District Not Recorded

The Department of Justice announced today that Hypothekarbank Lenzburg AG (HBL) has reached a resolution under the department’s Swiss Bank Program.

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

Under the program, banks are required to:

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

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

• Cooperate in treaty requests for account information;

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

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

• Pay appropriate penalties.

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

According to the terms of the non-prosecution agreement signed today, HBL 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.

HBL was founded in 1868 and is headquartered in Lenzburg, Switzerland.  Its principal business, focused on the Canton of Aargau, Switzerland, is issuing mortgages on real property and lending to businesses.

HBL offered a variety of traditional Swiss banking services that it knew could assist, and that did assist, U.S. clients in the concealment of assets and income from the Internal Revenue Service (IRS).  For example, HBL, upon client request, did not send mail associated with some U.S.-related accounts to the United States.  In addition, HBL offered numbered accounts to its clients, a service by which access to information about an account, including the identity of the accountholder, was limited to only certain employees of HBL.  In a handful of instances, the accountholders of U.S.-related accounts who refused to provide a Form W-9 or who admitted that they were not tax compliant withdrew significant amounts of cash or physical assets when HBL forced these accounts to be closed.

In or about 2008, Swiss bank UBS AG publicly announced that it was the target of a criminal investigation by the 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.  HBL opened one account for a U.S. person who exited UBS.  For another long-standing holder of a U.S.-related account, HBL received a transfer of funds from an account held at UBS into a pre-existing account at HBL.

Another accountholder who resided in the United States for many years had two accounts, one of which was a numbered account.  In 2012, the accountholder’s relationship manager requested a Form W-9 for the numbered account and the accountholder refused to provide one.  As a result, the relationship manager directed the accountholder to close the numbered account.  Thereafter, the accountholder came to Lenzburg to close the numbered account.  The accountholder withdrew 240,000 Swiss francs and 12,000 euros and purchased precious metals in the amount of 318,000 Swiss francs.

Since Aug. 1, 2008, HBL had 96 U.S.-related accounts with an aggregate value of $69.8 million.  HBL’s average annual revenue attributable to U.S.-related accounts in the form of fees, commissions and earnings on client funds that were loaned out by HBL was $198,000, or a total of $1.2 million since Aug. 1, 2008.  HBL will pay a penalty of $560,000.

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

Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division thanked the IRS, and in particular, IRS-Criminal Investigation and the IRS Large Business and 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.

Dean Daniels, 52, Richard Smith, 57, Brenda Daniels, 45 and William Bradley, 58, all of Florida, pleaded guilty and were sentenced today in U.S. district court for charges related to a scheme involving the false production of biodiesel.

Dean Daniels was sentenced to 63 months incarceration, Bradley was sentenced to 51 months incarceration, Smith was sentenced to 41 months incarceration and Brenda Daniels was sentenced to 366 days incarceration. In addition, the court sentenced the defendants to pay $23 million in restitution.

Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division, U.S. Attorney Carter M. Stewart for the Southern District of Ohio, Acting Special Agent in Charge Troy N. Stemen for the Internal Revenue Service Criminal Investigation (IRS) and Acting Special Agent in Charge Jeffrey Martinez of  the Environmental Protection Agency’s (EPA) Criminal Enforcement Program in Ohio and Regional Special Agent in Charge Max D. Smith of the Department of Transportation’s Office of Inspector General announced the sentences handed down today by Senior U.S. District Court Judge James L. Graham.

According to court documents, the defendants profited by unjustly generating and selling biodiesel credits (RINs) and unjustly claiming biodiesel tax credits for the production and blending of fuel that was not actually biodiesel.

“Congress enacted incentives for the production of biofuels to make the United States stronger and more energy independent and to move our energy economy into the 21st century,” said Assistant Attorney General Cruden.  “The fraud perpetrated by the defendants threatens these important public policies.  The Justice Department will vigorously prosecute those seeking to line their pockets using scams like this one.”

The defendants were all employees and officers of New Energy Fuels LLC, a business in Waller, Texas, that claimed to process animal fats and vegetable oils into biodiesel.  The defendants subsequently relocated, operating a similar scheme at Chieftain Biofuels LLC in Logan, Ohio.

The defendants would purchase low-grade feedstock and perform minimal processing to produce a low-grade fuel.  The fuel was not biodiesel, however, the defendants would represent to the EPA that they had produced biodiesel.  They would generate fraudulent biodiesel RINs and sell them to various third parties.  Biodiesel RINs cannot be generated unless the biodiesel produced meets industry standards.  In total, the defendants sold over $15 million worth of fraudulent biodiesel RINs.

The defendants also made false claims to the IRS in order to obtain the biodiesel tax credit that they were not eligible to receive.  Throughout 2009, 2010 and 2011, refundable tax credits were available for renewable fuel producers.  If companies complied with IRS regulations, they could earn one dollar per gallon of biodiesel.  It was illegal to claim this tax credit unless the biodiesel was produced, blended and sold in compliance with rules and regulations.  Among other requirements, the biodiesel had to meet industry standards, which the defendant’s fuel did not.  In total, the defendants claimed over $7 million in false biodiesel tax credits.

In addition, New Energy Fuels’ production process generated substantial hazardous by-products.  Defendant Dean Daniels arranged for an employee of New Energy Fuels to transport the wastes off-site at night.  That employee, Lonnie Perkins, previously pleaded no-contest in Texas to several charges related to the dumping of hazardous waste in and around the city of Houston.

“The Renewable Fuel Standard helps reduce the climate impact of transportation fuel sold in this country,” said Acting Special Agent in Charge Martinez.  “The criminal activity by these defendants has real consequences.  The defendants manipulated and utilized federal governmental programs to line their pockets by fraud.  These guilty pleas demonstrate EPA’s commitment, working closely with our partners at the Department of Justice, to pursue these criminal cases vigorously.  Companies and their managers need to understand there are serious consequences to skirting the rules and undermining the integrity of an EPA program.”

“Today’s sentencings mark the successful end of an investigation that uncovered a complicated fraudulent scheme that generated millions of dollars through false biodiesel tax credits,” said Acting Special Agent in Charge Stemen.  “We want everyone to take advantage of the deductions and credits to which they are entitled by law; however, no one is entitled to defraud the government."      

“The Office of Inspector General is committed to investigating and seeking prosecution of those who choose to endanger the public by illegally transporting, distributing, or disposing of hazardous materials,” said Regional Special Agent in Charge Smith.  “Today’s sentencing should send a clear warning that these fraudulent actions and illegal hazmat violations will not be tolerated.”

Each of the defendants pleaded guilty to conspiracy to commit wire fraud and to defraud the United States.  Dean Daniels also pleaded guilty to offering a hazardous material for transport without providing or affixing proper placards.

Assistant Attorney General Cruden and U.S. Attorney Stewart commended the cooperative investigation by law enforcement, including the Houston Police Department, as well as Department of Justice Trial Attorney Adam Cullman and Assistant U.S. Attorney J. Michael Marous, who represented the United States in this case. 

Two Ohio residents were arrested today after being indicted on Aug. 25 by a federal grand jury sitting in Dayton, Ohio, for conspiracy and tax-related crimes, announced Acting Deputy Assistant Attorney General Bruce M. Salad of the Justice Department’s Tax Division. 

According to the 23-count indictment, Fesum Ogbazion, of Beavercreek, Ohio, and Kyle Wade, formerly of West Chester, Ohio, were indicted on one count of impeding the administration of the Internal Revenue Code, one count of conspiracy to commit wire fraud and five counts of wire fraud.  Ogbazion is also charged with six counts of money laundering, one count of evasion of payment of employment taxes, eight counts of failure to collect and pay over employment taxes and one count of bank fraud. 

According to the allegations in the indictment, Ogbazion owned and controlled ITS Financial LLC, which was the national franchisor of Instant Tax Service (ITS), a tax preparation business Ogbazion founded that claimed to have more than 1,100 franchise locations throughout the United States in 2009.  Wade was the vice president of financing for ITS and owned multiple ITS franchises.

From about January 2004 through November 2012, Ogbazion and Wade executed a scheme to obstruct the Internal Revenue Service (IRS), wherein numerous ITS franchises filed false federal income tax returns without valid Forms W-2 and without the permission of their taxpayer clients.  The false returns included false and inflated sole proprietorship Schedule C income in an attempt to increase the Earned Income Tax Credit.  Over the course of several years, Ogbazion also instructed an ITS employee to electronically file large volumes of unsigned tax returns on the first day of the “tax filing season,” then falsely backdated customer filing authorizations.  In an attempt to obstruct IRS civil compliance audits, ITS maintained and filed false documents with the IRS, including fabricated Forms W-2 created by ITS employees using tax preparation software, and forged client signatures on various false IRS forms.

From about December 2009 through November 2012, Ogbazion and Wade also conspired to generate loan and tax return preparation fees for ITS and its franchises by luring low-income and unsophisticated taxpayers into ITS franchises through a nationwide advertising campaign that offered customers tax refund anticipation loans.  Despite the fact that ITS did not have an independent lender that could fund the promised loans, ITS collected loan application and tax preparation fees from its customers.  For the 2011 tax filing season, Ogbazion and Wade represented to ITS staff, franchises and customers that refund anticipation loans were obtained through an independent lender, even though Ogbazion owned the purported lender, which had limited lending capabilities.  Ogbazion knew that the overwhelming majority of loan applications would be denied.  In total, the indictment alleges that ITS generated more than $12.5 million in fees in 2010, and more than $3.1 million in fees in 2011 from this loan scheme.

The indictment also alleges that Ogbazion was responsible for ITS’ and TaxMate LLC’s federal employment payroll taxes.  He failed to pay over approximately $1.26 million in payroll taxes due from these businesses during four tax quarters in 2009 and 2010.  Ogbazion also evaded the IRS’ attempts to collect ITS and TaxMate federal payroll taxes by directing business revenue to nominee accounts, placing assets in the names of nominee entities and making false statements to an IRS revenue officer during the course of collection activity, among other acts of concealment.

If convicted of impeding the administration of the Internal Revenue Code, the defendants face a statutory maximum sentence of three years in prison and a fine of up to $250,000.  If convicted of conspiracy to commit wire fraud and wire fraud, the defendants face a statutory maximum sentence of 30 years in prison and a fine of up to $1 million for each count.  If Ogbazion is convicted of money laundering, he faces a statutory maximum sentence of 20 years in prison and a fine of up to $500,000.  If convicted of tax evasion and failure to pay over employment taxes, Ogbazion faces a statutory maximum sentence of five years in prison and up to a $250,000 fine for each count.  Finally, Ogbazion faces a statutory maximum sentence of 30 years in prison and up to a $1 million fine if he is convicted of bank fraud.

The Tax Division commended the special agents of IRS-Criminal Investigation, who investigated the case, and Senior Litigation Counsel Corey Smith and Trial Attorney Mark S. McDonald of the Tax Division and Assistant U.S. Attorney Jessica Knight of the Southern District of Ohio, who are prosecuting the case. 

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

Attorney General Loretta E. Lynch released the following statement today on the passing of civil rights leader Amelia Boynton Robinson:

“With the passing of Amelia Boynton Robinson, America has lost a spirited advocate, a passionate activist and a trailblazing champion in the fight for civil rights and social justice.  Driven by her faith and her moral convictions, Ms. Boynton Robinson stood on the front lines of the Civil Rights Movement in Selma and beyond, inspiring countless men, women and children to stand up to injustice, to speak out for equality and to demand their opportunity to shape the future of this nation.  Her legacy continues to be felt today – at the Department of Justice and across the country – in the expanded voting rights she helped to win; in the ongoing work of equality she helped to advance; and in the desire for a more just society that will always drive us forward.  While Ms. Boynton Robinson’s journey on this earth has come to an end, the principles to which she dedicated her life – and the spirit of determination she brought to her mission – will forever march on.  My thoughts and prayers are with her family, her friends and all who loved her.”

A leader of a human trafficking ring pleaded guilty yesterday in federal court to charges that he lured Guatemalan minors and adults into the United States on false pretenses, then used threats of physical harm to compel their labor at egg farms in Ohio.  The guilty plea was announced by Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division, and U.S. Attorney Steven M. Dettelbach of the Northern District of Ohio.

Aroldo Castillo-Serrano, 33, of Guatemala, pleaded guilty to a labor trafficking conspiracy, one count of labor trafficking, one count of witness tampering and a related immigration offense.  His co-conspirator, Conrado Salgado Soto, 52, of Mexico, pleaded guilty on Aug. 5 to participating in the same labor-trafficking conspiracy, as well as an immigration offense, the Justice Department also announced today.  The guilty pleas are pending approval from a federal court judge and are not final until that approval is granted.

According to the indictment, which was unsealed on July 2, the defendants and their associates recruited workers from Guatemala, some as young as 14 or 15 years old, falsely promising them good jobs and a chance to attend school in the United States.  The defendants then smuggled and transported the workers to a trailer park in Marion, Ohio, where they ordered them to live in dilapidated trailers and to work at physically demanding jobs at Trillium Farms for up to 12 hours a day for minimal amounts of money.  The work included cleaning chicken coops, loading and unloading crates of chickens, de-beaking chickens and vaccinating chickens.

The defendants threatened workers with physical harm and withheld their paychecks in order to compel them to work.  Castillo-Serrano also pleaded guilty to convincing a witness to lie to the FBI about the scheme.  Eight minors, as young as 14, and two adults were identified in the indictment as victims of the forced labor scheme.

“These defendants exploited children who were poor, vulnerable and entirely at their mercy,” said Principal Deputy Assistant Attorney General Gupta.  “We will pursue and prosecute such behavior with all of the tools at our disposal.”

“Our laws and a sense of common decency require that people not be treated like commodities,” said U.S. Attorney Dettelbach.  “This defendant treated workers as if they were less important than the eggs that they would help produce.  Now he is going to learn the hard way that in this nation, there is a big difference."

“The defendants forced adults and children to work and live in deplorable conditions in exchange for false promises,” said Special Agent in Charge Stephen D. Anthony of the FBI Cleveland Division.  “These reprehensible actions are unacceptable and the FBI will continue to work with our partners to bring to justice those that engage in human trafficking.”

Charges are still pending against a third co-conspirator, Ana Angelica Pedro Juan, 21, of Guatemala.  Pedro Juan is charged with labor trafficking and conspiracy to commit labor trafficking, as well as witness tampering and making false statements to law enforcement.  Two other defendants, Conrado Salgado-Borbon and Bartolo Dominguez, have pleaded guilty to immigration offenses in connection with this case.

The forced labor counts and the witness tampering count each carry a statutory maximum sentence of 20 years in prison.  The charges involving immigration violations and false statements carry statutory maximum sentences of five years in prison.

The investigation is ongoing.  The case is being investigated by the FBI Cleveland Office’s Mansfield Resident Agency, the Department of Homeland Security, the Marion Police Department and the Marion County Sherriff’s Office.  The case is being jointly prosecuted by Trial Attorney Dana Mulhauser of the Civil Rights Division and Assistant U.S. Attorney Chelsea Rice of the Northern District of Ohio.

A federal jury in Miami late yesterday convicted the former medical director of, and three therapists employed by, a now-defunct health care provider of conspiracy to commit health care fraud and related charges for their roles in a scheme to fraudulently bill Medicare and Florida Medicaid more than $63 million.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge George L. Piro of the FBI’s Miami Field Office and Special Agent in Charge Shimon Richmond of the U.S. Department of Health and Human Services-Office of Inspector General’s (HHS-OIG) Miami Regional Office made the announcement.

Roger Rousseau, 73, of Miami; Doris Crabtree, 62, of Miami; Angela Salafia, 68, of Miami Beach, Florida; and Liliana Marks, 48, of Homestead, Florida, were found guilty of conspiracy to commit health care fraud.  In addition, Rousseau was convicted of two counts of health care fraud.  Sentencing is scheduled for Nov. 6, 2015, before U.S. District Judge Robert N. Scola Jr. of the Southern District of Florida.

Rousseau was the former medical director of Health Care Solutions Network Inc. (HCSN), a now-defunct partial hospitalization program (PHP) that purported to provide intensive treatment for mental illness.  Crabtree, Salafia and Marks were therapists who worked for HCSN.

According to the evidence presented at trial, from approximately 2004 through 2011, HCSN billed Medicare and Medicaid for mental health services that were not medically necessary or never provided, and that HCSN paid kickbacks to assisted living facility owners and operators in Miami who, in exchange, referred beneficiaries to HCSN.

The trial evidence showed that Rousseau routinely signed what he knew to be fabricated and altered medical records without reviewing the substance of the records and, in most instances, without ever meeting with the patients.  The evidence at trial also demonstrated that Crabtree, Salafia and Marks fabricated medical records to support HCSN’s false and fraudulent claims for reimbursement for PHP services.

In total, HCSN submitted approximately $63.7 million in false and fraudulent claims to Medicare and Medicaid.  Medicare and Medicaid paid approximately $28 million on those claims.

In November 2014, following a jury trial, co-defendants Blanca Ruiz and Alina Fonts were convicted of conspiracy to commit health care fraud, and Fonts also was convicted of health care fraud.  In February 2015, both Ruiz and Fonts were sentenced to serve six years in prison.

The case was investigated by the FBI and HHS-OIG, 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 of the Southern District of Florida.  The case was prosecuted by Trial Attorneys Allan J. Medina, Lisa H. Miller and Bryan D. Fields 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 over 2,300 defendants who collectively have billed the Medicare program for over $7 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are 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 husband and wife residing in Lewis Center, Ohio, were sentenced to prison in U.S. District Court today for their roles in a fraud scheme related to the company Imperial Integrative Health Research and Development LLC (Imperial) and its product, OXYwater, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Carter M. Stewart of the Southern District of Ohio.

Preston J. Harrison, 43, and Lovena Harrison, 42, were sentenced by U.S. District Judge Gregory L. Frost of the Southern District of Ohio.  Preston Harrison was sentenced to serve 83 months in prison and three years of supervised release, and ordered to pay $375,985.15 in restitution to the Internal Revenue Service (IRS) and $8,840,706 to victims of the fraud, and to forfeit $1.1 million, including two vehicles, eight weapons, cash and the contents of a bank account.  Lovena Harrison, Preston Harrison’s wife, was sentenced to serve one year and one day in prison and three years of supervised release, and ordered to pay $375,985.15 in restitution to the IRS. 

“The sentences imposed today reflect the department’s commitment to investigating and vigorously prosecuting individuals who defraud investors, misappropriate funds to finance lavish lifestyles and file false tax returns to conceal their ill-gotten gains,” said Acting Assistant Attorney General Ciraolo.  “Like the Harrisons, those who engage in such conduct will pay a heavy price.”

The couple went to trial in March and were convicted of multiple crimes.  Preston Harrison’s business partner, Thomas E. Jackson, 40, of Powell, Ohio, was also convicted at trial for his role in the scheme and is scheduled to be sentenced on Oct. 1.  Preston Harrison was convicted of conspiracy to defraud the United States and filing a false income tax return, conspiracy to commit wire fraud, conspiracy to commit money laundering and 12 counts of money laundering.  Lovena Harrison was convicted of conspiracy to defraud the United States and filing a false income tax return, and structuring financial transactions to evade currency reporting requirements.  Jackson was convicted of conspiracy to commit wire fraud, conspiracy to commit money laundering, eight counts of wire fraud and 12 counts of money laundering. 

“Preston Harrison and his co-conspirators made OXYwater appear to be a lucrative and profitable financial investment, touting investments and endorsements from athletes, a musician and others,” said U.S. Attorney Stewart.  “After they convinced folks to invest, they misappropriated that money to fuel their own lavish lifestyle, buying items like jewelry, luxury vehicles, weapons and swimming pools.”

“Today’s sentencings mark the successful end of an investigation that uncovered an investment fraud scheme laced with a web of financial lies that generated millions of dollars through false promises and deceit,” said Acting Special Agent in Charge Troy N. Stemen of the IRS-Criminal Investigation (CI) Cincinnati Field Office.  “Investment fraud schemes are often described as a house of cards.  The underlying structure can fall apart at any time and expose the individuals responsible.”

“The Harrisons and their business partner took advantage of unsuspecting investors to line their own pockets,” said Special Agent in Charge Angela L. Byers of the FBI’s Cincinnati Division.  “Hopefully they will now understand that their irresponsible actions have real consequences.”

According to court testimony, Jackson and Preston Harrison operated Imperial, based in Westerville, Ohio, and developed OXYwater, a beverage that promoters claimed was an all-natural, vitamin-enhanced sports drink that contained added oxygen for improved physical performance.

The defendants engaged in a scheme to deceive the investors in Imperial about Imperial and OXYwater’s structure, composition, finances, sales and profits in order to make the company appear to be a lucrative and profitable financial investment.  Jackson and Preston Harrison produced and sent false and fraudulent documents intended to deceive investors in order to obtain additional investments in Imperial.  They then misappropriated that money for their own personal use, including the purchase of jewelry, a Cadillac Escalade, a BMW vehicle, weapons, clothing, home improvements and a swimming pool.

Between August 2010 and spring 2013, Jackson and Preston Harrison misappropriated approximately $2 million of the investors’ funds.  The defendants’ scheme caused investors to suffer substantial losses when the corporation was forced to declare bankruptcy with no assets.  As a result of the defendants’ conduct, investors lost approximately $9 million.

In 2011, Preston Harrison misappropriated approximately $1.1 million from Imperial, which he and Lovena Harrison diverted into an account in the name of a daycare business and used for personal expenses.  The Harrisons did not report the money as income on their 2011 income tax return.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Stewart commended special agents of IRS-CI and FBI, who investigated the case, as well as Assistant U.S. Attorney Jessica Kim of the Southern District of Ohio and Trial Attorney Jason Scheff of the Tax Division, who prosecuted the case.

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

An indictment was unsealed yesterday charging an Alabama man with multiple tax-related crimes, including one count of conspiracy to defraud the United States, three counts of wire fraud, four counts of stealing U.S. Treasury funds and four counts of aggravated identity theft, 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, returned by a federal grand jury sitting in Montgomery, Alabama, Tavarious Jackson, of Montgomery County, Alabama, along with several co-conspirators, used stolen personal identification information to prepare and file false federal income tax returns.  From about February 2011 through April 2013, the conspirators filed more than 500 false returns that fraudulently claimed more than $1 million in tax refunds. 

If convicted, Jackson faces a statutory maximum sentence of 10 years in prison for conspiracy, 20 years in prison for each count of wire fraud, 10 years in prison for each count of stealing government funds and a mandatory minimum sentence of two years in prison for aggravated identity theft.  Jackson 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, who investigated the case, and Trial Attorneys Gregory Bailey and Robert 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.

The Justice Department announced today that it reached a settlement with Nebraska Beef Ltd., a meat packing company headquartered in Omaha, Nebraska.  The settlement resolves an investigation by the Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) into whether the company was engaging in employment discrimination in violation of the Immigration and Nationality Act (INA).  In particular, OSC investigated whether the company was requiring non-U.S. citizen employees, because of their citizenship status, to present proof of their immigration status for the employment eligibility verification process.

The department’s investigation found that the company required non-U.S. citizens, but not similarly-situated U.S. citizens, to present specific documentary proof of their immigration status to verify their employment eligibility.  The INA’s anti-discrimination provision prohibits employers from making documentary demands based on citizenship or national origin when verifying an employee’s authorization to work.

“The department is committed to ensuring that individuals who are authorized to work in the United States can support their families and contribute to our country’s economic growth without facing unnecessary and discriminatory barriers to employment,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “We will vigorously enforce the law to remove such barriers where we find them, and ensure that affected individuals have a means of seeking relief.”  

Under the settlement agreement, Nebraska Beef Ltd. will pay a $200,000 civil penalty to the United States and will establish an uncapped back pay fund to compensate individuals who lost wages because of the company’s practices.  The settlement also requires the company to undergo compliance monitoring for two years, train its employees on the anti-discrimination provision of the INA, and to review and revise its office policies.  For more information on the back pay fund or to make a claim for lost wages, please call 202-616-2603 or email OSC.NBClaims@usdoj.gov. 

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 Katherine E. Lamm and Silvia Dominguez-Reese of the Civil Rights Division investigated this matter. 

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.

Nebraska Beef Settlement Agreement (720.79 KB)

Jason A. Halek, 41, of Southlake, Texas, was indicted in federal court in Bismarck, North Dakota, on 13 felony charges stemming from the operation of a saltwater disposal well near Dickinson, in Stark County, North Dakota, the Justice Department announced.

Halek was charged with one count of conspiracy to violate the Safe Drinking Water Act and defraud the United States.  He was also charged with four counts of violating the Safe Drinking Water Act, four counts of making false statements and four counts of obstructing grand jury proceedings.

The well, named the Halek 5-22, received “produced water” constituting “brine and other wastes” commonly and generically referred to as “saltwater.”  “Saltwater” in this context covers a wide array of drilling waste fluids, including hydraulic fracturing fluid, which is water combined with chemical additives such as biocides, polymers and “weak acids.”  The Environmental Protection Agency (EPA) has stressed that this water is often saltier than seawater and can “contain toxic metals and radioactive substances.”

Previously, on Sept. 26, 2014, Nathan Garber pleaded guilty to multiple felony counts relating to the well.

“Our nation’s energy independence and security is enhanced by the safe, responsible, and lawful extraction of domestic energy, but it is undermined when laws are abused in a race to profit,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “The American people expect nothing less than legal behavior from those involved in oil and gas development and the Justice Department will vigorously prosecute those who do not honor this obligation.”

“Oil and gas production must be safe and legal every step of the way, including the treatment and disposal of drilling byproducts,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance.  “People who deliberately violate rules that protect drinking water from contamination put communities at risk.  These charges show that EPA takes this very seriously and will hold violators accountable.”

According to the indictment, Halek conspired with others, including Garber, in a number of coordinated and illegal acts, including injecting saltwater into the well without first having the state of North Dakota witness a test of the well’s integrity and continuing to inject saltwater after failing a Feb. 2, 2012 pressure test.  Halek is also charged under the Safe Drinking Water Act with injecting fluids down the “annulus” or “backside” of the well in violation of the well’s permit which required that fluids be injected through the tubing.  

Further, Halek is charged with telling Garber to move a device called a “packer” up the wellbore in violation of the well’s permit, without first getting approval from the state.  Then, Garber allegedly gave false information to a state inspector regarding the depth of the packer. 

Halek is charged with making multiple false statements to the state of North Dakota, including false statements about the depth of the packer.  In addition, Halek is charged with obstructing and impeding a grand jury investigation into the matter, by withholding responsive documents and making false statements.

The case was investigated by EPA’s Criminal Investigation Division.  Significant cooperation was provided by the North Dakota Industrial Commission.  The case is being prosecuted by the U.S. Attorney’s Office for the District of North Dakota and the Environmental Crimes Section of the Justice Department’s Environment and Natural Resources Division.

An indictment is merely a formal charge that a defendant has committed a violation of criminal laws and every defendant is presumed innocent until and unless proven guilty.

El Departamento de Justicia anunció hoy que ha llegado a un acuerdo con Nebraska Beef Ltd, una empresa de embalaje de carne con sede en Omaha, Nebraska. El acuerdo resolvió la investigación liderada por la Oficina del Consejero Especial para Prácticas Injustas en el Empleo Relacionadas a Inmigración (OSC, por sus siglas en inglés) para determinar si la compañía tenía prácticas laborales discriminatorias, en violación de la ley de Inmigración y Nacionalidad (INA, por sus siglas en inglés). En concreto, la OSC investigó si la empresa requería que sus empleados no ciudadanos estadounidenses, debido a sus estatus de ciudadanía, presentaran pruebas de su estatus migratorio para el proceso de verificación de su autorización para trabajar.

La investigación del departamento encontró que la empresa requirió únicamente a los que no eran ciudadanos estadounidenses –y no a sus homólogos que sí lo eran– que presentaran pruebas documentales específicas de sus estatus migratorio para verificar su autorización para trabajar. La disposición antidiscriminatoria de la INA prohíbe que los empleadores pidan documentos por motivos de ciudadanía o país de origen al verificar si un empleado cuenta con autorización para trabajar.

“El departamento se compromete a asegurar que los individuos que están autorizados para trabajar en los Estados Unidos puedan apoyar a sus familias y contribuir al crecimiento económico de nuestro país sin tener que enfrentarse a barreras innecesarias y discriminatorias al empleo,” declaró la Subprocuradora General Interina, Vanita Gupta, la cabeza de la División de Derechos Civiles. “Aplicaremos la Ley activamente para derrumbar tales barreras donde las hallemos y garantizar que los individuos afectados tengan una vía para buscar la rectificación de estas conductas.”

Conforme al acuerdo, Nebraska Beef Ltd, pagará una multa civil a los Estados Unidos que asciende a 200.000 $ y establecerá un fondo ilimitado de pagos retroactivos para indemnizar a los individuos en cuestión por concepto de los salarios que no percibieron debido a las prácticas de la empresa. Asimismo, el acuerdo requiere que la compañía se someta al control de conformidad durante dos años, capacite a sus empleados acerca de la disposición antidiscriminatoria de la INA y repase y revise sus políticas de oficina. Para más información sobre el fondo de pagos retroactivos o para presentar una reclamación por sueldos no percibidos, favor de llamar al 202-616-2603 o mandar un correo electrónico al OSC.NBClaims@usdoj.gov. 

La OSC tiene la responsabilidad de aplicar la disposición 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 investigaron las Abogadas Litigantes de la OSC de la División de Derechos Civiles, Katherine E. Lamm y Silvia Dominguez-Reese.

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.

Nebraska Beef Settlement Agreement (720.79 KB)

The Justice Department’s Antitrust Division, at the request of the Federal Trade Commission (FTC), filed a civil antitrust lawsuit today in U.S. District Court of the District of Columbia against Third Point LLC and three Third Point funds.  At the same time, the department filed a proposed settlement that, if approved by the court, will settle the charges.  Further details about this matter are described in the FTC’s press release issued today, and in the attached complaint and Competitive Impact Statement.

As required by the Tunney Act, the proposed settlement, along with the Competitive Impact Statement, will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Daniel P. Ducore, Special Attorney, United States, c/o Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580.  At the conclusion of the 60-day comment period, the U.S. District Court of the District of Columbia may approve the proposed settlement upon finding that it is in the public interest.

 

The Justice Department announced today that Sandia Corporation has agreed to pay $4,790,042 to resolve allegations that Sandia violated the Byrd Amendment and the False Claims Act by using federal funds for activities related to lobbying Congress and federal agencies to obtain a renewal of its Management and Operating (M&O) Contract with the Department of Energy’s (DOE’s) National Nuclear Security Administration (NNSA) to operate the Sandia National Laboratories (SNL).  Sandia is headquartered in Albuquerque, New Mexico, and is a wholly-owned subsidiary of Lockheed Martin Corporation (LMC).

“The money allocated by Congress for the Sandia National Laboratories is designed to fund the important mission carried out by our national laboratories, not to lobby Congress for more funding,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “This resolution demonstrates that the Justice Department will work to ensure that public funds are used for the important purposes for which they are intended.”

Between 1993 and the present, NNSA contracted with Sandia to manage and operate the SNL, a government-owned, contractor-operated laboratory that is part of the NNSA’s nuclear weapons complex, with its main facilities located in Albuquerque and Livermore, California.  Between 2008 and 2012, Sandia allegedly used federal funds to support activities to lobby Congress and other federal officials to receive a non-competitive extension of the M&O Contract in violation of a federal law known as the Byrd Amendment, which prohibits the use of federal funds for lobbying.

“Using public funds to lobby for a non-competitive extension of a contract is simply unacceptable,” said Inspector General Gregory H. Friedman of the DOE.  “I salute the work of the Department of Justice in pursuing this matter and the work of the Office of Inspector General professionals who were responsible for gathering the facts that served as the basis for the settlement.”

This case was handled by the Civil Division’s Commercial Litigation Branch with investigative assistance provided by the DOE’s Office of Inspector General.

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

Lumsden W. Quan, 47, an art dealer from San Francisco, California, pleaded guilty today to conspiracy to violate the Lacey and Endangered Species Act and to a violation of the Lacey Act for knowingly selling black rhinoceros horns to an undercover agent from the U.S. Fish and Wildlife Service (USFWS).  His co-defendant, Edward N. Levine, charged in the indictment remains scheduled for trial on Oct. 19, 2015, in Las Vegas, Nevada.

The guilty plea was announced by Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division, U.S. Attorney Daniel G. Bogden for the District of Nevada and Director Dan Ashe for USFWS.

Quan pleaded guilty before the Honorable Chief Judge Gloria M. Navarro in U.S. District Court in Las Vegas, Nevada, to all charges in the indictment. He is scheduled to be sentenced on Dec. 3, 2015. Quan was identified as part of “Operation Crash,” a nationwide effort led by the USFWS and the Justice Department to investigate and prosecute those involved in the black market trade of rhinoceros horns and other protected species.

Quan admitted in federal court to conspiring with co-defendant Levine to sell two black rhinoceros horns to an undercover agent posing as a Colorado wildlife collector.  Quan stated that he and Levine arranged to have the horns transported to Las Vegas, where on March 19, 2014, Quan sold them to the agent for $55,000.  Quan faces a maximum sentence of five-years imprisonment.

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

The investigation is continuing and is being handled by the USFWS’s Office of Law Enforcement, the U.S. Attorney’s Office for the District of Nevada and the Justice Department’s Environmental Crimes Section.  The government is represented by Trial Attorneys Jennifer Blackwell and Ryan Connors, Assistant U.S. Attorney Kathryn Newman, and paralegal Amanda Backer.

The Department of Justice announced today that bank zweiplus ag (Bank Zweiplus) and Banca dello Stato del Cantone Ticino (Banca Stato) have reached resolutions under the department’s Swiss Bank Program.  

“Swiss banks continue to accept responsibility for their involvement in the concealment of foreign assets and the evasion of tax by U.S. accountholders,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “The banks are paying penalties, making necessary reforms and providing information and cooperation that are enabling the department to hold accountable those individuals that facilitated this misconduct.”

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

Under the program, banks are required to:

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

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

• Cooperate in treaty requests for account information;

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

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

• Pay appropriate penalties.

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

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

Bank Zweiplus was founded in July 2008 as a retail bank based in Zurich.  Offices located in Geneva and Basel, Switzerland, were closed in 2008 and 2012, respectively.  Since Aug. 1, 2008, Bank Zweiplus maintained and serviced 44 U.S.-related accounts with an aggregate value of approximately $12.1 million. 

Bank Zweiplus was aware that U.S. taxpayers have a legal duty to report to the Internal Revenue Service (IRS) their ownership of bank accounts outside the United States and to pay taxes on income earned in such accounts.  Nevertheless, in disregard of U.S. laws, the bank provided a variety of traditional Swiss banking services that assisted some U.S. taxpayers in concealing their undeclared accounts.  For example, Bank Zweiplus maintained numbered accounts and accounts held in the name of structures which were effectively owned or controlled by U.S. persons, including structures in the British Virgin Islands and the Bahamas.

Bank Zweiplus cooperated with the department during its participation in the Swiss Bank Program and encouraged its U.S. clients to enter the IRS Offshore Voluntary Disclosure Program.  Bank Zweiplus will pay a penalty of $1.089 million.

Banca Stato was established in 1915 and is headquartered in Bellinzona, Switzerland.  Banca Stato was aware that U.S. taxpayers had a legal duty to report to the IRS and pay taxes on the basis of all of their income, including income earned in accounts that the U.S. taxpayers maintained at the bank.  Despite this, the bank opened and serviced accounts for U.S. clients who the bank knew or had reason to know were not complying with their U.S. income tax obligations. 

In 2001, Banca Stato entered into a Qualified Intermediary Agreement with the IRS.  In 2001, the bank issued an internal directive prohibiting U.S. persons without a Form W-9 on file with the bank from buying U.S. securities.  However, prior to 2011, Banca Stato’s relationship managers were not instructed to, and did not, evaluate or screen incoming U.S. clients for U.S. tax compliance status.  At that time, more than 70 percent of the assets under management were related to U.S. accountholders who had not provided a Form W-9 to the bank.

In 2011, Banca Stato implemented a project that it called “Colombo” to change the manner in which it handled U.S. clients.  The bank recognized both risks and rewards of handling U.S. clients.  As to the former, the bank recognized that “[w]e can no longer have clients who are U.S. Persons who have not signed the W-9 form.”  But the bank also recognized an opportunity to attract new U.S. clients because many Swiss banks declined to service U.S. persons from Ticino, Switzerland, and the bank perceived “a huge demand from fully tax-compliant U.S. Persons . . . attracted by the brand BancaStato (especially because we have no branches in the US).”

Banca Stato entered into a relationship with a Lugano-based U.S. Securities and Exchange-registered investment advisory firm to partner in attracting U.S. persons living and working in the Ticino region who could not open or maintain accounts at other institutions.  The bank paid the firm a one-time finder’s fee of 0.5 percent on the incoming funds.  Despite the bank’s decision to refuse to open new accounts of U.S. persons without a Form W-9, it did not always adhere to this policy.

Banca Stato offered a variety of traditional Swiss banking services that it knew would and in certain instances did assist U.S. clients in concealing assets and income from the IRS, including hold mail and code name or numbered accounts.  In addition, the bank employed a variety of other means or conduct that it knew or should have known would assist U.S. taxpayers in concealing their Banca Stato accounts, including opening accounts for U.S. taxpayers who left other banks being investigated by the department and allowing U.S. clients to direct repeated wire transfers between $9,000 and $9,900 in an effort to conceal their Swiss bank accounts from U.S. authorities.

During the applicable period, Banca Stato maintained and serviced 187 U.S.-related accounts with an aggregate maximum balance of approximately $137 million.  Banca Stato will pay a penalty of $3.393 million.

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

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

“The vigorous pursuit of unreported income in hidden offshore accounts is one of our top priorities,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “Through our coordinated efforts with the Department of Justice, we now have significantly more information about the institutions and individuals involved in offshore tax evasion.  The public should be on notice that we will continue to use all tools at our disposal to stop this abuse and protect the American taxpayer.”

Acting Assistant Attorney General Ciraolo thanked the IRS, and in particular, IRS-CI and the IRS Large Business and International Division for their substantial assistance.  Ciraolo also thanked John E. Sullivan, Thomas G. Voracek and Mark Kotila, who served as counsel on these matters, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer 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.

Contractor Allegedly Failed to Perform Required Quality Control Reviews on Contracts for Background Investigations with the U.S. Office of Personnel Management

The Justice Department announced today that U.S. Investigations Services Inc. (USIS) and its parent company, Altegrity, have agreed to settle allegations that USIS violated the False Claims Act (FCA) for conduct involving a contract for background investigations that USIS held with the U.S. Office of Personnel Management (OPM).  The companies have agreed to forgo their right to collect payments that they claim were owed by OPM, valued at least at $30 million, in exchange for a release of liability under the FCA.  USIS and Altegrity are headquartered in Northern Virginia.   

From its privatization in 1996 until September 2014, USIS provided background investigations services for OPM under various fieldwork contracts.  The government alleged that beginning in at least March 2008 and continuing through at least September 2012, USIS deliberately circumvented contractually required quality reviews of completed background investigations in order to increase the company’s revenues and profits.  Specifically, USIS allegedly devised a practice referred to internally as “dumping” or “flushing,” which involved releasing cases to OPM and representing them as complete when, in fact, not all the reports of investigations comprising those cases had received a contractually-required quality review.  The government contended that, relying upon USIS’ false representations, OPM issued payments and contract incentives to USIS that it would not otherwise have issued had OPM been aware that the background investigations had not gone through the quality review process required by the contracts.

“Shortcuts taken by any company that we have entrusted to conduct background investigations of future and current federal employees are unacceptable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Justice Department will ensure that those who do business with the government provide all of the services for which we bargained.”   

“Contractors who do business for the federal government have a responsibility to provide the goods and services that they promise,” said Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia.  “This particular company failed to meet its obligations of comprehensively reviewing the backgrounds of current and prospective federal employees.  This settlement demonstrates our commitment to holding government contractors accountable.”

“This case demonstrates my office’s dedication to protecting tax payers’ money,” said U.S. Attorney George L. Beck Jr. of the Middle District of Alabama.  “We will continue to vigorously pursue all fraud against the government in order to restore and safeguard funds paid by our citizens.”

In February 2015, Altegrity, USIS and their affiliates filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code in Delaware.  The settlement of USIS’ FCA liability is part of a broader settlement that also resolves other matters between the United States and USIS/Altegrity that were part of the bankruptcy proceeding.

The FCA lawsuit against USIS was originally filed under the whistleblower provisions of the act by Blake Percival, a former executive at USIS.  The FCA prohibits the submission of false claims for government money or property and, under the act’s whistleblower provisions, a private party may file suit on behalf of the United States and share in any recovery.  The United States may elect to intervene and take over the case, as it did here.  Mr. Percival’s share of the settlement has not yet been determined. 

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 Columbia, the U.S. Attorney’s Office of the Middle District of Alabama, OPM and OPM’s Office of Inspector General. 

The claims resolved by the settlement agreement are allegations only and there has been no determination of liability.  The case is United States of America, ex rel., Blake Percival, v. U.S. Investigations Services, LLC, No. 14-cv-00726-RMC (D.D.C.).

Mississippi Phosphates Corp. (MPC), a Mississippi corporation which owned and operated a fertilizer manufacturing facility located on Bayou Casotte in Pascagoula, Mississippi, pleaded guilty today to a felony information charging the company with a criminal violation of the Clean Water Act, announced Principal Deputy Assistant Attorney General Sam Hirsch of the Justice Department’s Environment and Natural Resources Division and U.S. Attorney Gregory K. Davis for the Southern District of Mississippi. 

As part of the guilty plea, MPC admitted discharging more than 38 million gallons of acidic wastewater in August 2013.  The discharge contained pollutants in amounts greatly exceeding MPC’s permit limits, resulting in the death of more than 47,000 fish and the closing of Bayou Casotte.  MPC also admitted that, in February 2014, MPC discharged oily wastewater from an open gate on a storm water culvert into Bayou Casotte, creating an oily sheen that extended approximately one mile down the bayou from MPC.

MPC entered its guilty plea before Chief Judge Louis Guirola Jr. of the U.S. District Court for the Southern District of Mississippi.  Because MPC is in bankruptcy and is obligated to assist in funding the estimated $120 million cleanup of its site, the court accepted the parties’ agreement for MPCto transfer 320 acres of property near to its Pascagoula plant to become a part of the Grand Bay National Estuarine Research Reserve, which is managed by the Mississippi Department of Marine Resources as part of the National Oceanic and Atmospheric Administration’s National Estuarine Research Reserve System. 

“With this plea, Mississippi Phosphates has accepted responsibility for having discharged millions of gallons of industrial pollutants that killed tens of thousands of fish, damaged marine habitats and polluted recreational waterways,” said Principal Deputy Assistant Attorney General Hirsch.  “Mississippi Phosphates has acknowledged its misconduct and has been sentenced to transfer property it owns that is adjacent to the Grand Bay National Estuary, thus protecting and potentially rehabilitating a vital marine resource that this company’s pollutant discharges had severely damaged.”

“When operators break the law, they can harm natural resources and communities such as those around Bayou Casotte and neighboring waterways,” Acting Special Agent in Charge said Andy Castro of EPA’s criminal enforcement program in Mississippi.  “Over the years, state, local and federal governments have spent billions of dollars restoring the delicate Gulf Coast ecosystem.  Illegally discharged wastewater compromises that hard work.  EPA will continue to work with its law enforcement partners to hold companies fully accountable for their conduct, and to ensure they comply with laws that protect the public and from harm.”

As the felony information describes, when it was in full production, MPC manufactured diammonium phosphate fertilizers from phosphate rock which it received by ship and rail and from sulphur which was piped to its facility from a neighboring oil refinery.  In its production of fertilizer, MPC generated a variety of pollutants and hazardous wastes.  MPC has been regulated under a number of environmental statutes that govern the production, storage and release of a variety of air and water pollutants as well as hazardous wastes.  In the manufacturing process, strong acids and ammonia were produced.  If improperly discharged, acids and ammonia can be highly toxic to fish and to other forms of marine life.  MPC was obligated to comply with permits issued by the Mississippi Department of Environmental Quality (MDEQ) under the authority of the Environmental Protection Agency (EPA) as prescribed by the Clean Water Act.  These permits regulated the storage and discharge of MPC’s stormwater and wastewater, prescribing the circumstances under which they could be discharged into Bayou Casotte and limiting the concentration and quantity of the pollutants they could contain.

As detailed in the felony information, since January 2000, MPC has been cited by MDEQ in numerous notices for hundreds of violations of its Clean Water Act permit for discharging wastewater exceeding its pollutant limits.  MPC was also cited for its failure to maintain adequate wastewater storage capacity, its discharge of untreated wastewater from its sulfuric acid plant directly through MPC’s main outfall, its combined release of untreated and undertreated stormwater and process wastewater from other outfalls, and its failure to implement required remedial measures to prevent the pollutant discharges and environmental harm it has caused for decades.  An April 2005 discharge resulted in the release of more than 17 million gallons of highly acidic wastewater into waterways adjacent to its facility, including Bayou Casotte, Tillman Creek and Bangs Lake of the Grand Bay National Estuarine Research Reserve.  These waters are some of the most productive nurseries for aquatic species on the Gulf Coast.  MPC’s massive discharge of pollutants resulted in the death of thousands of fish and other forms of marine life as well as the destruction of marsh grass, trees and shrubs.  In the years following this environmental catastrophe, in spite of MDEQ’s orders and MPC’s remedial proposals, MPC never implemented the measures necessary to prevent the release of pollutants from its facility and the discharge of an even larger torrent of wastewater destroying even more marine life.

U.S. Attorney Davis praised the efforts of EPA’s Criminal Investigation Division, for its diligent work in the investigation of this matter.  Senior Trial Attorney Jeremy F. Korzenik of the Department of Justice’s Environmental Crimes Section and Assistant U.S. Attorney Gaines Cleveland are the prosecutors in charge of the case.

A New Jersey man was convicted in federal court today of illegally trafficking in paddlefish caviar after being caught in stemming from an undercover operation in the Warsaw, Missouri, area, announced the Department of Justice’s Environment and Natural Resources Division and the U.S. Attorney’s Office for the Western District of Missouri.

In support of Missouri’s paddlefish conservation efforts, the U.S. Fish and Wildlife Service and the Missouri Department of Conservation conducted an undercover investigation known as “Operation Roadhouse,” centered on an area known as the Roadhouse in Warsaw.  As part of the operation, state and federal officers operated a paddlefish snagging business during the 2011 and 2012 paddlefish seasons.  

Petr Babenko, 45, of Vineland, New Jersey, was found guilty of participating in a conspiracy to illegally buy and sell paddlefish and one count of illegally trafficking in paddlefish in violation of the Lacey Act.  Babenko owned European International Foods, a specialty grocery business in Vineland.

Codefendant Bogdan Nahapetyan, 37, an Armenian citizen residing in Lake Ozark, Missouri, pleaded guilty on Nov. 12, 2013, to illegally trafficking in paddlefish.

Neither Babenko nor Nahapetyan had a valid roe fish dealer permit.  Evidence introduced during the trial indicated that they possessed paddlefish and paddlefish eggs in excess of the Missouri possession limits and transported the paddlefish and paddlefish eggs across state lines.

For example, on April 24, 2012, Babenko and Nahapetyan negotiated with the undercover investigators to purchase 80 pounds of paddlefish eggs and five female paddlefish for $4,625.  While loading the purchased caviar and female paddlefish into their van, they placed an additional order with the undercover investigators for more fish and caviar.

Following the presentation of evidence, the jury in the U.S. District Court in Jefferson City, Missouri, deliberated for about 35 minutes before returning the guilty verdict to U.S. District Judge Stephen R. Bough, ending a trial that began Aug. 17, 2015.

In separate cases that arose from the undercover investigation, five additional defendants have pleaded guilty to trafficking in paddlefish and paddlefish eggs in violation of the Lacey Act: Fedor Pakhnyuk, 41, of Hinsdale, Illinois, Felix Baravik, 50, and Arkadiy Lvovskiy, 54, both of Aurora, Colorado, Dmitri Elitchev, 49, of Centennial, Colorado, and Artour Magdessian, 48, of Lone Tree, Colorado.

Under federal statutes, Babenko is subject to a sentence of up to ten years in federal prison without parole, plus a fine up to $500,000.  Babenko must forfeit to the government a 2011 Mercedes Benz cargo van that was used to commit the offense.  A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.

The Lacey Act is a federal statute which makes it unlawful for any person to import, export, transport, sell, receive, acquire or purchase fish that were taken, possessed, transported or sold in violation of any law or regulation of any state, or to attempt to do so.  Such conduct constitutes a felony crime if the defendant knowingly engaged in conduct involving the purchase or sale, offer to purchase or sell, or intent to purchase or sell, fish with a market value in excess of $350, knowing that the fish were taken, possessed, transported or sold in violation of, or in a manner unlawful under, a law or regulation of any state.

The American paddlefish (Polydon spathula), also called the Mississippi paddlefish or the “spoonbill,” is a freshwater fish that is primarily found in the Mississippi River drainage system.  Paddlefish eggs are marketed as caviar.  The retail value of the caviar is estimated to be between $30,000 and $50,000. Paddlefish were once common in waters throughout the Midwest.  However, the global decline in other caviar sources, such as sturgeon, has led to an increased demand for paddlefish caviar. This increased demand has led to over-fishing of paddlefish and consequent decline of the paddlefish population.

Missouri law prohibits the transportation of paddlefish eggs which have been removed or extracted from a paddlefish carcass.  Missouri law also prohibits the sale or purchase, or offer of sale or purchase, of paddlefish eggs.  There are also several restrictions on the purchase and possession of whole paddlefish in Missouri.

This case is being prosecuted by Senior Trial Attorney James B. Nelson of the Department of Justice’s Environmental Crimes Section and Assistant U.S. Attorney Lawrence E. Miller of the U.S. Attorney’s Office for the Western District of Missouri.  It was investigated by the U.S. Fish and Wildlife Service and the Missouri Department of Conservation, with assistance by the Oklahoma Department of Wildlife Conservation.

A former locally-employed staff member of the U.S. Embassy in London was charged with engaging in a hacking and cyberstalking scheme in which, using stolen passwords, he obtained sexually explicit photographs and other personal information from victims’ email and social media accounts, and threatened to share the photographs and personal information unless the victims ceded to certain demands.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney John A. Horn of the Northern District of Georgia, Director Bill A. Miller of the U.S. Department of State’s Diplomatic Security Service and Special Agent in Charge J. Britt Johnson of the FBI’s Atlanta Division made the announcement. 

Michael C. Ford, 36, was charged by indictment on Aug. 18, 2015, with nine counts of cyberstalking, seven counts of computer hacking to extort and one count of wire fraud.

“According to the indictment, Ford hacked into email accounts and extorted sexually explicit images from scores of victims,” said Assistant Attorney General Caldwell.  “As these allegations highlight, predators use the Internet to target innocent victims.  With the help of victims and our law enforcement partners, we will find those predators and hold them accountable.”

“Ford is alleged to have hacked into hundreds of email accounts and tormented women across the country, by threatening to humiliate them unless they provided him with sexually explicit photos and videos,” said U.S. Attorney John Horn.  “This sadistic conduct is all the more disturbing as Ford is alleged to have used the U.S. Embassy in London as a base for his cyberstalking campaign.”

“The Diplomatic Security Service is firmly committed to working with the Department of Justice and our other law enforcement partners to investigate allegations of crime and to bring those who commit these crimes to justice,” said Director Miller.  “When a public servant in a position of trust is alleged to have committed a federal felony such as cybercrime, we vigorously investigate such claims.”

“While the allegations in this case are disturbing, it does illustrate the willingness and commitment of the FBI and its federal partners to aggressively follow those allegations wherever they take us,” said Special Agent in Charge Johnson.  “The FBI will continue to provide significant resources and assets as we address complex cyber based investigations as seen here.”

According to allegations in the indictment, from January 2013 through May 2015, Ford, using various aliases that included “David Anderson” and “John Parsons,” engaged in a computer hacking and “sextortion” campaign to force numerous women to provide him with personal information and sexually explicit photographs and videos.  To do so, Ford allegedly posed as a member of the fictitious “account deletion team” for a well-known email service provider and sent notices to thousands of potential victims, including members of college sororities, warning them that their accounts would be deleted if they did not provide their passwords. 

Using the passwords collected from this phishing scheme, Ford allegedly hacked into hundreds of email and social media accounts, stole sexually explicit photographs and personal identifying information (PII), and saved both the photographs and PII to his personal repository.

Ford then allegedly emailed the victims and threatened to release the photographs, which were attached to the emails, unless they obtained videos of “sexy girls” undressing in changing rooms at pools, gyms and clothing stores, and then sent the videos to him.

The indictment alleges that, when the victims either refused to comply or begged Ford to leave them alone, Ford responded with additional threats, including by reminding the victims that he knew where they lived.  On several occasions, Ford allegedly followed through with his threats by sending sexually explicit photographs to victims’ family members and friends. 

During the pendency of the alleged scheme, Ford was a civilian employee at the U.S. Embassy in London, England.  He allegedly used his government-issued computer at the U.S. Embassy to conduct the phishing, hacking and cyberstalking activities. 

The charges and allegations contained in an indictment are merely accusations.  The defendant is presumed innocent unless and until proven guilty.

The case is being investigated by the U.S. Department of State’s Diplomatic Security Service and the FBI.  The Criminal Division’s Office of International Affairs and the U.S. Embassy in London provided assistance.  The case is being prosecuted by Senior Trial Attorney Mona Sedky of the Criminal Division’s Computer Crime and Intellectual Property Section, Trial Attorney Jamie Perry of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorney Kamal Ghali of the Northern District of Georgia. 

Anyone who believes that they are the victim of hacking, cyberstalking, or “sextortion” should contact law enforcement.  Resources regarding hacking and other cybercrimes can be found at: https://www.fbi.gov/about-us/investigate/cyber. 

Ford Indictment

Department of Justice Tribal Access Program (TAP) Will Improve the Exchange of Critical Data

Department of the Interior Companion Program to Provide Name-Based Emergency Background Checks for Child Placement

The Department of Justice is launching an initial phase of the Tribal Access Program for National Crime Information (TAP) to provide federally-recognized tribes access to national crime information databases for both civil and criminal purposes.  TAP will allow tribes to more effectively serve and protect their communities by ensuring the exchange of critical data.

This initial phase of TAP was announced today in a meeting with tribes held during the 2015 Department of Justice/FBI Criminal Justice Information Services (CJIS) Division Tribal Conference in Tulsa, Oklahoma.

“Federal criminal databases hold critical information that can solve crimes, and keep police officers and communities safe,” said Deputy Attorney General Sally Quillian Yates.  “The Tribal Access Program is a step forward to providing tribes the access they need to protect their communities, keep guns from falling into the wrong hands, assist victims and prevent domestic and sexual violence.  Empowering tribal law enforcement with information strengthens public safety and is a key element in our ongoing strategy to build safe and healthy communities in Indian country. ” 

“The FBI is pleased to participate in this initiative,” said Executive Assistant Director Amy Hess of the FBI’s Science and Technology Branch.  “This will be a positive step for the tribal agencies to receive valuable criminal information and also for those same tribal agencies to submit criminal information at the national level.  Through this partnership, information becomes richer and communities can become safer.”

TAP will support tribes in analyzing their needs for national crime information and help provide appropriate solutions, including a-state-of-the-art biometric/biographic computer workstation with capabilities to process finger and palm prints, take mugshots and submit records to national databases, as well as the ability to access CJIS systems for criminal and civil purposes through the Department of Justice.  TAP will also provide specialized training and assistance for participating tribes.

While in the Tribal Law and Order Act of 2010 Congress required the Attorney General to ensure that tribal officials that meet applicable requirements be permitted access to national crime information databases, the ability of tribes to fully participate in national criminal justice information sharing via state networks has been dependent upon various regulations, statutes and policies of the states in which a tribe’s land is located.  Therefore, improving access for tribal law enforcement to federal criminal information databases has been a departmental focus for several years.  In 2010, the department instituted two pilot projects, one biometric and one biographic, to improve informational access for tribes.  The biographic pilot continues to serve more than 20 tribal law enforcement agencies.

Departments of Justice and Interior Working Group

In 2014, the Departments of Justice and the Interior (DOI) formed a working group to assess the impact of the pilots and identify long-term sustainable solutions that address both criminal and civil needs of tribes.  The outcome of this collaboration was the TAP, as well as an additional program announced today by the DOI’s Bureau of Indian Affairs (BIA) that provides tribes with national crime information prior to making child placement decisions in emergency circumstances.  Under the BIA program, social service agencies of federally recognized tribes will be able to view criminal history information  accessed through BIA’s Office of Justice Services who will conduct name-based checks in situations where parents are unable to care for their children.

“Giving tribal government programs access to national crime databases through DOJ’s Tribal Access Program for National Crime Information is a tremendous step forward towards increasing public safety in Indian Country,” said Assistant Secretary Kevin K. Washburn for Indian Affairs at the Department of the Interior.  “The Bureau of Indian Affairs Office of Justice Services’ Purpose Code X program provides a much-needed tool for tribal social service agencies when they must find safe homes to place children during temporary emergency situations.”

In the initial phase of the TAP program, the biometric/biographic workstations will be deployed to up to 10 federally-recognized tribes who will provide user feedback.  This phase will focus on assisting tribes that have law enforcement agencies, while in the future the department will seek to address needs of the remaining tribes and find a long-term solution.  The department will continue to work with Congress for additional funding to more broadly deploy the program.

The Department of Justice’s Chief Information Officer manages TAP.  

“It is our hope that TAP can minimize the national crime information gap and drive a deeper and more meaningful collaboration between the federal, state, local and tribal criminal justice communities,” said Chief Information Officer Joseph F. Klimavicz for the department.

For more information on TAP, visit www.justice.gov/tribal/tribal-access-program-tap.

For more information about the Justice Department’s work on tribal justice and public safety issues, visit:  www.justice.gov/tribal.

For more information about the Department of the Interior Bureau of Indian Affairs, visit www.indianaffairs.gov/

A federal jury in Los Angeles late yesterday convicted the former owner, operator and managers of a Southern California ambulance company of health care fraud charges in connection with a Medicare fraud scheme of at least $2.4 million.   

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, Acting Special Agent in Charge Steve Ryan of the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG) Los Angeles Region and Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Division made the announcement.

Yaroslav Proshak, aka Steven Proshak, 47, of Valley Village, California; Emilia Zverev, 58, of Van Nuys, California; and Sharetta Michelle Wallace, 37, of Inglewood, California, each were convicted of one count of conspiracy to commit health care fraud and five counts of health care fraud following a two-week trial.  Proshak’s sentencing is scheduled for Nov. 24, 2015, and Zverev’s and Wallace’s sentencing is scheduled for Nov. 30, 2015, all before U.S. District Judge S. James Otero of the Central District of California, who presided over the trial.

Proshak owned and operated ProMed Medical Transportation, an ambulance transportation company in the greater Los Angeles area that provided non-emergency ambulance transportation services to Medicare beneficiaries, many of whom were dialysis patients.  Zverev was the billing manager, and Wallace supervised ProMed’s emergency medical technicians (EMTs).

The evidence at trial demonstrated that, between May 2008, and October 2010, the defendants conspired to bill Medicare for ambulance transportation services for individuals whom the defendants knew did not need such services.  In addition, the evidence showed that the defendants instructed EMTs who worked at ProMed to conceal the true medical conditions of patients they were transporting by altering requisite paperwork and creating fraudulent documents to justify the transportation services.

According to evidence admitted at trial, during the course of the conspiracy, ProMed submitted at least $2.4 million in false and fraudulent claims to Medicare for medically unnecessary transportation services.  Medicare paid at least $1.2 million of those claims.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.  The case was investigated by the FBI and HHS-OIG.  The case was prosecuted by Trial Attorneys Blanca Quintero, Fred Medick and Ritesh Srivastava 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 Phenix City, Alabama, resident pleaded guilty today in the Middle District of Alabama to conspiracy and aggravated identity theft for her role in a multimillion-dollar stolen identity tax refund fraud (SIRF) scheme, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama announced.

According to court documents, between 2011 and June 2014, Talashia Hinton, also known as LayLay and LaLa, participated in a large-scale stolen identity tax refund conspiracy.  The indictment alleges that the co-conspirators filed more than 3,000 false tax returns for 2012 and 2013 that falsely claimed more than $7.5 million in federal income tax refunds from the Internal Revenue Service (IRS).  Hinton worked with Keisha Lanier, who supplied her with IRS electronic filing identification numbers in the names of sham tax businesses and stolen identities that included personal information so that Hinton could prepare and file false tax returns to claim refunds using the stolen identities.  At the direction of Lanier, Hinton also obtained identities from Tamika Floyd, who stole names from databases maintained by the state of Alabama.  The false returns directed the IRS to pay the refunds by issuing U.S. Treasury checks and direct deposits onto prepaid debit cards. 

Tamika Floyd was sentenced to serve 87 months in prison on May 19.  Lanier is scheduled to be sentenced on Aug. 24 and other defendants involved in the scheme were sentenced on Aug. 7.  A sentencing date for Hinton has not been scheduled.

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 Gregory P. Bailey 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 owner and operator of three medical clinics located in Los Angeles pleaded guilty today to submitting more than $4.5 million in fraudulent claims to Medicare.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, Acting Special Agent in Charge Steve Ryan of the U.S. Department of Health and Human Services’ Office of Inspector General of the (HHS-OIG) Los Angeles Region and Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Division made the announcement.

Hovik Simitian, 48, of Los Angeles, pleaded guilty before U.S. District Court Judge Beverly Reid O’Connell of the Central District of California to one count of conspiracy to commit health care fraud.  Sentencing has been scheduled for Nov. 16, 2015.

Simitian owned and operated three medical clinics that were located in the Los Angeles area:  Columbia Medical Group Inc., Life Care Medical Clinic and Safe Health Medical Clinic.  In connection with his guilty plea, Simitian admitted that, from approximately February 2010 through June 2014, he and his co-conspirators paid cash kickbacks to patient recruiters who brought Medicare beneficiaries to the clinics.  Simitian also admitted that he and his co-conspirators billed Medicare for lab tests and other services that either were not medically necessary or were not actually provided to the Medicare beneficiaries, and that, to support the bills to Medicare, he and others created false documentation reflecting that the services had been provided.

Simitian further admitted that, between February 2010 and June 2014, he and his co-conspirators submitted approximately $4,526,791 in false and fraudulent claims to Medicare.Medicare paid approximately $1,668,559 of those claims.

The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.  This case is being prosecuted by Trial Attorneys Blanca Quintero and Alexander F. Porter 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 over 2,300 defendants who collectively have billed the Medicare program for over $7 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are 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.

Simitian Plea Agreement

WASHINGTON, D.C.— U.S. Immigration and Customs Enforcement (ICE) arrested 50 fugitives sought for their roles in known or suspected human rights violations during a nationwide operation this week targeting these individuals in multiple cities across the United States.

During the operation that concluded Thursday, the ICE National Fugitive Operations Program in coordination with the ICE Human Rights Violators and War Crimes Center (HRVWCC) and ICE National Criminal Analysis and Targeting Center (NCATC), arrested these fugitives via the ICE field offices of Atlanta, Baltimore, Boston, Chicago, Detroit, Los Angeles, Miami, Newark, New York City, Philadelphia, Phoenix, San Francisco, St. Paul and Washington.

The foreign nationals arrested during this operation all have outstanding removal orders and are subject to repatriation to their countries of origin. Of the 50 known or suspected human rights violators arrested during Operation No Safe Haven II, 10 individuals are also convicted criminal aliens. This operation more than doubled the number of known or suspected human rights violators arrested during the first nationwide No Safe Haven operation, which took place in September 2014.

Those arrested across the country included:

• an individual from South America who assisted for many years in interrogations involving electric shock torture and who beat prisoners;

• an individual from Central America—an aggravated felon convicted of multiple U.S. drug-related charges—who served as a military police officer for several years and turned over victims to a regime perpetrating documented human rights violations;

• an individual from East Africa who engaged in torture as an intelligence officer in a specific government regime known to perpetrate torture, murder, and other human rights violations;

• an individual from the former Yugoslavia who arrested and interrogated victims on behalf of a paramilitary organization dedicated to ethnic cleansing;

• an individual from Asia who performed false sterilizations upon several female victim patients and supervised dozens of other false sterilizations and/or forced abortions upon other victim patients.

ICE is committed to rooting out known or suspected human rights violators who seek a safe haven in the United States. ICE's Human Rights Violators and War Crimes Center (HRVWCC) investigates human rights violators who try to evade justice by seeking shelter in the United States, including those who are known or suspected to have  participated in persecution, war crimes, genocide, torture, extrajudicial killings, and the use or recruitment of child soldiers. These individuals may use fraudulent identities to enter the country and attempt to blend into communities in the United States.

Members of the public who have information about foreign nationals suspected of engaging in human rights abuses or war crimes are urged to contact ICE by calling the toll-free ICE tip line at 1-866-347-2423 or internationally at 001-1802-872-6199. They can also email HRV.ICE@ice.dhs.gov or complete ICE’s online tip form.

Since fiscal year 2004, ICE has arrested more than 296 individuals for human rights-related violations under various criminal and/or immigration statutes. During that same period, ICE obtained deportation orders and physically removed more than 740 known or suspected human rights violators from the United States. Currently, ICE's Homeland Security Investigations has more than 140 active investigations into suspected human rights violators and is pursuing more than 1,800 leads and removal cases involving suspected human rights violators from 97 different countries.

Over the last four years, ICE's Human Rights Violators and War Crimes Center has issued more than 67,000 lookouts for individuals from more than 111 countries and stopped 161 human rights violators or war crime suspects from entering the United States.

The NCATC provided critical investigative support for this operation, including criminal and intelligence analysis from a variety of sources. The NCATC provides comprehensive analytical support to aid the at-large enforcement efforts of all ICE components.

ICE credits the success of this operation to the combined efforts of the U.S. National Central Bureau-Interpol Washington, U.S. Marshals Service, U.S. Department of State Diplomatic Security Service, U.S. Citizenship and Immigration Services, and U.S. Customs and Border Protection.

A federal grand jury has returned a four-count indictment against two Texas men alleging hate crime offenses for their roles in a Mar. 8, 2012, assault of a gay, African-American man in Corpus Christi, Texas, announced Principal Deputy Assistant Attorney General Vanita Gupta, head of the Department of Justice’s Civil Rights Division, and U.S. Attorney Kenneth Magidson of the Southern District of Texas.

The indictment charges Jimmy Garza Jr., 32, and Ramiro Serrata Jr., 22, with conspiracy to commit hate crimes, a hate crime violation based on race and color, a hate crime violation based on sexual orientation and using a firearm during the commission of a crime of violence.  The indictment was returned under seal Aug. 12, 2015, and unsealed upon the arrest of Serrata, of Robstown, Texas, on Friday, Aug. 14, 2015.  He made his initial appearance before U.S. Magistrate Judge Jason Libby today, at which time the government requested he remain in custody pending further criminal proceedings.  A detention hearing has been set for Aug. 20, 2015.  Garza, of Corpus Christi, Texas, is currently in custody on unrelated charges and is expected to be transferred to federal custody and make an appearance on these charges on Aug. 24, 2015.

The indictment alleges that on Mar. 8, 2012, Garza and Serrata conspired to assault a gay, African-American man because of his race, color and sexual orientation.  According to the indictment, the defendants invited the man into an apartment in Corpus Christi then assaulted him while calling him racial and homophobic epithets.  Over the course of approximately three hours, the conspirators allegedly punched and kicked the man and assaulted him with various dangerous weapons, including, among other things, a frying pan, a coffee mug, a belt and a chair.  During the assault, the conspirators poured a household cleaning agent or chemical solution onto the man’s face and eyes, pistol whipped him with a handgun and whipped him with a belt, according to the allegations.

When the man began to bleed, the defendants allegedly forced him to remove all of his clothing and clean up the blood throughout the apartment.  The indictment further alleges that after the man was completely naked, the defendants sodomized him using a broom or mop and another unknown object. 

Throughout the assault, the conspirators repeatedly called the man racial and homophobic slurs and made other anti-black and anti-gay statements, according to the indictment.  The conspirators also allegedly prevented the man from leaving the apartment by physical force and threats of force.  The man eventually escaped the apartment by jumping out of a window.

An indictment is merely an accusation, and the defendants are presumed innocent unless and until proven guilty.  

If convicted, both Garza and Serrata face a maximum sentence of life in prison. 

This case was investigated by the FBI’s Corpus Christi Resident Agency with assistance from the Corpus Christi Police Department and is being prosecuted by Trial Attorneys Jared Fishman and Nicholas Durham of the Justice Department’s Civil Rights Division and Assistant U.S. Attorney Ruben Perez of the Southern District of Texas.

The Department of Justice and the Environmental Protection Agency (EPA) today announced a settlement with the Delaware County Regional Water Quality Control Authority (DELCORA) resolving alleged Clean Water Act violations involving combined sewer overflows (CSOs) to the Delaware River and its tributaries.  In a proposed consent decree, DELCORA has agreed to develop and implement a plan to control and significantly reduce overflows from its sewer system, which will improve the water quality of the Delaware River, Chester Creek and Ridley Creek near Philadelphia, Pennsylvania.                                                                                      

Based on information submitted by DELCORA, EPA estimates that the Authority could spend as much as $200 million to implement an overflow control plan that complies with the terms of the Clean Water Act.  Once the specific pollution control measures are selected and approved, the settlement requires DELCORA to implement the plan as quickly as possible, with a 20-year deadline from when the settlement is filed in court to complete the necessary controls.  DELCORA must also pay a $1.375 million penalty for prior violations, which will be split between the United States and the Commonwealth of Pennsylvania, a co-plaintiff in this case.

“This important agreement will protect residents from sewers that discharge raw sewage and other contaminants into local waterways,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “It is the latest in a series of settlements with municipalities across the country to address aging and inadequate sewer infrastructure, particularly in older communities where residents have had to deal with sewer overflows for generations.  Agreements like this one are a victory for environmental justice.”

“This settlement means cleaner water for communities in the greater Philadelphia area, including many that have historically been overburdened by water pollution,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance.  “These communities have demonstrated how effective long-term planning and public participation can protect clean water in a way that’s achievable and cost effective.”

The settlement stands to address longstanding problems with DELCORA’s combined sewer system, which when inundated with stormwater, discharges raw sewage, industrial waste, nitrogen, phosphorus and polluted stormwater into Chester Creek, Ridley Creek and the Delaware River.  According to DELCORA, the volume of combined sewage that overflows from the system is approximately 739 million gallons annually. 

Exposure to raw sewage can cause a range of illness from mild gastroenteritis, causing stomach cramps and diarrhea, to life-threatening ailments such as cholera, dysentery, infectious hepatitis and severe gastroenteritis.  Exposure to untreated sewage, therefore, presents a serious health risk to those who may come into contact with it.  Groups facing greater risks include children, the elderly, immune-compromised groups and pregnant women.

DELCORA’s wastewater facilities serve approximately 500,000 people in the greater Philadelphia area, including many low-income communities.  Once fully implemented, the settlement will help reduce the direct exposure of low-income and minority populations in the service area to raw sewage.  DELCORA must also seek input from the public on the long-term control plan, including from Chester Creek and surrounding communities that have historically been overburdened by pollution.

The consent decree also requires DELCORA to notify the public of CSO discharges using a visual notification system, including warning lights and flags at CSO outfalls, where a sewer empties into local waterways.

Keeping raw sewage and contaminated storm water out of the waters of the United States is one of EPA’s National Enforcement Initiatives.  EPA is working to reduce discharges from sewer overflows by securing commitments from cities to implement timely, affordable solutions.

The proposed consent decree is subject to a 30-day public comment period and court approval after it is published in the Federal Register. 

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

The U.S. District Court for the Northern District of Iowa today entered a consent decree of permanent injunction against Iowa Select Herbs LLC, of Cedar Rapids, Iowa, its president and CEO, Gordon L. Freeman, and a partial owner, Lois A. Dotterweich, to prevent the distribution of adulterated dietary supplements, announced Principal Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.

Iowa Select Herbs manufactures and distributes a variety of dietary supplements, consisting primarily of extracts from various plants, including papaya leaf, echinacea, elderberry and nettle leaf.  The firm also produces a product called “Cold BeGone,” which purports to be a complex of natural ingredients.  The company and its owners marketed their products online and through online marketplace websites, such as eBay Inc., Amazon.com Inc. and buy.com.  They also sold their products through a retail location in Cedar Rapids. 

The department filed a complaint in the Northern District of Iowa at the request of the U.S. Food and Drug Administration (FDA) alleging that the company’s dietary supplements are manufactured under conditions that are inadequate to ensure the quality of its products.  The complaint also alleged that the firm’s dietary supplements qualify as unapproved and misbranded drugs in that they claim to treat or prevent a variety of diseases, including cancer, malaria and heart disease, but have never been submitted to FDA for approval, and have never been found safe and effective for those purposes. 

On Aug. 13, the parties filed a consent decree of permanent injunction by which the defendants agreed to settle the litigation.  The consent decree was entered by the court today and requires the defendants to cease all production and distribution of the adulterated, unapproved and misbranded products, and to recall their drugs and dietary supplements.  Further, the defendants have agreed to cease the manufacture and distribution of any dietary supplement or drug and will not be allowed to resume such activities without FDA approval.

The government is represented by Trial Attorney Heide L. Herrmann of the Civil Division’s Consumer Protection Branch, with the assistance of Associate Chief Counsel for Enforcement Laura Akowuah of the Department of Health and Human Services’ Office of General Counsel-Food and Drug Division and Assistant U.S. Attorney Jacob Schunk of the Northern District of Iowa.

Attorney General Loretta E. Lynch released the following statement Sunday on the passing of civil rights leader Julian Bond:

“Throughout his remarkable life, Julian Bond was a leader, a trailblazer, and an icon in this country’s enduring fight for civil rights and equal justice for all people.  Bond’s career reflects his extraordinary gift for turning conviction into action – from helping to establish the Student Nonviolent Coordinating Committee and the Southern Poverty Law Center to representing his community in the Georgia General Assembly; and from leading the NAACP to sharing his vision and intellect through his writing, teaching, and public commentary.  I will never forget hearing Bond speak when I was a student in college, and he has remained a personal hero to me ever since.  For me and for so many others, Bond’s words and deeds reached into our hearts and inspired us to take up his noble causes of equality, justice, and freedom.  The legion of committed and passionate advocates he leaves behind is just one of many ways that his legacy will live on – by advancing his ongoing work, by spreading his timeless message, and by lifting up his example for all to see for generations to come.”

The Justice Department today released its first annual report following former Attorney General Eric Holder’s pledge in February 2014 to make public information related to law enforcement requests for information from, or records of, members of the news media.

The report exemplifies the department’s continuing commitment to increased transparency in its interactions with the media and to ensure that newsgathering activities by members of the news media are not unreasonably impaired by law enforcement activities.  The report covers authorizations made during the 2014 calendar year and includes information provided by department divisions, including the U.S. Attorneys’ Offices.

“Today’s report is an important step in the Justice Department’s ongoing efforts to promote the freedom of the press, to keep the American people informed and to improve transparency and accountability regarding media-related process,” said Attorney General Loretta E. Lynch.  “In addition to the statistical data former Attorney General Holder pledged to disclose, I have asked the department to provide information about each case or matter listed so that the public can better understand how the department is striking the proper balance among several vital interests: protecting national security, ensuring public safety, promoting effective law enforcement and the fair administration of justice and safeguarding the essential role of the free press in fostering government accountability and an open society.”

A copy of the report can be found here.

Today, U.S. District Court of the District of Arizona granted a motion by the Department of Justice’s Civil Rights Division to intervene in a private lawsuit, Melendres v. Arpaio, brought against Maricopa County Sheriff Joseph M. Arpaio.  In Melendres, the federal court found in May 2013 that the Maricopa County Sheriff’s Office (MCSO) had engaged in unlawful discrimination against Hispanic persons in its traffic enforcement operations in violation of the Fourth and 14th Amendments to the U.S. Constitution and Title VI of the Civil Rights Act of 1964.  Last month, the department reached a partial settlement in a lawsuit against Maricopa County and Sheriff Arpaio, resolving claims not addressed in this intervention. Moving forward, the department, court, plaintiffs and independent monitor can work to ensure the Sheriff’s office implements the court-ordered reforms.

In October 2013, the court issued an injunction setting forth specific reforms for MCSO’s law enforcement practices and appointed an independent monitor to oversee implementation of the injunction.  In June, the U.S. District Court of the District of Arizona granted the department’s motion for summary judgment on its discriminatory policing claim, based on the court’s findings in Melendres.  The department filed for intervention in Melendres so that it may enforce the court’s injunction and any future remedies ordered by the court to address Sheriff Arpaio’s and MCSO’s alleged violations of the court’s orders. 

“As a party in the Melendres case, the Department of Justice can now work together with the court, the plaintiffs and the independent monitor to ensure that the Maricopa County Sheriff’s Office meaningfully implements the court-ordered reforms so that the constitutional rights of all people of Maricopa County are protected,” said Deputy Assistant Attorney General Mark Kappelhoff of the Civil Rights Division.  “The Constitution guarantees that all people receive the equal protection of the law, and the department is now positioned to ensure that this important right is upheld.”

The department has had an ongoing parallel lawsuit against Sheriff Arpaio and Maricopa County since May 2012.  That lawsuit alleged four patterns or practices of unconstitutional conduct: discriminatory policing against Hispanic persons in MCSO’s saturation patrols, general traffic enforcement and worksite operations targeting Hispanic immigrants; detentions in violation of the Fourth Amendment during MCSO’s worksite raids targeting Hispanic immigrants; failures in the provision of language access to Hispanic limited English proficient jail inmates; and retaliatory police action against critics of Sheriff Arpaio and MCSO.  

Last month, on July 17, the department entered into settlement agreements to resolve the claims in its lawsuit that were not addressed by the summary judgment–one agreement addressing MCSO’s unlawful detentions and retaliation, and a separate agreement addressing MCSO’s language access policies and practices in its jails.  On the same date, the parties filed a joint motion requesting that the U.S. District Court of the District of Arizona approve and agree to enforce the settlement agreement concerning MCSO’s unlawful detentions and retaliation.  That motion is still pending before the court. 

The injunction in Melendres, the settlement agreements in the Justice Department’s separate case and a description of the department’s previous investigation of and litigation against the Maricopa County Sheriff Arpaio and Maricopa County, will be available at: http://www.justice.gov/crt/about/spl/

The Justice Department today announced a settlement agreement under the Americans with Disabilities Act (ADA) to make the Golden Corral in Farmington, New Mexico, accessible to persons with disabilities.  The Golden Corral was investigated in conjunction with the department’s Project Civic Access, a Civil Rights Division initiative to ensure that cities, towns, counties and local businesses throughout the country comply with the ADA.  The investigation revealed that the restaurant required architectural modifications to make it accessible to persons with disabilities.

Golden Corral Corp., headquartered in North Carolina, worked cooperatively with the department after the architectural barriers to access were identified and agreed to remedy the barriers in compliance with the 2010 ADA Standards for Accessible Design (2010 standards).  Under the agreement, the Golden Corral will physically modify its:    

• designated accessible parking spaces;

• counter;

• men’s Room signage, mirrors, coat hook and accessible toilet stall; and

• women’s Room signage, coat hook and accessible toilet stall.

“As we continue our yearlong celebration of the 25th anniversary of the enactment of the ADA, the Civil Rights Division of the Justice Department renews its commitment to the full and fair enforcement of this historic civil rights law, for large and small venues, alike,” said Principal Deputy Attorney General Vanita Gupta, head of the Civil Rights Division.  “Accessibility in local businesses is equally important so that people with disabilities be able to enjoy goods and services in their own neighborhood.”

The ADA protects individuals with disabilities from discrimination by public accommodations, such as restaurants, and requires that persons with disabilities have full and equal enjoyment of a restaurant’s goods, services, facilities, privileges and advantages.  The ADA also requires restaurants to make accommodations for persons with disabilities.  In addition, businesses have an ongoing obligation to remove architectural barriers to make their businesses accessible to persons with disabilities.  The department and Small Business Administration have provided an ADA Guide for Small Businesses describing the obligations under the ADA, as well as tax credits and deductions available, at http://www.ada.gov//smbustxt.htm.  People interested in finding out more about the ADA or this agreement can call the Justice Department’s toll-free ADA Information Line at 1-800-514-0301 or 1-800-514-0383 (TTY), or access its ADA Web site at www.ada.gov.

A U.S. citizen charged in connection with the operation of a series of fraudulent business opportunities based in Costa Rica was sentenced to prison today in Miami, the Justice Department announced. 

John White, aka Gregory Garrett, was sentenced by U.S. District Court Judge Patricia A. Seitz of the Southern District of Florida to serve 70 months in prison and five years of supervised release.  White was also ordered to pay $6,412,006.19 in restitution.  White is one of 12 defendants charged in connection with a series of business opportunity fraud ventures that operated in Costa Rica.  Nine of those other defendants have been convicted in the United States with sentences ranging from three to 16 years in prison and the two remaining defendants are not yet in the custody of the United States.

“The defendants in this scheme promised victims the American dream while knowing they in fact were being ripped off,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will continue to prosecute those who would deprive Americans of their savings just so they can make a quick buck.” 

White was indicted by a federal grand jury in Miami on Nov. 29, 2011, arrested in Costa Rica in 2012, extradited to the United States in 2015 and pleaded guilty on April 29, 2015, to one count of conspiracy to commit mail and wire fraud in connection with the business opportunity scheme. 

As part of his guilty plea, White admitted that from 2005 to 2008, he and his co-conspirators fraudulently induced individuals in the United States to buy business opportunities in USA Beverages Inc., Twin Peaks Gourmet Coffee Inc., Cards-R-Us Inc., Premier Cards Inc. and The Coffee Man Inc.  White and his co-conspirators claimed that these opportunities would allow purchasers to sell coffee or greeting cards from display racks located at other retail establishments.  The business opportunities cost thousands of dollars each, with most purchasers paying at least $10,000.  Each company operated for several months and after one company closed, the next opened.

White admitted that the conspiracy used various means to make it appear to potential purchasers that the businesses were located entirely in the United States.  The companies used bank accounts, office space and other services in the Southern District of Florida and elsewhere.  In reality, White and his co-conspirators operated out of call centers in Costa Rica. 

White admitted that he and his co-conspirators made numerous false statements to potential purchasers of the business opportunities, including that purchasers likely would earn substantial profits; that prior purchasers of the business opportunities were earning substantial profits; that purchasers would sell a guaranteed minimum amount of merchandise, such as greeting cards and beverages; and that the business opportunity worked with locators familiar with the potential purchaser’s area who would secure or had already secured high-traffic locations for the potential purchaser’s merchandise stands.  Potential purchasers also were falsely told that the profits of the companies were based in part on the profits of the business opportunity purchasers, thus creating the false impression that the companies had a stake in the purchasers’ success and in finding good locations.

As alleged in the indictment against White and others, the companies employed various types of sales representatives, including fronters, closers and references.  A fronter spoke to potential purchasers when the prospective purchasers initially contacted the company in response to an advertisement.  A closer subsequently spoke to potential purchasers to close deals and references spoke to potential purchasers about the financial success they had purportedly experienced since purchasing one of the business opportunities.  The companies also employed locators, who were typically characterized by the sales representatives as third parties who worked with the companies to find high-traffic locations for the prospective purchaser’s merchandise display racks.  White admitted that he worked as a fronter and reference using aliases.

“This international and domestic investigation shows the Postal Inspection Service’s resolve to protect Americans from business opportunity scams,” said Postal Inspector in Charge Ronald Verrochio of the U.S. Postal Inspection Service (USPIS) Miami Division. 

Principal Deputy Assistant Attorney General Mizer commended the investigative efforts of USPIS.  The case is being prosecuted by Trial Attorney Alan Phelps of the Civil Division’s Consumer Protection Branch.

Company Previously Paid $4.6 Million in Restitution as Part of Non-Prosecution Agreement in Related Criminal Investigation

PC Specialists Inc., doing business as Technology Integration Group (TIG), has agreed to pay the United States $5.9 million to settle allegations that the company inflated the price of computers sold through another company to the National Nuclear Security Administration (NNSA) for use at Sandia National Laboratories in Albuquerque, New Mexico.  TIG, headquartered in San Diego, buys computers and other technology products for resale to other purchasers.

“The resources available to achieve the important goals carried out by our national laboratories are precious and limited,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates that diverting funds from the critical mission of the laboratories by inflating costs and making false claims or causing others to make false claims for government funds will not be tolerated.”

From 2003 to 2013, TIG sold Dell computers to Sandia Corporation for resale to the United States under Sandia’s contract with the NNSA.  The NNSA purchased the computers for use at Sandia National Laboratories.  The United States alleged that TIG knowingly inflated the amounts it charged Sandia by failing to give credits for rebates and discounts it received from Dell as required by its contract and causing false claims to the government for the inflated prices.  

“Fraud involving government contracts will be zealously pursued in New Mexico,” said U.S. Attorney Damon P. Martinez of the District of New Mexico.  “The U.S. Attorney’s Office and its law enforcement partners are committed to recovering losses, preventing fraud, holding accountable those who exploit government contracts and ensuring that the taxpayers’ monies are properly spent.”

In a separate but related matter, in April 2015, TIG entered into a non-prosecution agreement with the U.S. Attorney’s Office of the District of New Mexico regarding allegations that three employees in TIG’s Albuquerque branch office engaged in a scheme to defraud the United States by inflating the amounts it charged Sandia for computers.  The non-prosecution agreement in that matter required TIG to terminate the employment of the three employees in its Albuquerque branch office – a vice president, a senior account executive and an accounts executive – who participated in and profited from the scheme.  The non-prosecution agreement also required TIG to retain and pay for an independent monitor selected by the U.S. Attorney’s Office who is responsible for monitoring TIG’s compliance with the agreement, and TIG policies, procedures and training relating to federal government contracts over the agreement’s three-year term.  

The allegations resolved by the civil settlement announced today arose from a lawsuit filed by Maverick Granger, a former TIG executive in Albuquerque, 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. Granger’s share of the settlement has not yet been determined. 

These resolutions were the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the District of New Mexico and the U.S. Department of Energy’s Office of Inspector General (DOE-OIG).  The criminal investigation was conducted by DOE-OIG, the FBI’s Albuquerque Division and the Albuquerque Office of the Internal Revenue Service-Criminal Investigation.

The False Claims Act lawsuit is captioned United States ex rel. Granger v. PC Specialists, Inc. d/b/a/ Technology Integration Group, No. 14-cv-00633 (D.N.M.).  The claims resolved by today’s civil settlement and the earlier non-prosecution agreement are allegations only; there has been no determination of guilt or liability.

North Carolina-based seafood processor and wholesale distributor Alphin Brothers Inc., was sentenced today in federal court for falsely labeling imported shrimp, the Justice Department announced.

Pursuant to plea agreement entered on Feb. 10, 2015, Alphin Brothers Inc., pleaded guilty to one felony count of making or submitting false records in violation of the Lacey Act.  Court documents state that an Alphin Brothers employee, who purchased and sold shrimp on the company’s behalf, directed Alphin Brothers employees and employees of another seafood processing facility to falsely label approximately 25,000 pounds of farm-raised imported shrimp as wild-caught product of the United States.  The falsely labeled shrimp was later sold by Alphin Brothers in interstate commerce to customers in Louisiana.

Consistent with the plea agreement, the court sentenced Alphin Brothers Inc., to pay a criminal fine of $100,000 and to forfeit approximately 21,450 pounds of shrimp.  The company also will serve three years of probation, including a special condition requiring the company to implement a training program to educate its employees on federal labeling requirements, as they relate to business activities at the company. 

Federal regulations require seafood retailers to provide customers with notice of the country of origin and the method of production, wild-caught or farm-raised, of shrimp and other shellfish.  These regulations are known by the acronym COOL, which stands for “country of origin labeling.”  The COOL regulations allow country of origin and method of production information to be provided in any format, as long as it is placed in a conspicuous location such that it will likely be read and understood by a customer under normal circumstances.  Many shrimp processors and wholesale distributors, including Alphin Brothers Inc., print country of origin and/or method of production information directly on packaging, such as boxes, intended for retail sale.

Under the COOL regulations, shrimp may be labeled as “product of the United States” only if they were harvested and processed in the United States or by a United States-flagged vessel and have not undergone any substantial transformation outside the United States.  Packing, repacking, thawing, freezing, cleaning, peeling, deveining, grading, cooking, or soaking shrimp in sodium tripolyphosphate solution does not constitute a substantial transformation under the COOL regulations.

The Lacey Act is a federal law making it illegal to make or submit any false record, account, or label for, or any false identification of, any fish or wildlife that has been or is intended to be imported, transported, purchased or received from any foreign country, or transported in interstate or foreign commerce.  The maximum penalties for a felony violation of the Lacey Act include up to five years of imprisonment and $250,000 in fines for individual defendants and up to $500,000 in fines for corporate defendants.

The case was investigated by the National Oceanic and Atmospheric Administration Office of Law Enforcement, with assistance from the Louisiana Department of Wildlife and Fisheries.  The case was prosecuted by the Justice Department’s Environmental Crimes Section and the U.S. Attorney’s Office for the Eastern District of North Carolina.

Two tax return preparers with offices located in California, Maryland and New York were sentenced today in Los Angeles for facilitating an offshore tax fraud scheme, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. 

David Kalai was sentenced to serve 36 months in prison to be followed by three years of supervised release, with a condition of home confinement to last the entire term of release, and ordered to pay a $286,000 fine, and Nadav Kalai, David Kalai’s son, was sentenced to serve 50 months in prison to be followed by three years of supervised release, and ordered to pay a $10,000 fine.  The defendants’ sentences were imposed by U.S. District Judge Terry J. Hatter Jr. of the Central District of California.

On Dec. 19, 2014, a federal jury in Los Angeles convicted the Kalais of one count of conspiracy to defraud the Internal Revenue Service (IRS).  The Kalais were also each convicted of two counts of willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR).  An alleged co-conspirator, David Almog, who is charged in the second superseding indictment, remains a fugitive.  The Kalais advised and assisted their high net-worth clients in concealing millions of dollars of assets and income in secret foreign bank accounts and filing false federal income tax returns.  The defendants also maintained a secret offshore account of their own at Bank Leumi in Luxembourg in the name of a foreign sham corporation and failed to disclose the account to the IRS or the U.S. Treasury.

“The sentences imposed today make it clear that the department is aggressively prosecuting financial professionals like the Kalais, who assist U.S. taxpayers in concealing assets offshore and evading their tax and reporting obligations,” said Acting Assistant Attorney General Ciraolo.  “The days of hiding behind numbered accounts and sham corporations are over; accountholders are coming in, accepting responsibility and cooperating against their accountants, attorneys and advisors who actively facilitated their criminal conduct.”

“Today’s sentencing of David and Nadav Kalai is another victory for American taxpayers as IRS-Criminal Investigation (CI) continues its pursuit to stop offshore tax evasion schemes and bring these criminals to justice,” said Chief Richard Weber of IRS-CI.  “It is becoming increasingly difficult for criminals to hide their money offshore and IRS-CI will continue to level the playing field for all taxpayers by ensuring we are all playing by the same rules.”

According to the second superseding indictment and evidence introduced at trial, the Kalais were principals of United Revenue Service Inc. (URS), a tax return preparation business with 12 offices located throughout the United States.  David Kalai worked primarily at URS’ former headquarters in Newport Beach, California, and later at URS’ location in Costa Mesa, California.  Nadav Kalai worked out of URS’ headquarters in Bethesda, Maryland, as well as the locations in Newport Beach and Costa Mesa.

U.S. citizens, resident aliens and permanent legal residents have an obligation to report to the IRS on Schedule B of the U.S. Individual Income Tax Return, Form 1040, whether they had a financial interest in, or signature authority over, a financial account in a foreign country in a particular year by checking “Yes” or “No” in the appropriate box and identifying the country where the account was maintained.  They are further obligated to report all income earned from the foreign financial account on the tax returns.  Separately, U.S. citizens, resident aliens and permanent legal residents with a foreign financial interest in, or signatory authority over, a foreign financial account worth more than $10,000 in a particular year must also file an FBAR with the U.S. Treasury by June 30 of the following year disclosing such an account. 

Evidence introduced at trial established that the co-conspirators purposefully prepared false individual income tax returns for their URS clients that did not disclose the clients’ foreign financial accounts nor report the income earned from those accounts.  In order to conceal the clients’ income, ownership and control of assets from the IRS, the co-conspirators incorporated offshore companies in Belize and elsewhere and helped clients open secret bank accounts at the Luxembourg locations of two Israeli banks, Bank Leumi and Bank B.  Bank Leumi is a large financial institution headquartered in Tel-Aviv, Israel, with worldwide branches.  Bank B is also a financial institution headquartered in Tel-Aviv with a worldwide presence.

The sham corporations that the co-conspirators incorporated in Belize and elsewhere were used to act as named accountholders on the secret Israeli bank accounts.  The co-conspirators then recommended and facilitated the transfer of client funds to the secret accounts and prepared and filed tax returns that falsely reported the money sent offshore as a false investment loss or a false business expense, or entirely omitted any income earned by a client from a foreign source.  The Kalais also failed to disclose the clients’ secret accounts on tax returns that they prepared, and caused the clients to fail to file FBARs with the U.S. Treasury as required.

Three URS clients who testified at the Kalais’ trial have pleaded guilty to tax felonies arising from their participation in the scheme.  On July 1, 2013, Alexei Iazlovsky, a client of URS and Nadav Kalai, pleaded guilty in U.S. District Court in Los Angeles to signing and filing a false federal income tax return for tax year 2008.  According to court documents and evidence introduced at trial, Nadav Kalai facilitated the incorporation of a nominee Belize corporation for Iazlovsky, assisted Iazlovsky with setting up an offshore account in Luxembourg at one of the Israeli banks that was held in the name of the Belizean corporation and prepared false federal income tax returns, which Iazlovsky signed and filed with the IRS, that concealed the existence, assets and income of Iazlovsky’s offshore account.  On Nadav Kalai’s advice, Iazlovsky diverted a total of $2.6 million in untaxed business receipts from Russian clients to his undeclared bank account in Luxembourg.

On July 17, 2013, Moshe Handelsman pleaded guilty in U.S. District Court in San Jose, California, to signing and filing a false income tax return for the 2007 tax year.  According to court documents and evidence introduced at trial, Handelsman was David Kalai’s client since the 1990s.  On David Kalai’s advice, Handelsman used three foreign bank accounts held in the names of two different sham foreign corporations to reduce his taxes.  The last of those accounts was held at the Tel-Aviv branch of one of the Israeli banks.  Nadav Kalai was Handelsman’s tax return preparer from 2003 through 2007.  During those years, Handelsman sent approximately $1.47 million offshore, which was fraudulently deducted as a business expense on corporate tax returns prepared by Nadav Kalai.

On Feb. 2, Baruch Fogel pleaded guilty in U.S. District Court in Los Angeles to failing to file an FBAR declaring his Bank Leumi account in Luxembourg.  According to court documents and evidence introduced at trial, David Kalai devised a scheme to reduce Fogel’s income taxes in 2002 and 2003 by using a sham offshore corporation and a secret offshore bank account at Bank Leumi Luxembourg held in the name of the offshore corporation.  David Kalai’s scheme involved obtaining $8 million in loans from Bank Leumi USA and transferring that money through one or more of Fogel’s U.S. businesses to Fogel’s Luxembourg bank account.  The $8 million in transfers were designed to make it appear that one or more of Fogel’s U.S. businesses incurred business expenses by paying Fogel’s offshore corporation.  Once the paper trail was created, $8 million was fraudulently deducted as business expenses on Fogel’s corporate tax returns prepared by URS.  David Kalai told Fogel not to disclose his control of the foreign bank account to U.S. authorities. 

The evidence at trial also established that the Kalais each failed to file an FBAR for calendar years 2008 and 2009 with respect to a foreign account held at Bank Leumi in Luxembourg.  According to the bank’s internal records from Luxembourg, the Kalais were the true owners of the account, which was held in the name of Anack Ltd., a nominee Belizean corporation.  In 2008 and 2009, their offshore bank account had more than $300,000 on deposit. 

Acting Assistant Attorney General Ciraolo commended the special agents of IRS-CI, who investigated the case, and Trial Attorneys Christopher S. Strauss and Ellen M. Quattrucci of the Tax Division, who prosecuted the case.  Ciraolo also thanked Assistant U.S. Attorney and Chief of the Tax Division Sandra R. Brown of the U.S. Attorney’s Office of the Central District of California and her office for their substantial support and assistance.             

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

The Department of Justice and the Department of Health and Human Services (HHS) today issued joint technical assistance to state and local child welfare agencies and courts on the requirements of Title II of the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act.  The technical assistance released today is part of a new partnership between HHS and the Department of Justice to help child welfare agencies protect the welfare of children and ensure compliance with nondiscrimination laws.                                                                                                                         

The technical assistance addresses disability discrimination complaints that HHS and the Department of Justice have received from parents who have had their children taken away from them as well as individuals who have not been given equal opportunities to become foster or adoptive parents.  Noting that the goals of child welfare and disability non-discrimination are complementary, the technical assistance provides an overview of Title II of the ADA and Section 504 and examples about how to apply them in the child welfare system, including child welfare investigations, assessments, guardianship, removal of children from their homes, case planning, adoption, foster care and family court hearings, including termination of parental rights proceedings.  It also underscores that Title II and Section 504 prohibit child welfare agencies from acting based on unfounded assumptions, generalizations, or stereotypes regarding persons with disabilities.

“This technical assistance reflects an important milestone in the ongoing effort to realize equality for individuals with disabilities in all aspects of our society,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “The ADA and Section 504 ensure that all government providers of programs, activities, and services treat people with disabilities in a fair and equal manner.  State and local agencies and courts are our partners in defending the rights of people with disabilities, and this guidance gives them an improved understanding of how to uphold those rights more effectively.”

“Ensuring nondiscrimination in the child welfare system is an Office for Civil Rights (OCR) priority and we’re very pleased to join with the HHS Administration on Children and Families and the Department of Justice in this important initiative,” said Director Jocelyn Samuels of HHS’ Office for Civil Rights.  “It’s particularly fitting that we are beginning this initiative with guidance on the rights of parents and prospective parents with disabilities given our recent investigation with the Department of Justice in this area and as we commemorate the 25th Anniversary of the ADA.  This guidance will help ensure that parents and prospective parents are not discriminatorily deprived of custody of their children, or denied the opportunity to adopt or serve as foster parents, because of stereotypes and unfounded assumptions about persons with disabilities, which we have seen in our complaints.”

“Providing this technical assistance to state and local agencies and courts will help ensure that families with a member with a disability get equal access to vital child welfare services,” said Acting Assistant Secretary Mark Greenberg of HHS’ Administration for Children and Families (ACF).

The Children’s Bureau in the Department of Health and Human Services, ACF administers funding for child welfare agencies and courts.  ACF also provides guidance and technical assistance to child welfare agencies regarding child welfare law.  OCR and the Civil Rights Division of the Department of Justice are responsible for protecting the rights of individuals with disabilities by enforcing Title II of the ADA and Section 504 of the Rehabilitation Act.  These laws prohibit discrimination on the basis of disability, and require providers of government programs, services and activities to make reasonable modifications to their policies and practices when necessary to avoid discrimination on the basis of disability, unless such modifications would fundamentally alter the nature of the program or the services.

Additional information about the Civil Rights Division of the Department of Justice is available at www.justice.gov/crt.  Additional information about the Department of Health and Human Services, Office of the Administration for Children and Families, Children’s Bureau is available at www.acf.hhs.gov/cb.  Additional information about the Department of Health and Human Service’s Office for Civil Rights is available at www.hhs.gov/ocr/.

A Miami-area pharmacy owner pleaded guilty today to submitting almost $1.6 million in fraudulent claims to Medicare.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge George L. Piro of the FBI’s Miami Field Office and Special Agent in Charge Shimon R. Richmond of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Regional Office made the announcement.

Tamara Esponda, 47, of Miami, pleaded guilty before U.S. District Judge James I. Cohn of the Southern District of Florida to one count of health care fraud.  Sentencing has been scheduled for Nov. 13, 2015.

Esponda owned Biomax Pharmacy Inc.  In connection with her guilty plea, Esponda admitted that, between October 2012 and September 2013, Biomax Pharmacy submitted almost $1.6 million in fraudulent claims to Medicare for prescription drugs that were not prescribed by physicians, not medically necessary, not purchased by Biomax Pharmacy and not provided to Medicare beneficiaries.  Medicare paid 100 percent of the claims.

According to Esponda’s admissions, she and her accomplices stole or illegally paid for unique identifying information of Medicare beneficiaries, and used this information to submit the fraudulent claims.  Esponda also admitted that she controlled Biomax Pharmacy’s bank accounts, and that she transferred the payments received from Medicare to herself and her accomplices.

This case is being investigated by the FBI and HHS-OIG, 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 of the Southern District of Florida.  This case is being prosecuted by Trial Attorney Timothy P. Loper 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 over 2,300 defendants who collectively have billed the Medicare program for over $7 billion.  In addition, the U.S. Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services, working in conjunction with the HHS-Office of Inspector General, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Team, go to: www.stopmedicarefraud.gov.

Esponda Plea Agreement

Gerard Kruse, 42, a social worker who lives in Oviedo, Florida, pleaded guilty today in federal court in Brooklyn, New York, to 13 Lacey Act violations for his role in the trade of illegally caught snakes, the Justice Department’s Environment and Natural Resources Division announced.

Kruse pleaded guilty to seven counts of illegal transport of wildlife and six counts of illegal receipt of wildlife, which under the facts of the case are misdemeanors under the Lacey Act.  At the time of the crimes, Kruse was living in Douglaston, New York.  In court documents, Kruse admitted that between 2008 and 2012, he knowingly participated in violations, which involved the illegal collection, transport and receipt of 59 snakes that were collected from and protected by various states, such as New Jersey, California and Oregon.  Under the Lacey Act, it is illegal to knowingly ship or receive snakes in interstate commerce that were taken in violation of state law.  During the course of his conduct, Kruse personally collected protected snakes and shipped them to collectors in other states.  Sometimes he received money for the reptiles; other times he bartered snakes.  In addition, Kruse would solicit snakes from out-of-state collectors, while knowing that those collectors had procured their snakes illegally.  The last charge of the information deals with Kruse’s involvement in the shipment of a diamondback rattlesnake from Texas to Douglaston in a coffee can, in violation of U.S. Postal regulations.   

The Lacey Act is an important statute for protecting our nation’s wildlife against those who make enforcement of state laws difficult by crossing state lines with protected species,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “All of our protected species, including reptiles, are important to our ecosystems and must be shielded from such illegal trafficking. The Justice Department will continue to vigorously support efforts against domestic wildlife trafficking.”

According to the terms of the pela agreement, the government will seek 13 months of home confinement with electronic monitoring, a request which is unopposed by the defense.  In addition, Kruse has agreed to be placed on probation and subject to special conditions such as forfeiture of his snakes and being banned from the collection, sale and trade of reptiles and amphibians.  Terms of Kruse’s sentence that the parties could not agree on will be decided at a sentencing hearing set for Dec. 15, 2015.

The case was investigated by agents of the U.S. Fish and Wildlife Service as part of Operation Kingsnake.  The case is being prosecuted by Christopher L. Hale of the Justice Department’s Environmental Crimes Section, Environment and Natural Resources Division.

9,000 Identities Stolen from the U.S. Army, Alabama State Agencies, a Georgia Call Center and a Georgia Company

Eight residents of Alabama and Georgia were sentenced today to serve more than 31 years in  prison, collectively, for their roles in a $24 million stolen identity refund fraud (SIRF) conspiracy, 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.

U.S. District Court Judge Kristi K. DuBose of the Southern District of Alabama imposed the following sentences:

• Tracy Mitchell, of Phenix City, Alabama, was sentenced to serve 159 months in prison, three years of supervised release and ordered to pay a forfeiture judgment in the amount of $329,242, which was seized in cash from her residence;
• Talarius Paige, of Phenix City, was sentenced to serve 60 months in prison, three years of supervised release and ordered to pay $762,512 in restitution to the Internal Revenue Service (IRS);
• Mequetta Snell-Quick, of Columbus, Georgia, was sentenced to serve 24 months and one day in prison, two years of supervised release and ordered to pay $199,471 in restitution to the IRS ;
• Latasha Mitchell, of Phenix City, was sentenced to serve 36 months in prison, two years of supervised release and ordered to pay $513,821 in restitution to the IRS ;
• Dameisha Mitchell, of Phenix City, was sentenced to serve 65 months in prison, three years of supervised release and ordered to pay $440,176 in restitution to the IRS;
• Sharonda Johnson, of Phenix City, was sentenced to serve 24 months in prison, two years of supervised release and ordered to pay $440,176 in restitution to the IRS;
• Patrice Taylor, of Midland, Georgia, was sentenced to serve 12 months and one day in prison, two years of supervised release and ordered to pay $28,783 in restitution to the IRS; and
• Cynthia Johnson, of Phenix City, was sentenced to two years of probation and ordered to pay $5,047 in restitution to the IRS.

The sentencing of Keisha Lanier, of Seale, Alabama, is scheduled on Aug. 24.  Tamaica Hoskins, a co-defendant who was charged in the same indictment, was sentenced on June 25 to serve 145 months in prison.  Tamika Floyd, a defendant in a related case, was sentenced on May 19 to serve 87 months in prison.

“These conspirators abused their access to government and private databases to steal thousands of identities, including those of soldiers deployed in Afghanistan, and filed false tax returns seeking over $20 million in fraudulent refund claims,” said Acting Assistant Attorney General Ciraolo.  “The significant prison sentences and financial penalties imposed today reflect the seriousness of this criminal conduct and send a clear message that those who victimize U.S. citizens and steal from the U.S. Treasury will be prosecuted to the fullest extent of the law.”

According to information in court documents and at the sentencing hearings, between January 2011 and December 2013, Lanier and Tracy Mitchell led a large-scale identity theft ring in which Lanier, Tracy Mitchell and their co-defendants filed more than 9,000 false individual federal income tax returns that claimed more than $24 million in fraudulent claims for tax refunds.  The IRS paid out close to $10 million in refunds on these fraudulent claims.  The defendants obtained the stolen identities from various sources, including from the U.S. Army, several Alabama state agencies, a Georgia call center and employee records from a Georgia company.  Mitchell worked at the hospital located at Fort Benning, Georgia, where she had access to the identification data of military personnel, including soldiers who were deployed to Afghanistan.  She stole the personal information of soldiers and used that information to file false tax returns.

“Today’s sentencing of eight criminals, who used the identities of American service members and hospital patients to enrich themselves by stealing tax refunds, demonstrates the depths of how far criminals will stoop and the extent to which IRS-CI will go to fight identity theft,” said Chief Richard Weber of IRS-Criminal Investigation (IRS-CI).  “We will use every available resource in collaboration with our law enforcement partners to combat these serious crimes.”

“Today's sentences show our unwavering commitment to aggressively pursue cases of cybercrime and protect the men and women serving our nation,” said Director Daniel Andrews of the U.S. Army Criminal Investigation Command's (CID) Computer Crime Investigative Unit.  “These defendants stole personal identities for monetary gain, and their sentences should resonate with would-be criminals that we can, and we will, hold them accountable for their crimes.”Floyd stole personal information from two Alabama state agencies and provided those names to Lanier.  Lanier provided those names to Tracy Mitchell, Latasha Mitchell, Paige and others to file false tax returns.  Lanier also obtained stolen identities from the Alabama Department of Corrections.  Paige and Taylor worked in a call center for a payment-processing company in Columbus and stole identities.  Paige, in turn, used those identities to file false tax returns, some of which he filed from Tracy Mitchell’s residence.  Tracy and Latasha Mitchell also obtained employee files from a Columbus company and used those identities to file false tax returns.

In order to file the false tax returns, the defendants obtained several IRS Electronic Filing Numbers in the names of sham tax businesses.  On behalf of those sham tax businesses, the defendants applied for bank products from various financial institutions.  Under the guise of a legitimate business account, the institutions mailed blank check stock to the defendants’ homes.  The defendants directed the IRS to pay anticipated tax refunds to prepaid debit cards, in U.S. Treasury checks and to financial institutions, which in turn issued the tax refunds via prepaid debit cards or checks.  When the refunds were sent through the financial institutions, the defendants simply printed out the refund checks from the check stock that had been sent to their homes.

After a period of time, the financial institutions stopped permitting the defendants to print out the tax refund checks.  To continue the scheme, Tracy Mitchell and members of her family recruited U.S. Postal Service employees.  The corrupt postal employees specified addresses along their postal routes to have the U.S. Treasury checks mailed, then obtained those checks and turned them over to the defendants for a fee.

The scheme also involved a complex money laundering operation.  Almost $10 million in fraudulent tax refund checks were cashed at several businesses located in Alabama, Georgia and Kentucky.  To coordinate this massive check cashing scheme, the defendants communicated using text messages and maintained detailed records.  For instance, Sharondra Johnson worked at the Walmart money center in Columbus, where she cashed checks for customers as part of her job.  Dameisha Mitchell recruited Sharondra Johnson to cash tax refund checks that were fraudulently issued in the names of other individuals.  Sharondra Johnson agreed to cash the checks and communicated with Dameisha and Tracy Mitchell via text messages.  In an attempt to conceal the crime from Walmart, the defendants had multiple individuals deliver the tax refund checks to Johnson for her to cash them.

At sentencing, the government offered victim impact statements from several individuals whose identities were stolen, and from companies and governmental agencies where the identity theft breaches occurred.  As one agency representative noted, the identity theft was not only devastating financially, but it also had a chilling effect on their ability to serve the residents of this state.  A mother of a young U.S. Army soldier who was an identity theft victim described the consequences of the fraud on her and her family, stating:

While [my son] was fighting for our country and all back home[,] I received a very disturbing phone call from [an] Agent [] from the IRS that my son[,] while at Ft. Benning training to defend our country[,] the land of the free[,] had his identity stolen and fraudulent tax returns were filed with his social security number.  This news was devastating to think that my [] 19-year-old son[,] who was defending the very freedom this country stands [for] [,] was wronged by one of those people [he] was willing to die for.  My whole family could not believe what was happening.  We now had to worry about this terrible act by one of our own.  As I tried my best to keep composed and handle all of the gruesome mounds of paperwork to get this straightened out with the IRS, [my son] was then denied his tax refund.  This created a financial hardship on [him].  We were too afraid to tell [him] while he was deployed because we did not want to worry him and we wanted him to focus only on getting home alive and not have to worry about such an atrocious act by someone who did not even know [him].

“No sentence is too strong for those who prey on our fighting men and women,” said U.S. Attorney Beck Jr.  “War is hell on the home front, too, and the family left behind holding things together must be strongly protected.”

Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck Jr. commended special agents of the IRS-Criminal Investigation and the U.S. Army-CID, who investigated the case, and Trial Attorneys Michael C. Boteler and Gregory P. Bailey of the Tax Division and Assistant U.S. Attorneys Todd A. Brown, Jonathan S. Ross and Kevin P. Davidson of the Middle District of Alabama, who prosecuted the case.  Ciraolo and Beck Jr. also thanked the U.S. Attorney’s Office of the Middle District of Georgia for their assistance in the case.

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

A 38-year-old Bremerton, Washington man pleaded guilty today to a federal hate crime under the Matthew Shepard and James Byrd, Jr., Hate Crimes Prevention Act, for a January 2015 assault on three gay men, announced U.S. Attorney Annette L. Hayes, Western District of Washington and Principal Deputy Assistant Attorney General Vanita Gupta, head of the Department of Justice’s Civil Rights Division.  Troy Deacon Burns, will be sentenced by U.S. District Judge James L. Robart on November 10, 2015.

According to the plea agreement, just after midnight on January 25, 2015 three gay men were walking on East Pike Street toward Broadway in Seattle’s Capitol Hill neighborhood when Burns came up behind them and shouted homophobic slurs.  Burns was holding a knife, which he raised up over his head in a stabbing position.  Fearing for their safety the men started running.  As Burns caught up to one of the men he again used a slur as he attempted to stab him.  One of the other men was able to pull his friend away from Burns.  The third man located Seattle Police Officers who took Burns into custody.  While detained in the patrol car, Burns continued to yell homophobic slurs.  Burns was under the influence of drugs and alcohol at the time of the assault and says that he does not remember his actions.

The case was investigated by the Seattle Police Department and is being prosecuted by Assistant United States Attorney Bruce Miyake and Saeed Mody, Trial Attorney, Civil Rights Division, United States Department of Justice.  The King County Prosecuting Attorney’s Office is providing significant assistance with the case.

The Department of Justice announced today that Privatbank Reichmuth & Co., Banque Cantonale du Jura SA and Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA have reached resolutions under the department’s Swiss Bank Program.

“The department is acquiring detailed information regarding the many ways in which U.S. taxpayers attempt to hide foreign assets, including through the use of sham trusts and insurance policies wrapped around foreign bank accounts to shroud the identity of U.S. beneficial owners,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division.  “The department is dismantling these structures, unwrapping these policies, and pursuing and prosecuting those involved in this fraudulent conduct.”

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

Under the program, banks are required to:

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

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

• Cooperate in treaty requests for account information;

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

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

• Pay appropriate penalties.

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

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

Privatbank Reichmuth & Co. was founded in 1996 as an external asset management firm.  It is now a private bank headquartered in Lucerne, Switzerland.  Reichmuth knew that it was likely that certain U.S. customers who maintained accounts there were not complying with their U.S. income tax and reporting obligations. 

Reichmuth opened and maintained undeclared numbered or code name accounts for individual U.S. customers and held statements and other mail at its offices in Switzerland.  In the period since Aug. 1, 2008, Reichmuth opened at least 14 undeclared U.S.-related accounts that came from UBS or another bank under investigation by the department. 

In 2001, Reichmuth entered into a Qualified Intermediary (QI) Agreement with the Internal Revenue Service (IRS).  The QI Agreement took account of the fact that Reichmuth, like other Swiss banks, was prohibited by Swiss law from disclosing the identity of an accountholder.  In general, if an accountholder wanted to trade in U.S. securities and avoid mandatory U.S. tax withholding, the QI Agreement required Reichmuth to obtain the consent of the accountholder to disclose the client’s identity to the IRS.

Reichmuth’s position was that it could assist U.S. accountholders that it knew or had reason to believe were engaged in tax evasion so long as its accountholders were prohibited from trading in U.S.-based securities or the account  was nominally structured in the name of a non-U.S. based entity.  In the latter circumstance, U.S. accountholders, with the assistance of their advisors, would create an entity, such as a Liechtenstein or Panama foundation, and pay a fee to third parties to act as directors.  Those third parties, at the direction of the U.S. accountholder, would then open a bank account at Reichmuth in the name of the entity or transfer a pre-existing Swiss bank account from another Swiss bank.  Reichmuth made no effort to determine whether such an entity was valid for U.S. tax purposes.

Since Aug. 1, 2008, Reichmuth permitted U.S. customers to open and maintain at least 18 undeclared accounts held in the name of non-U.S. corporations, foundations, trusts or other legal entities.  Of these structures, seven were domiciled in Liechtenstein, five in Panama, five in St. Vincent and the Grenadines and one in the British Virgin Islands.  Even though Reichmuth was aware that U.S. persons were the beneficial owners of those accounts, Reichmuth obtained documents from the nominal accountholders that falsely declared they were not U.S. taxpayers. 

In connection with one structured account, Reichmuth agreed to open an “insurance wrapped” account for the U.S. beneficial owner, whereby the beneficial owner funded an insurance policy with assets held in an undeclared account at Reichmuth.  While the insurance-wrapped account was held in the name of a Panamanian structure and Reichmuth was not named as a party to the insurance contract, the assets held in the account were provided by the beneficial owner, held for his benefit and controlled by him.  Reichmuth was aware that the account consisted of assets supplied by the beneficial owner and retained for his benefit.  By accepting this account, Reichmuth knowingly enabled the beneficial owner in the evasion of his U.S. tax liabilities and concealment of his assets.

Since Aug. 1, 2008, Reichmuth maintained and serviced 103 U.S.-related accounts with an aggregate value of approximately $281 million, including both declared and undeclared accounts.  Reichmuth will pay a penalty of $2.592 million.

Banque Cantonale du Jura SA (BCJ) was formed in 1979 and is headquartered in Porrentruy, Switzerland.  BCJ opened and maintained undeclared accounts for certain U.S. client taxpayers knowing or having reason to know that by doing so, BCJ likely helped these U.S. taxpayers evade their U.S. tax obligations.  BCJ was aware, or should have been aware, that this conduct violated U.S. law.

BCJ provided traditional Swiss banking services that it knew could assist, and that did in fact assist, certain U.S. taxpayers to evade their U.S. tax obligations, file false federal tax returns with the IRS and otherwise hide accounts held at BCJ from the IRS.  Those services included opening accounts identified solely by pseudonyms, rather than by the names of the accountholders, and hold mail service.  In at least two instances, BCJ permitted U.S. persons to transfer funds from accounts held at banks under investigation by the department into pre-existing accounts at BCJ.  It also processed cash withdrawals for U.S. accountholders in sums below $10,000 on numerous occasions and, in at least two cases, withdrawing larger sums of cash when closing their accounts.

Due in part to the assistance of BCJ and its personnel, and with the knowledge that Swiss banking secrecy laws would prevent BCJ from disclosing their identities to the IRS, some of BCJ’s U.S. clients filed false and fraudulent U.S. Individual Income Tax Returns (IRS Forms 1040) which failed to report their respective interests in their undeclared accounts and the related income.  Some of BCJ’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 cooperation throughout the Swiss Bank Program, BCJ has provided certain account information related to U.S. taxpayers that may assist the government in making requests under the 1996 Convention between the United States and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income for, among other things, the identities of U.S. accountholders.

Since Aug. 1, 2008, BCJ had 18 U.S. clients with a total of 118 U.S.-related accounts.  The aggregate amount of assets under management of all accounts associated with U.S. taxpayers at BCJ was approximately $10 million.  BCJ will pay a penalty of $970,000.           

Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA (BIM Suisse) was established in 2001 and is located in Lugano, Switzerland.  BIM Suisse opened and maintained undeclared accounts for some U.S. taxpayers with the knowledge that by doing so, BIM Suisse was helping these U.S. taxpayers violate their legal duties.  BIM Suisse agreed to hold bank statements and other mail relating to the accounts at BIM Suisse, rather than send them to U.S. taxpayers located in the United States, to ensure that documents reflecting the existence of the accounts remained outside the United States and beyond the reach of U.S. tax authorities.

In January 2002, BIM Suisse entered into a QI Agreement with the IRS.  BIM Suisse subverted the terms of that agreement by failing to fully comply with both its withholding and reporting obligations to the IRS, thus enabling U.S. accountholders to avoid reporting their accounts to the U.S. authorities.

Between Aug. 1, 2008, and May 2015, BIM Suisse closed 13 of its 16 U.S.-related accounts.  As of July 2015, BIM Suisse maintains only three U.S.-related accounts, and none of those accounts remain undisclosed to the U.S. tax authorities.  Under the terms of the agreement signed today, BIM Suisse will not pay a penalty.

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

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

“Today’s announcement emphasizes the strength and stamina of the Swiss Bank Program,” said Chief Richard Weber of IRS-Criminal Investigation (IRS-CI).  “Taxpayers with offshore accounts continue to come forth voluntarily to make things right with the IRS.  Time is running out for those offshore accountholders who have not yet have taken that step.  Through the Swiss Bank Program and the tremendous volume of information these banks are providing, the IRS will continue to identify and bring to justice those who would evade U.S. tax laws.” 

Acting Assistant Attorney General Ciraolo thanked the IRS, and in particular, IRS-CI and the IRS Large Business and International Division for their substantial assistance.  Ciraolo also thanked Michael N. Wilcove, Gregory S. Seador, Sean P. Beaty and Kimberle E. Dodd, who served as counsel on these matters, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer 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.

More than 56 parties have agreed to restore key salmon habitat on the White River, which flows through King and Pierce Counties in Washington State, to resolve their liability for natural resource damages caused by hazardous substances released into the Thea Foss and Wheeler-Osgood Waterways in Tacoma’s Commencement Bay, the Justice Department, National Oceanic and Atmospheric Administration (NOAA) and Department of the Interior announced today. 

The habitat project will reopen 121 acres of historic floodplain for salmon, and reduces future flood risk to nearby homes and businesses. The project results from the collaborative efforts of settling parties and natural resource trustees: NOAA, the Department of the Interior, the Washington State Department of Ecology, the Puyallup Tribe of Indians, and the Muckleshoot Indian Tribe.

Under a settlement filed in federal district court in Tacoma, the parties will fund the Countyline Levee Setback Project, which will restore and provide off-channel rearing habitat for salmon and steelhead on the Lower White River in the vicinity of Pacific, Auburn and Sumner, Wash. The White River is one of the Puget Sounds’s most important watersheds for imperiled salmon and steelhead. The project will also help reduce the risk of flood damage for more than 200 nearby homes and businesses by allowing floodwaters more room to flow without damage.

The parties will monitor and adaptively manage the project under a 10-year plan that ensures at least 32.5 acres of the site are inundated by the river and thus accessible to fish. The parties also will pay more than $1 million towards the natural resource trustees’ assessment, oversight and the long-term stewardship costs maintaining the environmental value of the project over the next 100 years and beyond.

“This settlement is an important step toward repairing damaged natural resources from pollution in Commencement Bay, restoring critical salmon habitat in the area watershed, and reducing flooding for residents,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “Through this settlement, we are again demonstrating our commitment to protecting and restoring vital natural resources in the Northwest, which will result in lasting benefits to people and their environment.”

The settling parties consist of companies, individuals, and government entities who are past or current owners and/or operators of or successors to facilities that released hazardous substances to the waterways.   For many decades, the Thea Foss and Wheeler Osgood waterways received discharges of wastewater, chemical wastes, sludges, and miscellaneous industrial waste from a variety of industrial sources and sewers.  The contaminants discharged to the waterways include PCBs, PAHs, cadmium, lead and zinc.  Bis-2-ethyl hexylphthalate also was discovered to be widespread throughout the Thea Foss waterway at significant levels associated with biological effects.

This is the 20th natural resources settlement related to pollution in Commencement Bay, long the industrial heart of Tacoma. Through these settlements, more than 350 acres of salmon habitat will have been restored to offset the injuries to salmon and other fish from pollution of Commencement Bay.

“This is a great example of how providing sound habitat for our special salmon species provides benefits for people as well,” said General Counsel Lois Schiffer, NOAA.  “These approaches improve the resilience of Northwest Communities.”

The settlement resolves the natural resource trustees’ claims against the settling parties, which are contained in a complaint filed with the consent decree.  The complaint asserts claims for natural resource damages in Commencement Bay under the Superfund statute, the Clean Water Act, the Oil Pollution Act, and Washington’s Model Toxics Control Act.

The consent decree, lodged in the U.S. District Court for the Western District of Washington, is subject to a 30-day public comment period and approval by the federal court.  A copy of the consent decree is available on the Justice Department website at www.justice.gov/enrd/Consent_Decrees.html.

The Department of Justice filed a statement of interest today arguing that making it a crime for people who are homeless to sleep in public places, when there is insufficient shelter space in a city, unconstitutionally punishes them for being homeless.  The statement of interest was filed in federal district court in Idaho in Bell v. City of Boise et al., a case brought by homeless plaintiffs who were convicted under Boise ordinances that criminalize sleeping or camping in public. 

As stated by the Justice Department in its filing, “[i]t should be uncontroversial that punishing conduct that is a universal and unavoidable consequence of being human violates the Eighth Amendment. . .  Sleeping is a life-sustaining activity—i.e., it must occur at some time in some place.  If a person literally has nowhere else to go, then enforcement of the anti-camping ordinance against that person criminalizes her for being homeless.”

“Many homeless individuals are unable to secure shelter space because city shelters are over capacity or inaccessible to people with disabilities,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “Criminally prosecuting those individuals for something as innocent as sleeping, when they have no safe, legal place to go, violates their constitutional rights.  Moreover, enforcing these ordinances is poor public policy.  Needlessly pushing homeless individuals into the criminal justice system does nothing to break the cycle of poverty or prevent homelessness in the future.  Instead, it imposes further burdens on scarce judicial and correctional resources, and it can have long-lasting and devastating effects on individuals’ lives.”

“No one wants people to sleep on sidewalks or in parks, particularly not our veterans, or young people, or people with mental illness,” said Director Lisa Foster of the Office for Access to Justice.  “But the answer is not to criminalize homelessness.  Instead, we need to work with our local government partners to provide the services people need, including legal services, to obtain permanent and stable housing.”

In this case, the plaintiffs allege that enforcement of the city of Boise ordinances prohibiting sleeping or camping in public outdoor places, on nights when there is insufficient shelter space in Boise to accommodate the homeless population, amounts to cruel and unusual punishment in violation of the Eighth Amendment.  In its filing, the United States does not take a position on the factual accuracy of the plaintiffs’ claims, but instead addresses the appropriate legal framework for analyzing their claims.  The statement of interest advocates for the application of the analysis set forth in Jones v. City of Los Angeles, a Ninth Circuit decision that was subsequently vacated pursuant to a settlement.  In Jones, the court considered whether the city of Los Angeles provided sufficient shelter space to accommodate the homeless population.  The court found that, on nights when individuals are unable to secure shelter space, enforcement of anti-camping ordinances violated their constitutional rights.  The parties in Bell v. City of Boise disagree about whether the Jones court’s analysis was correct, reflecting the longstanding disagreement among courts analyzing the constitutionality of anti-camping ordinances.  The statement of interest was filed to address this currently unsettled area of the law.

Bell v. City of Boise et al. was filed in the District of Idaho in 2009. 

A former construction boss from Las Vegas was sentenced today to 188 months in prison for his role in a $58,141,275 million scheme to fraudulently gain control of condominium homeowners’ associations (HOAs) in the Las Vegas area to secure construction and other contracts for himself and others.  Forty-two individuals have been convicted of crimes in connection with the scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Special Agent in Charge Laura A. Bucheit of the FBI’s Las Vegas Office, Sheriff Joseph Lombardo of the Las Vegas Metropolitan Police Department and Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI) made the announcement.

Leon Benzer, 48, pleaded guilty on Jan. 23, 2015, to one count of conspiracy to commit mail and wire fraud, 14 counts of wire fraud, two counts of mail fraud and two counts of tax evasion.  In addition to imposing the prison term, U.S. District Judge James C. Mahan of the District of Nevada ordered Benzer to pay restitution in the amount of $13,294,100.

“Leon Benzer recruited and paid off puppets to serve on homeowners’ boards so that they would steer lucrative contracts to his company and cronies,” said Assistant Attorney General Caldwell.  “Far from enjoying their corrupt proceeds, however, Benzer and his co-conspirators will serve years behind prison bars.”

“This sentence serves as a reminder of the FBI's dedication and commitment to investigate, apprehend and prosecute criminals that prey on innocent and unsuspecting consumers,” said Special Agent in Charge Bucheit.

“When Leon Benzer named his company, Silver Lining Construction, he probably wasn’t aware of the IRS Criminal Investigation Division and the expertise of our special agents when it comes to putting pieces of a puzzle together to build a picture of fraudulent activity,” said Chief Weber.  “Benzer manipulated and bribed HOA boards in order to enrich himself and his co-conspirators at the expense of American taxpayers.  Not only did he try to hide the proceeds of his crimes in order to evade paying taxes, but he failed to pay his employment taxes.  Today, justice was served and the “silver lining” that Benzer anticipated was not realized thanks to the work of IRS-CI and our law enforcement partners.”

In connection with his guilty plea, Benzer admitted that, from approximately August 2003 through February 2009, he and an attorney developed a scheme to control the boards of directors of HOAs in the Las Vegas area.  According to plea documents, Benzer and his co-conspirators recruited straw buyers to purchase condominiums and secure positions on HOAs’ boards of directors.  Benzer admitted that he paid the board members to take actions favorable to his interests, including hiring his co-conspirator’s law firm to handle construction-related litigation and awarding remedial construction contracts to Benzer’s company, Silver Lining Construction. 

The case was investigated by the FBI, IRS-CI and the Las Vegas Metropolitan Police Department’s Criminal Intelligence Section.  The case was prosecuted by Deputy Chief Charles La Bella and Trial Attorneys Thomas B.W. Hall and Alison Anderson of the Criminal Division’s Fraud Section. 

The Department of Justice and the Department of Commerce’s National Institute of Standards and Technology (NIST) today announced six appointments to the National Commission on Forensic Science.

The commission, created in 2013, develops forward-looking policy recommendations for the Attorney General to enhance the practice and improve the reliability of forensic science.

The commission is co-chaired by Deputy Attorney General Sally Quillian Yates and Under Secretary of Commerce for Standards and Technology and NIST Director Dr. Willie E. May.  Deputy Assistant Administrator Nelson Santos of the Drug Enforcement Administration’s Office of Forensic Sciences and Special Assistant John M. Butler to the NIST Director for Forensic Science serve as vice-chairs.

“For nearly two years, the commission has been hard at work developing recommendations to strengthen the field of forensic science and the six new commissioners will bring valuable new insights to this process,” said Deputy Attorney General Yates.  “Their work is vital to ensuring the fairness of our criminal justice system.”

“Confidence in the collection, review and analysis of evidence by law enforcement and in the ability of the courts to fairly judge the strength of that evidence is the bedrock of any civil society,” said Under Secretary May.  “The new commissioners represent a diverse range of skills and training and we look forward to their contributions as we continue our efforts to ensure that the forensic evidence used in our criminal justice system is supported by rigorous science, measurements and analysis.”

The commission includes federal, state and local forensic science service providers; research scientists and academics; law enforcement officials; prosecutors, defense attorneys and judges; and other stakeholders from across the country.  This breadth of experience and expertise reflects the many different entities that contribute to forensic science practice in the United States and will ensure that these broad perspectives are represented on the commission and in its work.

The commission was established in 2013 and re-chartered for another two-year period in April 2015.  The new members announced today are replacing individuals whose tenures with the commission recently ended.  Because the re-charter includes a provision for digital evidence, an additional commissioner has been added to provide perspective in this important area of forensic science. 

The new commissioners are:

• Thomas D. Albright, Ph.D., Professor and Conrad T. Prebys Chair at The Salk Institute for Biological Studies in La Jolla, California;

• Arturo Casadevall, M.D., Ph.D., Bloomberg Distinguished Professor and Alfred and Jill Summer Professor and Chair of Molecular Microbiology and Immunology at the Johns Hopkins University Bloomberg School of Public Health in Baltimore;

• Gregory C. Champagne, Sheriff of St. Charles Parish, Louisiana;

• William N. Crane, Associate Professor and Director of the Champlain College Graduate Digital Forensic Program in Burlington, Vermont;

• Deirdre M. Daly, U.S. Attorney of the District of Connecticut; and

• Sunita Sah, M.D., Ph.D., Assistant Professor of Management and Organizations at the Cornell University Johnson Graduate School of Management in Ithaca, New York.

The commission’s next meeting will be held from August 10 to 11, 2015, at the House of Sweden, 2900 K Street, Washington, D.C.  More information about the commission can be found at http://www.justice.gov/ncfs.

 

The Department of Justice and Environmental Protection Agency (EPA) announced today that Arch Coal Inc., one of the nation’s largest coal companies, and 14 of its subsidiaries under the International Coal Group Inc. (ICG) have agreed to conduct comprehensive upgrades to their operations to ensure compliance with the Clean Water Act.  The settlement resolves hundreds of Clean Water Act violations related to illegal discharges of pollutants at the companies’ coal mines in Kentucky, Pennsylvania, Maryland, Virginia and West Virginia.  The states of West Virginia, Virginia and Pennsylvania are co-plaintiffs in today’s settlement.  The companies will also pay a $2 million civil penalty.

“This joint enforcement effort, with three states, has resulted in a settlement that will require changes that will benefit the health and environment of Appalachian communities for many years to come,” said Assistant Attorney General John C. Cruden for the Environment and Natural Resources Division.  “Under the terms of the agreement, Arch Coal and its subsidiaries will pay a significant penalty, improve their pollution control systems and provide for independent monitoring and data tracking that will make it a better company and a better neighbor to these communities.”

“Businesses have an obligation to ensure that their operations don’t threaten the communities they serve, especially those that are overburdened by or more vulnerable to pollution,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance. “This settlement will prevent future environmental and public health risks by making sure these companies comply with federal and state clean water laws.”

“Today’s settlement is good news for water quality in the Appalachian region, especially people living in vulnerable and underserved communities,” said Regional Administrator Shawn M. Garvin for EPA.  “It represents an important next step forward by requiring these companies to take necessary actions to reduce pollution from their mining operations.”    

In addition to paying the penalty, under the proposed consent decree the companies must implement measures to ensure compliance and prevent future Clean Water Act violations, which will help protect communities overburdened by pollution, including:

• Developing and implementing a compliance management system.

• Periodic internal and third-party environmental compliance audits.

• Maintaining a data management system to track violations, water sampling data and compliance efforts.

• Providing training for environmental managers and others responsible for the consent decree.

Paying escalating stipulated penalties if violations continue to occur.

The government complaint filed concurrently with the settlement alleged that in the last six years, ICG operations have violated discharge limits for aluminum, manganese, iron and total suspended solids in their state-issued National Pollution Discharge Elimination System permits on more than 1,200 occasions, resulting in over 8,900 days of violations.  Of those violations, 700 have been previously resolved by state enforcement actions in Kentucky and West Virginia.

EPA discovered the violations through inspections of ICG facilities and projects, reviewing various information provided by the companies and coordinating with the affected state governments.

The proposed consent decree, lodged in the U.S. District Court for the Southern District of West Virginia, is subject to a 30-day public comment period and approval by the federal court.

The proposed settlement will be available online at: http://www.justice.gov/enrd/consent-decrees

More information on Clean Water Act Enforcement: http://www.epa.gov/compliance/civil/cwa/index.html

A Department of Justice official released the following background statement at the conclusion of Attorney General Loretta E. Lynch’s meeting with Attorneys General from all Central American nations:

“On Wednesday, Attorney General Lynch convened the first ever ‘Dialogue’ with the Attorneys General of all seven Central American nations: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.  The goal of the Dialogue is to strengthen law enforcement cooperation against the threats common to all our countries.  The Attorneys General discussed enhanced coordination against transnational cartels, gangs and terrorists; the Dialogue also focused on the rapidly rising issue of cybercrime and the persistent problem of human trafficking and smuggling.  Attorney General Lynch and her counterparts agreed that this meeting was only a first step and that these vital discussions would continue, so as to enhance citizen security both in Central America and the U.S.”

DELEGATION

Belize: Wilfred Peter Elrington, Attorney General and Minister of Foreign Affairs

Costa Rica: Jorge Chavarria Guzman, Attorney General

El Salvador: Luis Antonio Martinez Gonzalez, Attorney General

Guatemala: Thelma Aldana Hernandez, Attorney General

Honduras: Oscar Fernando Chinchilla Banegas, Attorney General

Nicaragua: Ana Julia Guido Ochoa, Attorney General

Panama: Kenia Porcell De Alvarado, Attorney General

 

James Jariv, 64, of Las Vegas, Nevada, was sentenced in federal court in Las Vegas today to ten years in prison for his role in illegal schemes to generate fraudulent biodiesel credits and to export biodiesel without providing biodiesel credits to the United States.  Jariv was also ordered to make restitution in the amount of $6,345,830.91 and to forfeit between $4 to $6 million in cash and other assets. 

Jariv was the second defendant to be sentenced for the scheme.  Nathan Stoliar, 64, of Australia, was sentenced to two years in prison in April for his role in the conspiracy and ordered to pay more than $1.4 million in restitution and to forfeit of $4 million in cash.  In addition, in court papers unsealed last week, Alex Jariv, 28, also of Las Vegas, pleaded guilty in the scheme and his sentencing was scheduled for Aug. 18, 2015.

James Jariv and Stoliar both pleaded guilty to one count of conspiracy, one count of conspiracy to engage in money laundering, two counts of wire fraud and one count of making false statements under the Clean Air Act.  Alex Jariv pleaded guilty to one count of conspiracy to commit wire fraud, make false statements and launder monetary instruments. 

“This was an egregious scheme to defraud fuel suppliers, the United States, and a program designed to strengthen our nation’s petroleum independence and improve our air quality” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “We will not tolerate such fraud and will vigorously prosecute those who put their own enrichment above our nation’s interests.”

“Mr. Jariv and his co-defendant defrauded the United States government of millions of dollars through this biodiesel fraud scheme,” said U.S. Attorney Daniel Bogden for the District of Nevada.  “They used a Las Vegas company and Las Vegas bank accounts to facilitate the scheme.  Fortunately, in addition to convicting both defendants, we were able to seize and forfeit millions of dollars from numerous bank accounts, as well as real property in Nevada and California, jewelry and other assets.”

“EPA's criminal enforcement program goes after the most egregious offenders,” said Assistant Administrator Cynthia Giles for Enforcement and Compliance Assurance at EPA.  “For his role in undermining the Renewable Fuel Standard, developed to reduce the nation’s impact on climate change and lessen our dependence on foreign oil, Mr. Jariv is going to prison.   Let today’s sentence send a clear message to others who engage in biofuel fraud that EPA takes seriously its responsibility to bring violators of this important program to justice.”

The Energy Independence and Security Act of 2007 created a number of federally-funded programs that provided monetary incentives for the production and use of renewable fuels such as biodiesel in the United States.  Biodiesel producers and importers can generate and attach credits known as renewable identification numbers (RINs) to the gallons of biodiesel they produce or import.  Because certain companies (such as companies that sell transportation fuel in the United States) need RINs to comply with regulatory obligations, RINs have significant market value.  They are routinely bought and sold in the marketplace.  In addition, to ensure that RINs are generated for renewable fuel used only in the United States and in order to create an incentive for biodiesel in the United States to be used here, anyone who exports biodiesel is required to obtain these valuable RINs for all exported gallons and provide the RINs to EPA.   

Beginning around September of 2009, James Jariv and Stoliar operated and controlled a company -- City Farm Biofuel in Vancouver, British Columbia, Canada -- that represented itself as a producer of biodiesel from “feedstocks” such as animal fat and vegetable oils.  James Jariv and Stoliar also formed a company called Canada Feedstock Supply – that represented itself as City Farm’s supplier of feedstocks necessary to produce biodiesel.  James Jariv operated and controlled a company based in Las Vegas called Global E Marketing (GEM). 

Alex Jariv worked for and on behalf of these companies.  Using these three and other closely-held companies, the three defendants claimed to produce biodiesel at the City Farm facility and to import and sell biodiesel to GEM and then generated and sold RINs based upon this claimed production, sale and importation.  In reality, no biodiesel produced at City Farm was ever imported and sold to GEM as claimed.  The Jarivs and Stoliar used GEM to claim to blend the biodiesel with petroleum diesel, allowing them to sell the RINs separately from any actual biodiesel.  Using this scheme, the three men falsely claimed to import, purchase and blend more than 4.2 million gallons of biodiesel.  They then sold the RINs, and fraudulently generated more than $7 million. 

James Jariv and Stoliar also purchased and resold RIN-less B-99 biodiesel as B-100 biodiesel, which allowed them to charge substantially more for this product than if it has been accurately labeled.  They exported significant amounts of the RIN-less B-99 they bought in the United States to Canada and Australia.  They then sold the biodiesel in those countries and conspired to not acquire and provide RINs to the United States for these exports as they were required to do by law.  In doing so, James Jariv and Stoliar failed to give to the United States RINs worth in excess of $34 million, keeping this money for themselves instead.

Finally, James and Alex Jariv and Stoliar conspired to launder the proceeds of their crimes, utilizing foreign banking institutions and complex financial transactions to promote their illegal schemes and distribute the proceeds of their crimes.  Accounts were utilized in Canada, Nevada and Australia and transactions between the defendants’ closely-held companies were described as other legitimate transactions involving biodiesel, when in reality they were not.

The investigation into the Jarivs’ and Stoliar’s activities was the result of collaborative work by the EPA’s Criminal Investigation Division and the FBI, with assistance from the United States Secret Service, the Internal Revenue Service-Criminal Investigations, the Department of Homeland Security and the Royal Canadian Mounted Police. 

The case was prosecuted by Wayne D. Hettenbach of the Environmental Crimes Section, U.S. Department of Justice, Assistant U.S. Attorneys Crane M. Pomerantz and Daniel D. Hollingsworth of the U.S. Attorney’s Office in Nevada and Assistant Deputy Chief Darrin L. McCullough of the Justice Department’s Criminal Division, Asset Forfeiture and Money Laundering Section, with the assistance of the Justice Department’s Office of International Affairs and the U.S. Attorney’s Office for the Southern District of Texas.

Three members of a 2012 presidential campaign committee were charged with offenses relating to the concealment of payments made to a former Iowa State Senator.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Special Agent in Charge David J. LeValley of the FBI’s Washington, D.C., Field Office’s Criminal Division made the announcement. 

“Federal campaign finance laws are intended to ensure the integrity and transparency of the federal election process,” said Assistant Attorney General Caldwell.  “When political operatives make under-the-table payments to buy an elected official’s political support, it undermines public confidence in our entire political system.”

“Violating campaign finance laws by concealing payments to an elected official undermines our electoral system and deceives the public,” said Special Agent in Charge LeValley.  “The FBI will aggressively investigate those who corrupt the integrity of our democratic process.”

Jesse R. Benton, 37, of Louisville, Kentucky; John M. Tate, 53, of Warrenton, Virginia; and Dimitrios N. Kesari, 49, of Leesburg, Virginia, are charged by indictment with conspiracy, causing false records to obstruct a contemplated investigation, causing the submission of false campaign expenditure reports to the Federal Election Commission (FEC) and engaging in a scheme to make false statements to the FEC.  Benton is additionally charged with making false statements to the FBI, and Kesari is also charged with obstruction of justice. 

Kesari appeared in the U.S. District Court for the Southern District of Iowa today.  Benton and Tate are scheduled to appear on Sept. 3, 2015. 

The defendants were members of a campaign for a candidate in the 2012 presidential election.  According to allegations in the indictment, former Iowa State Senator Kent Sorenson initially supported one candidate in the 2012 presidential election, but between October and December 2011, secretly negotiated with the defendants to switch his support to their candidate in exchange for money.  On Dec. 28, 2011, at a political event in Des Moines, Iowa, Sorenson publicly announced his switch of support.

The payments to Sorenson were allegedly made in monthly installments of approximately $8,000 each and ultimately amounted to over $70,000.  The indictment alleges that the defendants concealed the payments by causing them to be recorded – both in campaign accounting records and in FEC filings – as campaign-related audio-visual expenditures, and by causing them to be transmitted to a film production company and then to a second company that was controlled by Sorenson.  According to the indictment, the conspirators concealed their campaign’s payments to Sorenson from their candidate and also from the FEC, the FBI and the public.   

The indictment further alleges that, in response to criticism of Sorenson’s change of support from one candidate to the other, the conspirators arranged for Sorenson to issue public statements denying allegations that he was offered money for his endorsement and noting that the campaign committee’s FEC filings would show that it made no payments to Sorenson. 

On Aug. 27, 2014, Sorenson pleaded guilty to causing a campaign committee to falsely report its expenditures to the FEC and to obstruction of justice.  He has not yet been sentenced.

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

The case is being investigated by the FBI’s Washington, D.C., Field Office, with assistance from the Omaha, Nebraska, Field Office and the Des Moines Resident Agency.  The case is being prosecuted by Director Richard C. Pilger of the Criminal Division’s Public Integrity Section’s Election Crimes Branch and Trial Attorney Jonathan I. Kravis of the Public Integrity Section.

Benton et al Indictment

The U.S. Department of Justice’s Office on Violence Against Women (OVW) today announced the launch of The Center for Changing Our Campus Culture (www.changingourcampus.org), a new comprehensive online clearinghouse on sexual assault, domestic violence, dating violence, and stalking on campus.  This new website provides the latest information, materials and resources for campus administrators, faculty and staff, as well as campus and community law enforcement, victim service providers, students, parents and other key stakeholders to use to improve campus safety.

“The launch of this website reaffirms the department’s commitment to providing campuses with tools to develop and implement effective responses to sexual and dating violence on campus,” said Deputy Attorney General Sally Quillian Yates.  “The department commends campus leaders for championing these issues and for their dedication to bringing about lasting changes on their campuses.”

Since the release of Not Alone: The First Report of the White House Task Force to Protect Students from Sexual Assault on Jan. 22, 2014, the Justice Department, in partnership with the Department of Education, has strengthened federal enforcement efforts and provided institutions of higher education with tools to help combat sexual assault and domestic violence on campus.

“Colleges and universities across the country are looking for resources to improve their response to sexual assault, domestic violence, dating violence and stalking on campus," said Principal Deputy Director Bea Hanson of the Office on Violence Against Women.  "Visitors to the website will have access to cutting-edge tools, including sample policies, protocols, and best practices, that can be adapted and replicated on colleges and universities across the county."

Content for The Center for Changing Our Campus Culture website was provided by OVW and its Grants to Reduce Sexual Assault, Domestic Violence, Dating Violence and Stalking on Campus Program technical assistance providers, in partnership with the U.S. Department of Education, the U.S. Department of Health and Human Services and the Centers for Disease Control and Prevention.

The center will continue to work collaboratively to update and maintain the website and will seek guidance and input from campus-based experts, campus communities, and grassroots groups committed to ending sexual assault, domestic violence, dating violence and stalking.