subcontracts paid for by the government to companies owned by the former managers and their relatives by using confidential bid information to ensure that their companies would beat out other, honest competitors.   

In a related criminal investigation, the U.S. Attorney’s Office of the Eastern District of Virginia previously obtained guilty pleas from former PAE program manager Keith Johnson; Johnson’s wife, Angela Gregory Johnson; and RM Asia’s former project manager, John Eisner, and deputy project manager, Jerry Kieffer, for their roles in the scheme.

“This resolution, following criminal charges that were also brought against the individuals involved, represents the government’s efforts to use all of the criminal and civil tools available to the government to remedy fraudulent conduct,” said U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

The allegations resolved by this settlement arose from a lawsuit filed by Steven D. Walker, a former employee of PAE, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and share in the recovery.  Mr. Walker will receive $261,000.

This case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Virginia, the Defense Criminal Investigative Service, the U.S. Department of the Army Criminal Investigation Command-Major Procurement Fraud Unit and the Defense Contract Audit Agency.

The lawsuit is captioned United States ex rel. Walker v. PAE, et al., 1:11CV382-LO/TCB (E.D. Va.).  The claims resolved by the settlement are allegations only; there has been no determination of liability. 

A Houston psychiatrist was convicted late yesterday by a federal jury of participating in a $158 million Medicare fraud scheme involving false claims for mental health treatment.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office, Special Agent in Charge C.J. Porter U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG) Dallas Region, the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU) and Special Agent in Charge D. Richard Goss of the Internal Revenue Service-Criminal Investigation Division (IRS-CI) Houston Field Office made the announcement.

Sharon Iglehart, 58, of Harris County, Texas, was convicted of one count of conspiracy to commit health care fraud, one count of health care fraud and three counts of making false statements relating to health care matters, following a seven-day jury trial before U.S. District Judge Ewing Werlein Jr. of the Southern District of Texas.  Iglehart is scheduled to be sentenced on Dec. 5, 2015.

According to evidence presented at trial, from 2006 until June 2012, Iglehart and others engaged in a scheme to defraud Medicare by submitting, through Riverside General Hospital (Riverside), approximately $158 million in false and fraudulent claims for partial hospitalization program (PHP) services to Medicare.  A PHP is a form of intensive outpatient treatment for severe mental illness.

The evidence presented at trial showed that the Medicare beneficiaries for whom Riverside billed Medicare did not receive PHP services.  In fact, according to evidence presented at trial, most of the Medicare beneficiaries for whom Riverside billed Medicare rarely saw a psychiatrist and did not receive intensive psychiatric treatment.

In addition, evidence presented at trial showed that Iglehart personally billed Medicare for individual psychotherapy and other treatment to patients at Riverside locations – treatment that she never provided.  The evidence at trial also demonstrated that Iglehart falsified the medical records of patients at Riverside’s inpatient facility to make it appear as if she provided psychiatric treatment when, in fact, she did not.

To date, 12 others previously have been convicted of offenses based on their roles in the fraudulent scheme.  Earnest Gibson III, the former president of Riverside; Earnest Gibson IV, the operator of one of Riverside’s PHP satellite locations; Regina Askew, a group home owner and patient file auditor; and Robert Crane, a patient recruiter, were all convicted after a jury trial in October 2014.  Earnest Gibson III was sentenced to 45 years in prison.  Earnest Gibson IV was sentenced to 20 years in prison.  Regina Askew was sentenced to 12 years in prison.  Robert Crane has not yet been sentenced.  Mohammad Khan, an assistant administrator at the hospital, who managed many of the hospital’s PHPs, pleaded guilty and was sentenced to 40 years in prison.  William Bullock, an operator of a Riverside satellite location, as well as Leslie Clark, Robert Ferguson, Waddie McDuffie and Sharonda Holmes, who were all involved in paying or receiving kickbacks, also pleaded guilty.  Bullock, Clark and Ferguson await sentencing.

The case was investigated by the FBI, HHS-OIG, Texas MFCU, and IRS-CI with assistance from the Railroad Retirement Board-Office of Inspector General (RRB-OIG) Chicago Field Office and the Office of Personnel Management-Office of Inspector General, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas.  The case is being prosecuted by Assistant Chief Laura M.K. Cordova and Trial Attorney Ashlee C. McFarlane of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 2,300 defendants who have collectively billed the Medicare program for more than $7 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.

A former business manager of the Local 657 of the Laborers International Union of North America (LIUNA) was charged with stealing from the organization. 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Director in Charge Paul M. Abbate of the FBI’s Washington, D.C., Field Office, Special Agent in Charge Steven D. Anderson of the Department of Labor Office of Inspector General’s Office of Labor Racketeering and Fraud Investigations Washington, D.C., Regional Office and District Director Mark Wheeler of the Department of Labor’s Office of Labor Management Standards Washington, D.C., District Office made the announcement.

Anthony Wendel Frederick Sr., 49, of Upper Marlboro, Maryland, the former Business Manager of Local 657 of LIUNA based in Washington, D.C., was charged by criminal complaint with one count of theft from a labor organization.  The defendant was arrested today and is scheduled to have his initial appearance at 1:45 p.m. EDT before U.S. Magistrate Judge G. Michael Harvey of the District of Columbia.

LIUNA is a labor organization that represents laborers in the construction industry.  LIUNA’s Local 657 represents construction laborers in Washington, D.C. and five adjacent counties.  For approximately 10 years, until June 2014, Frederick served as the business manager for Local 657.

The criminal complaint alleges that, from May 2013 to June 2014, Frederick directed more than $1.7 million in Local 657 funds to STS Contracting of Greenbelt, Maryland, without the knowledge or authorization of the Local 657 Executive Board or officials in LIUNA International.  Specifically, according to the criminal complaint, a routine audit of the local union by LIUNA in June 2014 revealed that Frederick had paid nearly $1.1 million to STS Contracting for minimal renovations at the Local 657 administrative building.  In addition, the complaint alleges that, without authorization, Frederick directed over $580,000 in Local 657 funds to STS Contracting for expediting permits for the construction of a new training center for Local 657, which project was being handled by another construction firm.  According to the criminal complaint, the LIUNA auditor also discovered that Frederick grossly overpaid STS Contracting for expediting various permits, including $20,000 to expedite a $143 excavation permit, and over $20,000 to renew existing permits, which could have been accomplished online for approximately $250 apiece.

The criminal complaint further alleges that STS Contracting paid a down payment of $225,000 on a home purchased by Frederick, and directed more than $600,000 to a corporation owned in part by Frederick’s wife.  In addition, STS Contracting principals allegedly depleted a company bank account, which contained only stolen Local 657 funds, by withdrawing more than $500,000 in cash and using the remainder for personal items, entertainment, shopping trips, hotel stays and overseas travel.

The charges and allegations contained in a criminal complaint are merely accusations.  The defendant is presumed innocent until and unless proven guilty.

The case is being investigated by the FBI and the Department of Labor.  The case is being prosecuted by Trial Attorney Vincent Falvo of the Criminal Division’s Organized Crime and Gang Section.

Frederick Criminal Complaint

The Department of Justice has filed an amicus curiae brief in the Supreme Court of Pennsylvania in Adam Kuren, et al. v. Luzerne County, et al.  The class action asserts that the public defense system in Luzerne County, Pennsylvania, is so underfunded and poorly staffed that the attorneys appointed to represent indigent adults accused of committing criminal acts are attorneys in name only.  The department’s brief focuses solely on the question of whether indigent defendants can bring a civil claim alleging a constructive denial of counsel under the Sixth Amendment to the United States Constitution.  This brief represents the department’s first filing to address constructive denial of counsel in a state’s highest court.

“For too many public defenders, crushing caseloads and scarce resources make it impossible to adequately represent clients who need and deserve assistance in legal matters,” said Attorney General Loretta E. Lynch.  “The Constitution of the United States guarantees adequate counsel for indigent defendants, and the Department of Justice is committed to ensuring that right is met.”

“This brief recognizes the importance of the right to counsel as fundamental to a fair criminal justice process,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “The Civil Rights Division will continue to ensure that this essential right is protected.”

“Public defenders around the country are being asked to do essential, even heroic work, with a fraction of the resources they need,” said Director Lisa Foster of the Office for Access to Justice.  “When defenders are unable to do their jobs, their clients are stripped of a critical constitutional right, and our justice system is diminished.”

In Kuren, the plaintiffs allege that their Sixth Amendment right to counsel has been violated by the failure of the county to provide adequate resources to the Luzerne County Office of the Public Defender (OPD).  According to the plaintiffs, due to the overwhelming volume of work, OPD lawyers are unable to engage in many of the basic functions of representation, including conferring with clients in a meaningful way prior to critical stages of their legal proceedings, reviewing client files, conducting discovery, engaging in motion practice, conducting factual investigations or devoting the time necessary to prepare for hearings, trials and appeals.  The plaintiffs claim that the conditions are systemic and so egregious that although a lawyer may technically be appointed to represent them, they will be constructively denied their right to counsel.

In its amicus brief, the department asserts that, “the Sixth Amendment right to counsel requires more than the mere appointment of a member of the bar.”  Additionally, the amicus brief goes on to explain that the right of indigent criminal defendants to an attorney may be violated by the government’s “actual denial of counsel or by a constructive denial of counsel.”  A civil action to remedy such violations is viable when traditional markers of representation such as “timely and confidential consultation with clients, appropriate investigation, and meaningful adversarial testing of the prosecution’s case” are systemically absent or compromised and when substantial structural limitations “such as a severe lack of resources, unreasonably high workloads, or critical understaffing of public defender offices” result in such absence or limited representation.

Both the trial court and the Pennsylvania Commonwealth Court ruled that the plaintiffs could not bring a civil claim for constructive denial of counsel.  The Pennsylvania Supreme Court will now consider whether the plaintiffs’ claim can proceed. 

Combined Total of $79 Million through Partnership with New York County DA’s Office

Vice President Joe Biden and Attorney General Loretta E. Lynch today announced $41 million in grant awards to 20 jurisdictions to eliminate or reduce the number of untested sexual assault kits across the country.  Today’s announcement is being announced as part of an unprecedented partnership with the New York County District Attorney’s Office (DANY) – whose own grant program is contributing $38 million to the cause for a total of $79 million to eliminate the backlog reaching 43 jurisdictions in 27 states across the country.

“Rape kits are an essential tool in modern crime fighting — not only for the victim, but, for the entire community. Studies show we solve up to 50 percent of previously unsolved rapes when these kits are tested. When we solve these cases, we get rapists off the streets. For most survivors, seeing their rapists brought to justice, and knowing that they will not return, brings peace of mind and a sense of closure. The grants we’re announcing today to reduce the national rape kit backlog will bring that sense of closure and safety to victims while improving community safety,” Vice President Biden said.

“The groundbreaking initiative we are announcing today is part of the Justice Department’s longstanding efforts to support survivors of sexual violence and to bring abusers to justice,” said Attorney General Loretta Lynch. "For anyone who has felt isolated and afraid, for anyone that has lost faith or lost hope as a result of a sexual crime, this is our pledge to you: we will not forget you.  We will not abandon you."

The National Sexual Assault Kit Initiative, a competitive grant program administered by the Justice Department’s Bureau of Justice Assistance (BJA), supports the comprehensive reform of jurisdictions’ approaches to evidence found in sexual assault kits that have never been submitted to a crime laboratory for testing. BJA created the initiative in consultation with the National Institute of Justice (NIJ), Office for Victims of Crime, (OVC), and Office on Violence Against Women (OVW).  The goals of the initiative are to create a coordinated community response that ensures just resolution to these cases whenever possible through a victim-centered approach, as well as to build jurisdictions’ capacity to prevent conditions that lead to high numbers of untested kits. The funding awarded through DANY’s program will pay directly for testing kits, and the combined effort between BJA and DANY is projected to achieve testing of approximately 70,000 sexual assault kits. BJA and DANY partnered to reach as many jurisdictions as possible and also to identify jurisdictions where funding could be combined to adequately address kit backlogs.

The initiative is part of the Justice Department’s larger ongoing effort to comprehensively address the problem of sexual assault and to support victims.  For example, NIJ maintains a webpage on Sexual Assault Investigations, Sexual Assault Kits: Using Science to Find Solutions, which provides information ranging from improving forensic sexual assault examinations to research findings on untested evidence in sexual assault cases.  OVC provides a Sexual Assault Response Team Toolkit, which has over 1.4 million views to date and includes a checklist of recommendations for victim-centered policies and practices in developing a sexual assault response. OVW updated the National Protocol for Sexual Assault Medical Forensic Examinations and released a companion document on Recommendations for Administrators of Prisons, Jails, and Community Confinement Facilities for Adapting the U.S. Department of Justice's National Protocol for Sexual Assault Medical Forensic Examinations, Adults/Adolescents.

Since 2008, the National Institute of Justice (NIJ) has provided more than $825 million for DNA analysis in crime laboratories and for activities such as research dedicated to strengthening the accuracy and reliability of forensic science.

A complete listing of today’s federal award recipients can be found at www.bja.gov/SAKI

A complete listing of the Manhattan District Attorney’s Initiative awards can be found here.

The Department of Justice announced today that Valiant Bank AG has reached a resolution under the department’s Swiss Bank Program.

“Offshore enforcement remains a top priority of the department, and banks seeking to avoid prosecution pursuant to the terms of the Swiss Bank Program continue to accept responsibility, provide a detailed account of the ways in which they have assisted U.S. individuals in willfully evading their U.S. tax obligations and fully cooperate with our ongoing investigations that are stretching around the globe,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “Those engaged in this criminal conduct who choose not to come forward, or come forward but offer only limited cooperation, picking and choosing the facts disclosed and attempting to minimize culpability, will quickly learn that the department is committed to aggressively investigating and prosecuting these offenses, and holding both individuals and entities accountable.”

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, Valiant 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 this bank for tax-related criminal offenses.

Valiant traces its origins to 1824 and is headquartered in Bern, the capital of Switzerland.  Today, Valiant is the successor of 40 banks.

Valiant offered hold mail services and numbered accounts to its U.S. clients, including some U.S. clients who had not provided Valiant with an Internal Revenue Service (IRS) Form W-9.  Valiant also accepted funds from 19 UBS accountholders who exited UBS.  Eleven of these 19 U.S. persons provided a signed Form W-9.  The remaining eight U.S. persons who did not were later forced to close their Valiant accounts.

For 26 accountholders who refused to sign a Form W-9, Valiant cashed out or converted into gold hundreds of thousands (and even millions) of dollars in account balances.  In late November 2011, one accountholder withdrew more than one million Swiss francs in various currencies and 114,000 Swiss francs in gold coins, gold bars and precious metal.  Another accountholder withdrew $2 million in cash and wired 400,000 Swiss francs to a U.S. bank.  In both instances, the accountholders refused to sign a Form W-9.  Other accountholders withdrew only amounts under $10,000 either by U.S. dollar cash withdrawals or by check or wire transfer to the United States, or transferred large sums to non-U.S. institutions.  For example, one accountholder transferred over 435,000 euros to France and $350,000 to Luxembourg.  Two other accountholders each transferred 75,000 Swiss francs to Dubai and closed their accounts with cash withdrawals of over 300,000 Swiss francs.

In 2009, an accountholder refused to sign a Form W-9 and requested that Valiant ignore the accountholder’s U.S. status.  The accountholder’s non-U.S. spouse later opened a separate account at Valiant, and the accountholder transferred more than $1 million into that account.  According to an “Agreement of Donation” between the accountholder and the accountholder’s non-U.S. spouse, the purpose of the transfer was “to make a donation” and “without any consideration.”  The agreement provided that the donation was “irrevocable.”  The non-U.S. spouse then transferred the funds to UBS and instructed Valiant to close the account.

Some U.S.-related accounts at Valiant were held in the name of non-U.S. entities with one or more U.S. beneficial owners.  In one case, a British Virgin Islands entity opened an account at Valiant through a third-party Swiss entity assigned to manage the account.  The entity holding the account designated four U.S. persons as beneficial owners, but signed a Valiant form declaring that the account was for the benefit of non-U.S. persons. 

Since Aug. 1, 2008, Valiant had 330 U.S.-related accounts, out of a total of 600,000 accounts.  The maximum aggregate dollar value of the U.S.-related accounts was $147.4 million.  Valiant will pay a penalty of $3.304 million.

In accordance with the terms of the Swiss Bank Program, Valiant 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 Valiant 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 Valiant 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 Valiant Bank AG marks another significant milestone in DOJ’s Swiss Bank Program,” said Acting Deputy Commissioner David Horton of the IRS Large Business & International Division.  “These settlements ensure that U.S. taxpayers report their foreign accounts and pay their taxes on the income earned on those accounts.  They also provide additional information that supports our efforts to fight offshore tax evasion and those who may be aiding this unlawful behavior.”

“Today is another example of the success of the Swiss Bank Program and our partnership with the Department of Justice,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “We are proud of our joint efforts and the resulting success of the program to date.  Each of these agreements is a recognition of that collaboration leading to increased international tax compliance.  With each new partnership, we gain a wealth of information and assistance to put an end to the abusive practice of illegally concealing offshore accounts.”

Acting Assistant Attorney General Ciraolo thanked the IRS, and in particular, IRS-CI and the IRS Large Business & International Division for their substantial assistance.  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 and Senior Litigation Counsel Nanette L. Davis of the Tax Division.

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

The Department of Justice and the Environmental Protection Agency (EPA) today announced a settlement with Duke Energy Corporation to resolve Clean Air Act violations at five coal-fired power plants across North Carolina.  The settlement resolves long-standing claims that Duke violated the federal Clean Air Act by unlawfully modifying 13 coal-fired electricity generating units located at the Allen, Buck, Cliffside, Dan River and Riverbend plants, without obtaining air permits and installing and operating the required air pollution control technologies.

Duke recently shut down 11 of the 13 units and under today's settlement those shutdowns also become a permanent and enforceable obligation under the consent decree.  At the remaining two units, Duke must continuously operate pollution controls and meet interim emission limits before permanently retiring them.  In addition, the settlement requires that Duke retire another unit at the Allen plant, spend a total of $4.4 million on environmental mitigation projects and pay a civil penalty of $975,000.  The United States is joined in the settlement by co-plaintiffs Environmental Defense, the North Carolina Sierra Club and Environment North Carolina.

EPA estimates that the settlement will reduce emissions by approximately 2,300 tons per year from the three Allen units, as compared to recent emission levels.  With these additional retirements, total emissions from all 13 allegedly modified units – which were in excess of 51,000 tons in 2000 when the suit was filed – will be zero.

“The settlement announced today marks another milestone in our ongoing efforts to enforce the Clean Air Act and reduce air pollution from coal-fired power plants,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “This settlement is a just and fair resolution to this long-running enforcement action in which we alleged that Duke modified these plants in ways that significantly increased their annual emissions.  It is good news for the environment and public health in North Carolina.”

“This settlement brings five more power plants into compliance under EPA’s national initiative to cut pollution from the country’s largest sources,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance.  “After many years, we’ve secured a strong resolution, one that will help reduce asthma attacks and other serious illnesses for the people of North Carolina.”

The United States initially sued Duke in 2000 and trial was set to begin in October 2015 following years of pre-trial litigation, including a landmark 2007 Supreme Court decision agreeing with EPA’s interpretation of Clean Air Act regulations covering modifications that increase the annual amount of pollution from a plant.  Under the settlement, Duke must continuously operate existing equipment to control sulfur dioxide (SO2) and nitrogen oxide (NOx) emissions at two electricity-generating units at the Allen facility in Belmont, North Carolina, and meet enforceable emission limits, prior to permanently retiring both units in 2024.  In addition, to help mitigate the harm from the alleged violations, the settlement also requires Duke to retire an additional unit at the Allen plant by 2024.

The settlement also requires Duke to spend at least $4.4 million to fund several environmental mitigation projects.  These projects include restoring native wildlife and plants on National Park Service and Forest Service lands in North Carolina, a program to help North Carolina residents replace higher polluting wood stoves and fireplaces with cleaner burning alternatives and a program to increase the use of clean energy and energy efficiency measures in economically distressed communities.  Other projects may include efforts towards increasing truck stop electrification and electric vehicle charging stations in North Carolina.

SO2 and NOx, two predominant pollutants emitted from power plants, have numerous adverse effects on human health and are significant contributors to acid rain, smog and haze.  These pollutants are converted in the air to particulate matter that can cause severe respiratory and cardiovascular impacts and premature death.

This settlement is part of EPA’s national enforcement initiative to control harmful emissions from large sources of pollution, which includes coal-fired power plants, under the Clean Air Act’s Prevention of Significant Deterioration requirements.  The total combined SO2 and NOx emission reductions secured from all these settlements will exceed two million tons each year once all the required pollution controls have been installed and implemented.

The settlement was lodged with the U.S. District Court for the Middle District of North Carolina and is subject to a 30-day public comment period and final court approval.

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

Attorney General Loretta E. Lynch announced today the appointment of U.S. Attorney Deborah R. Gilg of the District of Nebraska to the Attorney General’s Advisory Committee (AGAC), effective Sept. 4, 2015:

“The Attorney General’s Advisory Committee plays a crucial role in shaping the Justice Department’s approach to some of the most pressing public safety issues facing our country today,” said Attorney General Lynch.  “I am grateful that the U.S. Attorneys who serve on the AGAC are able to lend their wisdom, their expertise and their counsel to advance the committee’s critical work on behalf of the American people.  As a former chair of the AGAC, I know that serving on the committee while leading federal law enforcement efforts within one’s home district is no easy feat.  But I also know that the AGAC’s members are on the committee precisely because of their talent and effectiveness as public service leaders.  That is why I could not be more pleased to welcome Deborah to the committee, where I know she will continue to serve her district and our country with passion, with intelligence and with results.”

U.S. Attorney Gilg will fill the seat vacated by former U.S. Attorney Conner Eldridge for the Western District of Arkansas, who stepped down on Aug. 22, 2015.

U.S. Attorney Gilg was appointed by President Barack Obama on Oct. 1, 2009, as the 32nd U.S. Attorney of the District of Nebraska and the first female U.S. Attorney of the District of Nebraska.  Prior to her appointment, U.S. Attorney Gilg served as an elected county attorney in Western Nebraska for 16 years.  In recognition of her expertise as a prosecutor, she was appointed as a deputy county attorney or special prosecutor in more than 21 counties in Nebraska, in addition to maintaining a private law practice.  U.S. Attorney Gilg currently serves on the Attorney General’s Subcommittees on Native American Issues, Civil Rights Issues, and Terrorism and National Security Issues.

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

Company’s Executive Vice President Pleads Guilty to Obstruction of an Agency Investigation

The owner and president of a dietary supplement manufacturing company in Flanders, New Jersey, was sentenced to prison today for the sale of diluted and adulterated dietary ingredients and supplements, the Department of Justice announced. 

Barry Steinlight, 70, of Hackettstown, New Jersey, was sentenced by U.S. District Court Judge Esther Salas of the District of New Jersey to serve 40 months in prison and one year of supervised release.  Steinlight was also ordered to forfeit $1 million in profits from his fraudulent scheme.  Steinlight previously pleaded guilty to a one-count information charging him with conspiring to commit wire fraud. 

“The Justice Department has increased its attention on supplement sellers like Barry Steinlight who sell products that are not what they claim to be,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will investigate and prosecute companies and individuals that sell supplements that threaten the health of the American public and drain their bank accounts with misrepresented products.”

Steinlight was the president and owner of Raw Deal Inc., a dietary supplement manufacturer.  In pleading guilty, Steinlight admitted that from at least 2009 through November 2013, he instructed Raw Deal employees to add “fillers,” including maltodextrin, viobin cocoa replacer and rice flours, to the dietary ingredients and supplements sold to customers.  These “fillers” were added without customer consent or knowledge.  Steinlight also directed Raw Deal employees not to list the “fillers” as ingredients on certificates of analysis issued to its customers as proof of the identity of the ingredients contained in the products.  During his plea hearing, Steinlight admitted that Raw Deal Inc.’s gross profits during the scheme were between $7 million and $20 million.

Yesterday, Raw Deal’s executive vice president, Catherine Palmer, 38, of Budd Lake, New Jersey, pleaded guilty to a one-count information charging her with obstructing an agency investigation.  The obstruction charge carries a statutory maximum sentence of five years in prison and a $250,000 fine, or twice the gain or loss caused by the offense.  Her sentencing is scheduled for Dec. 21.

According to court documents, Palmer lied to U.S. Food and Drug Administration (FDA) investigators and ordered a subordinate to falsify a dietary supplement product’s ingredient list before submitting it to the FDA.  In addition, she admitted instructing a Raw Deal employee not to run blenders during the 2012 inspection so that the FDA would not see “fillers” being added to customer orders.  This practice hid from the FDA the fact that Steinlight and Raw Deal diluted the products before sale to unsuspecting customers.

Court documents also revealed that Steinlight directed Raw Deal employees to create certificates of authenticity that falsely claimed that certain Raw Deal products were kosher or organic. 

“Consumers expect labels that accurately describe the products they ingest,” said U.S. Attorney Paul J. Fishman of the District of New Jersey.  “Steinlight deceived his customers as part of a four-year scheme in which he delivered bogus, mislabeled products.  Today he was appropriately punished for his crime.”

“Today’s announcement demonstrates that those who sell adulterated dietary supplements and purposely subvert the regulatory functions of the FDA by providing false and misleading information will be held accountable for their actions,” said Acting Special Agent in Charge Jeffrey J. Ebersole of the FDA Office of Criminal Investigations’ New York Field Office.  “We commend the efforts of the Department of Justice for vigorously pursuing the prosecution of this matter.”

Principal Deputy Assistant Attorney General Mizer and U.S. Attorney Fishman commended the investigative efforts of the FDA’s Office of Criminal Investigations.  The government is represented by Assistant U.S. Attorney Joseph Mack of the District of New Jersey, Deputy Chief of the office’s Health Care and Government Fraud Unit; Special Assistant U.S. Attorney Shannon M. Singleton of the FDA’s Office of Chief Counsel; and Trial Attorneys Patrick Runkle and David Sullivan of the Civil Division’s Consumer Protection Branch.  Paralegal Jeffrey Skonieczny of the District of New Jersey also assisted in the criminal investigation.

The Department of Justice announced today that it will require General Electric Company (GE) to divest Alstom S.A.’s subsidiary Power Systems Mfg. LLC (PSM) in order for GE to proceed with its proposed approximately $13.8 billion acquisition of Alstom.

The Antitrust Division filed a civil antitrust lawsuit in the U.S. District Court of the District of Columbia to block the proposed transaction.  At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the department’s competitive concerns alleged in the lawsuit.

“The acquisition as originally proposed would have eliminated General Electric’s primary competitor in the supply of aftermarket parts and services for GE gas turbines in the United States,” said Principal Deputy Assistant Attorney General Renata B. Hesse of the Antitrust Division.  “We appreciate the close cooperation of the European Commission, which greatly facilitated our investigation and helped formulate remedies that will preserve competition in the United States and internationally.” 

The European Commission announced today that in order to address its competitive concerns with the acquisition, it will require GE to divest a package of Alstom assets relating to the development and manufacture of large gas turbines widely used in Europe, including PSM.  The department’s Antitrust Division and the European Commission cooperated closely throughout the course of their respective investigations, with frequent contact between the agencies. 

According to the department’s complaint, only three competitors, including GE and PSM, develop, manufacture and sell new aftermarket parts to repair and service GE 7FA gas turbines installed in the United States.  PSM’s entry in 1998 into the aftermarket parts and service market led to widespread price decreases, including a drop of 60 to 70 percent in the price of replacement parts for GE 7FA gas turbines.  In addition, PSM’s entry led to the development of many new parts that have improved the performance of GE 7FA gas turbines.  The loss of PSM as an independent competitor would have harmed owners of GE turbines and ultimately U.S. consumers.   

The proposed divestiture will remedy this loss of competition.  Under the terms of the proposed consent decree, GE must divest Alstom’s PSM subsidiary to Ansaldo Energia S.P.A. (Ansaldo) or an alternative, independent buyer approved by the United States.

GE, based in Connecticut, is a global manufacturing, technology and services company.  GE’s subsidiary, GE Power and Water, provides power generation, energy delivery and water process technologies in a number of areas in the energy industry.  In 2014, GE’s revenues from aftermarket parts and service for GE 7FA gas turbines were approximately $730 million.

PSM, headquartered in Florida, is a wholly owned subsidiary of Alstom, a French corporation.  PSM provides aftermarket parts and services for a variety of turbine engines, including the GE 7FA model.  In 2014, PSM’s U.S. revenues for aftermarket parts and service for GE 7FA gas turbines were approximately $90 million.

As required by the Tunney Act, the proposed consent decree, along with the department’s competitive impact statement, will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement within 60 days of its publication to Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division, Department of Justice, 450 Fifth Street, N.W., Suite 8700, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.

GE Alstom Complaint (426.5 KB)

GE Alstom PFJ (1.52 MB)

GE Alstom CIS (1.01 MB)

A former employee with International Relief and Development Inc. (IRD) pleaded guilty today to charges of bribery in connection with a federal program and conspiracy to structure financial transactions to avoid currency transaction reporting requirements, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division.

George E. Green, 57, of Carrollton Texas, pleaded guilty before U.S. Magistrate Judge Don D.  Bush of the Eastern District of Texas.  Sentencing will be scheduled at a later date before U.S. District Judge Marcia A. Crone of the Eastern District of Texas.  The parties agreed to a stipulated sentence of 46 months in prison and a forfeiture of $51,000.

In connection with a cooperative agreement between the U.S. Agency for International Development (USAID) and IRD to strengthen economic stabilization and promote long-term agricultural development in specific areas in Afghanistan, Green served as IRD’s director of contracts, procurement and grants.  According to admissions made in connection with his guilty plea, in March and April 2012, Green solicited and received a $51,000 bribe from a representative of an Afghan company that provided agriculture-related products and that sought subcontracts from IRD.  Green also admitted that between May and August 2012, after he returned to Texas, he attempted to conceal the bribe proceeds by conspiring with others to make deposits of less than $10,000 each into his bank and credit card accounts to circumvent the financial institutions’ mandatory cash reporting requirements.

The case is being investigated by Special Inspector General for Afghanistan Reconstruction, the FBI and the USAID Office of Inspector General.  This case is being prosecuted by Special Trial Attorney Mark H. Dubester and Trial Attorney Michael T. O’Neill of the Criminal Division’s Fraud Section.

The Department of Justice and the Federal Trade Commission signed an antitrust memorandum of understanding (MOU) with the Korea Fair Trade Commission (KFTC) today to promote increased cooperation and communication among the competition agencies in both countries.  The MOU was signed in Washington, D.C. by Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division, Chairwoman Edith Ramirez of the FTC and Chairman Jeong Jae-chan of the KFTC, and went into effect upon signature.

“This memorandum of understanding recognizes the day-to-day working relationship we already enjoy with the KFTC and expresses our interest in continuing and strengthening that relationship in the years to come,” said Assistant Attorney General Baer.  “Enforcement cooperation – including candid and constructive dialogue – is critical to maintaining competitive markets in the United States, Korea and around the world."

“This MOU marks an important point in our relationship with the KFTC, providing an opportunity to further strengthen our agencies’ interactions and solidify our cooperative efforts throughout Asia,” said Chairwoman Ramirez.  “It will help us to work even more closely to promote convergence around sound competition policy and procedures.”

Highlights of the new agreement include the following:

• mutual acknowledgment of the importance of antitrust cooperation, including an intention to coordinate when pursuing enforcement activities on matters under common review;

• articulating the framework for communications between the U.S. antitrust agencies and the KFTC; and

• committing to maintain the confidentiality of any information provided by the other party and honoring prohibitions on sharing information when not permitted by law.

The U.S. antitrust agencies and the KFTC have developed an increasingly close working relationship since Korea adopted its competition law in 1981, which includes exchanging views on policy and, as appropriate, cooperating on investigations.  Today’s MOU is intended to further promote these relations.

The MOU with the KFTC is the U.S. antitrust agencies’ third antitrust cooperation arrangement in East Asia, following those reached with Japan in 1999 and the Chinese competition agencies in 2011.

The Justice Department announced today that Walter Investment Management Corp. (WIMC) has agreed to pay $29.63 million to resolve allegations that WIMC, through its subsidiaries, Reverse Mortgage Solution Inc. (RMS), REO Management Solutions LLC and RMS Asset Management Solutions LLC, violated the False Claims Act in connection with their participation in the Department of Housing and Urban Development’s (HUD’s) Home Equity Conversion Mortgages (HECM) program, which insures “reverse” mortgage loans.  WIMC, through subsidiaries such as RMS and Green Tree Servicing LLC, provides business support to the residential mortgage industry, including servicing of reverse or forward mortgages on behalf of major financial institutions.

“The Department of Justice is committed to ensuring that those who service HUD-insured reverse mortgages are held accountable for their knowing failure to comply with important HUD requirements,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Schemes such as these undermine an important tool available to older Americans who wish to use a HUD-insured reverse mortgage loan to age in place.”

Reverse mortgage loans allow elderly people to access the equity in their homes.  To encourage reverse mortgage loans, HUD insures such loans through a program administered by HUD’s Federal Housing Administration (FHA).  Under HUD’s program, a loan becomes due and payable when the home is sold or vacant for more than 12 months or upon the death of the homeowner, whichever comes first.  The lender is repaid the amount of the loan, including the costs of servicing the loan and interest that accrues, after a loan becomes due and payable.  HUD will reimburse a lender that is unable to recoup the full amount of the loan.  In order to claim recoupment, the servicer is required to meet a number of regulatory requirements and deadlines.  Failure to meet these requirements and deadlines could result in denial of the insurance claim.

The government alleged that, from August 2009 to March 2015, RMS, with the knowledge and support of its corporate parent, WIMC, submitted false claims for debenture interest from HUD by failing to properly disclose that it had not met certain deadlines and, therefore, was not entitled to such interest payments.  In order to obtain such interest, HUD requires lenders and their servicers to obtain appraisals within 30 days of the loan becoming due and payable.  The significance of the 30-day appraisal requirement is, among other things, to establish a mutual understanding between the lender and HUD as to the market value of the property so that a decision can be made as to whether to proceed with foreclosure, engage in a workout with the lender or deal with estate rights issues.

The government also alleged that from July 2010 to October 2014, WIMC, through its subsidiaries, submitted false claims to HUD for the reimbursement of unlawful referral fees by falsely representing them to be lawful sales commissions.  As part of an insurance claim, HUD will reimburse lenders or their servicers for sales commissions paid to real estate agents as part of the liquidation of foreclosed properties.  HUD will not, however, reimburse lenders or their servicers for fees paid for the referral of liquidation business.  According to the government, RMS often used straw companies to liquidate foreclosed properties.  Upon sale of the foreclosed property, the straw companies split the six-percent sales commissions: the real estate agents shared a five-percent sales commission and the companies kept a one-percent referral fee.  These straw companies, in turn, deducted a small fee from the one-percent referral fee and kicked the remainder back to RMS.  Nonetheless, RMS submitted insurance claims to HUD that included payment for the full six-percent sales commission, when, in fact, the payment included a prohibited referral fee.

“This settlement represents a significant milestone in our office’s long standing campaign against mortgage fraud,” said U.S. Attorney A. Lee Bentley III of the Middle District of Florida.  “HUD’s lending programs are vital to the economic well-being of some our district’s most vulnerable residents and we are committed to holding servicers and lenders to the high standards required by these programs.”

“This settlement demonstrates my office’s commitment to holding accountable those who seek to undermine the Department of Housing and Urban Development’s financial programs serving homeowners and, particularly, our elderly citizens, who are often most in need of the benefits of the reverse mortgage loan program,” said HUD Inspector General David A. Montoya.

“Today’s settlement is another example that we are serious about making certain our approved lenders are complying with FHA requirements,” said HUD General Counsel Helen Kanovsky.  “This is a significant settlement concerning FHA’s reverse mortgage program, which is designed to benefit America’s seniors.  We’re pleased that WIMC agreed to accept financial responsibility for these violations.”

The settlement resolves allegations filed in a lawsuit by Matthew McDonald, a former executive of RMS, under the qui tam, or whistleblower, provisions of the False Claims Act.  The act permits private individuals to sue on behalf of the government for false claims and to share in any recovery.  The False Claims Act also permits the government to intervene in such lawsuits, as it did in this case.  Mr. McDonald will receive $5.15 million as his share of the recovery in this case.

The settlement was the result of the coordinated efforts of the Civil Division, the U.S. Attorney’s Office of the Middle District of Florida and HUD’s Office of Inspector General and Office of General Counsel.

The lawsuit is captioned United States ex rel. McDonald v. Walter Investment Management Corp., et al., Case No. 8:13-cv-1705-T-23TGW (M.D. Fla.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

The Department of Justice announced today that Robert Wingfield, of Texas, and Bill Ma, of New Jersey, have agreed to pay $385,000 and $50,000, respectively, to resolve a lawsuit brought by the United States under the False Claims Act alleging that they engaged in a scheme to evade customs duties on imports of aluminum extrusions from the People’s Republic of China (PRC). 

“The nation’s customs laws are designed to protect domestic manufacturers from unfair competition abroad,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “These settlements show that the Department of Justice is committed to pursuing claims against anyone involved in a scheme to seek an unfair advantage in U.S. markets by evading duties on imported goods, including individuals who make such evasion possible by the businesses that import the goods.”

The Department of Commerce assesses, and the U.S. Department of Homeland Security’s Customs and Border Protection (CBP) collects, antidumping and countervailing duties to protect U.S. businesses and level the playing field for domestic products.  Antidumping duties protect against foreign companies “dumping” products on U.S. markets at prices below cost, while countervailing duties offset foreign government subsidies.  Imports of PRC-manufactured aluminum extrusions have been subject to antidumping and countervailing duties since 2010.  Aluminum extrusions are used, among other things, to make shower doors and enclosures.

Wingfield was the U.S. sales representative for Tai Shan Golden Gain Aluminum Products Ltd., the Chinese company that exported the aluminum extrusions in this case.  The complaint alleged that Wingfield conspired with domestic importers to submit false information to the government to evade duties, and that Ma later formed a company, Northeastern Aluminum Corp. (Northeastern), to act as the importer of record for the goods in an attempt to shield the real importers from liability.  As the ostensible importer of record, Northeastern, through Ma, allegedly misrepresented the country of origin of the goods as Malaysia, when the goods were actually manufactured in the PRC and merely shipped through Malaysia, a country without duties on such items.  This practice is called transshipping.

The United States previously settled with four other importers allegedly implicated in the scheme.  Today’s settlements bring the total to more than $4.58 million.  For previous settlement press releases in this case, click here and here.  In addition, Wingfield pleaded guilty to one count of using false statements to import goods into the United States.

“When businesses and individuals fraudulently evade import duties designed to foster fair competition, consumers lose,” said U.S. Attorney A. Lee Bentley III of the Middle District of Florida.  “We will hold accountable those involved in illegal schemes that place businesses in our district at an unfair disadvantage.”

“Antidumping and countervailing duties are critical to ensure fair competition for U.S. manufacturers,” said Commissioner R. Gil Kerlikowske of the CBP.  “U.S. Customs and Border Protection works diligently with the Department of Justice, U.S. Immigration and Customs Enforcement, Homeland Security Investigations and the U.S. Department of Commerce to aggressively pursue duty evasion.”

The allegations resolved by the settlements announced today were originally brought by whistleblower James F. Valenti Jr. in the U.S. District Court for the Middle District of Florida under the qui tam provisions of the False Claims Act.  The act permits private parties to sue on behalf of the government those who falsely claim federal funds or, as in this case, those who avoid paying funds owed to the government or cause or conspire in such conduct.  The United States may intervene in and take over the lawsuit, as it did in this case.  The act allows the whistleblower to receive a share of any funds recovered through the lawsuit.  Mr. Valenti will receive approximately $79,000 as his share of today’s settlements.

The case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Middle District of Florida, CBP, U.S. Immigration and Customs Enforcement and the Department of Commerce’s International Trade Administration.

The lawsuit is captioned United States ex rel. Valenti v. Tai Shan Golden Gain Aluminum Products Ltd., et al., Case No. 11-cv-368 (M.D. Fla.).  The claims resolved by these settlements are allegations only; there have been no determinations of liability.

Columbus Regional Healthcare System (Columbus Regional) and Dr. Andrew Pippas have agreed to pay more than $25 million to resolve allegations that they violated the False Claims Act by submitting claims in violation of the Stark Law.  Today’s settlement also resolves allegations that Columbus Regional and Pippas submitted claims for payment to federal health care programs that misrepresented the level of services they provided.  Under the settlement agreement, Columbus Regional has agreed to pay $25 million, plus additional contingent payments not to exceed $10 million, for a maximum settlement amount of $35 million, and Pippas has agreed to pay $425,000.

“Today’s settlement demonstrates our continuing vigilance to ensure that health care referrals are based solely on the medical needs of the patient and that health care providers bill the government only for the care they provide,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Healthcare providers who seek to profit at the expense of taxpayers will face serious consequences.”

“The maximum amount of this settlement, some $35 million, is appropriate given the number of alleged violations involving the False Claims Act and the Stark Act,” said U.S. Attorney Michael Moore of the Middle District of Georgia.  “Access to health care is on everyone’s mind, especially with respect to rural communities.  The type of conduct alleged in this case puts that access at risk.  This settlement reflects on the one hand, the Department of Justice’s commitment to make sure that hospitals and physicians who commit violations of federal law are held to account, and on the other hand, especially with the requirement of the monitoring agreement, makes sure that we continue to have appropriately functioning health care providers accessible to the wide array of communities they serve.”

The Stark Law prohibits physician referrals of certain health services for Medicare and Medicaid patients if the physician has a financial relationship with the entity to which he or she refers the patient.  The United States alleged that between 2003 and 2013, Columbus Regional provided excessive salary and directorship payments to Pippas that violated the Stark Law.

The United States also alleged that from May 2006 through May 2013, Columbus Regional submitted claims to federal health care programs for services at higher levels than supported by the documentation, and between 2010 and 2012, they submitted claims to federal health care programs for radiation therapy at higher levels than the therapy that was provided.

Of the $25.425 million that Columbus Regional and Pippas have agreed to pay to resolve their respective civil claims, they will pay $24,666,040 to the federal government for federal healthcare program losses and $758,960 to the state of Georgia for the state share of its Medicaid losses. 

Also as part of the settlement, Columbus Regional will enter into a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services-Office of the Inspector General (HHS-OIG) that requires Columbus Regional to implement measures designed to avoid or promptly detect future conduct similar to that which gave rise to this settlement.

“Increasing referrals by self-dealing and violating the Stark statute – as the government contended in this case – undermines impartial medical judgment at the expense of patients and taxpayers,” said Special Agent in Charge Derrick L. Jackson of HHS-OIG.  “Charging federal health care programs for pricier services than those actually provided will not be tolerated.”

The settlements resolve allegations filed in two lawsuits by Richard Barker, a former Columbus Regional executive, in federal court in Columbus, Georgia.  The lawsuits were filed under the qui tam, or whistleblower, provisions of the federal False Claims Act and the Georgia False Medicaid Claims Act, which permit private individuals to sue on behalf of the federal and state governments, respectively, for false claims and to share in any recovery.  Mr. Barker’s share of the settlement has not yet been determined.

This 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 $24.9 billion through False Claims Act cases, with more than $15.9 billion of that amount recovered in cases involving fraud against federal health care programs.

The civil settlement was handled by the U.S. Attorney’s Office of the Middle District of Georgia and the Civil Division’s Commercial Litigation Branch.  These matters were investigated by HHS-OIG’s Office of Investigations, with assistance from the HHS Office of Counsel to the Inspector General and Office of General Counsel and Center for Medicare and Medicaid Services, and the state of Georgia’s Medicaid Fraud Control Unit.    

The civil lawsuits are captioned United States ex rel. Barker v. Columbus Regional Healthcare System, et al., Case No. 4:12-cv-108 (M.D. Ga.) and United States ex rel. Barker v. Columbus Regional Healthcare System, et al., Case No. 4:14-cv-304 (M.D. Ga.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

The Department of Justice announced today that Schroder & Co. Bank AG has reached a resolution under the department’s Swiss Bank Program.

“As today’s agreement reflects, Swiss banks continue to lift the veil of secrecy surrounding bank accounts opened and maintained for U.S. individuals in the names of sham structures such as trusts, foundations and foreign corporations,” said Acting Deputy Assistant Attorney General Larry J. Wszalek of the Department of Justice’s Tax Division.  “The department’s prosecutors and the IRS are actively following these leads to criminally investigate and prosecute those individuals who willfully evaded or assisted in the evasion of U.S. income tax obligations.”

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, Schroder 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 the bank for tax-related criminal offenses.

Schroder Bank was founded in 1967 and received its Swiss banking license in 1970.  Since 1984, Schroder Bank has had a branch in Geneva.  The bank has two wholly owned subsidiaries, Schroder Trust AG (domiciled in Geneva) and Schroder Cayman Bank & Trust Company Ltd. (domiciled in George Town, Grand Cayman).  Schroder Cayman Bank & Trust Company Ltd. provides services to clients such as the creation and support of trusts, foundations and other corporate bodies.  Both subsidiaries also acted in some cases as an account signatory for entities holding an account with the bank.  Schroder Bank is in the process of closing the operations of Schroder Trust AG and Schroder Cayman Bank & Trust Company Ltd.

Schroder Bank opened accounts for trusts and companies owned by trusts, foundations and other corporate bodies established and incorporated under the laws of the British Virgin Islands, the Cayman Islands, Panama, Liechtenstein and other non-U.S. jurisdictions, where the beneficiary or beneficial owner named on the Form A was a U.S. citizen or resident.  In addition, a small number of accounts were opened for U.S. limited liability companies (LLCs) with U.S. citizens or residents as members, as well as for U.S. LLCs with non-U.S. persons as members.  Schroder Bank communicated directly with the beneficial owners of some accounts of trusts, foundations or corporate bodies, and it arranged for the issuance of credit cards to the beneficial owners of some such accounts that appear in some cases to have been used for personal expenses.

Schroder Bank also processed cash withdrawals in amounts exceeding $100,000 or the Swiss franc equivalent.  For at least three U.S.-related accounts, a series of withdrawals that in aggregate exceeded $1 million were made.  In addition, at least 26 U.S.-related accountholders received cash or checks in amounts exceeding $100,000 on closure of their accounts, including in at least three cases cash or checks in excess of $1 million.

Between 2004 and 2008, four Schroder Bank employees traveled to the U.S. in connection with the bank’s business with respect to U.S.-related accounts.  In 2008, Swiss bank UBS AG publicly announced that it was the target of a criminal investigation by the Internal Revenue Service (IRS) and the department, and that it would be exiting and no longer accepting certain U.S. clients.  In a later deferred prosecution agreement, UBS admitted that its cross-border banking business used Swiss privacy law to aid and assist U.S. clients in opening accounts and maintaining undeclared assets and income from the IRS.  Between Aug. 1, 2008, and June 30, 2009, Schroder Bank opened eight U.S.-related accounts with funds received from UBS, which was then under investigation by the U.S. government.

Since Aug. 1, 2008, Schroder Bank had 243 U.S.-related accounts with approximately $506 million in assets under management.  Schroder Bank will pay a $10.354 million penalty.

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

“The cumulative penalties the Swiss Bank Program has generated to date are extraordinary,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “However, a significant element of the program is the highly-detailed account and transactional data that has been provided to IRS specifically for law enforcement purposes.  We will continue to use this information to vigorously pursue U.S. taxpayers who may still be trying to illegally conceal offshore accounts, ensuring we are all playing by the same rules.”

Acting Deputy Assistant Attorney General Wszalek thanked the IRS, and in particular, IRS-CI and the IRS Large Business and International Division for their substantial assistance.  Wszalek also thanked Sean P. Beaty and Gregory S. Seador, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer and Senior Litigation Counsel Nanette L. Davis of the Tax Division.

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

Automotive parts supplier NGK Insulators Ltd. has agreed to plead guilty and to pay a $65.3 million criminal fine for its role in a conspiracy to fix prices and rig bids for ceramic substrates for automotive catalytic converters supplied to automobile manufacturers.  The company will also plead guilty to obstruction of justice.            

According to the two-count felony charge filed today in the Eastern District of Michigan, NGK Insulators, based in Nagoya, Japan, conspired to rig bids for, and to fix, stabilize and maintain the prices of, catalytic converter substrates.  The parts were supplied to automobile manufacturers such as General Motors Company, Toyota Motor Corporation, Nissan Motor Company Ltd and certain of their subsidiaries, affiliates and suppliers in the United States and elsewhere.  NGK Insulators was involved in the conspiracy from at least July 2000 until at least February 2010.  NGK Insulators is also charged with obstructing justice between February 2010 and approximately July 2012, for altering, destroying, mutilating and concealing documents with the intent of impeding the investigation into criminal antitrust violations in the automotive parts industry.  NGK Insulators has agreed to cooperate in the department’s ongoing investigation.  The plea agreement will be subject to court approval.           

“Companies and their executives who commit antitrust crimes will be found out and punished,” said Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division.  “And if they attempt to obstruct our investigation, they will face even harsher consequences.”   

Ceramic substrates are uncoated ceramic monoliths with a fine honeycomb structure that are used in automotive catalytic converters.  Catalytic converters are critical emissions control devices that convert pollutants in an exhaust gas stream into less harmful gases through catalytic chemical reactions.       

According to the charge, NGK Insulators and representatives of another corporate conspirator had conversations in which they agreed upon anticompetitive bids and price quotations on bids to be submitted to certain automobile manufacturers.  NGK Insulators, which sells a variety of ceramic and metallic products for the automotive industry, power generation, electronics components and other industrial processes, is the second-largest worldwide manufacturer of ceramic substrates for automotive catalytic converters.            

Additionally, after becoming aware of antitrust investigations in the United States and other countries, NGK Insulators and certain of its executives and employees obstructed justice through a series of actions in both the United States and Japan.  NGK Insulators deleted and attempted to delete electronic files, destroyed and concealed paper files, removed and replaced high executives’ office computers, removed and concealed electronic files stored on its U.S. office computer system, attempted to destroy paper files located in the U.S., engaged in misleading actions and withheld information about the offenses under investigation.            

The charges against NGK Insulators are the latest in the department’s ongoing investigation into anticompetitive conduct in the automotive parts industry.  Including NGK Insulators, 36 companies and 30 executives have pleaded guilty or agreed to plead guilty in the ongoing investigation and have agreed to pay more than $2.5 billion in criminal fines.           

NGK Insulators is charged with price fixing and bid rigging 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.  NGK Insulators is also charged with obstruction of justice, which carries a maximum penalty of $500,000 per count for corporations. 

Today’s charge was brought by the Antitrust Division’s Washington Criminal I Section and the FBI’s Detroit Division with the assistance of the FBI Headquarters’ International Corruption Unit.  Anyone with information on price fixing, bid rigging and other anticompetitive conduct related to the automotive parts industry should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258, visit http://www.justice.gov/atr/contact/newcase.html or call the FBI’s Detroit Field Office at 313-965-2323.

NGK Insulators Information (209.19 KB)

Increased Privacy Protections and Higher Legal Standards to Be Required

The Justice Department today announced a new policy for its use of cell-site simulators that will enhance transparency and accountability, improve training and supervision, establish a higher and more consistent legal standard and increase privacy protections in relation to law enforcement’s use of this critical technology.

The policy, which goes into effect immediately and applies department-wide, will provide department components with standard guidance for the use of cell-site simulators in the department’s domestic criminal investigations and will establish new management controls for the use of the technology.

“With the issuance of this policy, the Department of Justice reaffirms its commitment to hold itself to the highest standards as it performs its critical work to protect public safety,” said Deputy Attorney General Sally Quillian Yates.  “Cell-site simulator technology has been instrumental in aiding law enforcement in a broad array of investigations, including kidnappings, fugitive investigations and complicated narcotics cases.  This new policy ensures our protocols for this technology are consistent, well-managed and respectful of individuals’ privacy and civil liberties.”

Cell-site simulators are just one tool among many traditional law enforcement techniques and are deployed only in the fraction of cases in which the capability is best suited to achieve specific public safety objectives. 

To enhance privacy protections, the new policy establishes a set of required practices with respect to the treatment of information collected through the use of cell-site simulators.  This includes data handling requirements and an agency-level implementation of an auditing program to ensure that data is deleted consistent with this policy.  For example, when the equipment is used to locate a known cellular device, all data must be deleted as soon as that device is located, and no less than once daily.

Additionally, the policy makes clear that cell-site simulators may not be used to collect the contents of any communication in the course of criminal investigations.  This means data contained on the phone itself, such as emails, texts, contact lists and images, may not be collected using this technology.

While the department has, in the past, obtained appropriate legal authorizations to use cell-site simulators, law enforcement agents must now obtain a search warrant supported by probable cause before using a cell-site simulator.  There are limited exceptions in the policy for exigent circumstances or exceptional circumstances where the law does not require a search warrant and circumstances make obtaining a search warrant impracticable.  Department components will be required to track and report the number of times the technology is deployed under these exceptions.

To ensure that the use of the technology is well managed and consistent across the department, the policy requires appropriate supervision and approval.

Sanofi Subsidiary Admits Unlawful Conduct and Agrees to Enhance its Compliance Program

Genzyme Corporation, a wholly-owned biotechnology subsidiary of French pharmaceutical company Sanofi, agreed today to resolve criminal charges that it violated the federal Food, Drug and Cosmetic Act (FDCA) with regard to the unlawful distribution of Seprafilm, a surgical device it markets and promotes, the Justice Department announced.

As part of the agreed resolution, the department filed a two-count criminal information in the U.S. District Court for the Middle District of Florida charging that between 2005 and 2010, Genzyme caused a medical device to become adulterated and misbranded while being held for sale.  The conduct occurred prior to Sanofi’s acquisition of Genzyme, based in Cambridge, Massachusetts, in 2011.  To resolve these charges, Genzyme agreed to enter into a deferred prosecution agreement with the government for a term of at least two years.  As part of the agreement, Genzyme agreed to admit to and accept responsibility for the facts underlying the charges and pay a monetary penalty of $32,587,439.  It further agreed to undertake several groundbreaking measures to enhance its internal compliance program.  The agreement also acknowledges the significant level of cooperation Genzyme provided to the government during its investigation as well as the company’s independent remediation efforts.

Along with the information, the government also filed a consent motion with the court, requesting that its case against Genzyme be stayed during the term of the agreement.  If Genzyme fulfills its obligations under the agreement, the government will dismiss the charges it filed today at the end of the agreement’s term.

Today’s agreement is in addition to a separate $22.28 million civil agreement the government reached with Genzyme in December 2013 to resolve allegations under the False Claims Act related to Seprafilm.  After today’s agreement, Genzyme will have paid almost $55 million to resolve government allegations regarding Seprafilm.  If Genzyme fulfills its obligations under the agreement, the government will dismiss the charges it filed today at the end of the agreement’s term.

“Today’s action demonstrates that the Department of Justice will evaluate the facts of each case and choose the most appropriate tool of the several available to it to best address criminal misconduct,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of  the Justice Department’s Civil Division.  “The deferred prosecution agreement with Genzyme is yet another example of the department’s continuing efforts to ensure that pharmaceutical and medical device manufacturers adhere to laws and regulations that have been put in place to protect the health and safety of the American public.”

According to the papers filed in the district court today, Seprafilm is a clear piece of film that can be applied to internal tissues during pelvic and abdominal surgeries to reduce the formation of adhesions—bands of scar tissue that can form between traumatized tissues and organs after surgery, causing them to stick together.  Seprafilm was approved by the U.S. Food and Drug Administration (FDA) for use in patients undergoing open abdominal or pelvic laparotomy, which is a traditional surgical technique that utilizes a relatively large incision to permit the surgeon to open and view the patient’s abdominopelvic contents.  Over time, laparotomy became a less common surgical technique in favor of laparoscopic surgery, which is perceived to have several advantages for the patient.

To respond to the diminishing number of laparotomies performed, some Genzyme sales representatives taught surgeons and other medical staff how to mix the Seprafilm sheets into a liquid “slurry” that could be squirted through the narrow tubes used during laparoscopic surgery, even though Seprafilm was never indicated or FDA-approved for use in laparoscopic procedures.  Genzyme sales representatives’ participation in the preparation of slurry in the operating room caused Seprafilm to become adulterated, according to the criminal charges.

During the course of the government’s investigation regarding Seprafilm slurry, Genzyme voluntarily disclosed to the government that it had distributed promotional material for Seprafilm that implied that Seprafilm had been proven safe and effective for use in gynecologic cancer surgeries, even though Seprafilm’s FDA-approved label cautioned that the device had not been clinically evaluated in the presence of malignancies.  Genzyme based its claim on a study that involved only fourteen patients, which was far too few to support such an assertion.  A separate count in the government’s information charges that Genzyme’s use of this misleading promotional material caused Seprafilm to become misbranded while held for sale.

“Patients rely heavily on the integrity and efficacy of claims made by manufacturers of medical products,” said U.S. Attorney A. Lee Bentley III of the Middle District of Florida.  “When manufacturers make misleading statements about using their products in ways that have not been approved by the FDA, patient care, confidence, and safety are put at risk.”

The case has been handled by Trial Attorney Ross S. Goldstein of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Simon Gaugush, Chief of the General Crimes Section at the U.S. Attorney’s Office of the Middle District of Florida, with support from FDA’s Office of Criminal Investigations and Office of Chief Counsel.

Parsons Government Services Inc. has agreed to pay the United States $3.8 million to settle allegations that the company knowingly mischarged the U.S. Department of Energy (DOE) for ineligible or inflated short-term and long-term employee relocation costs in connection with its contract on the DOE Salt Waste Processing Facility Project (SWPF) at the DOE Savannah River Site in Aiken, South Carolina.  Parsons is headquartered in Pasadena, California.  

“Those who expect to do business with the government must do so fairly and honestly,” 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 contractors that knowingly seek taxpayer funds to which they are not entitled.”

Since Sept. 1, 2002, Parsons has been the primary construction contractor on the DOE’s SWPF project at the Savannah River Site.  Pursuant to the terms of the SWPF contract, Parsons was entitled to be reimbursed for the payments it made to eligible employees for moving, meals, lodging and transportation expenses incurred when the employees were relocated or transferred by Parsons to work on the SWPF project in Aiken.  In order to be entitled to reimbursement by the DOE, however, Parsons was required to take steps to ensure that the employees met certain contractual requirements of eligibility, such as maintaining a permanent residence at the location from which they were transferred.  The United States alleged that Parsons sought and obtained reimbursement for these relocation expenses under the SWPF contract even for employees it knew did not qualify for these payments under the terms of the contract.

“The District of South Carolina continues to devote significant resources to pursuing claims under the False Claims Act and this is yet another example of how this commitment is benefiting the taxpayers by recovering funds for the government,” said U.S. Attorney William N. Nettles of the District of South Carolina.

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the District of South Carolina, the DOE Savannah River Operations Office and the DOE Office of Inspector General.

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

The Justice Department’s Office on Violence Against Women (OVW) today announced the release of a new $2.8 million funding opportunity as part of OVW’s Sexual Assault Justice Initiative (SAJI).  Launched in April 2015, the SAJI is an opportunity to improve how the justice system in general, and prosecution in particular, handles sexual assault cases.  This funding announcement will support approximately eight pilot sites to receive up to $400,000 to implement performance measures that reflect promising practices for prosecuting sexual assault and promote justice for victims.

“Very few victims report their assaults to law enforcement,” said Principal Deputy Director Bea Hanson of the Office on Violence Against Women.  “But among victims who do report, the reality is that many will likely see their cases dropped during the investigation or prosecution stage.  We know that sexual assault cases can be difficult to prosecute and we see the Sexual Assault Justice Initiative as an opportunity for prosecutors to learn about, and implement, effective practices for sexual assault prosecution.  The goal is to look beyond convictions to see what prosecutors can do to hold offenders accountable and provide victims with the justice they deserve.”

The demonstration initiative is designed to strengthen the justice system’s response to sexual violence and enhance collaborations among sexual assault victim services providers, law enforcement agencies, and sexual assault medical forensic services providers.  With funding from the Grants to Encourage Arrest Policies and Enforcement of Protection Orders Program, the Rural Sexual Assault, Domestic Violence, Dating Violence, and Stalking Grant Program and the Tribal Governments Grant Program, SAJI sites will be able to use the funds to strengthen services in their communities that support sexual assault victims.

Each pilot site will receive technical assistance from AEquitas: The Prosecutor’s Resource on Violence Against Women to implement the performance measures and enhance their approach to prosecuting sexual assault. Sites will also participate in the evaluation of the initiative.

Applications for the SAJI demonstration initiative are due on Oct. 13, 2015.  The solicitation is available at www.justice.gov/ovw/open-solicitations and www.grants.gov.  For information on the Office on Violence Against Women and its grant programs, visit www.justice.gov/ovw.

About the Office on Violence Against Women

Created in 1995, the Office on Violence Against Women provides federal leadership in developing the Nation’s capacity to reduce violence against women through the implementation of the Violence Against Women Act (VAWA) and subsequent legislation.  OVW administers financial and technical assistance to communities across the country that are developing programs, policies and practices aimed at ending domestic violence, dating violence, sexual assault and stalking.  To learn more, visit www.justice.gov/ovw.

NEC TOKIN Corp. will plead guilty and pay a $13.8 million criminal fine for conspiring with competitors between 2002 and 2013 to fix prices for electrolytic capacitors sold to customers in the United States and elsewhere. 

Electrolytic capacitors store and regulate electrical current in electronic products, including computers, televisions, car engine and airbag systems, home appliances and office equipment. 

“NEC Tokin and its co-conspirators fixed prices on capacitors, a component used in just about every product that has a battery or a plug,” said Assistant Attorney General Bill Baer.  “In announcing our first guilty plea in this ongoing investigation, we are enforcing the principle that American consumers are entitled to competitive markets.  We will vigorously investigate and prosecute illegal cartels regardless of where the defendants are located or the products they target.”

“For over a decade and through various financial crises, NEC Tokin has exploited American consumers and fixed the price of capacitors, which are critical to our modern way of electronic life,” said Special Agent in Charge David J. Johnson of the FBI’s San Francisco Division.  “This investigation is ongoing and the FBI and DOJ Antitrust Division are dedicated to holding responsible all of the companies that illegally take advantage of customers.”

The one-count felony charge was filed today in the U.S. District Court of the Northern District of California in San Francisco.  In addition to pleading guilty to that charge and paying a criminal fine, NEC Tokin, based in Tokyo, has agreed to cooperate in the department’s ongoing investigation.  The plea agreement is subject to court approval.

The charge today results from an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the capacitor industry conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Field Office.  Anyone with information on price fixing, bid rigging or other anticompetitive conduct related to the capacitors 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 tip line at 415-553-7400.

The Justice Department's Office on Violence Against Women (OVW) today announced 27 awards totaling $8.5 million to enhance victim services and develop programs to prevent, investigate and respond to sexual assault, domestic violence, dating violence and stalking on campus.  The awards are made with funds from the Grants to Reduce Sexual Assault, Domestic Violence, Dating Violence, and Stalking on Campus Program (campus program).

The campus program supports institutions of higher education in developing comprehensive coordinated campus and community-based approaches to prevent and respond to sexual assault, domestic violence, dating violence and stalking.  Recipients are required to conduct mandatory prevention and education programming for all incoming students and to train campus law enforcement and all members of campus disciplinary boards to respond effectively to sexual assault, domestic violence, dating violence and stalking.  Campuses can use funds to develop and adopt policies and protocols that prioritize victim safety and hold offenders accountable.

“We know that victims who receive comprehensive advocacy and services are more likely to achieve their goals of safety, autonomy and healing,” said Principal Deputy Director Bea Hanson of the Office on Violence Against Women.  “Coordination between on-and-off campus victim services organizations and the local criminal justice system is critical to providing holistic support and services that victims need and ensuring that perpetrators are held accountable.”

For more information about the Campus Program, visit www.justice.gov/ovw/responding-campus-sexual-assault.

The Fiscal Year 2015 grant recipients are:

Humboldt State University, Arcata, California; Shasta-Tehama-Trinity Joint Community College, Redding, California; Asnuntuck Community College, Enfield, Conn Florida Agricultural and Mechanical University, Tallahassee, Florida; Daytona State College, Daytona Beach, Florida.; Valencia College, Orlando, Florida.; Indian Hills Community College, Ottumwa, Iowa; Saint Joseph’s College, Rensselaer, Indiana; Washburn University of Topeka, Topeka, Kansas; Salam State University, Salem, Massachusetts; Bates College, Lewiston, Maine; Avila University, Kansas City, Missouri; Mississippi Valley State University, Itta Bena, Mississippi; Salish Kootenai College, Pablo, Montana; Mars Hill University, Mars Hill, North Carolina; University of North Carolina at Chapel Hill, Chapel Hill, North Carolina; Passaic County Community College, Paterson, New Jersey; The College of New Jersey, Ewing, New Jersey.; University of Nevada at Reno, Reno, Neveda; Juniata College, Huntingdon, Pennsylvania.; Cabrini College, Radnor, Pennsylvania.; Messiah College, Mechanicsburg, Pennsylvania.; University of Puerto Rico at Carolina, Carolina, Puerto Rico; Augustana College (recently renamed Augustana University), Sioux Falls, South Dakota; University of Tennessee, Knoxville, Tennessee; University of Texas at El Paso, El Paso, Texas; Edmonds Community College, Lynnwood, Washington.     

About the Office on Violence Against Women

Created in 1995, the Office on Violence Against Women provides federal leadership in developing the Nation’s capacity to reduce violence against women through the implementation of the Violence Against Women Act (VAWA) and subsequent legislation.  OVW administers financial and technical assistance to communities across the country that are developing programs, policies and practices aimed at ending domestic violence, dating violence, sexual assault and stalking.  To learn more, visit www.justice.gov/ovw.

A southern Alabama business man has pleaded guilty for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in southern Alabama.

Michael P. Barbour admitted to conspiring to fraudulently acquire title to foreclosed properties at artificially low prices by agreeing with others not to bid against each other at public foreclosure auctions in southern Alabama.  

“Including this defendant, 11 individuals have been convicted for conspiring to corrupt the public foreclosure auction process in Alabama,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “Together with our partners at the FBI, we will continue to obtain justice for the homeowners and banks victimized by these crimes.”

“When individuals knowingly defraud homeowners and financial institutions, the FBI is committed to holding them accountable in accordance with the law,” said Special Agent in Charge Robert F. Lasky of the FBI’s Mobile Division.  “We will continue working with our law enforcement partners to identify and stop those who line their own pockets at the expense of others."

According to documents filed with the court, from 2003 until 2010, Barbour conspired with other potential bidders for foreclosed properties to designate one person to bid at certain public foreclosure auctions.  Once the designated bidder won the property at the public auction, the conspirators held a secret, second auction open only to members of the conspiracy where they paid each other off.  As a result of these crimes, homeowners and banks received less than competitive prices for the properties. 

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.  The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than the statutory maximum fine.  A count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine in an amount equal to the greatest of $250,000, twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.

The investigation into fraud and bid rigging in the Alabama real estate foreclosure industry is being conducted by the Washington Criminal II Section of the Antitrust Division and the FBI’s Mobile Field Office, with the assistance of the U.S. Attorney’s Office of the Southern District of Alabama.  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258 or visit www.justice.gov/atr/contact/newcase.htm.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.

After a five-day trial in Minneapolis, a federal jury convicted two Brooklyn Center-based tax return preparers of conspiracy to defraud the United States, tax crimes and aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. 

The jury convicted Ishmael Kosh, a resident of Philadelphia, of one count of conspiracy to defraud the United States and eight counts of aiding and assisting in the preparation of false federal income tax returns.  The jury convicted Amadou Sangaray, a resident of New York City, of one count of conspiracy to defraud the United States, four counts of aggravated identity theft and eight counts of aiding and assisting in the preparation of false federal income tax returns.

The defendants were charged in a second superseding indictment with alleged co-conspirators Chatonda Khofi, David Mwangi and Francis Saygbay for their involvement in Primetime Tax Services Inc., (Primetime) a tax preparation business with three locations in the Minneapolis area.  All five defendants were charged in a conspiracy to defraud the United States by preparing fraudulent individual federal income tax returns for customers of Primetime for tax years 2006, 2007 and 2008.  According to court documents, during these years, the defendants and others filed more than 2,000 federal tax returns through Primetime.

“Today’s verdicts send a clear message that individuals who hold themselves out as tax return preparers, and then prepare and file false returns to steal from the U.S. Treasury, will be prosecuted and will face substantial incarceration and monetary penalties,” stated Acting Assistant Attorney General Ciraolo.  “The department, working with the Internal Revenue Service and its other law enforcement partners, is committed to holding these fraudulent return preparers, and those who participate in their illegal enterprises, accountable for their criminal conduct.”

Evidence introduced at trial established that in late 2006, defendants Kosh, Sangaray and Khofi set up a Primetime storefront in Brooklyn Center, where they prepared false tax returns that reported false dependents using stolen identities, fake business income and losses, inflated deductions, and inflated credits and false filing status, all to inflate customers’ tax refunds.  The defendants directed the Internal Revenue Service (IRS) to send their customers’ refunds to Primetime and then withdrew the return preparation fees from the refund.  When a customer came to the office to retrieve their refund check or debit card, the defendants sometimes escorted that customer to a check-cashing location or an ATM and demanded an additional cash fee. 

After the guilty verdicts, the court determined that Sangaray was a flight risk and he was detained pending sentencing.  The defendants’ sentencings are scheduled for Jan. 5, 2016.  At sentencing, the defendants face a statutory maximum sentence of five years in prison for conspiracy, a statutory maximum sentence three years in prison for each count of aiding and assisting in the preparation of false tax returns, and a mandatory minimum sentence of two years in prison for aiding aggravated identity theft.  They also face substantial financial penalties and restitution.

“The Internal Revenue Service works very hard to stop these fraudulent refund and identity theft schemes,” said Special Agent in Charge Shea Jones of IRS-Criminal Investigation.  “The fraudulent actions of these tax return preparers have caused undue harm to their clients and to the American taxpayers.”

In November 2014, Mwangi pleaded guilty to conspiracy to defraud the United States and Khofi pleaded guilty to conspiracy and aggravated identity theft.  In 2013, Stephanie Robinson, a defendant in a related case who worked at Primetime, pleaded guilty to filing her own false return and aiding and assisting the preparation of a false return.  Saygbay is set for trial on Nov. 2.

Acting Assistant Attorney General Ciraolo commended the special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Dennis R. Kihm, Thomas W. Flynn and Ryan R. Raybould and Paralegal Saundra Burgess of the Tax Division, who are prosecuting the case.  Ciraolo also thanked the U.S. Attorney’s Office of the District of Minnesota for their substantial assistance.

KMART Corp. (Kmart), a discount department store chain that operates approximately 780 in-store pharmacies throughout the United States, Puerto Rico and the U.S. Virgin Islands, has paid the United States $1.4 million to resolve allegations that it violated the False Claims Act by using drug manufacturer coupons and gasoline discounts as improper Medicare beneficiary inducements, the Justice Department announced today. 

“The United States will continue to pursue retail pharmacies that improperly attempt to influence a beneficiary’s choice of pharmacy,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The government will not permit pharmacies to use improper business tactics to solicit business that does nothing to improve the quality of healthcare received by Medicare beneficiaries and increases the costs of the Medicare program.” 

The settlement resolves allegations that Kmart violated the False Claims Act by providing illegal inducements to beneficiaries of the Medicare program.  The government alleged that from June 2011 to June 2014, Kmart knowingly and improperly influenced the decisions of Medicare beneficiaries to bring their prescriptions to Kmart pharmacies by permitting the Medicare beneficiaries to use drug manufacturer coupons to reduce or eliminate prescription co-pays that they otherwise would be obligated to pay.  Federal law prohibits a person from offering beneficiaries of certain federal health programs, such as Medicare, remuneration that is intended to influence the beneficiary’s choice of provider.  The government alleged that Kmart’s conduct caused the Medicare beneficiaries to seek expensive, brand name drugs in lieu of cheaper generic drugs, which caused the government’s costs to increase without any medical benefit to the beneficiary.  The government also alleged that Kmart improperly encouraged Medicare beneficiaries to bring their prescriptions to Kmart pharmacies by offering them varying levels of discounts on the purchase of gasoline at participating gas stations based on the number of prescriptions that they filled at Kmart pharmacies.

The settlement resolves allegations in a lawsuit filed by Joshua Leighr, a former Kmart pharmacist, under the qui tam, or whistleblower provisions of the False Claims Act.  The act authorizes private parties, such as Mr. Leighr, to sue for fraud on behalf of the United States and to share in any recovery.  Mr. Leighr will receive approximately $248,500 of the settlement.   

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $24.9 billion through False Claims Act cases, with more than $15.9 billion of that amount recovered in cases involving fraud against federal health care programs.

This case was investigated jointly by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Western District of Missouri, the Department of Health and Human Services’ Office of Inspector General and the U.S. Postal Service’s Office of Inspector General.

The claims settled by today’s agreement are allegations only and there has been no determination of liability.

The case is captioned U.S. ex rel. Leighr v. Kmart Sears Holding Corporation and Kmart Corporation, Case No. 4:13cv00988-DGK (W.D. Missouri).

The United States has asked a federal court to permanently bar a Colorado man and the tax preparation business he operates from preparing federal tax returns for others, the Justice Department announced today.   

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

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

WASHINGTON - Estados Unidos le pidió a un tribunal federal que prohíba en forma permanente a un hombre de Colorado y la empresa de declaraciones de impuestos que administra, preparar declaraciones de impuestos federales para terceros, anunció hoy el Departamento de Justicia.   

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

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

Herrera filed Complaint

A Phenix City, Alabama, woman was sentenced to prison today in U.S. District Court for the Middle District of Alabama for her involvement in a stolen identity tax fraud scheme, announced 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.

Lasondra Miles Davis, 37, pleaded guilty earlier this year to one count of aggravated identity theft.  Chief U.S. District Judge W. Keith Watkins of the Middle District of Alabama sentenced Davis to serve 24 months in prison to be followed by one year of supervised release and ordered her to pay $1,941 in restitution to the Internal Revenue Service (IRS).  Davis’ mother, Teresa Floyd, pleaded guilty earlier this year to one count of conspiracy to defraud the United States and one count of aggravated identity theft.  Floyd will be sentenced on Oct. 15. 

According to court documents, between March 2011 and May 2014, Davis and Floyd operated several tax preparation businesses in the Phenix City area, including T & L Tax Service.  Davis obtained stolen identities which, according to allegations in the superseding indictment, Floyd then used to file more than 900 false federal income tax returns that claimed more than $2.5 million in tax refunds.  Davis, Floyd and others caused the fraudulently obtained refund checks to be cashed at several businesses in Alabama and Georgia.

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

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

The Justice Department announced today that it reached a settlement with Louisiana Crane & Construction LLC (Louisiana Crane), a crane and construction company headquartered in Eunice, Louisiana, that provides services to oilfields.  The settlement resolves a lawsuit filed on Aug. 29, 2014, by the Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC).

The lawsuit alleged that from at least Jan. 1, 2013, until at least Sept. 1, 2013, Louisiana Crane required workers who are not U.S. citizens to produce documents issued by the Department of Homeland Security as a condition of employment, but it did not make similar demands of U.S. citizens.  The anti-discrimination provision of the Immigration and Nationality Act (INA) prohibits employers from placing additional documentary burdens on workers during the employment eligibility verification process based on the worker’s citizenship status.

Under the settlement agreement, Louisiana Crane will pay $165,000 in civil penalties to the United States, establish a $50,000 back pay fund to compensate workers who lost wages because of the company’s practices, undergo monitoring for two years and train its employees on the INA’s anti-discrimination provision.

People who were authorized to work in the United States but were denied a job at Louisiana Crane, whose hire date was delayed by Louisiana Crane or were fired by Louisiana Crane between 2011 and 2015 because they could not show the documents the company requested to prove their work authorization, should contact OSC at (202) 305-0144.  Any unclaimed money from the $50,000 back pay fund will be donated to a non-profit organization in Texas or Louisiana.

“We see far too many cases of employers creating discriminatory barriers for immigrants who have permission to work in the United States,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “It is important that all employers examine their employment policies to make sure they are treating all workers fairly.”   

OSC is responsible for enforcing the anti-discrimination provision of the INA.  Among other things, the statute prohibits citizenship status and national origin discrimination in hiring, firing or recruitment or referral for a fee; unfair documentary practices; retaliation; and intimidation.  Trial Attorneys Liza Zamd and Silvia Dominguez-Reese and Paralegal Isabel Otero 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. 

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 for a fee should contact OSC’s worker hotline for assistance.

The United States filed a complaint seeking to permanently bar a Durant, Mississippi, woman and the tax preparation business she operates from preparing federal tax returns for others, the Justice Department announced today.

The civil complaint against Teresa Chism and her business, Lady T. Taxes, was filed in the U.S. District Court for the Southern District of Mississippi.  The complaint alleges that Chism prepares income tax returns for customers that fraudulently overstate the refunds due by falsely claiming refundable credits, including the Earned Income Tax Credit (EITC) and credits for education expenses.  The complaint further alleges that Chism frequently prepares a fabricated Internal Revenue Service (IRS) Form W-2, Wage and Tax Statement, to submit with a tax return in order to maximize the amount of EITC a customer claims.

According to the complaint, since 2010, Chism has prepared more than 2,845 tax returns, and audits of 220 returns uncovered a total of more than $1 million in tax credits that Chism’s customers were not entitled to claim.

Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams for 2015.  The IRS has some tips on its website for choosing a tax return preparer, and has launched a free directory of federal tax return 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 anunció hoy que ha llegado a un acuerdo con Louisiana Crane & Construction («Louisiana Crane»), una empresa de grúas y construcción con sede en Eunice, Luisiana que suministra servicios a campos petrolíferos. El acuerdo resolvió la demanda presentada el 29 de agosto del 2014 por parte de la Oficina del Consejero Especial para Prácticas Injustas en el Empleo Relacionadas a Inmigración (OSC, por sus siglas en inglés).

La demanda acusó que a partir de al menos del primero de enero del 2013 hasta al menos del primero de septiembre de 2013, Louisiana Crane, obligaba a los trabajadores que no eran ciudadanos estadounidenses a presentar documentos emitidos por el Departamento de Seguridad Nacional como condición de su empleo, pero no le exigieron nada parecido a los que sí eran ciudadanos de los EE. UU. La provisión antidiscriminatoria de la ley de Inmigración y Nacionalidad (INA, por sus siglas en inglés) prohíbe que los empleadores les pidan documentos adicionales a sus trabajadores durante el proceso de verificación de elegibilidad laboral por motivos del estatus de ciudadanía del trabajador.

Conforme al acuerdo, Louisiana Crane le pagará a los Estados Unidos una multa civil que asciende a $165.000, establecerá un fondo de pagos retroactivos de $50,000 para indemnizar a los trabajadores que no recibieron sus salarios a causa de las prácticas de la empresa, será sujeto al monitoreo durante dos años, y capacitará a sus empleados acerca de la provisión antidiscriminatoria de la INA.

Los individuos que fuesen autorizados para trabajar en los Estados Unidos pero que se les negó un puesto en Louisiana Crane, cuya fecha de contratación fue retrasada por parte de Louisiana Crane, o que fueron despedidos por Louisiana Crane entre el 2011 y el 2015 porque no pudieron enseñar los documentos que la compañía solicitaba para probar que cuentan con autorización para trabajar deberán contactar a la OSC al (202) 305-0144. Cualquier parte del fondo de $50,000 de pagos retroactivos que no se reclame se donará a una organización sin fines de lucro en Tejas o Luisiana.

«Nos encontramos demasiados casos de empleadores que crean obstáculos discriminatorios para inmigrantes que tienen autorización para trabajar en los Estados Unidos», declaró la Subprocuradora General Interina, Vanita Gupta, jefa de la División de Derechos Civiles. «Es fundamental que todos los empleadores examinen sus políticas laborales para asegurarse de que traten a todos sus trabajadores de una manera justa».

La OSC tiene la responsabilidad de aplicar la provisión antidiscriminatoria de la INA. Entre otras cosas, la ley prohíbe la discriminación por motivos de estatus de ciudadanía o país de origen en la contratación, el despido o el reclutamiento o la referencia por comisión, prácticas documentales injustas; las represalias o la intimidación. El caso lo gestionaron las Abogadas Litigantes Liza Zamd y Silvia Dominguez-Reese, juntas con la Asistente Legal Isabel Otero, las tres de la División de Derechos Civiles.

Para más información sobre 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 las 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 las personas con discapacidades auditivas); matricúlese para una conferencia en línea gratuita 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 postulantes o empleados que creen haber sido víctimas de discriminación por motivos de su ciudadanía, estatus migratorio o país de origen en la contratación, el despido o el reclutamiento o la referencia por comisión deberán llamar a la línea directa para trabajadores mencionada arriba y serán atendidos.

LCC Settlement Agreement (1.94 MB)

On Aug. 27, 2015, the Foreign Intelligence Surveillance Court (FISC) issued a primary order approving the government’s application to renew the Section 215 bulk telephony program.  The USA FREEDOM Act of 2015 banned bulk collection under Section 215 of the USA PATRIOT Act, but provided a new mechanism to allow the government to obtain data held by the providers.  To ensure an orderly transition to this new mechanism, the USA FREEDOM Act provided for a 180-day transition period during which the existing National Security Agency (NSA) bulk telephony metadata program may continue.  After considering an application filed shortly after the passage of the USA FREEDOM Act, on June 29, 2015, the court held that the continuation of the NSA’s bulk telephony metadata program during the transition period remains consistent with both the statute and the Fourth Amendment.  The authority under the court’s June 29 order was set to expire today, Aug. 28, 2015.

The government recently filed an application to renew the authority to collect bulk telephony metadata.  On Aug. 27, 2015, the court authorized the continued collection of telephony metadata through Nov. 28, 2015, the end of the 180-day transition period contemplated by the USA FREEDOM Act.  As of Nov. 29, 2015, both the 180-day transition period and the court’s authorization will have expired and the bulk collection of telephony metadata pursuant to Section 215 will cease.

As previously stated in a July 27, 2015, Joint Statement, the NSA has determined that analytic access to the historical metadata collected under Section 215 (any data collected before Nov. 29, 2015) will also cease on Nov. 29, 2015.  However, solely for data integrity purposes to verify the records produced under the new targeted production mechanism authorized by the USA FREEDOM Act, the NSA, subject to court approval, plans to allow technical personnel to continue to have access to the historical metadata for an additional three months.  Separately, the NSA remains under a continuing legal obligation to preserve its bulk 215 telephony metadata collection until civil litigation regarding the program is resolved, or the relevant courts relieve NSA of such obligations.  The telephony metadata preserved solely because of preservation obligations in pending civil litigation will not be used or accessed for any other purpose, and, as soon as possible, the NSA will destroy the Section 215 bulk telephony metadata upon expiration of its litigation preservation obligations.

As background, in January 2014, early last year in a speech at the Department of Justice, President Obama announced that the intelligence community would end the Section 215 bulk telephony metadata program as it previously existed.  The President directed the intelligence community and the Attorney General to develop options for a new approach to match the capabilities and fill gaps that the Section 215 program was designed to address without the government holding this metadata.  After carefully considering the available options, the President announced in March 2014 that the government should not hold this data in bulk, and that the data should remain at the telephone companies with a legal mechanism in place that would allow the government to obtain data pursuant to individual orders from the FISC approving the use of specific numbers for such queries.

The President also noted, however, that legislation would be required to implement this new approach and the administration worked closely with Congress to enact the President’s proposal.  On June 2, 2015, Congress passed and President Obama signed the USA FREEDOM Act of 2015, which reauthorized several important national security authorities; banned bulk collection under Section 215 of the USA PATRIOT Act, under the pen register and trap and trace provisions found in Title IV of FISA, and pursuant to National Security Letters; and adopted the new legal mechanism proposed by the President.

As in past primary orders in effect since February 2014, and consistent with the President’s direction, the court’s new primary order requires that during the transition period, absent a true emergency, telephony metadata can only be queried after a judicial finding that there is a reasonable, articulable suspicion that the selection term is associated with an approved international terrorist organization.  In addition, the query results must be limited to metadata within two hops of the selection term instead of three.

The Office of the Director of National Intelligence will post the new primary order to its website and icontherecord.tumblr.com after it has undergone a classification review.

The new primary order is available here and icontherecord.tumblr.com.

FISC Primary Order

EDF Resource Capital Inc. and its CEO, Frank Dinsmore, have agreed to resolve allegations that they violated the False Claims Act and otherwise failed to remit payments owed to the Small Business Administration (SBA) under the 504 loan program, the Department of Justice announced today.  Under the settlement agreement, EDF and Dinsmore have agreed to make payments and turn over certain assets to the United States for a total settlement of approximately $6 million.

“Today’s settlement demonstrates our commitment to ensure that companies and individuals who elect to participate in federal programs live up to their statutory and contractual commitments, play by the rules, and deal honestly and openly with the federal government,” 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 side-by-side with the Small Business Administration to ensure that fraud committed by SBA program participants is thoroughly investigated and, where appropriate, vigorously prosecuted.”

The SBA 504 loan program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.  Under the program, local lenders like EDF are responsible for arranging, servicing and collecting on these small business loans, which are guaranteed, in part, by the SBA.  In return for the authority to make determinations on 504 loans without prior SBA approval, EDF was required to bear a share of any losses suffered by the SBA on such loans and to maintain a loan loss reserve fund (LLRF) to help ensure payment of its loss-sharing obligations. 

Today’s settlement resolves claims that EDF and Dinsmore violated the False Claims Act in connection with EDF’s failure to maintain adequate reserves in its LLRF.  EDF allegedly was required to fund its LLRF at a level determined by the riskiness of its 504 loan program portfolio yet knowingly concealed from the SBA hundreds of troubled loans to avoid its obligation to fully fund its LLRF.

The settlement also resolves a lawsuit filed by the United States against EDF and a related entity, Redemption Reliance LLC, alleging that EDF failed to remit required payments to the SBA to satisfy its loss-sharing obligations.  The lawsuit also alleges that the SBA agreed to advance funds to EDF in connection with certain defaulted 504 loans but that, after EDF assigned the loan documents for these loans to Redemption Reliance, neither EDF nor Redemption Reliance remitted the monies owed on these loans to the SBA. 

“The 504 Loan Program provides small businesses with access to the capital they need to start, grow and succeed,” said General Counsel Melvin F. Williams Jr. of the SBA.  “SBA has no tolerance for fraud, waste, or abuse by participants in the 504 Loan Program.  Working with the attorneys at the Department of Justice and SBA’s Office of Inspector General, this settlement marks the successful conclusion of a major enforcement action.”        

“The defendants’ misrepresentations to SBA knowingly put the taxpayer’s money at risk,” said Inspector General Peggy E. Gustafson of the SBA.  “As stewards of the taxpayers’ money, the SBA must guard against losses within its loan portfolios.  In this instance, the actions of the defendants did not allow SBA to protect taxpayers from such losses.  I want to thank the Department of Justice and our investigative partners for achieving this settlement.”

The settlements were the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the SBA’s Office of General Counsel and the SBA’s Office of Inspector General Los Angeles Field Office’s Counsel Division and Investigations Division.

The lawsuit is captioned United States v. EDF Resource Capital, Inc., et al., Case No. 13‑cv-389 (E.D. Cal.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability. 

An Alabama resident and U.S. Postal Service (USPS) employee was arrested today after being indicted by a grand jury sitting in Montgomery, Alabama, on one count of conspiracy to defraud the United States, 14 counts of mail fraud, 14 counts of aggravated identity theft and 14 counts of embezzling mail, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama.

According to the allegations in the indictment, Elizabeth Grant of Seale, Alabama, was a USPS mail carrier.  In 2013, Grant became involved in a stolen identity tax refund fraud conspiracy.  Grant’s co-conspirators obtained stolen personal identification information from several sources, including from an Alabama state database, and then prepared and filed false federal income tax returns for tax year 2012.  The co-conspirators directed the tax refund checks from the U.S. Treasury to be mailed to addresses located on Grant’s postal route.  Grant would then be paid a fee to provide the checks to her co-conspirators.  The conspirators allegedly filed more than 700 false returns that claimed more than $1.5 million in refunds. 

If convicted, Grant faces a statutory maximum sentence of 10 years in prison for the conspiracy count, 20 years in prison for each count of mail fraud, five years in prison for each count of embezzling mail and a mandatory minimum sentence of two years in prison for aggravated identity theft.  She also faces substantial monetary penalties and restitution. 

Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck Jr. commended special agents of IRS-Criminal Investigation and the USPS Office of the Inspector General, who investigated the case, and Trial Attorneys Michael C. Boteler, Gregory Bailey and Robert J. Boudreau of the Tax Division and Assistant U. S. Attorney Jonathan Ross of the Middle District of Alabama, who are prosecuting this case.

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

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

A San Diego tax return preparer was arrested today after being indicted by a federal grand jury sitting in the Southern District of California on 36 counts of aiding and assisting in the preparation of false federal income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

The indictment alleges that Marla Lynn Cunningham owned and operated Cunningham’s Tax Service, a tax preparation business located in El Cajon, California.  According to the charges in the indictment, in 2010, 2011 and 2012, Cunningham prepared false individual income tax returns for others, which included false Schedules C that reported fictitious business losses and false Schedules A that reported inflated or fictitious itemized deductions, such as charitable contributions and medical, dental and unreimbursed employee expenses.  Cunningham also attached forms claiming fictitious education credits that her clients were not entitled to receive.

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

Acting Assistant Attorney General Ciraolo commended the special agents of the Internal Revenue Service–Criminal Investigation, who investigated the case, and Trial Attorneys Matthew R. Hoffman and Benjamin J. Weir of the Tax Division, who are prosecuting the case.  Ciraolo also thanked the U.S. Attorney’s Office of the Southern District of California for their substantial assistance.

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

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

A resident of Lima, Peru, was indicted by a Miami grand jury on fraud and attempted extortion charges for allegedly operating call centers that lied to and threatened Spanish-speaking victims in the United States, convincing them to pay fraudulent settlements. 

Cesar Luis Kou Reyna, 40, was charged in a 33-count indictment with conspiracy, mail fraud, wire fraud and attempted extortion.

The announcement was made by Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida and Inspector in Charge Ronald J. Verrochio of the U.S. Postal Inspection Service (USPIS) Miami Division. 

“The Department of Justice is committed to addressing the noted increase in fraud schemes targeting specific communities of U.S. residents,” said Principal Deputy Assistant Attorney General Mizer.  “As this case and other recent examples show, we will track down those responsible for defrauding American consumers, no matter where the fraudster resides, what language the fraudster uses or which population he or she targets.”

“The U.S. Postal Inspection Service’s investigations have no borders when it comes to investigating crimes committed in the U.S. or on American victims,” said Inspector in Charge Verrochio.  “Postal inspectors will track down criminals, anywhere in the world, and bring them to justice.”

According to allegations in the indictment, Kou Reyna owned and controlled a corporation, Fonomundo FC, which operated call centers in Peru and payment and fulfilment operations in Miami.  Fonomundo FC and its affiliates in South America used Internet-based telephone calling services to place cold calls to Spanish-speaking residents in the United States.  The callers falsely claimed to be attorneys and sometimes claimed to be government representatives.  Callers claimed that victims had failed to pay for or receive a delivery of products, although the victims had not ordered these products. 

According to the indictment, callers claimed that victims would be sued and that the companies would obtain large monetary judgements against them.  Some victims were also threatened with negative marks on their credit reports, imprisonment or deportation.  The callers said these threatened consequences could be avoided if the victims immediately paid “settlement fees.”  Many victims made monetary payments based on these threats. 

Kou Reyna was originally charged by criminal complaint and was arrested by USPIS on July 31 in Houston.  He has remained incarcerated since his arrest.

Principal Deputy Assistant Attorney General Mizer commended USPIS for its investigative efforts and thanked the U.S. Attorney’s Office of the Southern District of Florida for its contributions to the case.  The case is being prosecuted by Trial Attorneys Phil Toomajian and Stephen T. Descano of the Civil Division’s Consumer Protection Branch.

The charges in the indictment are only allegations, and the defendant is presumed innocent unless and until proven guilty.

A Brunswick, Maine, businessman was sentenced to prison today for tax crimes in U.S. District Court for the District of Maine, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s  Tax Division and U.S. Attorney Thomas E. Delahanty II of the District of Maine.

F. William Messier, 71, and David E. Robinson, 78, both of Brunswick, were convicted on April 3 after a five-day jury trial of conspiracy to defraud the United States and corruptly endeavoring to impede the lawful administration of the Internal Revenue Code.  U.S. District Judge D. Brock Hornby of the District of Maine sentenced Messier to serve one year and one day in prison and three years of supervised release.  The court also ordered Messier to pay a $15,000 fine and file federal income tax returns dating back to 2005.  Robinson’s sentencing has been scheduled for Oct. 5. 

According to trial testimony, Messier, doing business as Oak Hill Communications, earned income generated on leases from telecommunication towers located on his Brunswick property.  From 1999 through 2014, Messier engaged in conduct that was intended to impede and obstruct the enforcement of the Internal Revenue laws, including the provision of false tax documents to customers, obstruction of IRS collection activities and extensive use of cash.  In 2012, the IRS assessed taxes and interest against Messier totaling $172,094 for tax years 2000 to 2004.  Robinson claimed to be the “Interim Attorney General” of the “Maine Republic Free State” and advocated that people not pay federal and state taxes.  According to witness testimony, after the IRS sent Notices of Levy to Messier’s customers to collect the taxes due and owing, Robinson and Messier presented the IRS with a fake money order for the amount due by Messier and other false documents.  Messier and Robinson also urged customers not to honor the levies or to pay the IRS, directed customers to pay Messier in cash, and sent threatening and misleading correspondence to Oak Hill Communications customers urging them not to cooperate with the IRS.  The defendants also filed civil lawsuits against some of Messier’s customers and employees of the IRS, which were dismissed in separate proceedings.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Delahanty commended the special agents of IRS-Criminal Investigation, who investigated the case, and Assistant U.S. Attorney James W. Chapman Jr. of the District of Maine and Assistant Chief Karen E. Kelly of the Tax Division, who are prosecuting the case.