District Not Recorded

The owner of a heating, ventilation and air conditioning (HVAC) installation and repair company from West Bridgewater, Massachusetts, was arraigned today in U.S. District Court in Boston on an indictment filed on July 23 charging him with one count of tax evasion, five counts of filing false federal income tax returns and four counts of failing to file tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. 

According to the allegations in the indictment, Keith A. Eaton failed to file tax returns for tax years 1998 through 2003.  In 2004, the Internal Revenue Service (IRS) assessed him with approximately $280,000 in taxes, interest and penalties, which he failed to pay.  Eaton also filed delinquent false tax returns for tax years 2000 through 2008, on which he failed to report the income that he had earned working for another HVAC company located in Brockton, Massachusetts.  Eaton allegedly attached false IRS Forms 1099, Miscellaneous Income, to some of the false tax returns that he submitted.  The Forms 1099 purportedly reflected the compensation he had received from companies for whom he had performed work, but Eaton altered the forms to falsely show that he had not received compensation.

The indictment further alleges that in 2008, Eaton began operating his own HVAC company, Eaton Mechanical LLC.  In order to obstruct the IRS from collecting taxes that Eaton owed, he caused the HVAC company to be registered in the name of a nominee and caused the nominee to be listed as the signatory on the business bank account.  To further conceal his financial transactions from the IRS, Eaton used cash to pay his personal expenses.   

If convicted, Eaton faces a statutory maximum sentence of five years in prison for tax evasion, a statutory maximum sentence of three years in prison for each count of filing a false return and a statutory maximum sentence of one year in prison for failing to file a return.  He also faces substantial monetary penalties, including fines and restitution to the IRS.  His arraignment is scheduled for Aug. 28 at 10:00 a.m. in Boston.

Acting Assistant Attorney General Ciraolo commended the special agents of the IRS–Criminal Investigation, who investigated the case, and Trial Attorneys Kenneth C. Vert and Brittney N. Campbell of the Tax Division, who are prosecuting the case.  Ciraolo also thanked the U.S. Attorney’s Office of the District of Massachusetts for their substantial assistance.

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

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

The Justice Department announced today that it has reached an agreement with the city of Eugene, Oregon, to resolve allegations that the city violated the anti-discrimination provision of the Immigration and Nationality Act (INA).  The city of Eugene is the second largest city in the state of Oregon.

The Justice Department’s investigation found that the city of Eugene improperly restricted law enforcement positions to U.S. citizens at the time of hire, even though no law, regulation, executive order or government contract authorized such a restriction.  The investigation revealed that the city of Eugene asked police officer applicants about their citizenship status with the intent to exclude any applicant who was not a U.S. citizen at the time of hire.  The INA’s anti-discrimination provision prohibits employers from limiting jobs to U.S. citizens except where the employer is required to do so by law, regulation, executive order, or government contract.

Under the settlement agreement, the city of Eugene must pay a civil penalty, train its employees about the anti-discrimination provision of the INA and be subject to monitoring by the Justice Department for a period of three years. 

“The Civil Rights Division is committed to ensuring that individuals who are authorized to work in the United States do not face unlawful discriminatory barriers,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “The Civil Rights Division commends the city of Eugene for cooperating with the Justice Department and taking swift remedial action to address the situation.”

The Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) is responsible for enforcing the anti-discrimination provision of the INA.  Among other things, the statute prohibits discrimination in hiring, firing, or recruitment or referral for a fee based on an individual’s citizenship, immigration status, or national origin.  The case was handled by OSC Trial Attorney Pablo A. Godoy.  

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 discrimination based on their citizenship, immigration status, or national origin in hiring, firing, or recruitment or referral, should contact the worker hotline above for assistance.

The Justice Department has reached a comprehensive settlement agreement with the county of Los Angeles and the Los Angeles County Sheriff to protect prisoners from serious suicide risks and excessive force in the Los Angeles County Jails, announced Deputy Assistant Attorney General Mark J. Kappelhoff of the Civil Rights Division and U.S. Attorney Eileen M. Decker of the Central District of California.  The settlement agreement was filed simultaneously with a complaint this morning alleging a pattern or practice of inadequate mental health care and excessive force at the jails in violation of prisoners’ federal constitutional rights.  The Justice Department, together with the county and the Sheriff, has requested that the District Court enter the settlement agreement as an order to bring court oversight to the reforms, to ensure that the reforms are implemented fully and transparently, and to strengthen public confidence in the jails.

Today’s settlement resolves claims stemming from the Justice Department’s long-standing civil investigation into mental health care at the jails, which found a pattern of constitutionally deficient mental health care for prisoners, including inadequate suicide prevention practices.  In addition, the settlement agreement includes remedial measures to address a separate civil investigation into use of force by jails staff.  The Justice Department’s investigations involved an in-depth review of thousands of pages of documents and other records, on-site visits and interviews with numerous jails staff members, prisoners and others.  The Justice Department was assisted by subject matter experts in the fields of mental health care, suicide prevention and correctional practices.  The county and the Sheriff cooperated with the civil investigations and have begun to implement many of the negotiated reforms in the settlement agreement, which was negotiated by attorneys in the Justice Department’s Civil Rights Division and the U. S. Attorney’s Office for the Central District of California.

“This historic settlement represents a renewed commitment by the county and Sheriff McDonnell to provide constitutionally adequate care for prisoners with serious mental illness,” said Deputy Assistant Attorney General Kappelhoff.  “The agreement also puts in place a structure that will help turn around a persistent culture in which the use of excessive force on prisoners was sometimes tolerated.  I want to thank the sheriff and county for their cooperation and leadership.  Their efforts are critical to the long-term success of this agreement.”   

“The Justice Department will continue to vigorously protect the federal civil rights of all individuals, including those who are imprisoned and who must depend on jail officials for their most basic needs and safety,” said U.S. Attorney Decker.  “The settlement agreement avoids protracted litigation and provides a blue print for durable reform that will foster continued collaboration among sheriff deputies, healthcare professionals and other stakeholders.  We commend the county and Sheriff McDonnell for their cooperation and for their commitment to make this historic settlement agreement possible.”

Under the settlement agreement filed today, the county and the Sheriff have agreed to implement comprehensive reforms to ensure constitutional conditions in the jails and restore public trust.  The settlement agreement will be court-enforceable once approved by the District Court and will be overseen by an independent monitor and a team of mental health and corrections experts.  The settlement agreement is designed to prevent and respond more effectively to suicides and self-inflicted injuries through measures that include:

• additional steps to recognize, assess and treat prisoners with mental illness, from intake to discharge;

• significant new training on crisis intervention and interacting with prisoners with mental illness for new and existing custody staff;

• improved documentation in prisoners’ medical and mental health records to ensure continuity of care;

• improved communication between custody and mental health staff and increased supervision of mentally ill and suicidal prisoners;

• steps to mitigate suicide risks within the jails;

• increased access to out-of-cell time for mentally ill prisoners; and

• improved investigation and critical self-analysis of suicides, suicide attempts and other critical events.

With respect to use of force, the settlement agreement expands critical reforms agreed to by the county and the Sheriff in Rosas v. McDonnell to cover all facilities within the jails system.  These reforms include:

• enhanced leadership and executive staff engagement;

• significant revisions to use-of-force policies, which should significantly reduce the use of excessive force, with added protections for use of force against prisoners with mental illness;

• enhanced training for custody and mental health staff;

• enhanced data collection and analysis;

• enhanced accountability measures, including use-of-force reporting, use-of-force reviews and discipline; and

• enhanced grievance procedures.

The Justice Department’s investigation was originally opened in 1996, under the Civil Rights of Institutionalized Persons Act (CRIPA).  The Justice Department found constitutional deficiencies in mental health care, suicide prevention and the use of excessive force against prisoners with mental illness.  In 2002, the Justice Department entered into a memorandum of agreement with the county and the Sheriff to address these concerns.  Despite considerable progress over the years of monitoring the memorandum of agreement, the Justice Department concluded in 2014 that the jails were failing to provide adequate mental health care, including suicide prevention, and that conditions under which prisoners with mental illness were housed exacerbated the risk of suicide.

In addition, in 2013, the Justice Department initiated a separate civil investigation into allegations of use of excessive force by jails staff under both CRIPA and the Violent Crime Control and Law Enforcement Act of 1994.  While the use of force investigation was ongoing, the county and the Sheriff settled, the Rosas v. McDonnell class-action lawsuit, which alleged excessive force by jails deputies in three downtown facilities.  The settlement agreement incorporates all of the reforms in Rosas and extends them to all jails facilities to cover prisoners throughout the jails system. 

The civil investigations were conducted by attorneys and staff from the Civil Rights Division’s Special Litigation Section and the Civil Division of the U. S. Attorney’s Office for the Central District of California. 

The Department of Justice announced today that the U.S. District Court for the District of Puerto Rico has approved the department’s consent decree with the commonwealth of Puerto Rico and the Puerto Rico Police Department (PRPD) that resolved allegations that the PRPD discriminated against Yolanda Carrasquillo on the basis of race, color and religion in violation of Title VII of the Civil Rights Act of 1964. 

The department’s complaint in this action, filed on July 22, 2013, alleged that Carrasquillo, a sworn police officer, was subjected to a hostile work environment because of the discriminatory actions of a civilian co-worker.  This co-worker regularly directed racial and other offensive slurs at Carrasquillo and other black or dark-skinned employees, and disparaged Carrasquillo’s Christian faith.  According to the complaint, PRPD failed to take any meaningful steps to stop the harassment or discipline the harasser.  The department’s complaint was based on a charge filed by Carrasquillo with the Equal Employment Opportunity Commission, which investigated the matter, determined that there was reasonable cause to believe that discrimination had occurred and referred the matter to the department.

This consent decree resolves the individual charge of employment discrimination against the PRPD.  Under the terms of the decree, the PRPD will provide Carrasquillo with $60,000 in monetary relief and credit her with 30 days of annual leave.

The consent decree also requires the PRPD to revise its anti-discrimination employment policies and train its employees within the framework of its existing July 17, 2013, comprehensive systemic reform agreement with the department.

“This settlement agreement is yet another step towards the fulfillment of the necessary reforms in the Puerto Rico Police Department that will ensure that the PRPD will have appropriate procedures in place to protect the rights of its employees, ” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “Through this consent decree, the Department of Justice continues to protect the rights of all workers to a workplace free from the fear of harassment because of their race, color or religion.”

The continued enforcement of Title VII is a priority of the Civil Rights Division.  Additional information about the Civil Rights Division is available on its website at www.justice.gov/crt. 

WASHINGTON – El Departamento de Justicia anunció hoy que el Tribunal Federal de Distrito para el Distrito de Puerto Rico ha aprobado el decreto por consentimiento del departamento con el Estado Libre Asociado de Puerto Rico y el Departamento de Policía de Puerto Rico [Puerto Rico Police Department (PRPD)] que resolvió alegatos de que el PRPD discriminó a Yolanda Carrasquillo debido a raza, color y religión, en violación del Título VII de la Ley de Derechos Civiles de 1964.

La demanda del departamento, entablada el 22 de julio de 2013, alegó que Carrasquillo, una agente de la policía juramentada, fue sometida a un ambiente de trabajo hostil debido a las acciones discriminatorias de un compañero de trabajo civil.   Dicho compañero de trabajo se dirigía habitualmente a Carrasquillo y otros empleados de raza negra o con piel oscura, profiriendo insultos raciales y ofensivos, y menospreció la fe cristiana de Carrasquillo. De acuerdo con la demanda, el PRPD dejó de tomar medidas para poner fin al acoso o dejó de tomar medidas disciplinarias contra el acosador. La demanda del departamento se basó en una queja presentada por Carrasquillo a la Comisión de Igualdad de Oportunidades de Empleo, que investigó el caso, y habiendo determinado que existía causa razonable para creer que había ocurrido discriminación, remitió el caso al departamento.

Este decreto por consentimiento resuelve el cargo individual de discriminación en el empleo entablado contra el PRPD.  Bajo los términos del decreto, el PRPD pagará a Carrasquillo $60.000 en compensación monetaria y le otorgará 30 días de licencia anual.

El decreto por consentimiento también exige que el PRPD realice una revisión de sus políticas contra la discriminación en el empleo y capacite a sus empleados de acuerdo con su existente acuerdo integral de reforma sistémica del 17 de Julio de 2013 con el departamento.

“Este acuerdo conciliatorio es un paso más hacia la realización de las reformas necesarias en el Departamento de Policía de Puerto Rico que garantizarán que el PRPD implemente procedimientos adecuados para proteger los derechos de sus empleados”, dijo la Procuradora General Adjunta Suplente Principal Vanita Gupta, quien encabeza la División de Derechos Civiles.  “Por medio de este decreto por consentimiento, el Departamento de Justicia sigue protegiendo los derechos de todos los trabajadores de trabajar libres de temor al acoso debido a su raza, color o religión”.

Es prioridad de la División de Derechos Civiles hacer valer el Título VII en forma continua. Existe disponible información adicional sobre la División de Derechos Civiles en su sitio en internet en www.justice.gov/crt . 

WASHINGTON, D.C. – El Departamento de Justicia anunció hoy que ha llegado a un acuerdo con la Ciudad de Eugene, Oregón, que resuelve las acusaciones de que la Ciudad había violado la disposición antidiscriminatoria de la Ley de Inmigración y Nacionalidad (INA, por sus siglas en inglés).  La Ciudad de Eugene es la segunda ciudad más grande en el estado de Oregón.

La investigación del Departamento de Justicia encontró que la Ciudad de Eugene había restringido los puestos disponibles en los cuerpos de orden público a individuos que en el momento de la contratación fuesen ciudadanos estadounidenses, aunque no existe ninguna ley, reglamento, orden ejecutiva o contrato de gobierno que autorice ese tipo de restricción. La investigación demostró que la Ciudad de Eugene preguntó a postulantes al cargo de agentes de policía acerca de su estatus de ciudadanía con la intención de excluir a postulantes que no fuesen ciudadanos de los Estados Unidos en el momento de la contratación. La disposición antidiscriminatoria de la INA prohíbe que los empleadores restrinjan los cargos a ciudadanos estadounidenses salvo en los casos en los que el empleador está obligado a hacerlo por ley o conforme a un reglamento, una orden ejecutiva o un contrato gubernamental.

Según el acuerdo de resolución, la Ciudad de Eugene pagará una multa civil, capacitará a sus empleados acerca de la disposición antidiscriminatoria de la INA y será sujeto al monitoreo por parte del Departamento de Justicia durante un período de tres años.

“La División de Derechos Civiles se compromete a asegurar que los individuos que cuenten con autorización para trabajar en los Estados Unidos no se enfrentan con barreras discriminatorias ilegales”, declaró la Subprocuradora General Interina, Vanita Gupta, de la División de Derechos Civiles. “La División de Derechos Civiles desea felicitar a la Ciudad de Eugene por su cooperación con el Departamento de Justicia y las medidas correctivas oportunas que tomó para abordar la situación”.

La Oficina del Consejero Especial para Prácticas Injustas en el Empleo Relacionadas a Inmigración (OSC, por sus siglas en inglés) tiene la responsabilidad de hacer cumplir con la disposición antidiscriminatoria de la INA. Entre otras cosas, la ley prohíbe la discriminación por motivo de la ciudadanía o el estatus migratorio de un individuo, o bien por su origen nacional, en la contratación, el despido o el reclutamiento o la recomendación a cambio de un honorario. El caso lo gestionó el Abogado Litigante de la OSC, Pablo A. Godoy.

Para más información sobre las protecciones contra la discriminación en el empleo bajo las leyes migratorias, llame a la línea directa de la OSC para trabajadores al 1-800-255-7688 (1‑800-237-2515, TTY para 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 motivo de su ciudadanía, estatus migratorio u origen nacional en la contratación, el despido o el reclutamiento o referencia por comisión deberán llamar a la línea directa para trabajadores mencionada arriba y serán atendidos.

Defendant Screamed Homophobic Slurs while Chasing Gay Men with a Knife

A 38-year-old Bremerton, Washington, man was charged today with 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 Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division, and U.S. Attorney Annette L. Hayes of the Western District of Washington.  Troy Deacon Burns was transferred from state custody today for his initial appearance on the federal charge in U.S. District Court in Seattle at 2:00 p.m. PDT.

According to the criminal complaint, just after midnight on Jan. 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.

The charges contained in the complaint are only allegations.  A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.

Commission of a hate crime is punishable by up to ten years in prison and a $250,000 fine.

The case was investigated by the Seattle Police Department and is being prosecuted by Trial Attorney Saeed Mody of the Civil Rights Division and Assistant U. S. Attorney Bruce Miyake of the Western District of Washington.  The King County Prosecuting Attorney’s Office is providing significant assistance with the case.

Attorney General Loretta E. Lynch released a statement today after the 5th Circuit Court of Appeals upheld the ruling that Texas’s voter ID law violates Section 2 of the Voting Rights Act:

“We are pleased that the court of appeals agreed unanimously with the district court that the Texas statute violates Section 2 of the Voting Rights Act and we are studying the opinion in light of the future proceedings the court of appeals has ordered.”

The United States today filed a motion to intervene and a complaint in intervention on its own behalf and as trustee for the Tulalip Tribes in their lawsuit against the state of Washington and Snohomish County over the imposition of taxes on non-Indian businesses operating on lands held in trust for Tulalip on the Tulalip Reservation.  The intervention seeks to protect the authority of tribes under the U.S. Constitution and federal law to develop reservation resources and fund governmental services without unlawful interference from state and local taxation. 

The Tulalip Tribes occupy a 22,000-acre reservation in Snohomish County, 35 miles north of Seattle.  For economic-development purposes, Tulalip chartered its own municipal corporation, the Consolidated Borough of Quil Ceda Village, on trust land within the Reservation adjacent to Interstate 5.  

“The United States takes seriously the federal role in protecting tribal self-government, which has its foundation in federal statutes, treaties, and regulations,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “To this end, we are committed to eliminating barriers, such as these, which hinder tribes from developing healthy economies and providing necessary governmental services on the reservation.”

With tens of millions of dollars in financial support and planning assistance from the federal government, Tulalip designed and built the infrastructure necessary to support a major retail, tourism and commercial center at Quil Ceda Village, including a tribal casino, resort and shopping center.  The Tribe and federal government manage, maintain and provide all significant governmental services to the tenants and visitors at Quil Ceda, including police and fire protection, emergency medical and 911 services, among many others.

According to the complaint in intervention filed today in Seattle, the state of Washington and Snohomish County did not contribute in any significant respect to the development of Quil Ceda Village.  Moreover, they provide no significant governmental services at the Village and they play no role in the Village’s ongoing operations.  The state and county, however, impose over $40 million in annual property, business and occupation and sales taxes on the on-reservation activities at Quil Ceda.  Even though Tulalip has its own applicable tribal tax laws, state and county taxation in effect precludes Tulalip from imposing its own taxes and deprives it of the tax base needed to fund important governmental services.

The United States has substantial interests in this action by virtue of the Indian Commerce Clause of the U.S. Constitution as well as federal statutes and regulations designed to foster tribal self-determination and economic independence.  The United States also has substantial interests in the interpretation of its statutes and regulations and in the principles governing state and local taxation and regulation of activities on Indian reservations.

On June 12, 2015, the Tribe and Village filed suit against the Director of the Washington State Department of Revenue, as well as against Snohomish County and County officials, seeking declaratory and injunctive relief against the administration and enforcement of state and County sales and use, B&O and property taxes in connection with the economic activities at Quil Ceda Village.  The legal claims in this case, however, squarely implicate federal interests.

Seven members of the Vice Lords were charged in an indictment unsealed today with various offenses based on their roles in a gang-related shooting.  The charges are the result of the collaborative efforts of law enforcement and the community to reduce homicide and other violent crime under the Detroit One program, which has led to the arrests and convictions of Vice Lords leaders during this past year. 

The announcement was made by Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge Robin Shoemaker of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Detroit Field Division, Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Division and Chief James Craig of the Detroit Police Department. 

The seven Vice Lord members charged with crimes stemming from this incident are:     

• Antonio Clark, aka Cheeto, 25, of Detroit, is charged with attempted murder in aid of racketeering, assault with a dangerous weapon in aid of racketeering, use and carry of firearms during and in relation to a crime of violence and being a felon in possession of firearms;

• Aramis Wilson, aka Ace, 24, of Detroit, is charged with attempted murder in aid of racketeering, assault with a dangerous weapon in aid of racketeering, use and carry of firearms during and in relation to a crime of violence and being a felon in possession of firearms;

• Tyrone Price, aka Price, 26, of Detroit, is charged with assault with a dangerous weapon in aid of racketeering, and use and carry of firearms during and in relation to a crime of violence;

• Jonathan Kinchen, aka Deago, 22, of Detroit, is charged with assault with a dangerous weapon in aid of racketeering, and use and carry of firearms during and in relation to a crime of violence;

• Kojuan Lee, aka Juan, 19, of Detroit, is charged with assault with a dangerous weapon in aid of racketeering, and use and carry of firearms during and in relation to a crime of violence;

• Kirshean Nelson, 18, of Detroit, is charged with assault with a dangerous weapon in aid of racketeering, and use and carry of firearms during and in relation to a crime of violence; and

• Dion Robinson, aka Doggy, 37, of Detroit, is charged with assault with a dangerous weapon in aid of racketeering, and use and carry of firearms during and in relation to a crime of violence.

Robinson, Clark, Price and Kinchen are in custody; arrest warrants have been issued for the other three defendants. 

According to the indictment, the Vice Lords is a national gang engaged in a variety of crimes, including murder, robbery, narcotics trafficking and witness intimidation.  The indictment alleges that the Vice Lords’ leaders are located in both Chicago and Detroit, and that the gang is broken down into various “sets,” “decks,” or “branches,” including the Detroit-based Insane Vice Lords, Imperial Insane Vice Lords, Traveling Vice Lords, Conservative Vice Lords, Mafia Insane Vice Lords and Insane Goon Gang.  The indictment further alleges that members who seek to leave or withdraw from the gang oftentimes endure a physical beating, known as a “beat out,” by multiple Vice Lord members, or are targeted for killing, known as a “green light.” 

According to the indictment, on May 7, 2015, to maintain and improve their positions in the Traveling Vice Lords, the defendants shot four individuals from the same family.  The indictment alleges that the shooting was prompted by two of the family members’ attempts to leave the gang.            

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

This case is being investigated by the ATF, FBI and the Detroit Police Department.  The case is being prosecuted by the Criminal Division’s Organized Crime and Gang Section and the U.S. Attorney’s Office of the Eastern District of Michigan.

Today, the Justice Department reached a settlement agreement with Robertson County (Tennessee) Schools to revise assignment plans for middle and high school students in the district to promote diversity and ensure access to high quality educational programs for all students.  As a part of the student assignment plan, the agreement also requires the development of a new, innovative Science, Technology, Engineering and Math (STEM) magnet program at Springfield Middle School, which will be open to and draw students from across the district.  

The district, together with an expert consultant, will develop a plan to recruit and enroll a desegregated student population for the STEM magnet, which will open in the 2016-2017 school year.  The STEM magnet will receive dedicated resources and provide quality course offerings and facilities such as science labs.  Students will be able to progress in their STEM coursework at Springfield High School.  If the district is unsuccessful in recruiting a desegregated enrollment to Springfield Middle School through the magnet program, alternative rezoning plans will go into effect.

The district was required to revise its student assignment plans as a condition of the settlement agreement reached with the department on Feb. 2, 2015.  That agreement, in addition to the agreement reached today, aims to resolve the department’s determination that the district had yet to fulfill its desegregation obligations in the areas of student assignment and school construction.

“I commend the Robertson County school board for unanimously approving this agreement to advance educational opportunities for all students,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “The Justice Department is committed to working with Robertson County Schools to effectively implement the agreement and fulfill the district’s obligations to desegregate.”

Additional information about the Civil Rights Division is available on its website at www.justice.gov/crt.  

An Enterprise, Alabama, resident was arrested today after a federal grand jury sitting in the Southern District of Florida in Fort Lauderdale indicted him on one count of accepting unlawful kickbacks from 2009 through 2014, and five counts of tax evasion for tax years 2009 through 2013, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division.

According to the allegations in the indictment, Victor Villalobos worked for a federal contractor in Fort Rucker, Alabama, identified in the indictment as Company A, that furnished supplies, materials equipment and services to the government.  In 2009, Villalobos approached an individual identified in the indictment as Person X, who owned and operated Company B, a subcontractor of Company A based in Fort Lauderdale.  Villalobos solicited illegal kickbacks as payment on the federal subcontracts that Person X held in connection with Company A’s prime contract.  Villalobos agreed that in exchange for kickback payments he would refrain from conduct that would unfavorably affect Person X’s business relationship with Company A and would also help ensure that Person X obtained additional subcontracting business.  On Jan. 26, 2015, Villalobos met with Person X and accepted an envelope containing $5,000 in cash.  They met again approximately two weeks later and Villalobos accepted a bag containing $55,000 in cash as kickback payments.  From June 2009 to December 2014, Villalobos received approximately 57 separate wire funds transfers totaling more than $1.9 million in kickback payments from various foreign and domestic bank accounts controlled by Person X. 

Villalobos concealed these kickbacks by incorporating nominee entities, opening nominee bank accounts and failing to report the illegal kickback payments as income on his individual federal income tax returns for 2009 through 2013.

If convicted, Villalobos faces a statutory maximum sentence of 10 years in prison for the illegal kickback scheme and a statutory maximum sentence of five years in prison for each count of tax evasion.  He also faces potential fines of up to $250,000 on each count.

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

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

The U.S. District Court for the Eastern District of California entered a consent decree of permanent injunction against Henh Wong Fresh Produce, of Sacramento, California, its owner, David C. Ly, and employees, Kin S. Ly and Thahn “Danny” C. Ly, to prevent the distribution of adulterated food, the Department of Justice announced today. 

Henh Wong Fresh Produce manufactured and distributed tofu, seasoned tofu, fried tofu, fried bean cakes, soy jello and soy bean drinks.  It also grew, harvested, prepared, packed, held and distributed ready-to-eat mung bean and soy bean sprouts.  In addition to manufacturing and distributing products under the name Henh Wong Fresh Produce, the firm also manufactured and distributed products as Henh Wong Fresh Product and Henh Wong Tofu. 

The department filed a complaint in the U.S. District Court for the Eastern District of California at the request of the U.S. Food and Drug Administration (FDA), alleging that the company and individuals have a history of processing food products under insanitary conditions. 

In conjunction with the filing of the complaint, the defendants agreed to settle the litigation and be bound by a consent decree of permanent injunction that prohibits them from committing violations of the federal Food, Drug and Cosmetic Act (FDCA).  The consent decree states that the defendants have ceased operations at their production facility.  The consent decree also requires Henh Wong Fresh Produce to remain closed, and requires that if the defendants wish to resume manufacturing and distributing food, the FDA first must determine that the firm’s manufacturing practices have come into compliance with the law.

“The department will not hesitate to bring enforcement actions against food producers who do not follow the necessary procedures to comply with our nation’s food safety laws,”

said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division.

According to the complaint, the FDA’s most recent inspection of the manufacturing facility at 2630 Fifth Street, Unit 92, in Sacramento, occurred in the summer of 2014.  As alleged in the complaint, during this inspection, FDA investigators found: live cockroaches and flies in the tofu production room; a live cockroach inside a plastic container used for holding ready-to-eat tofu; dead cockroaches in the sprout processing room; a dead cockroach in the mung bean dry storage room; and rodent excreta pellets in the seed dry storage and sprout processing rooms. 

Also, as alleged in the complaint, the FDA found numerous violative employee practices, including: employees using a high-pressure hose to clean equipment and debris on the floor in the tofu production room, causing water to splash from the floor onto nearby fried tofu and other in-process tofu products; an employee touching the lid of a dumpster covered with a black slimy residue and old food build-up and then handling ready-to-eat tofu without sanitizing her hands; an employee scooping sprouts off the floor and then touching various food product contact surfaces without first changing or sanitizing his gloves; an employee using a dirty floor broom to clean sprout processing equipment; and an employee touching a scale stained with a black slimy residue and then continuing to pack ready-to-eat sprouts without first changing or sanitizing his gloves.

According to the complaint, the FDA inspected Henh Wong’s facility five other times prior to the 2014 inspection — in 2003, 2005, 2008, 2010 and 2011 — and similar to the 2014 inspection, FDA investigators observed questionable or violative practices during all of these inspections. 

The government is represented by Counsel Melanie Singh of the Civil Division’s Consumer Protection Branch, with the assistance of Associate Chief Counsel Laura Akowuah of the Department of Health and Human Services’ Office of General Counsel – Food and Drug Division.

The owner and operator of a Los Angeles pharmacy was sentenced today to 18 months in prison for his role in a fraud scheme involving the Medicare Part D prescription drug program.

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 and Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Division made the announcement.

Rouzbeh Javaherian, 35, of Beverly Grove, California, pleaded guilty to health care fraud on March 16, 2015.  In addition to imposing the prison term, U.S. District Court Judge Stephen V. Wilson of the Central District of California ordered Javaherian to pay $644,060 in restitution to Medicare.

Javaherian was a licensed pharmacist and owner of Emoonah Inc., doing business as Westaid Pharmacy and Medical Supply (Westaid), which was located in Los Angeles.  According to admissions in the plea agreement, from January 2008 to November 2014, Javaherian devised and executed a scheme to defraud the Medicare Part D program by paying illegal cash kickbacks to Medicare beneficiaries to induce them to submit their prescriptions to Westaid.  Javaherian then filled some of those prescriptions, but also submitted false and fraudulent claims to Medicare Part D plan sponsors for prescriptions that he did not actually fill.  Javaherian received approximately $644,060 in overpayments from Medicare as the result of the fraud scheme.

The case was investigated by the FBI 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 of the Central District of California.  The case is being prosecuted by Trial Attorney Alexander F. Porter of the 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.

Update: The indictment against one of the defendants below, Iain Nigel MacKeller, was dismissed without prejudice on May 22, 2022. 

An indictment was recently unsealed in Houston charging four men with various offenses based on their roles in smuggling pet products with counterfeit labels into the United States. 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Special Agent in Charge Catherine A. Hermsen of the Food and Drug Administration – Office of Criminal Investigations (FDA-OCI) Kansas City, Missouri, Field Office and Special Agent in Charge Brian M. Moskowitz of the U.S. Immigration and Customs Enforcement Homeland Security Investigations’ (HSI) Houston Field Office made the announcement. 

Iain Nigel MacKellar, 58, of England; Lam Ngoc Tran, aka Mark Tran, 40, of Fountain Valley, California; Allen Smith, 49, of Phoenix; and William Humphreys, 58, of Laguna Hills, California, were indicted on July 9, 2015.  They are charged with conspiracy to commit wire fraud, mail fraud and trafficking in counterfeit labels, and smuggling goods into the United States.  Mackellar and Tran also are charged with additional counts of wire fraud, mail fraud, trafficking in counterfeit labels and smuggling.  The defendants were suspected members of one of the largest known groups of importers of counterfeit packaged pet products.

Smith turned himself in to authorities this morning and made his initial appearance before U.S. Magistrate Judge Mary Milloy.  Humphreys and Tran were taken into custody in Phoenix and in California, respectively.  Tran made his initial appearance in Houston on July 29, while Humphreys is set to appear tomorrow before Judge Milloy.  MacKellar is considered a fugitive and a warrant remains outstanding for his arrest.

The indictment alleges the defendants smuggled veterinary products that were not manufactured for the U.S. market into the United States for distribution under false labels, including Frontline and Frontline Plus pesticides manufactured by Merial Pharmaceutical Company (Merial).  In some cases, the defendants allegedly imported the products into the U.S. under the pretense that the products were destined for use by charitable organizations, but instead distributed the products to large retail outlets for commercial sale, according to the indictment. 

Merial did not participate in or authorize the alleged unlawful conduct.  All known counterfeit veterinary products have been removed from store shelves.

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

This case is being investigated by the FDA-OCI, HSI and the Environmental Protection Agency.  The case is being prosecuted by Assistant Deputy Chief John H. Zacharia of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorneys Jennifer Lowery and Kebharu Smith of the Southern District of Texas.  The U.S. Attorney’s Office of the Central District of California and the CCIPS Cybercrime Lab provided significant assistance.

A Troy, Alabama, man was sentenced to prison today in U.S. District Court for the Middle District of Alabama for his involvement in a stolen identity tax refund fraud scheme, 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.

Devon Tucker, 31, a former jailer of the Troy Police Department at the city jail, pleaded guilty earlier this year to one count of conspiracy to defraud the United States and one count of aggravated identity theft.  U.S. District Judge Callie V.S. Granade sentenced Tucker to serve 32 months in prison and three years of supervised release, and ordered him to pay $13,162 in restitution to the Internal Revenue Service (IRS).

According to court documents, from January 2014 to January 2015, Tucker stole the personal identification information of approximately 150 individuals who were processed into the Troy city jail.  Tucker provided those identities to his co-conspirators for the purpose of filing false federal income tax returns claiming fraudulent refunds from the U.S. Treasury.  Tucker was paid in pre-paid debit cards in the names of the identity theft victims for his involvement in the scheme.     

“The Tax Division will vigorously pursue and prosecute government employees who abuse their positions by exploiting their access to personal information to victimize members of the community and steal from the U.S. Treasury,” said Acting Assistant Attorney General Ciraolo. 

“It is always a sad day when a law enforcement officer sworn to uphold the law, takes advantage of his position for his own personal gain,” stated U.S. Attorney Beck.  “This district will continue to vigorously prosecute those who steal identities and file fraudulent tax returns, regardless of where they are employed or what position they hold.”

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

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

The Department of Justice announced today that Bank EKI Genossenschaft (Bank EKI) 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, Bank EKI 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 Bank EKI for tax-related criminal offenses.

Bank EKI was founded in 1852 and has its headquarters in the tourist resort town of Interlaken, Switzerland.  It also operates small branch offices in Bönigen, Wilderswil, Grindelwald and Lauterbrunnen, Switzerland.

Bank EKI opened, serviced and profited from accounts for U.S. clients with the knowledge that many were likely not complying with their tax obligations.  Many of the U.S.-related accounts were transferred from other Swiss financial institutions that were closing such accounts, and Bank EKI knew or had reason to know that a portion of these accounts were likely undeclared.

Bank EKI provided traditional Swiss banking services that it knew could assist, and that did in fact assist, certain U.S. taxpayers in concealing their Bank EKI accounts from the Internal Revenue Service (IRS).  One such service was hold mail: for a fee, Bank EKI would hold all mail correspondence for a particular client at the bank.  By accepting and maintaining such accounts, Bank EKI thus ensured that documents reflecting the existence of the accounts remained outside the United States, beyond the reach of U.S. tax authorities and protected by Swiss banking secrecy laws.

Due in part to the means provided by Bank EKI and its personnel, and with the knowledge that Swiss banking secrecy laws would prevent Bank EKI from disclosing their identities to the IRS, many of the U.S. clients of Bank EKI filed false and fraudulent U.S. Individual Income Tax Returns, or IRS Forms 1040, that failed to report their respective interests in their undeclared accounts and the related income.  Moreover, many of the U.S. clients of Bank EKI also failed to file and otherwise report their undeclared accounts on Reports of Foreign Bank and Financial Accounts (FBARs).

Bank EKI did not sufficiently implement an effective system of supervisory policies, procedures or controls over its relationship managers to increase its U.S.-related clients’ tax compliance.  Moreover, Bank EKI’s relationship managers too readily accepted representations and directions from the accountholders without adequately investigating questionable information.

Since Aug. 1, 2008, Bank EKI held a total of 64 U.S.-related accounts with just over $21 million in aggregate assets.  Bank EKI will pay a penalty of $400,000.

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 Dara B. Oliphant, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer and Senior Litigation Counsel Nanette L. Davis of the Tax Division.

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

The Department of Justice filed a complaint today alleging that three Wisconsin companies that manufacture dietary supplements were not complying with the U.S. Food and Drug Administration’s (FDA’s) current good manufacturing practices and were misbranding their products.  The complaint was filed in the Eastern District of Wisconsin against Atrium Inc., Aspen Group Inc., Nutri-Pak of Wisconsin Inc., and the owners of the three firms, James F. Sommers and Roberta A. Sommers.  The companies, located in Wautoma, Wisconsin, sell dietary supplements to retail stores, healthcare professionals and directly to consumers via the Internet.

The complaint alleged that the firms were violating the federal Food, Drug and Cosmetic Act (FDCA) by failing to comply with current good manufacturing practices that, among other things, require manufacturers to establish specifications to ensure the identity and potency of the ingredients in dietary supplements.  The complaint also alleged that the firms’ products were misbranded because they failed to identify the part of the plant from which the ingredients were derived, did not list the number of servings per container and failed to identify the serving size.

Supplements manufactured by the firms included Atrium brands Chole-Sterin, Di-Acid Stim, Ocu-Comp and Super-Flex; Aspen brand Flexile-Plus; and Nutri-Pak brands Glucobiotic Supreme and Ocu-Comp.

“Makers of dietary supplements who do not follow the FDA’s regulations put the public at risk,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to work with the FDA to try to make sure that consumers are ingesting safe products and are getting what they paid for.”

“This case and the remedial actions required by the consent decree reflect the continuing focus of our office and the Justice Department generally in safeguarding and promoting the health and well-being of our people,” said U.S. Attorney James L. Santelle of the Eastern District of Wisconsin.  “The corrections that these companies are required to accomplish along with oversight and inspection of them, will ensure compliance with the law and responsible sales to consumers.”

In conjunction with the filing of the complaint, the defendants agreed to settle the litigation and be bound by a consent decree of permanent injunction that prohibits them from violating the FDCA.  The consent decree requires the dietary supplement manufacturer to cease all operations and requires that if the defendants wish to resume manufacturing dietary supplements in the future, the FDA first must determine that their manufacturing practices have come into compliance with the law.  The proposed consent decree is awaiting approval by the court.

The case is being handled by Trial Attorney Patrick Jasperse of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Susan M. Knepel of the Eastern District of Wisconsin, with assistance from Deeona Gaskin of the FDA’s Office of the Chief Counsel.

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

Twenty-two members of the international gang Mara Salvatrucha-13 (MS-13) have now been sentenced, many to life or decades in prison, for their roles in violent crimes in the Atlanta area between 2005 and 2010, including murders, attempted murders and armed robberies. 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting U.S. Attorney John Horn of the Northern District of Georgia made the announcement.

On July 15, 2013, a jury convicted the following defendants:

• Miguel Alvarado-Linares, aka Joker, 26, of Norcross, Georgia, was convicted of Racketeer Influenced and Corrupt Organization (RICO) conspiracy involving murder, two counts of Violent Crime in Aid of Racketeering (VICAR) involving murder, two counts of VICAR involving attempted murder and four firearms offenses.  He was sentenced on Oct. 15, 2013, to serve three life sentences followed by 85 years in prison.
• Ernesto Escobar, aka Pink Panther, aka Flaco, 32, of Norcross, was convicted of one count of RICO conspiracy involving murder, one count of VICAR involving murder and one firearms offense.  He was sentenced on Dec. 20, 2013, to serve two life sentences followed by 10 years in prison.
• Dimas Alfaro-Granados, aka Toro, 32, of Duluth, Georgia, was convicted of one count of RICO conspiracy involving murder, two counts of VICAR involving murder and two firearms offenses.  He was sentenced on Oct. 30, 2013, to serve three life sentences followed by 35 years in prison.
• Jairo Reyna-Ozuna, aka Flaco, 30, of Norcross, was convicted of one count of RICO conspiracy and one firearms offense.  He was sentenced on Jan. 31, 2014, to serve 13 years in prison.

According to the evidence introduced at trial, Alvarado-Linares and Alfaro-Granados, along with another gang member, killed Lal Ko in October 2006.  Ko was a fellow MS-13 member, but Alvarado-Linares, one of the gang leaders, thought that Ko was cooperating with police and ordered his murder. 

The trial evidence showed that in December 2006, when another MS-13 gang member wanted to quit the gang, Alvarado-Linares and Alfaro-Granados ordered him to kill a rival gang member as a condition of leaving MS-13.  Following orders, on Christmas Eve 2006, that gang member shot at a vehicle traveling on an interstate highway that he believed contained rival gang members.  A 20-year-old passenger in the vehicle was killed.  

The evidence at trial also demonstrated that on New Year’s Eve 2006, Alvarado-Linares shot two members of a rival gang.

Finally, the evidence introduced at trial showed that on Aug. 5, 2007, Reyna-Ozuna, who was a gang leader at the time, gave Escobar a .45 caliber semi-automatic handgun and instructed him to shoot a teenager with whom Escobar had an altercation earlier that day.  

On Nov. 21, 2013, a jury convicted the following defendants:

• William Espinoza, aka Cheberria, aka El Crazy, 33, of Norcross, was convicted of one count of RICO conspiracy involving murder, one count of VICAR involving attempted murder and one firearms offense.  He was sentenced on April 15, 2014, to serve 20 years and eight months in prison.
• Remberto Argueta, aka Pitufo, 26, of Lilburn, Georgia, was convicted of one count of RICO conspiracy involving murder, one count of VICAR involving murder and one firearms offense.  He was sentenced on Oct. 29, 2014, to serve two life sentences followed by five years in prison.

According to the evidence presented at trial, on April 13, 2007, Argueta, along with other gang members, attempted to rob Arpolonio Rios-Jarquin, who the defendants suspected was drug dealer.  After discovering that Rios-Jarquin was armed, Argueta and fellow MS-13 members engaged in a shootout with Rios-Jarquin, during which Rios-Jarquin was killed. 

The trial evidence showed that, on Oct. 24, 2007, Argueta and several other MS-13 members shot at rival gang members, hitting one in the back and another in the hip and arm.

The evidence also demonstrated that, while at a nightclub in DeKalb County, Georgia, on July 20, 2008, Espinoza and other members of MS-13 engaged in a fight with persons they suspected were members of a rival gang.  During the fight, Espinoza shot a man in the stomach. 

Just two days later, according to evidence introduced at trial, Espinoza and four other MS-13 members identified a victim to rob for beer money.  When the victim resisted, Espinoza shot him through the head.

On Oct. 7, 2014, a jury convicted the following defendant:

• Elio Marroquin-Lopez, aka Perico, 29, of Chamblee, Georgia, was convicted of one count of RICO conspiracy.  He was sentenced on Oct. 29, 2014, to serve seven years and two months in prison.

According to the evidence introduced at trial, on Dec. 15, 2008, Marroquin-Lopez, who was one of the gang leaders, and two other gang members shot at the owner of an apartment that the defendants were attempting to rob. 

The trial evidence also showed that on March 13, 2009, Marroquin-Lopez fought two suspected gang members and shot at one of them.

Finally, the evidence at trial demonstrated that Marroquin-Lopez often distributed baggies of cocaine to fellow MS-13 members at meetings and instructed them to sell the cocaine at clubs.

The following defendants previously pleaded guilty and have been sentenced:

• Jose Delgado, aka Fantasma, 28, of Lawrenceville, Georgia, pleaded guilty to RICO conspiracy involving murder and two counts of VICAR involving murder, and was sentenced on July 31, 2015, to serve 12 years in prison.
• Alex Ferrufino, aka Whiskey, 35, Tucker, Georgia, pleaded guilty to two counts of VICAR involving attempted murder and one firearms offense, and was sentenced on Sept. 11, 2014, to serve 25 years in prison.
• Joseph Ivan Dias, aka Travieso, 27, of Gainesville, Georgia, pleaded guilty to RICO conspiracy and was sentenced on April 1, 2015, to serve 14 years in prison.
• Miguel Guevara, aka Blacky, 31, of Fort Walton Beach, Florida, pleaded guilty to RICO conspiracy involving murder and a firearms offense, and was sentenced on Feb. 13, 2015, to serve 30 years in prison.
• Kenedis Bonilla, aka Mago, 33, of Tucker, pleaded guilty to RICO conspiracy involving murder and a firearms offense, and was sentenced on June 13, 2015, to serve 15 years in prison.
• Salvador Franco, aka Smiley, 30, of Norcross, pleaded guilty to RICO conspiracy and a firearms offense, and was sentenced on Sept.11, 2014, to serve 12 years in prison.
• Edwin Menjivar, aka Chilly Willy, aka Vago, 33, of Norcross, pleaded guilty to RICO conspiracy and VICAR involving attempted murder, and was sentenced on Nov. 21, 2014, to serve 11 years in prison.
• Omar Cubillos, aka Pancho, 30, of Gainesville, pleaded guilty to RICO conspiracy involving murder and a firearms offense, and was sentenced on June 15, 2015, to serve 20 years in prison.
• Carlos Mendoza, aka Catracho, 30, of Atlanta, pleaded guilty to RICO conspiracy involving murder and a firearms offense, and was sentenced on April 30, 2015, to serve 17 years and six months in prison.
• Emmanual Hidalgo, aka Scooby, 29, of Chamblee, pleading guilty to RICO conspiracy involving murder and a firearms offense, and was sentenced on Nov. 21, 2014, to serve 25 years in prison.
• Christopher Castro Ramirez, aka Demente, 26, of Norcross, pleaded guilty to RICO conspiracy and was sentenced on Nov. 1, 2012, to serve two years and six months in prison.
• Enzo Baires, aka Ghost, 25, of Norcross, pleaded guilty to RICO conspiracy involving murder and was sentenced on May 11, 2015, to serve 12 years in prison.
• Irvin Mejia-Cruz, aka Lil Triste, aka Triste, 25, of Duluth, pleaded guilty to RICO conspiracy and was sentenced on Feb. 13, 2015, to serve nine years in prison.
• Walter Aldana, aka Goofy, 25, of Norcross, pleaded guilty to RICO conspiracy and was sentenced on Feb. 13, 2015, to serve 10 years in prison.
• William Pineda, aka Slayer, 32, of Lawrenceville, pleaded guilty to RICO conspiracy and was sentenced on Dec. 11, 2014, to serve seven years in prison.

These cases were investigated by the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and the FBI with assistance from the U.S. Marshals Service, the Gwinnett County, Georgia, Police Department, the DeKalb County Police Department, the Norcross Police Department, the Chamblee Police Department, and the Gwinnett County Sheriff’s Office.

These cases were prosecuted by Trial Attorney Joseph Wheatley of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorneys Paul R. Jones and Kim S. Dammers of the Northern District of Georgia.

                  ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands, announced today that defendant QIONG LU PUA, a legal permanent resident of the United States, was found guilty, following a three day jury trial in the U.S. District Court for the Northern Mariana Islands, for conspiracy to defraud the United States.  The jury found the defendant planned and orchestrated two fraudulent marriages so that the foreign national spouses could obtain immigration benefits.  PUA instructed members of the conspiracy to open bank accounts, apply for passports, and encouraged them to lie to federal immigration officials.  The defendant will be sentenced October 30, 2015, and she faces a maximum of five years imprisonment and a $250,000.00 fine.

                  “Obtaining immigration benefits illegally is a continuing problem that threatens the safety of our community.   Becoming a legal permanent resident of the United States is an accomplishment that should not be demeaned by the criminal acts of those who enter into fraudulent marriages.  The United States Attorney’s Office will continue to work with our federal and local law enforcement partners, such as the Diplomatic Security Services and Homeland Security Investigations, to put an end to this problem.” United States Attorney Limtiaco stated.

                  The Diplomatic Security Services agency of the Department of State conducted the investigation with assistance from the Department of Homeland Security, Homeland Security Investigations.  Assistant United States Attorney Russell Lorfing and Assistant United States Attorney Ross Naughton prosecuted the case.

A Minnesota man who worked at Kadena Air Base in Okinawa, Japan, was sentenced today to 60 months for sexual assault.  Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Andrew M. Luger of the District of Minnesota, Acting Executive Assistant Director Charles Warmuth of the Naval Criminal Investigative Service’s (NCIS) Pacific Operations and Special Agent in Charge Richard T. Thronton of the FBI’s Minneapolis Field Office made the announcement. 

Ricky Isiah Sherwood, 19, pleaded guilty on Nov. 14, 2014, to sexual assault.  U.S. District Judge Ann D. Montgomery imposed today’s sentence.

In connection with his guilty plea, Sherwood admitted to sexually assaulting a heavily intoxicated minor in a residence on base on Feb. 11, 2014, and to filming parts of the assault using his cellular phone.  At the time of the assault, Sherwood was an employee of Kadena Air Base and a dependent of a member of the U.S. Military.  The Military Extraterritorial Jurisdiction Act gives federal courts jurisdiction over felonies committed abroad by certain persons employed by or accompanying the U.S. Military.

This case was investigated by NCIS and FBI.  This case is being prosecuted by Trial Attorney Ann Marie Ursini of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorney Katharine Buzicky of the District of Minnesota.

Following a comprehensive investigation, the Justice Department today announced its findings regarding the Family Court of the Twenty-First Judicial Circuit of the state of Missouri, commonly known as the St. Louis County Family Court.  The Justice Department found that the family court fails to provide constitutionally required due process to children appearing for delinquency proceedings, and that the court’s administration of juvenile justice discriminates against Black children.  The investigation was conducted under the Violent Crime Control and Law Enforcement Act of 1994, which gives the department the authority to seek a remedy for a pattern or practice of conduct that violates the constitutional or federal statutory rights of youths in the administration of juvenile justice. 

“The findings we issue today are serious and compelling,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “Missouri was at the forefront of juvenile corrections reform when it closed its large juvenile institutions and moved to a smaller, treatment-focused system and we are hopeful that Missouri will rise to this challenge to, once again, be a leader in juvenile justice reform.  This investigation is another step toward our goal of ensuring that children in the juvenile justice system receive their constitutionally guaranteed rights to due process and equal protection under the law.”

Since opening this investigation in November 2013, the Civil Rights Division has analyzed data relating to nearly 33,000 juvenile cases, including all delinquency and status offenses resolved in St. Louis County Family Court between 2010 and 2013; and has reviewed over 14,000 pages of documents, including family court records, transcripts, policies, procedures and external reports.  In June 2014, Justice Department attorneys and its consultants—a law school clinical professor and experienced juvenile defense attorney and a nationally-recognized expert on measuring juvenile justice disparities through statistical analysis—visited the family court and interviewed a number of court personnel, including all of the judges and commissioners as well as the heads of many of family court programs and services.  They also collected information from both the state and local public defender’s offices, private attorneys with experience in the family court and the parents of youth who had been involved in delinquency proceedings with the family court. 

The Justice Department found a number of constitutional violations, including:

• Failure to ensure youth facing delinquency proceedings have adequate legal representation;
• Failure to make adequate determinations that there is probable cause that a child committed the alleged offense;
• Failure to provide adequate due process to children facing certification for criminal prosecution in adult criminal court;
• Failure to ensure that children’s guilty pleas are entered knowingly and voluntarily;
• An organizational structure that is rife with conflicts of interest, is contrary to separation of powers principles and deprives children of adequate due process; and
• Disparate treatment of Black children at four key decision points within the juvenile justice system.

The department has opened four cases examining whether juvenile justice systems comply with children’s rights since 2009.  In 2012, the department settled its first investigation of this kind, reaching an agreement with the Juvenile Court of Shelby County, Memphis, Tennessee that calls for comprehensive due process, equal protection and facility reforms.  On June 19, 2015, the Justice Department announced a partial settlement of its lawsuit alleging violations of children’s due process rights in Lauderdale County, Mississippi.  In March 2015, the department announced its investigation of due process and disability discrimination issues in the Dallas County Truancy Court and Juvenile District Courts.

This investigation was conducted by the Special Litigation Section.  Additional information about the Civil Rights Division is available on its website at www.justice.gov/crt.

Following a comprehensive investigation, the Justice Department today announced its findings regarding the Family Court of the Twenty-First Judicial Circuit of the state of Missouri, commonly known as the St. Louis County Family Court.  The Justice Department found that the family court fails to provide constitutionally required due process to children appearing for delinquency proceedings, and that the court’s administration of juvenile justice discriminates against Black children.  The investigation was conducted under the Violent Crime Control and Law Enforcement Act of 1994, which gives the department the authority to seek a remedy for a pattern or practice of conduct that violates the constitutional or federal statutory rights of youths in the administration of juvenile justice. 

 “The findings we issue today are serious and compelling,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “Missouri was at the forefront of juvenile corrections reform when it closed its large juvenile institutions and moved to a smaller, treatment-focused system and we are hopeful that Missouri will rise to this challenge to, once again, be a leader in juvenile justice reform.  This investigation is another step toward our goal of ensuring that children in the juvenile justice system receive their constitutionally guaranteed rights to due process and equal protection under the law.”

Since opening this investigation in November 2013, the Civil Rights Division has analyzed data relating to nearly 33,000 juvenile cases, including all delinquency and status offenses resolved in St. Louis County Family Court between 2010 and 2013; and has reviewed over 14,000 pages of documents, including family court records, transcripts, policies, procedures and external reports.  In June 2014, Justice Department attorneys and its consultants—a law school clinical professor and experienced juvenile defense attorney and a nationally-recognized expert on measuring juvenile justice disparities through statistical analysis—visited the family court and interviewed a number of court personnel, including all of the judges and commissioners as well as the heads of many of family court programs and services.  They also collected information from both the state and local public defender’s offices, private attorneys with experience in the family court and the parents of youth who had been involved in delinquency proceedings with the family court. 

The Justice Department found a number of constitutional violations, including:

• Failure to ensure youth facing delinquency proceedings have adequate legal representation;
• Failure to make adequate determinations that there is probable cause that a child committed the alleged offense;
• Failure to provide adequate due process to children facing certification for criminal prosecution in adult criminal court;
• Failure to ensure that children’s guilty pleas are entered knowingly and voluntarily;
• An organizational structure that is rife with conflicts of interest, is contrary to separation of powers principles and deprives children of adequate due process; and
• Disparate treatment of Black children at four key decision points within the juvenile justice system.

The department has opened four cases examining whether juvenile justice systems comply with children’s rights since 2009.  In 2012, the department settled its first investigation of this kind, reaching an agreement with the Juvenile Court of Shelby County, Memphis, Tennessee that calls for comprehensive due process, equal protection and facility reforms.  On June 19, 2015, the Justice Department announced a partial settlement of its lawsuit alleging violations of children’s due process rights in Lauderdale County, Mississippi.  In March 2015, the department announced its investigation of due process and disability discrimination issues in the Dallas County Truancy Court and Juvenile District Courts.

This investigation was conducted by the Special Litigation Section.  Additional information about the Civil Rights Division is available on its website at www.justice.gov/crt. 

A federal jury in Huntsville, Alabama, convicted Huntsville Police Department Officer Brett Russell, 48, of deprivation of rights under color of law for assaulting and injuring G.H., a detainee, as well as obstruction of justice for filing a false police report regarding this incident.

According to the evidence presented at trial, on Dec. 23, 2011, G.H. was detained in the rear of a police vehicle parked in a hotel parking lot.  After initially uttering profanity and kicking a rear window, G.H. sat handcuffed, compliant and nonresisting for approximately 30 minutes.  As officers attempted to remove G.H. from the vehicle to place leg shackles on him, Russell yanked G.H. from the vehicle.  While G.H. was lying handcuffed on the ground, the defendant repeatedly punched and kneed G.H.  Other officers placed leg shackles on G.H. and Russell then transported G.H. to the Madison County, Alabama, Jail.  When the jail refused to accept G.H. because of his injuries, Russell transported G.H.to the Huntsville Hospital.  Russell subsequently wrote and submitted a false report claiming that G.H. tried to kick and head butt the officers.  Further, Russell omitted from the false report any reference to the fact that he had used force on G.H.

Russell faces a statutory maximum sentence of 10 years in prison for the civil rights charge and a statutory maximum sentence of 20 years for the obstruction charge.  Sentencing has yet to be scheduled, but will occur before U.S. District Court Judge Abdul K. Kallon in the Northern District of Alabama.

“The criminal behavior of this officer undermines the dedicated efforts of the vast majority of officers who serve honorably,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “The Justice Department is committed to holding officers who engage in such criminal acts accountable.”

“Most police officers honor their oaths, day in and day out, to uphold the law and protect the public, but this defendant disgraced his badge and used excessive force against a man in handcuffs,” said U.S. Attorney Joyce White Vance of the Northern District of Alabama.  "This verdict reflects that abusing the authority of a police badge is a serious crime and it will be punished accordingly.  My office remains committed to aggressive civil rights enforcement, and I thank the FBI for its dedication to investigating and compiling evidence in these type of cases. "

This case is being investigated by the FBI’s Florence Resident Agency.  It is being prosecuted by Trial Attorney Carroll McCabe of the Civil Rights Division and Assistant U.S. Attorneys Daniel Fortune and Xavier O. Carter Sr. of the Northern District of Alabama.

Ediel Lopez Falcon, a member of the Gulf Cartel, was sentenced today to serve 18 years in prison for conspiring to import multi-ton quantities of cocaine and marijuana into the United States.  Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting Administrator Chuck Rosenberg of the Drug Enforcement Administration (DEA) made the announcement. 

Lopez Falcon, 41, pleaded guilty on Feb. 3, 2015 before U.S. District Judge Barbara J. Rothstein of the District of Columbia.  In addition to imposing the prison term, the court ordered Lopez Falcon to forfeit $15 billion, which represents the gross receipts of the Gulf Cartel’s drug sales from its principal distribution centers located along the U.S.-Mexico border.

In connection with his guilty plea, Lopez Falcon admitted that he was a member of the Gulf Cartel, a Mexico-based criminal organization, also known as “The Company,” which was responsible for the distribution of multi-ton quantities of cocaine and marijuana from Mexico into the United States.  According to the statement of facts to which Lopez Falcon admitted as part of his guilty plea, the Gulf Cartel maintained an armed faction, known as “Los Zetas,” which was made up of ex-military personnel, and that acted as enforcers and hit-men to protect the Gulf Cartel’s territory from rival drug traffickers. 

In connection with his guilty plea, Lopez Falcon further admitted to supporting The Company’s mission by becoming directly involved in the importation of cocaine and marijuana into the United States and the transportation of drug proceeds back to Mexico from the United States.  Pretrial documents also reveal that Lopez Falcon was lawfully intercepted discussing shipments of cocaine and marijuana, the acquisition of weapons, and the transportation of bulk cash with his co-conspirators. 

The investigation was conducted by the DEA’s Houston Field Division and the DEA Bilateral Investigation Unit and was part of an Organized Crime and Drug Enforcement Task Force investigation.  The case was prosecuted by Trial Attorney Adrián Rosales of the Criminal Division’s Narcotic and Dangerous Drug Section.

Christopher R. Glenn, 34, a South Florida Resident, was sentenced on July 31, 2015, to 120 months of imprisonment to be followed by three years of supervised release by U.S. District Judge Kenneth A. Marra of the Southern District of Florida following his guilty plea for willful retention of classified national defense information under the Espionage Act, computer intrusion under the Computer Fraud and Abuse Act and conspiracy to commit naturalization fraud.

Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida and Special Agent in Charge George L. Piro of the FBI’s Miami Field Office made the announcement. 

“Christopher Glenn exploited his position as a cleared military contractor and systems administrator to steal classified U.S. military secrets,” said Assistant Attorney General Carlin.  “In doing so, he violated the unique trust placed in him by the Department of Defense.  Insider threats by trusted employees who exploit computer access are a significant danger to U.S. national security and this sentencing shows it will not be tolerated.”

“The defendant exploited and violated the special trust placed in him as a computer network system administrator working at a United States military base, in order to penetrate the computer system and steal classified materials,” said U.S. Attorney Ferrer.  “We will continue to investigate and prosecute insider threats to national security and we will bring those violators to justice.”

According to court records, while working as a computer systems administrator at Soto Cano Air Base in Honduras, Glenn accessed a classified Department of Defense network without authorization and removed classified national defense information from Department of Defense and U.S. Southern Command’s (SOUTHCOM’s) Joint Task Force-Bravo, including intelligence reports and military plans.  Glenn proceeded to encrypt the files and place them on an Internet-accessible network storage device located in his residence in Honduras.

Glenn also conspired with his wife, Khadraa A. Glenn, 28, to commit naturalization fraud for her benefit by fabricating fraudulent documents and submitting false statements and the documents to the U.S. Citizenship and Immigration Services (USCIS).  Khadraa A. Glenn previously pleaded guilty to naturalization fraud conspiracy and was sentenced on Oct. 7, 2014.

Assistant Attorney General Carlin and U.S. Attorney Ferrer commended the investigative efforts of the FBI, U.S. Army’s 470th Military Intelligence Brigade, U.S. Army’s Criminal Investigations Division, SOUTHCOM, USCIS, IRS-CI, the Department of Homeland Security and the South Florida Joint Terrorism Task Force.  The case is being prosecuted by Assistant U.S. Attorney Ricardo Del Toro of the Southern District of Florida and Trial Attorney Christian Ford of the National Security Division’s Counterintelligence and Export Control Section.

A federal court has permanently barred a Bolingbrook, Illinois, woman and her tax preparation business from preparing federal tax returns for others, the Justice Department announced today. 

The civil injunction order prohibits Judy Brooks and Judy Brooks & Associates Financial Services Corporation (JBA) from acting as a tax return preparer and from continuing to operate a tax preparation business.  Brooks agreed to entry of the injunction by U.S. District Court Judge Samuel Der-Yeghiayan of the Northern District of Illinois.

According to the complaint, Brooks prepares returns containing false expenses from non-existent businesses and claiming head of household filing status for customers who were ineligible, according to the suit.  In addition, the complaint alleges that Brooks fabricates tax credits, including education credits, child and dependent care credits, and residential energy credits.  These actions resulted in inflated tax refunds to which her customers were not entitled.

The complaint alleges the Internal Revenue Service (IRS) examined 59 income tax returns that Brooks or JBA prepared for tax years 2010 through 2013, and of those returns, 100 percent underreported the customer’s tax due.  The IRS calculated a deficiency of approximately $6,729 per examined return, according to the suit.

The injunction order requires Brooks to provide the United States with a list of her customers since 2010, and to send a copy of the court’s injunction order to all customers for whom she prepared returns.

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

Banks Will Collectively Pay Penalties of More than $8.4 Million and Continue to Cooperate with Department

The Department of Justice announced today that PKB Privatbank AG, Falcon Private Bank AG and Credito Privato Commerciale in liquidazione SA (CPC) have reached resolutions under the department’s Swiss Bank Program.

“Swiss banks continue to lift the veil of secrecy that for decades has assisted U.S. individuals in willfully evading their U.S. tax obligations, often through the use of sham structures and trusts established in foreign jurisdictions,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division.  “The department’s prosecutors and the IRS are actively following these leads to countries across the globe.”

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.

PKB Privatbank AG was founded in 1958 and has its head office in Lugano, Switzerland.  It also maintained offices in Bellinzona, Zurich, Geneva and Lausanne, Switzerland.  PKB was aware that some U.S. taxpayers who had opened and maintained accounts at PKB were not complying with their U.S. income tax and reporting obligations.  PKB 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 Internal Revenue Service (IRS).  These services included code name or numbered accounts and hold mail services, pursuant to which PKB would hold all mail correspondence for a particular client.  These services allowed U.S. clients to conceal their identities and minimize the paper trail associated with the undeclared assets and income they held at PKB in Switzerland.

PKB also employed a variety of other means or conduct that it knew or should have known would assist U.S. taxpayers in concealing their PKB accounts, including:

• referring U.S. taxpayers to an outside service provider to establish an offshore structure for purposes of holding an undeclared account at PKB;

• assisting U.S. taxpayers in transferring assets from accounts being closed at PKB to other PKB accounts held by a non-U.S. relative or other non-U.S. parties;

• assisting U.S. beneficial owners in transferring assets from accounts being closed at PKB to accounts at other banks in Switzerland;

• opening accounts for U.S. taxpayers who had left other banks being investigated by the department, including UBS; and

• providing credit cards or debit cards linked to undeclared accounts held in the name of an offshore trust, foundation or company that was beneficially owned by one or more U.S. taxpayers.

In certain cases, U.S. clients of PKB, with the assistance of their advisors, would create an entity, such as a Liechtenstein foundation, a Panamanian corporation or a British Virgin Islands corporation, and pay a fee to third parties to act as corporate directors.  Those third parties, at the direction of the U.S. client, would then open a bank account at PKB in the name of the entity or transfer assets from an account at another Swiss or other foreign bank.  In such cases involving a non-U.S. entity, PKB was aware that a U.S. client was the true beneficial owner of the account.  Despite this, PKB would obtain from the entity’s directors an IRS Form W-8BEN or equivalent bank document that falsely declared that the beneficial owner of the PKB account was not a U.S. taxpayer.  In some cases, the U.S. client or a related party also held a power of attorney or other signature authority with respect to the PKB account, thereby permitting the U.S. client to act directly with respect to the account and assets held therein, notwithstanding the corporate form of the accountholder.  Ultimately, the use of such offshore structures by U.S. taxpayer clients provided an additional layer of confidentiality and further assisted them in concealing their beneficial ownership of their PKB accounts and evading their U.S. tax and information reporting obligations.

Since Aug. 1, 2008, PKB had 244 U.S.-related accounts, both declared and undeclared, with an aggregate maximum balance of approximately $328.8 million.  PKB will pay a penalty of $6.328 million.

Falcon Private Bank AG was founded in 1965 by American International Group Inc. (AIG), and is headquartered in Zurich.  Falcon has branches in Geneva, Hong Kong and Singapore, and representative offices in Abu Dhabi, Dubai and London.  Since April 2009, Falcon has been owned by aabar Investments.  The majority shareholder of aabar is the International Petroleum Investment Company, a sovereign wealth fund owned by the government of Abu Dhabi.

Through its managers, employees and others, Falcon knew that some U.S. taxpayers who had opened and maintained accounts at Falcon were not complying with their U.S. income tax and reporting obligations.  Falcon offered a variety of standard Swiss banking services, including hold mail and code name or numbered account services, which it knew could assist, and did assist, its U.S. clients in the concealment of assets and income from the IRS.

The majority of Falcon’s U.S.-related accounts held since Aug. 1, 2008, were held in the names of entities or structures.  Those accounts were almost entirely held by non-U.S. structures, such as offshore corporations or trusts.  Typically, the beneficial owners of these structures created a legal entity, such as a Panamanian corporation, and paid third parties to act as the corporate “directors.”  Those third parties would then open a bank account at Falcon in the name of the entity, allowing clients the ability to conceal their undeclared accounts from the IRS.

Falcon also:

• accepted instructions in connection with one U.S.-related account not to invest in U.S. securities and not to disclose the names of U.S. taxpayer-clients to U.S. tax authorities, including the IRS;

• issued checks, including series of checks, in amounts of less than $10,000, in seven cases, that were drawn on accounts of U.S. taxpayers or structures even though Falcon knew or had reason to know that the withdrawals were made to avoid triggering scrutiny; and

• provided cash (310,000 Swiss francs and $250,000) at account closure in July 2011 to a U.S. citizen with signatory authority over an account held in the name of a British Virgin Island nominee company. 

Falcon maintained accounts for four British Virgin Islands nominee companies and two Panamanian nominee companies when Falcon knew or should have known that the Forms W-8BEN and Forms A associated with those accounts were contradictory, that the beneficial owners were U.S. citizens or residents, and that the structures were used by the U.S. taxpayer-clients to help conceal their identities from the IRS.

Since Aug. 1, 2008, Falcon also maintained three insurance segregated accounts for which it was aware that the policy holder or premium payer was a U.S. person.  By placing and maintaining their assets in accounts held in the names of insurance companies and not the actual beneficial owner of the funds (a procedure known colloquially as an “insurance wrapper”), Falcon was aware that by operation of Swiss bank secrecy laws, the U.S. client’s ownership would not be disclosed to U.S. authorities, including the IRS.

Since Aug. 1, 2008, Falcon maintained a total of 84 U.S.-related accounts with an aggregate value of approximately $134 million.  Falcon will pay a penalty of $1.806 million.

CPC is located in Lugano.  It was established in 1973 as a trust company and received its Swiss banking license in 2004.  On June 8, 2012, CPC’s Italian parent decided to exit the banking industry in Switzerland for reasons unrelated to U.S. tax issues and entered CPC into voluntary liquidation.  Ernst & Young AG, Zurich (Ernst & Young) was appointed as liquidator.  As of that date, with the assistance of three administrative personnel, Ernst & Young has engaged solely in carrying out the liquidation of CPC, including closing client accounts and disposing of assets pursuant to client instructions.

CPC offered a variety of traditional Swiss banking services, including numbered accounts and hold mail service.  CPC also employed other means to assist U.S. taxpayers in concealing their undeclared accounts, including:

• opening an account for a U.S. taxpayer who had left UBS, which was being investigated by the department;

• opening an account for two U.S. taxpayers who had left a bank in Luxembourg because, according to their later voluntary disclosures, their external asset manager was concerned about bank secrecy in Luxembourg and indicated it would be safer to maintain an undeclared account in Switzerland; and

• providing a cash card linked to an undeclared account.

After March 13, 2012, and considering the implementation of the U.S. Foreign Account Tax Compliance Act (FATCA), CPC decided to discontinue all of its relationships with its U.S. customers and closed its last U.S.-related account in April 2013.

In the period between Aug. 1, 2008, and CPC’s liquidation, CPC had 16 U.S.-related accounts with an aggregate maximum balance of approximately $71 million.  CPC will pay a penalty of $348,900.

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 agreement underscores the partnerships forged in this new era of international collaboration and further demonstrates IRS-CI’s commitment to pursuing offshore tax compliance,” said Chief Richard Weber of IRS-Criminal Investigation (IRS-CI).  “In today’s world, criminals can no longer hide assets behind a foreign border and assume that they will not be caught.  You can be certain that IRS-CI will use the information we are gathering through these partnerships to vigorously pursue tax cheats around the world, no matter how remote the location.” 

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 Mark W. Kotila, Carl D. Wasserman and John E. Sullivan, who served as counsel on these matters, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer 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.

Thirteen members of the Texas Guard have received their sentences for their roles in wide-ranging bribery and fraud schemes that caused more than $170,000 in losses to the United States.  Seven of those members were sentenced this past week in Houston.   

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas made the announcement.   

• Jammie Martin, 38, of Katy, Texas, and Michelle Davis, 34, of Houston, were convicted in February of this year after a five-day trial of conspiracy, bribery, wire fraud and aggravated identity theft.  Martin was sentenced to serve 102 months in prison and Davis was sentenced to serve 57 months in prison.   

• Vanessa Phillips, 37, of Houston, pleaded guilty to one count of conspiracy and one count of bribery and was sentenced to three years probation. 

• Zaunmine “Orlando” Duncan, 39, of Douglasville, Georgia, pleaded guilty to one count of conspiracy, one count of bribery and one count of aggravated identity theft.  He was sentenced to serve 70 months in prison. 

• Annika Chambers, 29, of Houston, and Lashae Hawkins, 29, of San Antonio, pleaded guilty to one count of conspiracy and one count of bribery.  Chambers was sentenced to serve six months in prison.  Hawkins received one year and one day in prison. 

• Christopher Renfro, 27, of Houston, pleaded guilty to one count of conspiracy, one count of bribery, one count of aggravated identity theft and two counts of wire fraud.  He was sentenced to serve 36 months in prison. 

In June, six other members of the Texas Guard were sentenced for their roles in the scheme.   

• Michael Rambaran, 52, of Pearland, Texas, pleaded guilty to one count of conspiracy, one count of bribery and one count of aggravated identity theft.  He was sentenced to serve 60 months in prison.   

• Edia Antoine, 29, and Ernest A. Millien III, 51, both of Houston, and Melanie Moraida, 35, of Pearland, pleaded guilty to one count of conspiracy and one count of bribery.  Each received 12 months and one day in prison.   

Elisha Ceja, 28, of Barboursville, West Virginia, and Kimberly Hartgraves, 30, of League City, Texas, pleaded guilty to one count of conspiracy and one count of bribery.  Ceja was sentenced to serve nine months in prison and Hartgraves received probation.

U.S. District Judge Lee H. Rosenthal in the Southern District of Texas imposed the prison terms and also ordered all 13 defendants to pay restitution.  One remaining defendant, Danielle Applin 29, of Harker Heights, Texas, who previously pleaded guilty to one count of conspiracy and one count of bribery, is scheduled to be sentenced on Sept. 2, 2015, in Houston. 

In approximately September 2005, the National Guard Bureau entered into a contract with Document and Packaging Broker Inc. to administer the Guard Recruiting Assistance Program (G-RAP).  Through this program, a participating soldier, known as a recruiting assistant, could receive bonus payments for referring another individual to join the National Guard.  Based on certain milestones achieved by the referred soldier, a participating soldier would receive payment through direct deposit into the participating soldier’s designated bank account.  To participate in the program, recruiting assistants were required to create online accounts.

According to the evidence presented at trial and in connection with various guilty pleas, Phillips and Davis, both of whom participated in the G-RAP as recruiting assistants, conspired with Martin, a recruiter, to defraud the program by falsely claiming that they were responsible for referring potential soldiers to join the National Guard.  The trial evidence showed that Martin used his position to obtain the names and Social Security numbers of potential soldiers which he provided to recruiting assistants so that they could use the information to obtain fraudulent recruiting referral bonuses.  The evidence at trial showed that, in exchange for the information, Martin, who organized and led the scheme, personally received approximately $15,000 in payments from the recruiting assistants.  This scheme resulted in more than $30,000 in losses to the National Guard Bureau.

In a separate scheme that resulted in an additional $70,000 in losses, recruiting assistants Antoine, Millien, Moraida and Renfro admitted to paying Rambaran, a recruiter who organized and led the scheme, for the personal information of potential soldiers.  They then used that information to obtain fraudulent bonuses by falsely claiming they referred those individuals to join the National Guard.  Rambaran admitted that, in exchange for the recruit information, he personally received a total of approximately $29,000 in payments from the recruiting assistants. 

In connection with his guilty plea in a scheme he organized and led, Duncan, a recruiter, admitted he personally received approximately $24,000 in payments from recruiting assistants in exchange for personal information of potential soldiers.  Those recruiting assistants – Ceja, Chambers, Hartgraves and Hawkins – admitted to paying Duncan for the information and using it to obtain fraudulent bonuses by falsely claiming they referred those individuals to join the National Guard.  This scheme resulted in another $70,000 in losses to the National Guard Bureau.

The cases were investigated by the San Antonio Fraud Resident Agency of Army Criminal Investigation Command’s Major Procurement Fraud Unit.  These cases are being prosecuted by Trial Attorneys Sean F. Mulryne, Heidi Boutros Gesch and Mark J. Cipolletti of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney John Pearson of the Southern District of Texas. 

California-based medical device manufacturer NuVasive Inc. has agreed to pay the United States $13.5 million to resolve allegations that the company caused health care providers to submit false claims to Medicare and other federal health care programs for spine surgeries by marketing the company’s CoRoent System for surgical uses that were not approved by the U.S. Food and Drug Administration (FDA), the Justice Department announced today.  The settlement further resolves allegations that NuVasive caused false claims by paying kickbacks to induce physicians to use the company’s CoRoent System.    

“The Justice Department is committed to holding medical device manufacturers accountable, which includes requiring that they follow all laws designed to ensure that medical devices are safe and effective,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “It is also imperative that manufacturers not improperly influence the selection of medical devices in order to ensure that these decisions are based on the needs and interests of patients, not on a physician’s own financial interests.”   

The United States alleged that between 2008 and 2013, NuVasive promoted the use of the CoRoent System for surgical uses that were not approved or cleared by the FDA, including for use in treating two complex spine deformities, severe scoliosis and severe spondylolisthesis.  As a result of this conduct, the United States alleged that NuVasive caused physicians and hospitals to submit false claims to federal health care programs for certain spine surgeries that were not eligible for reimbursement.       

The settlement agreement also resolves allegations that NuVasive knowingly offered and paid illegal remuneration to certain physicians to induce them to use the CoRoent System in spine fusion surgeries, in violation of the federal Anti-Kickback Statute.  The illegal remuneration consisted of promotional speaker fees, honoraria and expenses relating to physicians’ attendance at events sponsored by a group known as the Society of Lateral Access Surgery (SOLAS).  SOLAS was allegedly created, funded and operated solely by NuVasive, despite its outward appearance of independence.       

“Health care providers need to be free to make medical decisions without improper influence by material or incentives from manufacturers,” said U.S. Attorney Rod J. Rosenstein of the District of Maryland.  “A medical device manufacturer violates the law if it knowingly causes physicians to use its products for purposes that are not medically reasonable and necessary and to bill federal health insurance programs.”

“Defrauding Medicare and Medicaid by paying kickbacks to physicians and promoting uses not covered by Federal health care programs will not be tolerated,” said Special Agent in Charge Nick DiGiulio of the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG).  “Settlements such as the one entered into today by NuVasive send a message to the medical device industry that such practices will be closely monitored.”

The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act by Kevin Ryan, a former NuVasive sales representative.  The act permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  As part of today’s resolution, Mr. Ryan will receive approximately $2.2 million.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $24.8 billion through False Claims Act cases, with more than $15.9 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with NuVasive was the result of a coordinated effort among the U.S. Attorney’s Office of the District of Maryland, the Civil Division’s Commercial Litigation Branch and the National Association of Medicaid Fraud Control Units.  This matter was investigated by HHS-OIG, the Department of Defense’s Office of the Inspector General and the Office of Personnel Management’s Office of Inspector General, with assistance from the FDA’s Office of Chief Counsel and Office of Criminal Investigations. 

The federal share of the civil settlement is $12,583,413.84, and the state Medicaid share of the civil settlement is $916,586.16.  The claims resolved by this settlement are allegations only, and there has been no determination of liability. 

The lawsuit is captioned United States ex rel. Kevin Ryan v. NuVasive, Inc. (D. Md.).   

The Department of Justice announced today that it is pursuing criminal contempt sanctions against a Livingston, Montana, man for selling dietary supplements and drugs in violation of two court orders.

Toby McAdam, 57, is alleged to have violated a 2010 court order and an order of civil contempt issued in 2013, both of which prohibit him from selling dietary supplements and drugs.  The government alleges that McAdam has continued to sell both supplements and drugs, and failed to close down his business and online sites.

According to documents filed today, McAdam violated the order of civil contempt by failing to shutter Internet businesses on Amazon.com, websites and a promotional Facebook page McAdam uses to promote his products.

“Court orders must be taken seriously,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Civil Division’s Consumer Protection Branch will aggressively pursue those who violate court orders imposed to protect public health and prevent false product claims.”

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

Principal Deputy Assistant Attorney General Mizer commended the investigative efforts of the U.S. Postal Inspection Service and the FDA’s Seattle District Office.  This matter is filed in the District of Montana and is being handled by Trial Attorney David Sullivan of the Consumer Protection Branch.

Arafat M. Nagi, 42, of Lackawanna, New York, was arrested and charged by criminal complaint with attempting to provide material support and resources, namely personnel, to a foreign terrorist organization, the Islamic State of Iraq and the Levant (ISIL).  The charge carries a maximum penalty of 15 years in prison and a $250,000 fine.

Assistant Attorney General for National Security John P. Carlin, U.S. Attorney William J. Hochul Jr. of the Western District of New York and Special Agent in Charge Brian P. Boetig of the FBI’s Buffalo, New York, Division made the announcement today.

“Our continuing fight against international terrorism today returns to Western New York,” said U.S. Attorney Hochul.  “As alleged, Arafat Nagi pledged allegiance to the Islamic State and the leader of this terrorist organization.  After buying military combat gear, he traveled twice to Turkey in an effort to help the group.  Thanks to the combined efforts of law enforcement and community members, this defendant is no longer capable of achieving his goal of joining the most despicable group of our time.”

“The FBI has a responsibility to ensure that our law enforcement and intelligence agencies are positioned to identify existing or emerging threats,” said Special Agent in Charge Boetig.  “Joint Terrorism Task Forces (JTTFs) serve as the national platforms for deterring, detecting and disrupting terrorist machinations.  The JTTF in Buffalo relies on community engagement to gain perspectives on radicalization and to deter recruitment and the spread of radicalization messages.  We continue to call upon people to contact law enforcement if they know of someone who has been influenced by ISIL rhetoric on social media – powerful propaganda that calls for followers to commit quick and unpredictable violent acts.”

According to the complaint, on Aug. 28, 2014, a Lackawanna community member advised the FBI that Nagi talks about violent jihad to various people in the community and it is common for Nagi to get into verbal arguments regarding his jihadi beliefs.

Further investigation determined that Nagi pledged allegiance to ISIL and the leader of the terrorist group, Abu Bakr al Bagdadi.  The defendant traveled to Turkey on two occasions, in October 2012 and July 2014, with the intention to meet with members of the group.  Evidence revealed that prior to these trips, the defendant purchased large number of military combat items, including a tactical vest, army combat shirt, body armor, a Shahada Flag, combat boots, a backpack, burn kit, hunting knife, machete and night vision goggles.

During follow up interviews in December 2014 and March 2015, the community member who alerted the FBI regarding Nagi’s actions stated that the defendant still possessed radical political and religious views.  According to the individual, Nagi was angry about the killing of rebels in Yemen, which he blamed on the United States; pledged an oath to ISIL leaders; expressed agreement with ISIL tactics, including the killing of innocent men, women and children; and planned to travel to Yemen and Turkey again soon.  

Nagi will make his initial appearance this morning at 11:00 a.m. before U.S. Magistrate Judge Hugh B. Scott in the Western District of New York.

The complaint is the culmination of an investigation by the FBI’s Buffalo JTTF, which includes the Amherst, New York, Police Department; the Buffalo Police Department; the U.S. Department of State; the Federal Protective Service; Immigration and Customs Enforcement’s Homeland Security Investigations; the Internal Revenue Service; the New York State Police; the Niagara County, New York, Sheriff’s Office; the Niagara Falls, New York, Police Department; the Customs and Border Protection’s U.S. Border Patrol; and the U.S. Customs and Border Protection/Air and Marine Branch.  Additional assistance was provided by the New York State Attorney General’s Office.

The fact that a defendant has been charged with a crime is merely an accusation and the defendant is presumed innocent until and unless proven guilty.

A member of Congress and four of his associates were indicted today for their roles in a racketeering conspiracy involving several schemes that were intended to further the political and financial interests of the defendants and others by, among other tactics, misappropriating hundreds of thousands of dollars of federal, charitable and campaign funds.   

Congressman Chaka Fattah Sr., 58, of Philadelphia; lobbyist Herbert Vederman, 69, of Palm Beach, Florida; Fattah’s Congressional District Director Bonnie Bowser, 59, of Philadelphia; and Robert Brand, 69, of Philadelphia; and Karen Nicholas, 57, of Williamstown, New Jersey, were charged today in a 29-count indictment with participating in a racketeering conspiracy and other crimes, including bribery; conspiracy to commit mail, wire and honest services fraud; and multiple counts of mail fraud, falsification of records, bank fraud, making false statements to a financial institution and money laundering.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania, Special Agent in Charge Edward J. Hanko of the FBI’s Philadelphia Division and Special Agent in Charge Akeia Conner of the Internal Revenue Service-Criminal Investigation (IRS-CI) Philadelphia Field Office made the announcement.

“As charged in the indictment, Congressman Fattah and his associates embarked on a wide-ranging conspiracy involving bribery, concealment of unlawful campaign contributions and theft of charitable and federal funds to advance their own personal interests,” said Assistant Attorney General Caldwell.  “When elected officials betray the trust and confidence placed in them by the public, the department will do everything we can to ensure that they are held accountable.  Public corruption takes a particularly heavy toll on our democracy because it undermines people’s basic belief that our elected leaders are committed to serving the public interest, not to lining their own pockets.”

“The public expects their elected officials to act with honesty and integrity,” said U.S. Attorney Memeger.  “By misusing campaign funds, misappropriating government funds, accepting bribes, and committing bank fraud, as alleged in the Indictment, Congressman Fattah and his co-conspirators have betrayed the public trust and undermined faith in government.”

“These crimes and the subsequent elaborate cover-up constitute an egregious breach of public trust,” said Special Agent in Charge Hanko.  “It is the duty of the FBI, IRS and Department of Justice to investigate and prosecute those who violate this trust and put personal gain above public service.”

“Public corruption by our elected officials and their associates undermines the American public’s confidence in our government,” said Special Agent in Charge Conner.  “When our elected officials and their associates violate the law and create sophisticated financial schemes to enrich themselves, the Internal Revenue Service-Criminal Investigation, will work diligently with our fellow law enforcement partners to restore the public’s trust.”

Specifically, the indictment alleges that, in connection with his failed 2007 campaign to serve as mayor of Philadelphia, Fattah and certain associates borrowed $1 million from a wealthy supporter and disguised the funds as a loan to a consulting company.  After he lost the election, Fattah allegedly returned $400,000 to the donor that the campaign had not used, and arranged for Educational Advancement Alliance (EAA), a non-profit entity that he founded and controlled, to repay the remaining $600,000 using charitable and federal grant funds that passed through two other companies, including one run by Brand.  To conceal the contribution and repayment scheme, the defendants and others allegedly created sham contracts and made false entries in accounting records, tax returns and campaign finance disclosure statements. 

In addition, the indictment alleges that after his defeat in the mayoral election, Fattah sought to extinguish approximately $130,000 in campaign debt owed to a political consultant by agreeing to arrange for the award of federal grant funds to the consultant.  According to the allegations in the indictment, Fattah directed the consultant to apply for a $15 million grant, which he did not ultimately receive, on behalf of a then non-existent non-profit entity.  In exchange for Fattah’s efforts to arrange the award of the funds to the non-profit, the consultant allegedly agreed to forgive the debt owed by the campaign.

The indictment further alleges that Fattah misappropriated funds from his mayoral and congressional campaigns to repay his son’s student loan debt.  To execute the scheme, Fattah and Bowser allegedly arranged for his campaigns to make payments to a political consulting company, which the company then used to lessen Fattah’s son’s student loan debt.  According to the allegations in the indictment, between 2007 and 2011, the consultant made 34 successful loan payments on behalf of Fattah’s son, totaling approximately $23,000. 

In another alleged scheme, beginning in 2008, Fattah communicated with individuals in the legislative and executive branches in an effort to secure for Vederman an ambassadorship or an appointment to the U.S. Trade Commission.  In exchange, Vederman provided money and other items of value to Fattah.  As part of this scheme, the indictment alleges that the defendants sought to conceal an $18,000 bribe payment from Vederman to Fattah by disguising it as a payment for a car sale that never actually took place.

Finally, the indictment alleges that Nicholas obtained $50,000 in federal grant funds that she claimed would be used by EAA to support a conference on higher education.  The conference never took place.  Instead, Nicholas used the grant funds to pay $20,000 to a political consultant and $10,000 to her attorney, and wrote several checks to herself from EAA's operating account.

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 and IRS-CI.  Assistance was also provided by the Department of Justice’s Office of the Inspector General, the NASA Office of Inspector General and the Department of Commerce’s Office of Inspector General.  The case is being prosecuted by Trial Attorneys Eric L. Gibson, T. Patrick Martin and Jonathan Kravis of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Paul L. Gray of the Eastern District of Pennsylvania.  Trial Attorney Bob Dalton of the Criminal Division’s Organized Crime and Gang Section also provided assistance in this case. 

Fattah et al. Indictment.pdf (5.96 MB)

A federal jury convicted an Alaskan physician of distributing and receiving child pornography, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Karen. L. Loeffler of the District of Alaska.

Greg Alan Salard, 54, of Wrangell, Alaska, was found guilty after a six-day trial before U.S. District Judge Timothy Burgess of the District of Alaska.  Sentencing has been scheduled for Oct. 9, 2015, in Juneau, Alaska.

According to evidence presented at trial, in June 2014, during an FBI investigation concerning the trading of child pornography using peer-to-peer (P2P) software, investigators discovered that an Internet Protocol (IP) address linked to Salard was used to share files of known child pornography and that one of those files contained a video of child pornography.  The evidence also showed that a laptop computer subsequently seized from Salard’s home contained the same P2P software used to share the video.

Testimony regarding a forensic examination of the laptop demonstrated that the computer contained a child pornography video as well as evidence of hundreds of other files with names indicative of child pornography; the jury reviewed the contents of 11 of those files.  The testimony also showed that multiple searches had been run on the laptop for a term associated with child pornography, and that videos of child pornography had been viewed on the computer.  Finally, the evidence introduced at trial revealed that a program designed to erase or “wipe” computer files had been used multiple times, including on the morning the search warrant was executed.

This case was investigated by the FBI, with assistance from the U.S. Forest Service, Petersburg, Alaska Police Department, Wrangell, Alaska Police Department and Juneau, Alaska, Police Department.  The case is being prosecuted by Trial Attorney Leslie Williams Fisher of the Criminal Division’s Child Exploitation and Obscenity Section and Assistant U.S. Attorney Kyle Reardon of the District of Alaska.

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child exploitation and abuse launched in May 2006 by the Department of Justice.  Led by U.S. Attorney’s Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims.  For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

A member of the Lucchese organized crime family of La Cosa Nostra (LCN) was sentenced today to serve 360 months in prison for participating in a racketeering conspiracy and related offenses.  Three other members of the conspiracy are scheduled to be sentenced later this week.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Paul J. Fishman of the District New Jersey made the announcement. 

“Nicodemo Scarfo and his associates tried to take La Cosa Nostra corporate, using traditional, strong-arm mob tactics to take over a publicly traded company and loot it like a personal piggy bank,” said Assistant Attorney General Caldwell.  “The Justice Department will fight organized crime wherever it may surface – from back alleys to public board rooms – to ensure that crime does not pay.”

“Scarfo and his crew gave new meaning to the term ‘corporate takeover,’ pushing out the legitimate leadership of a publicly traded company and then looting it,” said U.S. Attorney Fishman.  “They used false SEC filings, phony consulting agreements and more traditional mob methods to steal $12 million from the company’s shareholders.  That’s a risk that investors should never have to take.”

Nicodemo S. Scarfo, 50, of Galloway, New Jersey; Salvatore Pelullo, 48, of Philadelphia, an associate of the Philadelphia and Lucchese LCN families; William Maxwell, 56, of Houston, a Texas attorney; and John Maxwell, 63, of Dallas, were convicted in July 2014, after a six-month trial, of racketeering conspiracy and related offenses, including securities fraud, wire fraud, mail fraud, bank fraud, extortion, money laundering and obstruction of justice. 

In addition to sentencing Scarfo to prison, U.S. District Judge Robert B. Kugler ordered Scarfo to forfeit his interest in certain properties and to pay restitution in the amount of approximately $14 million.  Pelullo, William Maxwell and John Maxwell are scheduled to be sentenced later this week. 

According to evidence presented at trial, since 1989, Scarfo has been a member of the Lucchese family.  As a member, he was required to earn money and participate in the affairs of the Lucchese family.

The trial evidence showed that, in April 2007, Scarfo, Pelullo and others conspired to take control of FirstPlus Financial Group Inc. (FPFG), a publicly-held company in Texas, by using threats of economic harm to intimidate and remove FPFG’s management and board of directors, and to replace them with persons beholden to Scarfo and Pelullo, including William Maxwell and his brother, John Maxwell.  The evidence introduced at trial further demonstrated that, once the takeover had occurred, FPFG’s new board of directors named William Maxwell as “special counsel” to FPFG and John Maxwell as the company’s CEO, positions that they used to funnel approximately $12 million to themselves, Scarfo and Pelullo through fraudulent legal services and consulting agreements.  According to evidence presented at trial, Scarfo and Pelullo used their illicit gains to fund extravagant purchases, including an $850,000 yacht, a luxury home, a Bentley automobile and thousands of dollars in jewelry. 

The indictment also named as co-conspirators Nicodemo D. Scarfo, or Scarfo Sr., the imprisoned former boss of the Philadelphia LCN family, and Vittorio Amuso, the imprisoned boss of the Lucchese LCN family.  Five other defendants – Cory Leshner, Howard Drossner, John Parisi, Todd Stark and Scarfo’s wife, Lisa Murray-Scarfo – previously pleaded guilty to various charges related to their roles in the conspiracy. 

The case was investigated by the FBI’s Newark, New Jersey, Division, with assistance from the U.S. Department of Labor-Office of Inspector General’s Office of Labor Racketeering and Fraud Investigations New York Region, the FBI’s Philadelphia Division and the Bureau of Alcohol, Tobacco, Firearms and Explosives.  The case is being prosecuted by Trial Attorney Adam L. Small of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorneys Steven D’Aguanno and Howard Wiener of the District of New Jersey.

After more than 13 years of service as a federal prosecutor, including 16 months as Principal Deputy Assistant Attorney General and Chief of Staff of the Criminal Division, Marshall L. Miller will leave the Justice Department.  His last day will be Friday, July 31, 2015.  David Bitkower has been selected to assume the position following Miller’s departure.

“Marshall Miller is an outstanding attorney, a remarkable public servant, and an unwavering advocate for the principles of justice,” said Attorney General Loretta E. Lynch.  “Throughout his career in law enforcement – from the Eastern District of New York to Washington, D.C. – he has taken on some of America's most pressing challenges.  He has strengthened our country and empowered our communities.  And he has demonstrated his commitment to fair application of the law.  I commend him for his extraordinary service to the Department of Justice and to the American people, and I look forward to all that he will continue to achieve in the days and years ahead.”

“Throughout his career as a prosecutor, Marshall has inspired his colleagues with his unfailing commitment to the pursuit of justice,” said Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division.  “He has been a real force in the Criminal Division, and has had a strong voice in all the key decisions we have made during my tenure.  While Marshall’s departure is a great loss to the department, I am grateful to have someone with David’s experience, intellect and dedication to help guide me in leading the Criminal Division.”

Miller was appointed to his current position on April 17, 2014, from the U.S. Attorney’s Office of the Eastern District of New York, which Miller joined in 1999 as an Assistant U.S. Attorney.  While in the U.S. Attorney’s Office, Miller served as Chief and Deputy Chief of the Criminal Division, Chief and Deputy Chief of the Violent Crimes and Terrorism Section and Deputy Chief of the General Crimes Section.  He conducted and supervised numerous significant and complex investigations and prosecutions, including cases involving terrorism, organized crime, violent crime, political corruption and financial fraud.

For his work, Miller received a number of the department’s highest awards, including the Attorney General’s Award for Excellence in Furthering the Interests of National Security and the Director’s Award for Superior Performance.  He also received the Henry L. Stimson Medal from the New York City Bar Association, the National Intelligence Merit Award from the Director of National Intelligence and a Federal Prosecutor of the Year Award from the Federal Law Enforcement Foundation.  In 2009, Miller was recognized for the most outstanding performance by an Assistant U.S. Attorney by the National Association of Former U.S. Attorneys.

Miller has also significantly engaged in the teaching of law.  He has served as a professor at New York University (NYU) School of Law, where he founded the NYU Federal Prosecution Clinic at the Eastern District of New York.  He also served as an adjunct professor at Fordham University School of Law.  

Before joining the department, Miller clerked for U.S. District Judge Allyne R. Ross of the Eastern District of New York.  He earned both his undergraduate and law degrees from Yale University. 

Since April 2013, David Bitkower has served as a Deputy Assistant Attorney General of the Criminal Division, overseeing the Computer Crime and Intellectual Property Section, the Human Rights and Special Prosecutions Section and the Organized Crime and Gang Section.  He has represented the Department of Justice at Congressional hearings and in international fora, including the United Nations Committee against Torture in Geneva.   

Prior to joining the Criminal Division, Bitkower was an Assistant U.S. Attorney in the Eastern District of New York.  He served most recently as the first Chief of the National Security and Cybercrime Section, and previously served as Chief and Deputy Chief of the Violent Crimes and Terrorism Section.  From 2008 to 2009, Bitkower also served on detail to the Justice Department’s Counterterrorism Section of the National Security Division and to the President’s Guantanamo Bay Review Task Force. 

Bitkower has received several notable awards, including the Attorney General’s Award for Exceptional Service.  Before joining the Department of Justice, Bitkower was a law clerk for U.S. Circuit Judge Pierre N. Leval of the Second Circuit Court of Appeals and for U.S. District Judge Leonard B. Sand of the Southern District of New York.  He is a graduate of Yale University and Harvard Law School, where he served as an editor of the Harvard Law Review.

Leon Nathan Davis, 37, of Augusta, Georgia, was sentenced today to 15 years in federal prison by U.S. District Judge J. Randal Hall of the Southern District of Georgia for attempting to provide material support to a designated foreign terrorist organization, namely, the Islamic State of Iraq and the Levant (ISIL).  Davis pleaded guilty to an information charging him with attempting to provide material support to ISIL on May 27, 2015.  His prison term will be followed by a lifetime of supervised release.

Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Edward J. Tarver of the Southern District of Georgia and Special Agent in Charge J. Britt Johnson of the FBI’s Atlanta Field Office made the announcement.

“It is the obligation of all nations to serve as responsible global citizens and stem the flow of their residents from traveling abroad as foreign terrorist fighters engaged in the violence and oppression that ISIL is inflicting everywhere it operates,” said Assistant Attorney General Carlin.  “One of the National Security Division’s top priorities remains stemming the flow of foreign fighters and bringing to justice those who seek to provide material support to foreign designated terrorist organizations.”

“This defendant planned for over a year to join, assist and fight alongside an enemy of the United States,” said U.S. Attorney Tarver.  “His actions were criminal and he now faces a lengthy federal prison sentence.  I commend the hard work of the federal and local agents who work to keep our nation safe from terrorist organizations such as ISIL.” 

“The details and federal charges in this case provide a clear illustration of the problems that we face as a nation when our own citizens become radicalized in support of a foreign terrorist organization such as ISIL,” said Special Agent in Charge Johnson.  “Today’s sentencing of Mr. Davis in federal court, however, clearly illustrates the consequences.  The FBI will continue to partner with its various local, state and other federal law enforcement and intelligence agencies as we remain vigilant in identifying, investigating and presenting for prosecution those individuals who would pose a threat to our national security in this manner.”

Evidence produced at the guilty plea and sentencing hearings revealed that for more than a year, an FBI-led team investigated Davis’ attempts to join an overseas designated foreign terrorist organization.  Davis was arrested at the Atlanta Hartfield-Jackson Airport in October 2014 on a parole violation, after he had purchased a ticket to fly to Turkey and then traveled from Augusta to the Atlanta airport.  Davis has been in custody since his arrest.

Assistant Attorney General Carlin and U.S. Attorney Tarver commended the FBI-led Joint Terrorism Task Force, the Bureau of Alcohol, Tobacco, Firearms and Explosives and the Georgia Board of Pardons and Paroles for their work on this case.  Carlin and Tarver also expressed gratitude to the U.S. Customs and Border Protection Service and the Atlanta Police Department for their contributions to the investigation.

The case was prosecuted by Assistant U.S. Attorneys Charlie Bourne and Nancy Greenwood of the Southern District of Georgia and Trial Attorney Clement McGovern of the Justice Department’s National Security Division.  

Defendant, Allegedly Inspired by ISIL, Attempted to Obtain Weapons and Explosives to Conduct Attacks

Harlem Suarez, also known as Almlak Benitez, 23, of Key West, Florida, was charged by a criminal complaint with attempting to use a weapon of mass destruction against a person or property within the United States.

Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida and Special Agent in Charge George L. Piro of the FBI’s Miami Field Office made the announcement.

“According to the complaint, Harlem Suarez, a self-professed ISIL adherent, knowingly attempted to use a weapon of mass destruction - a backpack bomb - in the United States,” said Assistant Attorney General Carlin.  “Stopping attacks on our homeland by those inspired or directed by designated foreign terrorist organizations is the highest priority of the National Security Division.”

“The top priority of the Department of Justice is to protect the security of the American people,” said U.S. Attorney Ferrer.  “The U.S. Attorney’s Office, in collaboration with the FBI, works tirelessly to advance this mission by continuing to thwart home-grown acts of terrorism.”

“There is no room for failure when it comes to investigating the potential use of a weapon of mass destruction,” said Special Agent in Charge Piro.  “The FBI and our local, state and federal partners work around the clock to prevent such catastrophic weapons from being used against our citizens.  Even so, we ask the public to be vigilant and report suspicious activity to law enforcement.”

According to the complaint, in April 2015, Suarez came to the attention of the FBI due to Facebook posts that contained extremist rhetoric and promoted the Islamic State of Iraq and the Levant (ISIL), a designated foreign terrorist organization.

The complaint further alleges that Suarez told the confidential source that he wanted to make a “timer bomb.”  Suarez purchased components for this device, which was to contain galvanized nails, be concealed in a backpack and be remotely detonated by a cellphone.  Suarez intended to bury the device at a public beach in Key West and then detonate it.

On July 27, 2015, Suarez took possession of an inert device and was arrested.

Assistant Attorney General Carlin and U.S. Attorney Ferrer commended the investigative efforts of the FBI,  members of the South Florida Joint Terrorism Task Force, the Bureau of Alcohol, Tobacco, Firearms, and Explosives , U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI), the Key West Police Department, the Monroe County Sheriff’s Office and the Palm Beach County Sheriff’s Office.  This case is being prosecuted by Assistant U.S. Attorneys Marc S. Anton and Karen E. Gilbert and Trial Attorneys Clement McGovern and Michael Dittoe of the Justice Department’s Counterterrorism Section.

A complaint is only an accusation and a defendant is presumed innocent unless and until proven guilty. 

A former agent for a large national trucking company was indicted for paying bribes to officials at the Marine Corps Logistics Base (MCLB) in Albany, Georgia, in order to obtain lucrative freight hauling business from the base.  Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Michael J. Moore of the Middle District of Georgia made the announcement.

Ivan Dwight Brannan, 60, of Jupiter, Florida, is charged by indictment with one count of conspiracy to bribe a public official and three counts of bribery of a public official. 

From 1999 to 2013, Brannan worked as a broker for a national trucking company that delivers both commercial and military freight.  According to the indictment, he was paid a commission for each delivery that he arranged.

According to the allegations in the indictment, from 2006 to 2012, Brannan provided cash and other items of value to Mitchell Potts, a former Traffic Office Supervisor for the Defense Logistics Agency (DLA) at MCLB-Albany, for the purpose of ensuring that Brannan’s trucking company client was awarded business at MCLB-Albany.  The indictment also alleges that Brannan directed truck driver David Nelson to provide cash to both Potts and Jeffrey Philpot, another official in the DLA Traffic Office at MCLB-Albany, to ensure that the trucking company continued to receive MCLB-Albany’s business.  According to the indictment, over the course of the conspiracy Nelson paid at least $120,000 in bribes to Potts and Philpot at Brannan’s behest.   

In October 2014, Philpot, Nelson and Potts each pleaded guilty to one count of bribery of a public official.  They are scheduled to be sentenced on Sept. 29, 2015. 

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

The case is being investigated by the U.S. Army Criminal Investigation Command, the Naval Criminal Investigative Service and the Defense Criminal Investigative Service.  The case is being prosecuted by Trial Attorney John Keller of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney K. Alan Dasher of the Middle District of Georgia. 

A former Washington, D.C., businessman was sentenced today to serve three and one-half years in prison for employment tax fraud, announced Acting Deputy Assistant Attorney General Larry J. Wszalek of the Justice Department’s Tax Division. 

Jeffrey Norman Jackson, who currently resides in Maryland, previously pleaded guilty to failing to file federal employment tax returns and failing to pay over approximately $600,000 in employment taxes.  In addition to 42 months in prison, Jackson was sentenced to three years of supervised released, ordered to perform 360 hours of community service and ordered to pay $595,687.39 in restitution to the Internal Revenue Service (IRS).

“Business owners have a responsibility to their employees and the IRS to honestly collect, account for and pay over employment taxes to the IRS,” said Acting Deputy Assistant Attorney General Wszalek.  “As evidenced by today’s sentencing, employers like Jeffrey Jackson, who willfully evade their employment tax obligations, will be prosecuted to the fullest extent and face lengthy terms of imprisonment and substantial financial penalties.”

According to court documents, Jackson operated Innovative Security Services LLC (Innovative) in the District of Columbia.  From 2006 through 2010, Jackson controlled the company’s finances and was responsible for filing the Employer’s Quarterly Federal Tax Returns (IRS Forms 941).  He was also responsible for paying over to the IRS the federal income, social security and Medicare taxes, known as Federal Insurance Contributions Act (FICA) taxes, that were withheld from the wages of Innovative’s employees.

Instead of paying the taxes that were due and owing to the IRS over the four-year period, Jackson diverted money from the company for his personal use.  He used company funds to pay rent and buy furniture for his personal residence, spent more than $21,000 at the men’s clothing store Everett Hall and made other personal expenditures at Nordstrom and Tiffany & Co.  Jackson also paid more than $10,000 for his gym membership and personal training sessions and paid $10,000 to his childcare provider. 

Jackson has a previous federal conviction related to the theft of employment taxes.  In 2006, he pleaded guilty to bankruptcy fraud after he stole $373,429.57 from a bank account that was set up to pay the payroll taxes for Jackson’s former company, Unlimited Security Inc., while that company was proceeding through Chapter 11 bankruptcy.  In that case, Jackson used the stolen funds to support a boxing promotion business that he controlled and to pay professional boxers. 

Acting Deputy Assistant Attorney General Wszalek commended the special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorney Melissa S. Siskind of the Tax Division, who prosecuted the case.  He also thanked the U.S. Attorney’s Office of the District of Columbia for their substantial assistance.

Two home health care agency owners were convicted today of various offenses based on their roles in a $33 million Medicare fraud scheme, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Office and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services-Office of Inspector General’s (HHS-OIG) Chicago Regional Office.

Zafar Mehmood, 49, of Ypsilanti, Michigan, was convicted of conspiracy to commit health care fraud, four counts of health care fraud, one count of conspiracy to pay and receive health care kickbacks, one count of conspiracy to commit money laundering and two counts of money laundering.  Mehmood also was convicted of two counts of obstruction of justice related to his theft of evidence from an HHS-OIG facility.  Badar Ahmadani, 48, also of Ypsilanti, was convicted of one count of conspiracy to commit health care fraud and one count of conspiracy to pay and receive health care kickbacks. 

According to evidence presented at trial, from 2006 through 2011, Mehmood and Ahmadani participated in a scheme in which they obtained patients by paying cash kickbacks to recruiters, who in turn paid cash to patients to induce them to sign up for home health care with Mehmood’s companies: Access Care Home Care Inc., Patient Care Home Care Inc., Hands On Healing Home Care Inc. and All State Home Care Inc.  The evidence also showed that the defendants paid kickbacks to physicians to refer patients to the defendants’ companies for unnecessary home health care services.

The evidence introduced at trial further established that the defendants and their co-conspirators falsified records to make it appear as if the patients qualified for and received the services for which Medicare was billed over $33 million during the course of the conspiracy.  The evidence also showed that Mehmood used a co-conspirator to launder the proceeds of the fraud through shell companies under his control.          

Trial evidence also demonstrated that, while visiting an HHS-OIG facility during pretrial release, Mehmood stole documents and materials that law enforcement authorities seized during the execution of search warrants at his companies.  Law enforcement subsequently recovered the missing documents and materials during the execution of a search of Mehmood’s jail cell.

The investigation was conducted by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, a joint effort of the U.S. Attorney’s Office of the Eastern District of Michigan and the Criminal Division’s Fraud Section.  This case was prosecuted by Trial Attorneys Niall M. O’Donnell and A. Brendan Stewart, and Senior Trial Attorney Nathan Dimock, Assistant Chief Jennifer L. Saulino, Assistant Chief Catherine K. Dick and Deputy Chief Gejaa T. Gobena 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 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 Michigan resident was sentenced to 80 months in prison late yesterday for his leading role in a $12.6 million Medicare fraud and tax fraud scheme.  Eleven other individuals have been convicted in this case.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Office, Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG) Chicago Regional Office and Special Agent in Charge Jarod Koopman of the Internal Revenue Service-Criminal Investigation (IRS-CI) Detroit Field Office made the announcement.

Mohammed Sadiq, 67, of Oakland County, Michigan, pleaded guilty on March 13, 2015, to one count of health care fraud and one count of filing a false tax return.  In addition to imposing the prison term, U.S. District Judge Denise Page Hood of the Eastern District of Michigan ordered Sadiq to pay $14.1 million in restitution and entered a forfeiture judgment for the same amount, which represents the proceeds traceable to his criminal conduct.

Sadiq owned and directed operations at two home health care companies in Detroit.  In connection with his guilty plea, Sadiq admitted that, working with co-conspirators, he billed Medicare for home health services that were not provided.  Sadiq also admitted to paying kickbacks to patient recruiters in order to obtain the information of Medicare beneficiaries, which he then used to bill Medicare for services that were not medically necessary or were not provided at all.  Sadiq further admitted that he created fake patient files to fool a Medicare auditor by making it appear as if home health services were provided and medically necessary.  Medicare paid $12.6 million for these services.

In connection with his guilty plea, Sadiq also admitted that he received proceeds of the fraud through bank accounts that he controlled, that he withdrew substantial sums for his personal use and that he failed to report these amounts on his individual federal income tax return in 2008.  In total, Sadiq admitted that he owes approximately $1.5 million in taxes, interest and penalties for tax years 2008 through 2010.

This case was investigated by the FBI, HHS-OIG and IRS-CI, 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 of the Eastern District of Michigan.  The case is being prosecuted by Trial Attorneys William Kanellis, Christopher Cestaro, Brooke Harper and Elizabeth Young of the Criminal Division’s Fraud Section, as well as Assistant U.S. Attorney Patrick Hurford of the Eastern District of Michigan.

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

The Department of Justice announced an agreement today under its Project Civic Access (PCA) initiative with Lumpkin County, Georgia, to address accessibility issues in the county’s services, programs, activities and facilities under Title II of the Americans with Disabilities Act (ADA). The department’s celebration of the 25th anniversary of the ADA – ADA 25: Advancing Equal Access – culminates today in a convening of ADA pioneers, advocates, persons with disabilities and dignitaries to commemorate the enactment of this historic civil rights law.

PCA was initiated to ensure that persons with disabilities have an equal opportunity to participate in civic life, a fundamental part of American society.  As part of the PCA initiative, Justice Department investigators, attorneys and architects survey state and local government facilities, services and programs in communities across the country to identify the modifications needed for compliance with ADA requirements.

Today’s agreement will allow people with disabilities to participate in and benefit from the services provided in Lumpkin County’s facilities including the Justice Center, Mental Health Center, Law Enforcement Center, Senior Center, Community Pavilion, the Health Department, the Administration Building, the Animal Shelter and library.  Lumpkin County will renovate and remediate everything from entrances, service areas, counters, restrooms and parking so that people with disabilities can get into county buildings and use the services and programs offered by the county in each of its buildings. 

“The Americans with Disabilities Act was signed into law on July 26th 1990,” said head of the Civil Rights Division, Principal Deputy Assistant Attorney General Vanita Gupta.  “Today, as we gather to remember, honor, and celebrate the ADA’s 25th Anniversary, it is fitting that we sign this agreement.  It reminds us that when it comes to the civil rights of persons with disabilities, the work never stops.  I congratulate Lumpkin County, who has worked cooperatively with the department to come to this agreement and has demonstrated its commitment to serve its citizens with disabilities.”

In addition, Lumpkin County will take several important steps to improve access for individuals with disabilities, including:

• Ensuring that all of its webpages comply with the Web Content Accessibility Guidelines version 2.0;

• Officially recognizing Georgia telephone relay service as a key means of communicating with individuals who are deaf, are hard-of-hearing or have speech impairments and training staff in using the relay service for telephone communications;

• Surveying other facilities and programs and making modifications under the supervision of an Independent Licensed Architect to achieve full compliance with ADA requirements;

• Ensuring that buildings and outdoor facilities that will be built or altered by or on behalf of the county comply with the ADA’s architectural requirements; and

• Providing information for interested persons with disabilities concerning the existence and location of the county’s accessible services, activities and programs.

For more information about the ADA, today’s agreement or the PCA, individuals may access the ADA Web page at http://www.ada.gov/civicac.htm or call the toll-free ADA Information Line at (800) 514-0301 or (800) 514-0383 (TTY).

A Miami-area pharmacy owner pleaded guilty today for his role in the submission of more than $1.8 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.

Evelio Fernandez Penaranda, 47, of Miami, Florida, pleaded guilty before U.S. Magistrate Judge Chris M. McAliley of the Southern District of Florida to one count of health care fraud.  Sentencing has been scheduled for Oct. 8, 2015.

Penaranda owned Naranja Pharmacy Inc.  In connection with his guilty plea, Penaranda admitted that, between May 2013 and March 2014, Naranja Pharmacy submitted fraudulent claims to Medicare for prescription drugs that were not prescribed by physicians, not medically necessary and not provided to Medicare beneficiaries.  According to admissions made in connection with Penaranda’s guilty plea, Naranja Pharmacy submitted these false claims by obtaining and using the unique identifying information of Medicare beneficiaries and doctors without their consent.

Penaranda admitted that he controlled Naranja Pharmacy’s bank accounts, and that he transferred the payments received from Medicare to himself and his accomplices.  According to admissions made in connection with Penaranda’s plea, during the course of the scheme, Naranja Pharmacy submitted to Medicare over $1.8 million in false claims for prescription drugs, and Medicare paid 100 percent of the claims.

The 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.  The case is being prosecuted by Trial Attorney Nicholas E. Surmacz 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 Team, go to: www.stopmedicarefraud.gov.

Fernandez Penaranda Plea Agreement

An Adams, Massachusetts, man has been charged in an indictment in connection with a plot to engage in terrorism on behalf of ISIL.  The announcement was made by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Carmen M. Ortiz of the District of Massachusetts and Special Agent in Charge Vincent Lisi of the FBI’s Boston Division.

Alexander Ciccolo, aka Ali Al Amriki, 23, was charged by a grand jury in U.S. District Court in Springfield, Massachusetts, with one count of being a convicted felon in possession of firearms and one count of assault with a deadly weapon and causing bodily injury to a person assisting an officer of the United States in the performance of official duties.  The latter charge stems from Ciccolo’s alleged attack of a nurse during a jail intake process after his arrest.

According to evidence presented at a previous detention hearing, on July 4, 2015, Ciccolo took delivery of four firearms which he had ordered from a person who was cooperating with members of the Western Massachusetts Joint Terrorism Task Force, and who had been communicating with Ciccolo about Ciccolo’s plans to engage in a terrorist act.  Ciccolo was arrested immediately after taking delivery of the firearms, which included a Colt AR-15 .223 caliber rifle, a SigArms Model SG550-1 556 rifle, a Glock 17-9 mm pistol and a Glock 20-10 mm pistol.  Ciccolo had previously been convicted of a crime punishable by more than a year in jail and therefore was prohibited from possessing firearms.

The government alleged that Ciccolo is a supporter of the Islamic State of Iraq and the Levant (ISIL), a designated foreign terrorist organization.  Ciccolo had spoken with a cooperating witness in recorded conversations about his plans to commit acts of terrorism inspired by ISIL, including setting off improvised explosive devices, such as pressure cookers filled with black powder, nails, ball bearings and glass, in places where large numbers of people congregate, such as college cafeterias.  Prior to his arrest, agents had observed Ciccolo purchase a pressure cooker similar to that used in the Boston Marathon bombings.

During a search of Ciccolo’s apartment after he was arrested, agents found several partially constructed “Molotov cocktails.”  These incendiary devices contained what appeared to be shredded Styrofoam soaking in motor oil.  Ciccolo had previously stated that this mixture would cause the fire from the exploded devices to stick to people’s skin and make it harder to put the fire out.

Shortly after his arrest, while he was being processed at the Franklin County Correctional Center, Ciccolo stabbed a nurse with a pen, leaving a bloody gash on the top of the nurse’s head.

Based on these alleged facts and evidence presented at Ciccolo’s detention hearing on July 14, 2015, Magistrate Judge Katherine A. Robertson of the District of Massachusetts ordered that Ciccolo be detained until trial.

The charge of being a felon in possession of firearms provides a sentence of no greater than 10 years in prison, three years of supervised release and a fine of $250,000.  The charge of assault with a dangerous weapon causing bodily injury provides a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $250,000.  Actual sentences for federal crimes are typically less than the maximum penalties.  Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

This investigation is being conducted by the Western Massachusetts Joint Terrorism Task Force.  The case is being prosecuted by Assistant U.S. Attorneys Kevin O’Regan and Deepika Shukla of the District of Massachusetts and the National Security Division’s Counterterrorism Section.

The details contained in the indictment are allegations.  The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

Ciccolo Indictment

The Department of Justice announced today that SB Saanen Bank AG and Privatbank Bellerive AG have reached resolutions 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 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.

SB Saanen Bank AG is headquartered in Saanen, Switzerland.  It was founded in 1874 and has branches in the neighboring villages of Gstaad, Gsteig and Lauenen, as well as a retail office in Schönried. 

Prior to Aug. 1, 2008, and thereafter, SB Saanen accepted accounts from U.S. taxpayers, some of whom had undeclared accounts and wished to take advantage of Swiss bank secrecy laws.  SB Saanen offered a variety of traditional Swiss banking services which could and did assist U.S. clients in concealing assets and income from the Internal Revenue Service (IRS), including numbered or pseudonym accounts and holding mail at the bank.  These services helped U.S. clients to eliminate the presence of documents in the United States that associated the U.S. taxpayer’s name with the undeclared assets and income they held at SB Saanen in Switzerland.  In some instances, SB Saanen permitted accounts to be closed with large cash withdrawals, precious metals or transfers of funds to accounts held by non-U.S. persons.  SB Saanen had reason to believe that such an accountholder was taking that action to avoid detection by U.S. tax authorities. 

In December 2008, SB Saanen’s board of directors decided that it should continue to manage U.S. clients and open new accounts for U.S. clients on the condition that they had a “link to our region or one of our relationship managers.”  As a result, SB Saanen opened accounts for some U.S. taxpayers who transferred accounts from other Swiss institutions that were closing such accounts.  SB Saanen knew, or had reason to know, that two of those accounts were undeclared.  SB Saanen continued to service U.S. taxpayers even though it had reason to believe that some of them were evading U.S. taxes. 

An SB Saanen procedural manual, dated November 2009 and related to the directive, warned its employees to minimize U.S-related contacts with undeclared U.S. clients.  The manual required relationship managers to obtain an IRS Form W-9 for new U.S. clients and stated, with respect to existing U.S. clients, that “clients who do not want disclosure to the IRS (American tax authority) may not be contacted at all in the U.S.A. and/or other countries!  Contact is only permissible within [Switzerland].” 

In 2009, SB Saanen implemented a policy with respect to foreign travel by its relationship managers.  Pursuant to that policy, travel was permitted to the United States to meet with U.S. clients so long as it was approved in advance by SB Saanen’s chief executive officer and subject to restrictions.  For example, under the policy, SB Saanen declared that “No files may be taken abroad,” relationship managers must “complete a training course,” relationship managers “may not actively acquire” new customers, there was to be “no signing of business documents” or “accepting of orders” or providing “investment advice,” and bank employees were prohibited from “handing over cash, securities, or objects.”  In 2010 and 2011, SB Saanen’s then-head of private banking, who is no longer employed by the bank, traveled to the United States to entertain U.S. clients at the U.S. Open tennis championship in Flushing Meadows, New York. 

Since Aug. 1, 2008, SB Saanen maintained three U.S.-related accounts for individual U.S. taxpayers who opened the account in the name of a non-U.S. entity, such as offshore corporations or trusts.  Those three accounts comprised an aggregate value of approximately $5 million.  SB Saanen was not involved in creating these entities, but it was aware that some U.S. clients created and used such non-U.S. entities to hold Swiss bank accounts to avoid their disclosure to, or otherwise be concealed from, U.S. tax authorities. 

The undeclared U.S.-related accounts maintained at SB Saanen include one instance in 2011 where SB Saanen assisted a U.S. taxpayer-client in the transfer of securities from his undeclared account to that of a Jersey company with a non-U.S. person as its beneficial owner.  SB Saanen allowed the transfer of funds even though the Jersey corporation had not completed all required bank documents.  In January and March 2012, the U.S. accountholder closed his account and transferred an additional $4.3 million to an account at SB Saanen held in the name of his wife, who was not a U.S. citizen. 

Since Aug. 1, 2008, SB Saanen maintained 110 U.S.-related accounts with a maximum aggregate value of approximately $62 million.  SB Saanen will pay a penalty of $1.365 million.

Privatbank Bellerive AG was founded in 1988, and its sole office is in Zurich.  Bellerive was aware that U.S. taxpayers had a legal duty to report to the IRS and pay taxes on all of their income, including income earned in accounts that these U.S. taxpayers maintained at the bank.  Bellerive knew that it was likely that some of its U.S. customers who maintained accounts at the bank were not complying with their tax and reporting obligations under U.S. law.  In two instances, U.S. accountholders, with the assistance of their external asset managers, created Panamanian corporations and paid a fee to third parties to act as directors.  The companies’ directors were two trust companies based in Panama.  Those third parties, at the direction of the U.S. accountholder, opened a bank account at Bellerive in the name of the entity.  Bellerive made no effort to determine whether such an entity was valid for U.S. tax purposes.  In those circumstances involving a non-U.S. entity, Bellerive was aware that a U.S. person was the true beneficial owner of the account.

Prior to Nov. 1, 2000, Bellerive required individuals subject to federal income tax under the U.S. Internal Revenue Code and who were beneficial owners of accounts to sign a “Form 1,” titled “W-9 Custodian Waiver.”  The “Form 1” contained two statements from which the beneficial owner could choose one option.  The first of the two options stated: “I would like to avoid disclosure of my identity to the U.S. tax authorities under the new tax regulations.  To this end, I declare that I expressly agree that my account shall be frozen for all new investments in U.S. securities as from November 1, 2000.”  Bellerive knew or had reason to know that the four U.S. accountholders who signed this option were engaged in tax evasion.

An internal Bellerive memorandum dated Sept. 16, 2008, from the then-head of Legal Compliance and Risk, stated that “all Swiss banks have set up the following rules for dealing with U.S. clients:

• Absolutely no contact as long as the client is on U.S. territory, even if the contact has been initiated by the client, including phone calls, e-mails, etc.;

• The client may only take up contact with the bank, if he is not in the United States;

• Assets may only be managed via a discretionary mandate, or not at all (cash on current account); and

• No mail correspondence allowed, hold mail agreements however are permitted.”

Bellerive had hold-mail agreements with its 20 U.S.-related accountholders both before and after the date of the memorandum.

Since Aug. 1, 2008, Bellerive maintained 20 U.S.-related accounts, comprising a total of $68.9 million in assets under management.  Bellerive will pay a penalty of $57,000.

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.

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 Thomas J. Sawyer and Michael N. Wilcove, who served as counsel on these matters, as well as 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.

            ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands, announced that the Office of the United States Attorney for the Northern Mariana Islands (Office) and Defendant, HONG KONG ENTERTAINMENT (OVERSEAS) INVESTMENTS, LTD. dba TINIAN DYNASTY HOTEL & CASINO (“TDHC”), entered into a Non Prosecution Agreement (Agreement) which requires TDHC to forfeit $3,036,969.12 — the largest forfeiture ever collected by the United States in the Commonwealth of the Northern Mariana Islands.  The Agreement also obligates TDHC to fully cooperate with the United States in ongoing criminal investigations and to comply with federal reporting and other regulatory requirements.  The United States — in its sole discretion — can rescind the Agreement and initiate criminal proceedings should the Government determine that TDHC has failed to comply with any provision of the Agreement.

            The Agreement further requires TDHC to implement new policies and procedures to ensure stringent compliance with federal law.  This will assist the IRS and the Gaming Commission on better identifying all taxable revenue.

            The United States will closely monitor TDHC to ensure compliance with their reporting requirements under federal law as well as under the terms of the Agreement.  “Casino reporting requirements under the Bank Secrecy Act are an important means of preventing abuse of our financial system by those seeking to conceal ill-gotten gains or evade their tax obligations,” said Teri L. Alexander, Special Agent in Charge of IRS Criminal Investigation in Seattle, Washington.  “The requirement of this agreement that the Tinian Dynasty Casino fully cooperate with IRS CI is an important step in ensuring that those who may be trying to evade reporting requirements are detected.”

            Federal law known as the Bank Secrecy Act (BSA) requires that financial institutions and certain businesses, including casinos with annual gaming revenue in excess of $1 million, be vigilant in detecting and reporting activity that may indicate that money laundering, or other financial crimes, are being committed, and that the casino implement and maintain an effective anti-money laundering program.  The BSA requires casinos to file a “Currency Transaction Report for Casinos” (CTR-C) for transactions that involve more than $10,000 in cash.  Cash includes the coins and currency of the United States and foreign countries. The law requires that casinos and businesses report transactions when customers use cash in a single transaction or a related transaction occurring within a 24-hour period.

            On November 20, 2014, a federal grand jury returned a Second Superseding Indictment that charged TDHC with one count of conspiracy to fail to file CTRs in violation of 18 U.S.C. § 371 and 31 U.S.C. §§ 5313(a), 5322(b) and 5324(a)(1) and (d)(2); 155 counts of failure to file CTRs in violation of  31 U.S.C. §§ 5313(a) and 5322(b); one count of failure to file a SAR in violation of 31 U.S.C. §§ 5313(a), and 5322(b); and one count of failure to maintain an effective anti-money laundering program in violation of 31 U.S.C. §§ 5318(h) and 5322(b).

            According to filings with the court, TDHC did not fully identify and disclose all individuals whose gambling activities should have legally triggered a BSA report.  From October 1, 2009 through April 25, 2013, TDHC failed to document over $138 million in reportable cash transactions.  It is estimated that TDHC failed to report 3,640 separate cash transactions during this same time period.

              Documents filed with the court show that during May 2012 and September 2012, TDHC VIP Services Manager George Que spoke to an undercover IRS agent and assured him that he could gamble at TDHC with large amounts of currency, and that no paperwork would be filed by the casino to report their transactions to the United States.  Moreover, between February 28, 2013 and March 4, 2013, two undercover IRS agents posed as casino players at the TDHC and conducted currency transactions totaling more than $450,000.  The undercover agents made repeated requests to TDHC employees Tim Blyth and Que to not file a CTR on their activity.  A CTR was prepared but ultimately never filed with the government.

          U.S. Attorney Alicia A.G. Limtiaco stated, “Under the BSA and its implementing regulations, financial institutions that fail to adequately know its customers and screen their transactions for suspicious activities can be exploited by criminals.  Financial institutions that do not comply with the BSA also gain an unfair competitive advantage within the industry.  The IRS CI, the U.S. Attorney’s Office, and the Department of Justice will continue to partner together to ensure casinos, financial institutions, and businesses comply with the requirements of the BSA and other regulations.  This case was investigated by and we acknowledge and commend the hard work and diligent investigative efforts of the IRS CI.”

            The case was handled and prosecuted by Assistant United States Attorneys Marivic P. David, Russell H. Lorfing, and Ross K. Naughton.

Four Lancaster County, Pennsylvania, family members and businessmen were sentenced in U.S. District Court for the Eastern District of Pennsylvania in Allentown, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania.

In October 2010, following a three-week jury trial, Chester A. Bitterman Jr. and his sons, Craig L. Bitterman, C. Grant Bitterman and Curtis L. Bitterman, were convicted of conspiracy to defraud the United States.  Craig Bitterman was additionally convicted of obstruction of justice.  Prior to sentencing, the defendants paid $437,000 in restitution to the Internal Revenue Service (IRS).

At sentencing hearings held on July 15, 17 and 22, U.S. District Court Judge James Knoll Gardner imposed the following sentences and stated that the offense was serious and the conspiracy was a long-term, complex and concerted effort by a family to avoid taxation:

• Chester A. Bitterman Jr., 81, was sentenced to serve three years’ probation to include six months of home confinement, due in part to his age and ailing spouse confined to hospice care, and was ordered to pay a $5,000 fine;

• Craig L. Bitterman, 55, was sentenced to serve three years in prison and three years of supervised release with 1,000 hours of community service at a rate of at least 30 hours of service per week, and was ordered to pay a $10,000 fine;

• C. Grant Bitterman, 53, was sentenced to serve 21 months in prison and three years of supervised release with 1,000 hours of community service at a rate of at least 30 hours of service per week, and was ordered to pay a $7,500 fine; and

• Curtis L. Bitterman, 61, was sentenced to serve 21 months in prison and three years of supervised release with 1,000 hours of community service at a rate of at least 30 hours of service per week, and was ordered to pay a $7,500 fine.

According to the evidence at trial, from 1996 to 2005, the Bittermans owned and operated the Bitterman Scale Company, which now operates as Bitterman Scales LLC.  To conceal their income and assets from the IRS, the Bittermans used aliases, offshore bank accounts and a complex series of sham paper transactions to disguise the income.  The defendants transferred their personal and business assets to sham trusts purchased from the Commonwealth Trust Company, a tax protester organization that marketed trust products to clients for the purpose of avoiding federal income tax payment.  The trusts were used to make it appear as though the defendants had little or no assets or income.  In reality, the defendants retained complete access and control over their funds.  In January 2008, the principal owners of the Commonwealth Trust Company were convicted at trial in the Eastern District of Pennsylvania of tax crimes for causing losses of over $17 million and were sentenced to prison.

The defendants paid themselves in cash and arranged bogus payments between the numerous trusts that they had created.  These bogus payments were purported to be leases, management fees and fiduciary fees.  The defendants submitted trust tax returns for their business and took fraudulent deductions for these payments to create the appearance of minimal or no taxable business income.  After the IRS levied the business bank account and receivables, the defendants instructed their customers to pay another trust to thwart IRS collection efforts.  The defendants also placed bogus liens and mortgages on their assets to make it appear to the IRS that the defendants had no assets that could be levied or seized as part of the tax collection process.  Some of the defendants used aliases and bank accounts in the names of trusts to make school tuition payments for their children appear as if they were scholarships from third parties.  In addition, to further conceal their assets from the IRS, at least one defendant used offshore bank accounts in the British Virgin Islands and three of the defendants arranged for sham transfers of real estate to their children.

During the investigation, after Craig Bitterman was served with federal grand jury subpoenas requiring the production of trust records, he failed to produce the records to the grand jury and instead shipped those trust records to Texas and New Mexico in an attempt to conceal them.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Memeger commended special agents of IRS–Criminal Investigation, who investigated the case, and Assistant U.S. Attorney Vineet Gauri of the Eastern District of Pennsylvania and Trial Attorney Michael C. Vasiliadis of the Tax Division, who prosecuted the case.

An indictment was unsealed today charging a Louisiana woman with offenses related to her sex trafficking of a minor, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney J. Walter Green of the Middle District of Louisiana and Special Agent in Charge Michael J. Anderson of the FBI New Orleans Division.

Kellie M. Dominique, 36, of Baton Rouge, Louisiana, was indicted today for sex trafficking of a minor, attempted sex trafficking of a minor, obstruction of justice and four counts of use of an interstate facility in aid of racketeering.

According to the indictment, Dominique allegedly promoted a prostitution business out of her home and other venues in Baton Rouge, Louisiana.  The indictment alleges that a minor worked as a prostitute for Dominique, and that, to promote Dominique’s prostitution business, the minor and others allegedly used the website “backpage.com” to post classified advertisements for commercial sex acts.

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

This case is being investigated by the FBI New Orleans Division, Louisiana Attorney General’s Office, Louisiana State Police and East Baton Rouge Parish Sheriff’s Office, with assistance from the Baton Rouge Police Department’s Narcotics Division, the U.S. Marshals Service Fugitive Task Force and other law enforcement agencies.  The case is being prosecuted by Trial Attorney Reginald E. Jones of the Criminal Division’s Child Exploitation and Obscenity Section and Assistant U.S. Attorney Jamie A. Flowers Jr. of the Middle District of Louisiana.

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice.  Led by U.S. Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims.  For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

Dominique Indictment

A leader of a coupon counterfeiting ring pleaded guilty today to participating in a conspiracy to sell counterfeit coupons using the “Silk Road” online marketplace, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kenneth A. Polite of the Eastern District of Louisiana.

Beau Wattigney, 30, New Orleans, pleaded guilty before U.S. District Judge Ivan L.R. Lemelle of the Eastern District of Louisiana to conspiracy to commit wire fraud and conspiracy to commit trademark counterfeiting.  Sentencing has been scheduled for Oct. 28, 2015.

In connection with his plea, Wattigney admitted that, between May 2012 and November 2014, he used the online monikers “PurpleLotus” and “GoldenLotus” to sell counterfeit coupons for various goods and services on Silk Road 1.0, which was a hidden website through which users around the world bought and sold illegal drugs, goods and services.  Wattigney further admitted that he engaged in the same conduct on Silk Road 2.0, a successor to Silk Road 1.0, using the monikers “PurpleLotus” and “CouponKing.”

The coupons allowed purchasers to obtain significant discounts on a variety of goods and services offered by the victim companies, including Hopster, Veri-fi, SmartSource, RedPlum and Visa.  For example, Wattigney sold a counterfeit coupon that allowed users to purchase $50.00 Visa Gift Cards for $0.01 each.

Wattigney admitted that he created and manufactured the fraudulent coupons with the assistance of several co-conspirators, and that they designed the coupons to look like original print-at-home manufacturers’ coupons by using the companies’ trademarks.  He also admitted that the scheme affected more than 50 U.S.-based businesses, and caused or attempted to cause more than one million dollars in intended losses. 

The investigation is being conducted by the FBI Philadelphia Division, with assistance from the FBI New Orleans Field Office.  The case is being prosecuted by Senior Counsel Marie-Flore Johnson, Gavin Corn and Robert Wallace of the Criminal Division’s Computer Crime and Intellectual Property Section, and Assistant U.S. Attorney Jordan Ginsberg of the Eastern District of Louisiana.