District Not Recorded

Banque Pasche SA Will Pay $7.229 Million Penalty and ARVEST Privatbank AG Will Pay $1.044 Million Penalty; Both Continue to Cooperate With Department of Justice

The Department of Justice announced today that two banks, Banque Pasche SA and ARVEST Privatbank AG, have reached resolutions under the department’s Swiss Bank Program.

“Banque Pasche and ARVEST have provided detailed information regarding the ways in which Swiss banks helped U.S. taxpayers conceal foreign accounts and evade their U.S. tax obligations, including through the use of numbered and coded accounts and sham offshore entities,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division.  “As required under the program, these banks will continue to cooperate as we aggressively pursue those individuals and the professionals who facilitated their criminal conduct.”

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

Under the program, banks are required to:

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

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

• Cooperate in treaty requests for account information;

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

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

• Pay appropriate penalties.

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

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

Banque Pasche SA is headquartered in Geneva, Switzerland, and owns and controls a group of companies in various jurisdictions, including Monaco and the Bahamas.     From at least August 2008 to August 2013, Banque Pasche assisted certain U.S. taxpayers in evading their U.S. taxes and filing obligations, filing false income tax returns with the IRS and hiding offshore assets from the IRS.

Banque Pasche offered a variety of traditional Swiss banking services that it knew could and did assist U.S. taxpayers in concealing assets and income from the IRS.  For example, Banque Pasche offered hold mail service, as well as code name or numbered account services.  These services allowed certain U.S. taxpayers to minimize the paper trail associated with their undeclared assets and income.

Banque Pasche also permitted certain U.S. taxpayers to open accounts held in the name of sham, conduit or nominee offshore structures where the U.S. taxpayer’s interest in the account was not reported to the IRS.  With respect to these accounts, Banque Pasche would obtain from the entity’s directors an IRS Form W-8BEN (or equivalent bank document) that falsely declared that the beneficial owner was not a U.S. taxpayer.  As of Dec. 31, 2008, Banque Pasche had U.S.-related accounts held by entities created in Panama or the British Virgin Islands with U.S. beneficial owners.  The majority of these accounts had false IRS Forms W-8BEN in the file.

Banque Pasche also opened accounts for U.S. taxpayers who had left other Swiss banks that were being investigated by the department, including UBS and Credit Suisse.  Banque Pasche knew or should have known that the beneficial owners of the majority of these accounts were attempting to evade U.S. tax and foreign account reporting requirements.  Many of these accounts were held by Panamanian corporations with U.S. beneficial owners.  Some of these accounts were managed by a particular Geneva-based attorney who held a power of attorney over them.  When these accounts were subsequently closed, the assets were transferred to banks located in Israel and Hong Kong in an attempt to further escape detection from U.S. authorities.

Banque Pasche has fully cooperated with the department during its participation in the Swiss Bank Program.  For example, it described in detail the structure of its business with U.S. persons, which included the policies concerning U.S. accountholders.  Banque Pasche also provided the names of members of its management committee and information about its relationships with external asset managers.

Since Aug. 1, 2008, Banque Pasche had 186 U.S.-related accounts, as defined under the Swiss Bank Program, with an aggregate maximum balance of approximately $655 million.  Of these 186 accounts, 110 had U.S. beneficial owners and an aggregate maximum balance of approximately $111 million.  Banque Pasche will pay a penalty of $7.229 million.

ARVEST Privatbank AG was a private bank headquartered in Pfaffikon, Switzerland.  It provided portfolio management and related private banking services primarily to high net worth clients.  On April 15, 2015, it ceased being a licensed Swiss bank.

ARVEST opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the U.S. Department of the Treasury, as required by U.S. law.  The bank helped clients set up entities, including trusts and foundations, in Liechtenstein, St. Kitts and other jurisdictions, with bank representatives serving as officers of certain of these entities, and opened ARVEST accounts in the names of these entities.

For several U.S. customers, ARVEST gave the accountholders a travel debit card, which did not have a name imprinted on the card.  These cards were tied to accounts that the accountholders held in their names at a third-party Swiss Bank specializing in this service.

Since Aug. 1, 2008, ARVEST had 52 U.S.-related accounts, with a maximum aggregate asset value of over $134 million.  ARVEST will pay a penalty of $1.044 million.

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

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

“The growing number of non-prosecution agreements for the Swiss Bank Program demonstrates the DOJ and IRS resolve to make it increasingly difficult for taxpayers to leave offshore accounts undeclared,” said Deputy Commissioner Douglas O’Donnell of the IRS Large Business and International Division.  “Two additional agreements by ARVEST and Banque Pasche highlight the momentum of resolving these potential criminal liabilities and eliminating institutions holding undeclared funds for U.S. account holders.”

“Today’s agreements are significant both individually and in conjunction with the previous Swiss Bank Program agreements,” said Chief Richard Weber of IRS-Criminal Investigation.  “Individually, each bank agreement provides additional information to the IRS to assist us in going after illegally concealed offshore accounts and the financial professionals who helped U.S. taxpayers hide assets abroad.  Collectively, the bank agreements are a testament to the progress of the Swiss Bank Program and our commitment to the ongoing work with Swiss banks still in the process.”

Acting Assistant Attorney General Ciraolo thanked the IRS, in particular, IRS-Criminal Investigation and the IRS Large Business and International Division for their substantial assistance, as well as John E. Sullivan, Thomas G. Voracek, and Brian D. Bailey, who served as counsel on these matters, Senior Litigation Counsel Nanette L. Davis, and Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer of the Tax Division.

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

 

PHILADELPHIA - Matthew Lowry, 33, of Upper Marlboro, Maryland, was sentenced today to 36 months in prison for tampering with substantial quantities of drug evidence while working as a Special Agent with the Federal Bureau of Investigation ("FBI"). Lowry pleaded guilty to 20 counts of obstruction of justice, 18 counts of falsification of records, 13 counts of conversion of property, and 13 counts of possession of heroin. U.S. District Court Judge Thomas F. Hogan, in the District of Columbia, also ordered 2 years of supervised release, a $15,000 fine, and a $5,425. special assessment.

Lowry was assigned to the Washington, D.C. Field Office ("WFO"), and was a member of the Cross-Border Task Force ("CBTF"). He participated in the undercover purchase of heroin and, in lieu of turning the heroin into evidence and documenting its seizure, Lowry ingested the heroin. He also tampered with heroin evidence seized during several of his investigations.

The matter was referred to the Department of Justice Office of the Inspector General, which conducted the investigation, with assistance from the Federal Bureau of Investigation as requested by the OIG. It was prosecuted by Assistant United States Attorneys Kevin R. Brenner and Maureen McCartney.

Because Lowry’s investigations, as an agent, occurred within the District of Columbia and the districts surrounding it, those offices were recused by the Department of Justice.

Attorney General Lynch announced today that federal marriage benefits will be available to same-sex couples nationwide following the Supreme Court ruling in Obergefell v. Hodges:

 “Following the Supreme Court’s historic decision in Obergefell that every couple has the same right to participate in the institution of marriage, whether the partners are of the same-sex or opposite sexes, I directed Justice Department staff to work with the agencies to ensure that the ruling be given full effect across the federal government.  Thanks to their leadership and the quick work of the Social Security Administration and the Department of Veterans Affairs, today I am proud to announce that the critical programs for veterans and elderly and disabled Americans, which previously could not give effect to the marriages of couples living in states that did not recognize those marriages, will now provide federal recognition for all marriages nationwide.  The agencies are currently working towards providing guidance to implement this change in law.  Just over a year ago, Attorney General Holder announced that agencies across the federal government had implemented the Supreme Court’s Windsor decision by treating married same-sex couples the same as married opposite-sex couples to the greatest extent possible under the law as it then stood.  With the Supreme Court’s new ruling that the Constitution requires marriage equality, we have now taken the further step of ensuring that all federal benefits will be available equally to married couples in all 50 states, the District of Columbia and the US Territories.  The department will continue to work across the administration to fulfill our commitment to equal treatment for all Americans, including equal access to the benefits of marriage that the Obergefell decision guarantees.”

Two Northern California real estate investors pleaded guilty for their role in bid-rigging conspiracies and mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced today.

Real estate investors John Shiells, of Danville, California, and Miguel De Sanz, of San Francisco, each pleaded guilty to three counts of bid rigging and three counts of mail fraud in the U.S. District Court of the Northern District of California in Oakland, California, today.  Both were charged in an indictment returned by a federal grand jury in the Northern District of California on Nov. 19, 2014.

“These defendants took turns paying others or being paid by others to not bid at foreclosure auctions, all so that the conspirators could buy properties at reduced prices,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “The defendants and their co-conspirators corrupted these auctions and deprived lenders and homeowners of auction proceeds that were rightfully theirs.” 

To date, 56 individuals have pleaded guilty to criminal charges as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public foreclosure auctions in Northern California.  In addition, multi-count indictments are pending against 19 real estate investors that have been charged for their roles in bid-rigging and fraud schemes at foreclosure auctions in Alameda, Contra Costa, San Mateo and San Francisco counties. 

According to court documents, Shiells and De Sanz agreed not to compete to purchase selected properties at public real estate foreclosure auctions, designated which conspirator would win the selected properties and refrained from bidding on the selected properties at the public auctions.  This collusion began in Alameda County as early as June 2007; in Contra Costa County as July 2008; and in San Francisco County as early as November 2008.  The deals continued until approximately January 2011. 

Both Shiells and De Sanz were also charged with using the mail to carry out the schemes to fraudulently acquire the titles to selected properties sold at public auctions in Alameda, Contra Costa and San Francisco counties, to make and receive payoffs and to divert money to co-conspirators that would have otherwise gone to mortgage holders and other beneficiaries. 

“The FBI continues to work closely with the Antitrust Division to target those individuals who engage in fraudulent bid rigging and other anticompetitive activities at foreclosure auctions,” said Special Agent in Charge David J. Johnson of the FBI’s San Francisco Division.  “We are committed to bringing to justice those who engage in illegal and unfair practices that adversely impact legitimate home buyers and sellers.”   

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.  The maximum fine for violations of the Sherman Act may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million.  Each count of mail fraud carries a maximum sentence of 20 years in prison and a $1 million fine. 

Today’s charges are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties in California.  These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Division.  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-934-5300, or call the FBI tip line at 415-553-7400.

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

**The fraud charge(s) referenced in this press release were subsequently dismissed on the government’s motion.**

Three Miami real estate developers were sentenced to prison terms today for their roles in a mortgage fraud scheme that caused losses of $27.8 million.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge Nadine Gurley of the Department of Housing and Urban Development’s Office of Inspector General (HUD-OIG) and Special Agent in Charge Timothy A. Mowery of the Federal Housing Finance Agency’s Office of Inspector General (FHFA-OIG) made the announcement.

Stavroula Mendez, 68, was sentenced to 135 months in prison; Lazaro Mendez, 42, was sentenced to 108 months in prison; and Marie Mendez, 49, was sentenced to 57 months in prison.  U.S. District Judge Patricia A. Seitz of the Southern District of Florida also ordered each of the defendants to forfeit $35,252,331 in fraudulent proceeds and to pay $21,240,064 in restitution.  In November 2014, all three defendants were convicted of wire fraud, bank fraud and conspiracy.  Eleven other co-conspirators were previously convicted of fraud in connection with the scheme.   

Stavroula Mendez, Lazaro Mendez and Marie Mendez owned, controlled or managed various condominium developments in the Miami area.  According to evidence presented at trial, the defendants engaged in a scheme in which they facilitated payments to straw buyers as well as the submission of false loan applications on behalf of the straw buyers to secure mortgages to purchase units in the developments.  Once the units were sold, the defendants retained both the profits from the sales and control over the units.

The trial evidence showed that Lazaro Mendez recruited family members and others to be straw buyers of units that he controlled at one development and that he facilitated the submission of false loan applications.  In addition, Lazaro Mendez enlisted mortgage brokers and another individual to recruit straw buyers and to assist them in obtaining fraudulent loans.  Lazaro Mendez received kickbacks for each referred buyer.

The evidence at trial demonstrated that, after units were sold at a development that Stavroula Mendez and her husband controlled, Stavroula Mendez funneled a portion of the loan proceeds to shell companies to pay the straw buyers’ closing cash obligations and mortgage payments.  The evidence presented at trial further established that, in 2008 and 2009, Stavroula Mendez used other shell companies to divert more than $2 million of the fraudulent proceeds to bank accounts in Switzerland and Liechtenstein.

According to the evidence presented at trial, Marie Mendez used rental payments received by the conspirators to make mortgage payments, and directed cash to another individual to make mortgage payments on behalf of straw buyers.  The evidence also showed that Marie Mendez submitted fraudulent loan applications for three condominium units that were purchased in her name.

Eventually, the defendants and their co-conspirators were unable to make mortgage payments, which caused dozens of condominium units to go into foreclosure.  The scheme caused the Federal Housing Administration, Freddie Mac, Fannie Mae and private lenders to sustain combined losses of $27.8 million.

The case was investigated by the HUD-OIG and the FHFA-OIG.  The case was prosecuted by Trial Attorneys Gary A. Winters, Brian R. Young and Kyle Maurer of the Criminal Division’s Fraud Section.

A resident of Tangipahoa Parish, Louisiana, and the owner of two automotive businesses pleaded guilty today for his involvement in a stolen identity refund fraud scheme, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kenneth Allen Polite Jr. of the Eastern District of Louisiana.

Martin Jackson Sr., 48, pleaded guilty to one count of a triple object conspiracy to defraud the United States, to commit theft of public money and mail fraud.  According to court documents, Jackson conspired with at least six other individuals to use stolen identities to file false federal income tax returns that fraudulently claimed tax refunds.  Jackson owns Woodscale Automotive Sales LLC and Woodscale Autobody and Mec. LLC.  He used the business bank accounts as part of the scheme.  Some of the co-conspirators prepared and filed the false tax returns using the stolen identity information and requested that the Internal Revenue Service (IRS) mail the refund checks to addresses in Louisiana, including to post office boxes that were opened by co-conspirators.  Jackson deposited refund checks into his business bank accounts and gave cash or checks to his co-conspirators, while retaining a portion of the proceeds for himself.

Jackson is the final co-conspirator to plead guilty of the seven defendants indicted in this case.  Previously, Angela Chaney, 43, Thaddeus Richardson, 50, Corey Lewis, aka Coco, 37, Craig Lewis, 40, Brad Lewis, aka Bird, 32, and Cedrick Mitchell, aka Skeet, 39, pleaded guilty.  Their sentencings are scheduled in August and September.

U.S. District Court Judge Jay Zainey of the Eastern District of Louisiana set sentencing for Jackson on Oct. 6.  Jackson faces a statutory maximum sentence of five years in prison and a $250,000 fine, or twice the gross gain or loss caused by the offense and restitution.

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

The president and chief executive officer and two former Asia-based executives of a Las Vegas investment company were indicted today for their roles in an alleged $1.5 billion Ponzi scheme. 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Special Agent in Charge Laura A. Bucheit of the FBI’s Las Vegas Division made the announcement.  

“The defendants allegedly preyed on thousands of unsuspecting Japanese victims to enrich themselves by operating a billion-plus dollar Ponzi scheme,” said Assistant Attorney General Caldwell.  “This prosecution shows that the Criminal Division will pursue not only those who victimize American citizens, but also those who use the U.S. as a home base to defraud victims abroad.”

“Investment fraud and other financial fraud cases are a high priority for the U.S. Attorney’s Office in Nevada,” said U.S. Attorney Bogden.  “These defendants are accused of using a Nevada corporation to conduct their $1.5 billion fraud scheme and falsely telling thousands of overseas victims that their investments would be safely held and managed by an independent, third-party escrow agent in Nevada.  Fraudulent ruses and schemes perpetrated by Nevadans using Nevada corporations and entities will continue to be addressed by this office.”

“These indictments are a reminder of the FBI’s determination to identify, investigate and bring to justice those who are committing financial crimes against innocent consumers,” said Special Agent in Charge Bucheit.  “We are appreciative of the continued support we receive from our international, federal, state and local law enforcement partners.”

Edwin Fujinaga, 68, of Las Vegas; Junzo Suzuki, 66, of Tokyo; and Paul Suzuki, 36, of Tokyo, were charged in an indictment with eight counts of mail fraud and nine counts of wire fraud.  Fujinaga also is charged with three counts of money laundering.  The indictment seeks from all three defendants forfeiture of the proceeds from the alleged crimes. 

Fujinaga was the president and CEO of Las Vegas-based MRI International Inc. (MRI).  Junzo Suzuki previously was MRI’s executive vice president for Asia Pacific, and Paul Suzuki previously was the company’s general manager for Japan operations.  MRI purportedly specialized in “factoring,” whereby the company purchased accounts receivable from medical providers at a discount, and then attempted to recover the entire amount, or at least more than the discounted amount, from the debtor.

According to allegations in the indictment, from at least 2009 to 2013, Fujinaga and the Suzukis fraudulently solicited investments from thousands of Japanese residents, and MRI currently owes investors over $1.5 billion.  Specifically, the indictment alleges that Fujinaga and the Suzukis promised investors a series of interest payments that would accrue over the life of the investment and that would be paid out along with the face value of the investment at the conclusion of the investments’ duration.  The defendants allegedly solicited investments by, among other things, promising investors that their investments would be used only for the purchase of medical accounts receivable (MARS) and by representing that investors funds would be managed and safeguarded by an independent third-party escrow company.

The indictment further alleges that MRI operated as a Ponzi scheme, wherein the defendants used new investors’ money to pay prior investors’ maturing investments.  According to the indictment, the defendants also allegedly used investors’ funds for purposes other than the purchase of MARS, including paying themselves sales commissions, subsidizing gambling habits, funding personal travel by private jet, and other personal expenses.

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

This case is being investigated by the FBI’s Las Vegas Division.  Significant assistance was provided by the U.S. Securities and Exchange Commission, the Criminal Division’s Office of International Affairs and Japanese authorities.  This case is being prosecuted by Assistant Chief Albert B. Stieglitz Jr. and Trial Attorney Melissa Aoyagi of the Criminal Division’s Fraud Section and First Assistant U.S. Attorney Steven W. Myhre of the District of Nevada.

If you believe you are a victim of this offense, please click on the following link for more information: justice.gov/usao-nv/united-states-v-edwin-fujinaga-junzo-suzuki-and-paul-suzuki-mri.

MRI Indictment

A Burbank, Washington, businesswoman was sentenced yesterday to serve more than three years in prison following her February 2015 conviction of 10 counts of failing to pay over federal employment taxes to the Internal Revenue Service (IRS) after a five-day jury trial in U.S. District Court for the Eastern District of Washington, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Michael C. Ormsby of the Eastern District of Washington.

Maria Elizabeth Townsend, 39, was sentenced by U.S. District Court Judge Thomas O. Rice to serve 40 months in prison to be followed by three years of supervised release, and ordered to pay $3,327,124.49 in restitution to the IRS for employment taxes due and owing plus interest for her 10 counts that she was convicted of in the indictment, a $1,000 special assessment and $8,048.49 in prosecution costs.  At the conclusion of yesterday’s sentencing hearing, Judge Rice remanded Townsend to the custody of the U.S. Marshals Service.

“Holding business owners accountable who willfully evade their employment tax obligations to line their own pockets is among the Tax Division’s highest priorities,” said Acting Assistant Attorney General Ciraolo.  “These offenders, who not only steal from the United States, but also take advantage of honest competitors, will be prosecuted to the fullest extent of the law, and like Ms. Townsend, will face incarceration and substantial financial penalties.”

“The sentence imposed in this case reflects the seriousness of ‘white collar’ crime and that those accused of failing to pay over payroll taxes deducted from their employee’s pay checks to the IRS will be fairly and justly held accountable for their criminal conduct,” said U.S. Attorney Ormsby.  “This case is yet another example of the commitment of the U.S. Attorney’s Office to prosecute aggressively fraud cases in the Eastern District of Washington.  IRS-Criminal Investigation is commended for its tireless efforts in thoroughly investigating this case.” 

“Employers who do not withhold employment taxes are not only cheating the government, they are cheating their own employees and creating financial problems for them,” said Chief Richard Weber of IRS-Criminal Investigation.  “Ms. Townsend chose to ignore her duty to timely file and pay employment taxes and now has to pay the consequences.  Investigating employment tax crimes remains one of IRS-CI’s highest priorities, keeping the playing field level for all businesses in the United States who obey the law and pay their taxes.”

According to information disclosed in court documents and at trial, Townsend was the president and majority shareholder of Townsend Controls Inc. (TCI), a Pascoelectrical contractor.  Over time, TCI grew from a small company of 15 employees to more than 150 employees by 2008.  The majority of TCI’s employees were members of Local 112 of the International Brotherhood of Electrical Workers Union (Local Union 112).  Townsend was responsible for TCI’s operations and finances, and was required to file the Employer’s Quarterly Federal Tax Returns (IRS Forms 941) and pay over to the IRS the company’s federal income, social security and Medicare taxes, known as Federal Insurance Contribution Act (FICA) taxes, that were withheld from the wages of TCI’s employees.  For 16 tax quarters, between Oct. 1, 2005, and Sept. 30, 2009, Townsend withheld $3,361,246 in federal employment taxes from the wages of Local Union 112 TCI employees, as well as TCI’s non-union employees, and failed to pay over those taxes due and owing to the IRS.  In addition to failing to pay over the taxes due and owing, Townsend also did not file any Forms W-2 for her employees for 2007 and 2008 with the Social Security Administration.

Between April 2007 and September 2009, rather than pay the accumulating employment taxes due to the IRS, Townsend authorized the disbursement of more than $31 million in TCI funds to pay vendors and other business and personal expenses.  Specifically, using TCI’s funds, Townsend paid TCI’s vendors and employees; paid a dividend of approximately $200,000 to one of her partners who co-signed a business loan; disbursed $300,000 towards the payment of her joint personal income tax obligations; disbursed more than $260,000 in funds to family members; and spent $22,000 to construct a pool at her residence, $30,000 to purchase a boat, $30,000 to purchase a Cadillac Escalade, $42,982 to purchase a Jeep Commander, $14,850 to purchase a timeshare at Walt Disney World and to fund various physical improvements to TCI’s headquarters.

During court proceedings, a psychiatrist for Townsend testified that she was suffering from multiple psychiatric disorders that paralyzed her when it came to being able to pay over the quarterly employment taxes to the IRS, despite receiving quarterly notices from the IRS that taxes were due and owing.  At sentencing, Judge Rice credited the testimony of the psychiatrist who testified for the government and commented that in every other aspect of her life, Townsend was functioning, which included paying the company’s state tax obligations.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Ormsby commended the special agents of IRS-Criminal Investigation, who investigated the case, and Assistant U.S. Attorney George J.C. Jacobs III of the Eastern the District of Washington and Trial Attorney Lisa L. Bellamy of the Tax Division, who are prosecuting the case.

A former military contractor who ran two Kuwaiti companies during the Iraq War was sentenced today to 54 months in prison for paying a $15,000 bribe to a lieutenant in the Army National Guard in exchange for the award of a contract.  Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania made the announcement.

George H. Lee, 71, of Philadelphia, was sentenced by U.S. District Judge Joel H. Slomsky of the Eastern District of Pennsylvania.  

In connection with his guilty plea, Lee admitted that, as the president and chief executive officer of American Logistics Services (ALS), a Kuwaiti company providing supplies to the U.S. military in Iraq, he paid a $15,000 bribe to former Lieutenant Markus E. McClain in exchange for favorable official action in the awarding of an extension of a lucrative bus contract to ALS.  Specifically, Lee admitted that, in August 2004, several of his employees met with former Lieutenant McClain at Camp Arifjan, Kuwait, and offered McClain $15,000 and a Rolex watch in exchange for former Lieutenant McClain’s assistance in getting the contract extension to ALS.  Former Lieutenant McClain ultimately accepted the bribe payment.

During the sentencing hearing, the court also made specific findings that Lee directed the payment of over $1 million in bribes to other Army personnel.

Former Lieutenant McClain previously pleaded guilty to one count of accepting a gratuity, and will be sentenced on Oct. 23, 2015.  In addition, Lee’s son, Justin Lee, previously pleaded guilty to one count of conspiracy to commit bribery and four counts of bribery for his role in the scheme, and is scheduled to be sentenced on Oct. 29, 2015.

The case is being investigated by the U.S. Army Criminal Investigation Command, the Defense Criminal Investigative Service and the U.S. Department of Homeland Security Immigration and Customs Enforcement, and previously was investigated by the Office of the Special Inspector General for Iraq Reconstruction.  The case is being prosecuted by Trial Attorneys John Keller and Richard Evans of the Criminal Division’s Public Integrity Section and the U.S. Attorney’s Office of the Eastern District of Pennsylvania. 

Valerii Georgiev, 42, a Russian citizen, and the former chief mate of the ocean cargo vessel M/V Murcia Carrier, was sentenced to a term of three months prison for failing to maintain an accurate oil record book in violation of the Act to Prevent Pollution from Ships (APPS), by the Honorable Joseph Rodriguez, the Department of Justice Environment and Natural Resources Division and the U.S Attorney’s Office for the District of New Jersey announced today.

APPS requires vessels like the M/V Murcia Carrier to maintain a record known as an oil record book in which all transfers and disposals of oil-contaminated waste, including the discharge overboard of such waste, must be fully and accurately recorded. 

On April 27, 2014, at the direction of Georgiev, crew members on board the M/V Murcia Carrier dumped overboard several barrels containing some hydraulic oil.  While Georgiev disputes the number of barrels dumped into the sea, the government believes that approximately 20 barrels of hydraulic oil were dumped overboard.  The dumping occurred in international waters off the coast of Florida while the vessel was in transit from Costa Rica to New Jersey.  The dumping was not recorded in the ship’s oil record book.  During the course of the Coast Guard boarding, Georgiev denied that dumping occurred and instructed crew members on board the vessel to deny that dumping had occurred.

On June 17, 2015, Norbulk Shipping UK Ltd, a company in Glasgow, United Kingdom and operator of the M/V Murcia Carrier pleaded guilty failing to maintain an accurate oil record logbook and providing false statements with respect to the vessel’s garbage record book.  The company was sentenced to pay a fine of $750,000 and placed on probation for three years. 

The case was investigated by U.S. Coast Guard Sector Delaware Bay and the U.S. Coast Guard Investigative Service.  The case was prosecuted by Joel La Bissonniere of the Environmental Crimes Section of the Department of Justice and Assistant U.S. Attorneys Kathleen O’Leary and Matthew Smith of the U.S. Attorney’s Office of the District of New Jersey.

The United States has sued the estate and trusts of the late Layton P. Stuart, former owner and president of One Financial Corporation, and its wholly-owned subsidiary, One Bank & Trust N.A., both based in Little Rock, Arkansas, alleging that Stuart made misrepresentations to induce the U.S. Department of the Treasury to invest $17.3 million of Troubled Asset Relief Program (TARP) funds in One Financial as part of Treasury’s Capital Purchase Program (CPP), the Justice Department announced today.  

“TARP was enacted in 2008 to restore liquidity and stability to the financial system of the United States by injecting needed capital into financial institutions,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Obtaining TARP funds based on false representations to the government frustrates those goals and harms the American taxpayer.” 

According to the United States’ complaint, Stuart, on behalf of One Financial, applied in late 2008 for a TARP investment totaling $17.3 million.  The complaint alleges that Stuart knowingly made false statements about the financial condition of One Bank and its intentions for the use of the TARP funds.  In particular, the statements and TARP application allegedly concealed serial frauds that Stuart and other One Financial directors and bank executives had been committing and intended to continue committing on One Bank.  As set forth in the complaint, the schemes involved Stuart’s diversion of funds from One Bank for personal use including, within 30 days of receiving the $17.3 million in TARP funds, the diversion of more than $2 million into personal accounts for his own use. Stuart was terminated from One Bank in September 2012.

The investigation was conducted by the U.S. Treasury, Internal Revenue Service-Criminal Investigation Division, the Office of the Special Inspector General for TARP, the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office of the Eastern District of Arkansas.  The case is captioned United States v. Estate of Layton P. Stuart, et al., No. 1:15-cv-01044-RDM (D.D.C.).  The claims asserted by the government are allegations only and there has been no determination of liability.

A London, Kentucky, doctor was sentenced today to federal prison in the U.S. District Court for the Eastern District of Kentucky in London for filing false federal income tax returns that claimed millions in fictitious business expenses, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. 

Dr. Visa Haran Sivasubramaniam, 44, was sentenced by U.S. District Judge Amul R. Thapar to serve two years in prison and one year of supervised release to be served in the county jail with work release involving providing services at a local medical clinic.  At sentencing, Judge Thapar also ordered Sivasubramaniam to pay a fine of $100,000 and restitution of $4,532,777 to the Internal Revenue Service (IRS).

According to court documents, Sivasubramaniam owned and operated Hematology Oncology Physicians East (HOPE), a medical clinic where he offered oncology and hematology services.  From 2007 through 2009, Sivasubramaniam earned more than $16 million in total income from HOPE.  However, on his 2008 and 2009 personal and corporate income tax returns, Sivasubramaniam underreported his income and claimed millions in false and fictitious medical supply expenses.  Over a three-year period, he claimed nearly $13 million in fraudulent business expenses.  On Jan. 9, Sivasubramaniam pleaded guilty to two counts of filing false individual income tax returns.

Acting Assistant Attorney General Ciraolo commended special agents of IRS–Criminal Investigation, who investigated the case, and Trial Attorneys Yael T. Epstein and Thomas Voracek of the Tax Division, who are prosecuting the case. 

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

Lou’s Fish Market Inc , a federally-licensed fish dealer located in the Bronx, New York, and its company president, Mark Parente, of Englishtown, New Jersey, pleaded guilty today in federal court in Central Islip, New York, to federal felonies stemming from their role in systematically covering up purchases of illegal fluke (summer flounder), scup and black sea bass that were being harvested in violation of the federal Research Set-Aside (RSA) Program, the Justice Department’s Environment and Natural Resources Division announced.

Parente pleaded guilty to two counts of wire fraud, one count of aiding and abetting mail fraud and one count of falsification of federal records for fraud schemes that ran from May through December 2011.  Parente’s schemes involved two Long Island trawlers, one based in southern Nassau County and another in northern Suffolk County.  The trawlers utilized the RSA Program as a mask for unlawful quota overages.  In order to conceal the fishermen’s illicit catch, Parente directed unwitting company personnel to prepare and file at least 78 false dealer reports to the National Oceanic and Atmospheric Administration (NOAA), which omitted or misidentified approximately 203,000 pounds of fluke, 50,000 pounds of scup and 12,000 pounds of black sea bass.  The wholesale value of the fish was stipulated as $481,000.  Lou’s Fish Market Inc. pleaded guilty to the falsification of federal records charge as well as one count of Lacey Act False Labeling for the knowing use of false documents in connection with approximately 70,000 pounds of fluke that was shipped to interstate customers.

As part of the plea deal, the two defendants agreed to pay $932,000 in combined fines and restitution.  The defendants also agreed to make a $110,000 community service payment for the enhancement of seagrass and fluke habitat around Long Island.  The jointly proposed sentence includes a ban on Parente from holding a federal dealer license, accessing NOAA’s SAFIS computer system, participating in the RSA program, or being in a position to direct others to complete dealer reports.  Lou’s Fish Market also agreed to increased recordkeeping and auditing requirements.  The court will hear sentencing recommendations regarding non-agreed terms at a hearing set for Dec. 3, 2015.

“The Department will continue to vigorously prosecute those who jeopardize our nation’s fisheries by providing a market for illegally caught fish,” said Assistant Attorney General John C. Cruden.  “In this case, the crime is all the more aggravated because the participants took advantage of a federal program designed to study fish populations and enable law-abiding fishermen to increase their catch.”

“Protecting our nation's honest fishermen is, and will always be, a top priority for NOAA.  Egregious acts that undermine the sustainable management of our fisheries resources and steal from those in the industry who follow the rules will not be tolerated,” said Eileen Sobeck, Assistant Administrator for NOAA Fisheries.

The case was investigated by agents of NOAA’s National Marine Fisheries Service.  The case is being prosecuted by Christopher L. Hale of the Justice Department’s Environmental Crimes Section, Environment and Natural Resources Division.

A federal court has barred three Florida men from preparing federal tax returns for others, the Justice Department announced today.

The civil injunction order, to which Geto Dorlizier, Lival Gourdet and Jourmel Thomas consented, was signed by U.S. District Judge Kenneth A. Marra of the U.S. District Court for the Southern District of Florida.  The order also bars the businesses the defendants were operating — Atlantic Multi Services LLC, Authentic Financial Services LLC, and JTS Paperworks and Tax Services Inc. — from preparing federal tax returns for others.

According to the complaint, the defendants prepared federal income tax returns for customers that understated the tax that was due or overstated customers’ refunds by improperly claiming fuel tax credits, education credits and earned income tax credits.  Of the returns the defendants prepared for tax years 2009 through 2012 that were examined by the Internal Revenue Service (IRS), all returns contained false or frivolous tax credits or deductions.  The injunction requires the defendants to provide the government with a list of all customers for whom they have prepared federal tax returns since Jan. 1, 2009.

Dorlizier and Thomas previously were sentenced to serve 111 months in prison to be followed by three years of supervised release and 61 months in prison to be followed by three years of supervised release, respectively, following their guilty pleas to aggravated identity theft, among other crimes, for their participation in a scheme to commit stolen identity tax refund fraud.  Dorlizier and Thomas obtained identifying information on individuals, filed fraudulent tax returns on their behalf, and then cashed U.S. Treasury checks they received using these stolen identities, according to the suit.  As part of their plea agreements, Dorlizier and Thomas agreed to be permanently enjoined from preparing tax returns for others. 

Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams for 2015.  The IRS has some tips on its website for choosing a tax 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.

LB&B Associates Inc. and its principals, Lily A. Brandon and F. Edward Brandon, have agreed to pay the government $7.8 million to resolve allegations that they made false statements to obtain contracts through the Small Business Administration’s (SBA’s) 8(a) Business Development Program for Small Disadvantaged Businesses, the Justice Department announced today.  LB&B is a North Carolina corporation headquartered in Columbia, Maryland.

“The purpose of the 8(a) Program is to assist small disadvantaged businesses to compete in the American economy,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division.  “The Justice Department is committed to making sure that those who participate in 8(a) contracts do so honestly and fairly.”

“The basic purpose of this federal program is undermined when contractors falsely claim to be a small or disadvantaged business,” said Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia.  “This $7.8 million settlement demonstrates our commitment to protecting the integrity of this important program.  Working with relators and federal investigators, we will do all that we can to act against those who illegitimately bill the American taxpayers.”

The government alleged that in seeking certification under SBA’s 8(a) Program, LB&B falsely represented that Lily Brandon – who satisfied the criteria for a socially and economically disadvantaged person under the program – controlled the operations of LB&B, when she did not.  Securing 8(a) certification allowed LB&B to obtain 8(a) set aside contracts from various government agencies.  Throughout the performance of these contracts, Lily Brandon allegedly failed to exercise actual control over LB&B’s operations, a key component to qualifying for the set aside contracts. 

“This case shows the lengths we will go to protect the integrity of SBA’s 8(a) program,” said General Counsel Melvin F. Williams Jr. of the SBA.  “Both the Justice Department and SBA are prepared to do what it takes to make certain that the program helps folks who are really disadvantaged, and for whom it is intended to assist.”

The civil settlement resolves a lawsuit filed by Steven O. Sansbury and James T. Buechler, former employees of LB&B, under the whistleblower provision of the False Claims Act, which permits private parties, known as relators, to file suit on behalf of the government for false claims and to share in any recovery.  The act permits the government either to intervene in and take over the whistleblowers’ suit, or to allow the whistleblowers to pursue the action.  In addition to alleging LB&B’s improper receipt of 8(a) set aside contracts, Mr. Sansbury and Mr. Buechler alleged that LB&B made false claims in connection with contracts it obtained pursuant to the SBA’s Mentor-Protégé Program, which allows participants to obtain set aside contracts following LB&B’s graduation from the 8(a) Program.  The United States intervened in the whistleblowers’ 8(a) claims but not the Mentor-Protégé claims.  The settlement resolves both claims, and Mr. Sansbury and Mr. Buechler will recover a total of $1.5 million of the settlement.

The settlement with LB&B was the result of a coordinated effort among the Civil Division, the U.S. Attorney’s Office of the District of Columbia, the SBA’s Office of Inspector General and SBA’s Office of General Counsel.

The civil lawsuit was filed in the District of Columbia and is captioned United States ex rel. Sansbury, et al.  v. LB&B Associates, Inc., et al., No. 07-cv-00251 (D. D.C.).

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

AstraZeneca LP has agreed to pay the United States and participating states a total of $46.5 million, plus interest, to resolve allegations that it knowingly underpaid rebates owed under the Medicaid Drug Rebate Program, the Justice Department announced today.  Of that amount, AstraZeneca will pay roughly $26.7 million, plus interest, to the United States, and the remainder to states participating in the settlement.

In a separate settlement arising out of the same case, Cephalon Inc. has agreed to pay the United States and participating states a total of $7.5 million, plus interest, to resolve similar allegations.  Of that amount, Cephalon will pay roughly $4.3 million, plus interest, to the United States, and the remainder to states participating in the settlement.

“The Medicaid Drug Rebate Program relies on drug manufacturers reporting accurate pricing information used in the rebate calculations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, the head of the Justice Department’s Civil Division.  “These settlements demonstrate the Department of Justice’s commitment to ensuring that state Medicaid programs receive the full amount of rebates from manufacturers that Congress intended.”

“We will continue to police the pharmaceutical industry when the Medicaid program overpays for drugs,” said First Assistant U.S. Attorney Louis D. Lappen of the Eastern District of Pennsylvania.  “As these settlements demonstrate, it is critical for pharmaceutical manufacturers to comply with requirements of programs such as the Medicaid Drug Rebate Program to ensure that the government and the taxpayers are treated fairly in the reimbursement process.”

Pursuant to the Medicaid Drug Rebate Program, drug manufacturers are required to pay quarterly rebates to state Medicaid programs in exchange for Medicaid’s coverage of the manufacturers’ drugs.  The quarterly rebates are based, in part, on the Average Manufacturer Prices (AMPs) that the manufacturers report to the government for each of their covered drugs.  Generally, the higher the reported AMP for a drug, the greater the rebate the manufacturer pays to state Medicaid programs for the drug.  These settlements resolve allegations that AstraZeneca and Cephalon underreported AMPs for a number of their drugs by improperly reducing the reported AMPs for service fees they paid to wholesalers.  As a result, the government contends that AstraZeneca and Cephalon underpaid quarterly rebates owed to the states and caused the United States to be overcharged for its payments to the states for the Medicaid program. 

The two settlements partially resolve a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The amounts to be received by the whistleblower in this suit, Ronald J. Streck, a pharmacist, have not yet been determined.

These settlements illustrate the government’s emphasis on combating health care fraud and mark 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 settlements with AstraZeneca LP and Cephalon Inc. were the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Pennsylvania and the Department of Health and Human Services-Office of Inspector General.

The lawsuit is captioned United States ex rel. Streck v. Allergan, Inc., et al., Case No. 08-cv-5135 (E.D. Pa.).  The claims settled by these agreements are allegations only, and there have been no determinations of liability.

Two residents of Tangipahoa Parish, Louisiana, pleaded guilty today to multiple criminal charges for their involvement in a stolen identity tax refund fraud scheme, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kenneth Allen Polite Jr. of the Eastern District of Louisiana.

At today’s plea hearing in the U.S. District Court for the Eastern District of Louisiana, Angela Chaney, 43, pleaded guilty to one count of conspiracy to defraud the United States and one count of aggravated identity theft, and Thaddeus Richardson, 50, pleaded guilty to one count of conspiracy to defraud the United States, one count of conspiracy to commit money laundering and seven counts of theft of public money.

According to court documents, Chaney and Richardson conspired with each other and others to file false federal income tax returns using stolen identities that included false claims for tax refunds.  Richardson owned and operated a funeral home in Tangipahoa Parish and used the business bank account as part of the scheme.  Chaney and others used individuals’ names and social security numbers to prepare false tax returns and directed the Internal Revenue Service (IRS) to mail refund checks to addresses in Louisiana, including to post office boxes opened by some of the co-conspirators.  Chaney and others falsely endorsed the refund checks and then brought those checks to Richardson and others.  Richardson deposited the checks into the business bank account before dividing the proceeds amongst the co-conspirators.

The defendants are scheduled to be sentenced on Oct. 6 and each faces a statutory maximum sentence of five years in prison for conspiracy to defraud the United States.  Chaney also faces a mandatory minimum sentence of two years in prison for aggravated identity theft.  Richardson also faces a statutory maximum sentence of 10 years in prison for each theft of public money count and 20 years in prison for conspiracy to commit money laundering.  In addition to a prison sentence, the defendants face potential fines, forfeiture and restitution. 

After today’s guilty pleas, six of the seven defendants charged in the indictment have pleaded guilty.  Corey Lewis, aka Coco, 37; Craig Lewis, 40; Brad Lewis, aka Bird, 32; and Cedrick Mitchell, aka Skeet, 39, previously pleaded guilty to conspiracy and related charges and await their sentencing hearings scheduled in August and September.  The case of Martin Jackson Sr., 48, of Tangipahoa Parish, is still pending.

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

Victims Included Minors as Young as 14 or 15 Years Old

Today, a federal court in the Northern District of Ohio unsealed a 15-count superseding indictment charging three defendants with luring Guatemalan minors and adults into the United States on false pretenses, then using threats of physical harm to compel their labor at egg farms in Ohio.  The indictment was announced by Head of the CIvil Rights Division, Vanita Gupta, and U.S. Attorney Steven M. Dettelbach of the Northern District of Ohio.  A fourth defendant was charged with related immigration offenses.

Aroldo Castillo-Serrano, 33, Ana Angelica Pedro Juan, 21, both of Guatemala, and Conrado Salgado Soto, 52, of Mexico, are charged with labor trafficking conspiracy.  Castillo-Serrano is also charged with 10 counts of forced labor, and Salgado Soto and Pedro Juan are charged in 8 of those 10 counts.  Castillo-Serrano and Salgado Soto are also charged with related immigration offenses, along with a fourth defendant, Pablo Duran Jr., 23, an American citizen.

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

The defendants threatened workers with physical harm and withheld their paychecks in order to compel them to work.  Eight minors and two adults are identified in the indictment as victims of the forced labor scheme. 

Castillo-Serrano and Pedro Juan are also charged with witness tampering, and Pedro Juan is further charged with making false statements to law enforcement.

Each of the 11 forced labor and forced labor conspiracy counts carries a statutory maximum sentence of 20 years in prison.  The charges involving immigration violations, witness tampering and false statements carry statutory maximum sentences of five years in prison.

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

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

The Department of Justice announced today that Privatbank Von Graffenried AG 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, Von Graffenried 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 Von Graffenried for tax-related criminal offenses.  Von Graffenried also has provided certain account information related to U.S. taxpayers that will enable the government to make requests under the 1996 Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income for, among other things, the identities of U.S. accountholders.

Von Graffenried is a private bank founded in 1992 and based in Bern, Switzerland.  Starting in at least July 1998, Von Graffenried, through certain practices, assisted U.S. taxpayer-clients in evading their U.S. tax obligations, filing false federal tax returns with the Internal Revenue Service (IRS) and otherwise hiding assets maintained overseas from the IRS.

Von Graffenried opened and maintained undeclared accounts for U.S. taxpayers when it knew or should have known that, by doing so, it was helping these U.S. taxpayers violate their legal duties.  Von Graffenried offered a variety of traditional Swiss banking services that it knew could assist, and that did assist, U.S. clients in the concealment of assets and income from the IRS.  For example, Von Graffenried would hold all mail correspondence, including periodic statements and written communications for client review, thereby keeping documents reflecting the existence of the accounts outside the United States.  Von Graffenried also offered numbered account services, replacing the accountholder’s identity with a number on bank statements and other documentation that was sent to the client. 

In late 2008 and early 2009, Von Graffenried accepted accounts from two European nationals residing in the United States who had been forced to leave UBS and Credit Suisse, respectively.  At the time it accepted the accounts, Von Graffenried knew that UBS was the target of an investigation by the Department of Justice.  It also knew that both individuals had been forced to leave their respective banks because the banks were closing their accounts, and that both individuals had U.S. tax obligations and did not want the accounts disclosed to U.S. authorities.  Senior management at Von Graffenried approved the opening of these accounts. 

When Von Graffenried compliance personnel sought to obtain an IRS Form 8802, Application for U.S. Residency Certification, from one of the accountholders, that accountholder replied that completing the form would be problematic for him and that he believed the relationship manager knew why.  The beneficial owner of the second account was referred by an external fiduciary, who handled the account at Credit Suisse.  The fiduciary told a Von Graffenried relationship manager that Credit Suisse was attempting to exit its U.S. offshore clients to other banks if the clients would not sign an IRS Form W-9.  The relationship manager agreed to take on the account, which was held by a Liechtenstein “stiftung,” or foundation, with the beneficial owner as the primary beneficiary and U.S. citizens as other beneficiaries.

Between July 1998 and July 2000, Von Graffenried accepted approximately two dozen accounts from a specific external asset manager.  Von Graffenried was aware that the external asset manager seemed to be targeting U.S. clientele.  Sixteen of the accounts were beneficially owned by individuals with U.S. tax and reporting obligations, and most of those accounts were held by U.S. citizens residing in the United States.  At the time, Von Graffenried did not have a policy in place that required U.S. clients to show tax compliance.  Consequently, Von Graffenried accepted these accounts without obtaining IRS Forms W-9 or assurances that the accounts were in fact tax compliant.  By early 2009, Von Graffenried determined that some of the external asset manager’s accountholders likely were attempting to evade U.S. tax requirements.  In 2010, Von Graffenried began to close the existing U.S.-related accounts that originated with the external asset manager.  Von Graffenried did not complete the exit process for these accounts until late 2012.

Since Aug. 1, 2008, Von Graffenried held a total of 58 U.S.-related accounts with approximately $459 million in assets.  Von Graffenried will pay a penalty of $287,000.

In accordance with the terms of the Swiss Bank Program, Von Graffenried 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 Von Graffenried who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of this non-prosecution agreement, noncompliant U.S. accountholders at Von Graffenried 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, Kathleen E. Lyon, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer 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 following statement is attributable to Justice Department spokesperson Melanie Newman regarding recent church fires across five states:

“The federal law enforcement team of ATF, FBI, the Civil Rights Division and U.S. Attorneys’ Offices are actively investigating several church fires across five states that have occurred over the past two weeks.  Preliminary investigations indicate that two of the fires were started by natural causes and one was the result of an electrical fire.  All of the fires remain under active investigation and federal law enforcement continues to work to determine the cause of all of the fires.  To date the investigations have not revealed any potential links between the fires.

“If in fact there is evidence to support hate crime charges in any one of these cases, the FBI, in coordination with the ATF and local authorities, will work closely with the Civil Rights Division and the U.S. Attorneys’ Offices to bring those forward.”

Today, BP disclosed that it has reached agreements in principle with the United States, state, and local governments for a settlement of civil claims arising from the April 20, 2010, Deepwater Horizon oil spill in the Gulf of Mexico.  The Attorney General made the following statement:

“Since the Deepwater Horizon oil spill – the largest environmental disaster in our nation’s history – the Justice Department has been fully committed to holding BP accountable, to achieving justice for the American people and to restoring the environment and the economy of the Gulf region at the expense of those responsible and not the American taxpayer.  In December 2010, my predecessor, Attorney General Eric Holder, announced a civil lawsuit against BP and its co-defendants.  Since that time, the Deepwater trial team has fought aggressively in federal court for an outcome that would achieve this mission, proving along the way that BP’s gross negligence resulted in the Deepwater disaster.

“Today, I am pleased to say that after productive discussions with BP over the previous several weeks, we have reached an agreement in principle that would justly and comprehensively address outstanding federal and state claims, including Clean Water Act civil penalties and natural resource damages.  BP is also resolving significant economic claims with the impacted state and local governments.  We will work diligently during the next several months to incorporate the agreement in principle into a consent decree, which would then undergo public comment before court approval.  If approved by the court, this settlement would be the largest settlement with a single entity in American history; it would help repair the damage done to the Gulf economy, fisheries, wetlands and wildlife; and it would bring lasting benefits to the Gulf region for generations to come. 

“I am so very grateful to the Deepwater civil trial team, made up of men and women from the department’s Environment and Natural Resources Division and Civil Division, as well as the incredible response, investigative and supporting efforts of the Departments of Homeland Security, Interior, Commerce and Agriculture and the Environmental Protection Agency, whose efforts have made this important step possible.  I also appreciate the extraordinary effort of the many state leaders and environmental professionals who collaborated to advance this agreement in principle.”

The Justice Department announced today it has reached a settlement agreement with Pima Community College (PCC) that, if approved by the U.S. District Court of the District of Arizona, will resolve allegations that PCC violated the Uniformed Services Employment and Reemployment Rights Act (USERRA) by discriminating against Army National Guardsman Timothy Stoner.  USERRA prohibits employment discrimination based on a service member’s past, current or future military status, service or obligation.  Stoner, a PCC police officer, is a veteran of active duty military deployments in Afghanistan and Iraq with 22 years of total military service.  He is currently a Sergeant First Class in the Army National Guard.

The department’s complaint alleges that PCC violated USERRA by failing to promote Stoner to the position of police corporal in 2010 and in 2013.  According to the department’s complaint, PCC created the supervisory position of police corporal in 2010.  Before that position was created, Stoner was effectively performing comparable duties in his position as a lead police officer.  The lead police officer assignment was abolished by PCC when it created the supervisory police corporal job.  In 2010 and 2013, Stoner applied for promotion to police corporal, but both times he was not selected.  As alleged in the lawsuit, Stoner’s military service was a motivating factor in PCC’s decision to deny him promotion on both occasions.  As the complaint alleges, the former police chief, who was one of the selecting officials, demonstrated military animus toward Stoner by making anti-military statements to Stoner before and during the corporal selection process.  Under the terms of the settlement, PCC must provide Stoner the back pay that he lost due to its failure to promote him and PCC must place him in a regular police corporal position.  In addition, PCC must amend its written personnel policies to advise its employees of their rights and obligations under USERRA.     

“The men and women who serve in the National Guard makes a tremendous sacrifice to protect our nation,” said Acting Associate Attorney General Stuart F. Delery.  “We are dedicated to enforcing the laws ensuring that guard members do not have to sacrifice even more in their civilian careers.”

“This lawsuit and settlement reinforces the commitment of the Department of Justice to requiring employers to comply with their legal obligations under USERRA so that members of our military who sacrifice to serve this country are considered fairly for promotions and other employment opportunities,” said Vanita Gupta, Head of the Civil Rights Division.  “The Department of Justice will continue to vigorously enforce USERRA so that the rights of our uniformed service members are protected from unlawful discrimination in the workplace based on their military service obligations.”

Stoner initially filed a complaint with the U.S. Labor Department’s Veterans’ Employment and Training Service, which investigated this matter and, after resolution failed, referred it to the Justice Department.  The department’s Civil Rights Division, through its Employment Litigation Section, then filed suit on Stoner’s behalf.  The Civil Rights Division has given a high priority to the enforcement of service members’ rights under USERRA.  Additional information about USERRA can be found on the Justice Department’s websites at http://www.usdoj.gov/crt/emp and http://www.servicemembers.gov, as well as on the Labor Department’s website at http://www.dol.gov/vets/programs/userra/main.htm.

A Fort Campbell Army Sergeant pleaded guilty today to conspiracy to commit bribery in connection with contracting for supplies while serving in Afghanistan. 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney John E. Kuhn Jr. of the Western District of Kentucky, Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office, Special Inspector General for Afghanistan Reconstruction John F. Sopko, Director Frank Robey of the U.S. Army Criminal Investigation Command’s (CID) Major Procurement Fraud Unit, Acting Special Agent in Charge Paul Sternal of the Defense Criminal Investigative Service’s (DCIS) Mid-Atlantic Field Office and Brigadier General Keith M. Givens, Commander of the Air Force Office of Special Investigations (OSI) made the announcement.

Ramiro Pena Jr., 43, of Fort Campbell, Kentucky, pleaded guilty before U.S. District Judge Thomas B. Russell of the Western District of Kentucky to a one-count information charging him with conspiracy to commit bribery.  Pena’s sentencing hearing is scheduled for Oct. 15, 2015. 

From January 2008 through September 2009, Pena worked as a U.S. Army Sergeant First Class at the Humanitarian Assistance (HA) Yard at Bagram Airfield in Afghanistan.  Pena and his supervisor, Army Master Sergeant Jimmy W. Dennis, were responsible for contracting with local vendors to purchase supplies necessary to support humanitarian relief in Afghanistan.  On behalf of the Army, between June 2008 and March 2009, Pena and Dennis entered into approximately 217 such contracts for approximately $30,760,255.

In connection with his guilty plea, Pena admitted that he received money and jewelry from the vendors – primarily through Dennis – in return for Pena and Dennis taking action favorable to the vendors in connection with the HA Yard contracts.  Specifically, Pena admitted that he received from the vendors, through Dennis, a Rolex watch in addition to $100,000 in bribe payments, which he received in approximately six installments.

Pena admitted that he sent some of the cash to his family in Kentucky, which he dispersed throughout numerous greeting cards to avoid drawing attention to the thickness of any particular envelope.  Pena also used the bribe money to pay his family’s personal expenses both in Afghanistan and in the U.S., and to purchase a Harley Davidson motorcycle.

In May 2014, Dennis pleaded guilty in the Western District of Tennessee to conspiracy to launder bribe payments.  In January 2015, Dennis was sentenced to serve 41 months in prison and was ordered to forfeit $115,000. 

This case was investigated by the Special Inspector General for Afghanistan Reconstruction, the FBI, CID, DCIS and OSI.  This case is being prosecuted by Trial Attorney Daniel P. Butler of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Nute A. Bonner of the Western District of Kentucky. 

A Jamaican citizen residing in Virginia was sentenced to prison today for his role in an international lottery scam, the Justice Department and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) announced. 

Carlos O’Brien Ricketts, 32, was sentenced by U.S. District Court Judge Michael F. Urbanski of the Western District of Virginia to serve 10 months in prison to be followed by three years of supervised release, and ordered him to pay $74,450 in restitution to his victims. 

Ricketts was indicted on Nov. 6, 2014, by a federal grand jury in Harrisonburg, Virginia, in connection with a fraudulent lottery scheme based in Jamaica that induced elderly victims to send thousands of dollars to cover fees for lottery winnings that the victims had not in fact won.  On March 24, Ricketts pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud.

“The masterminds of lottery fraud from Jamaica use co-conspirators in the United States not only to help collect money from innocent victims, but also to make their scheme appear less suspicious,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to prosecute those who direct or facilitate these international lottery schemes.”

As part of his guilty plea, Ricketts acknowledged that, had the case gone to trial, the government would have proved beyond a reasonable doubt that from May 2010 through April 2011, he was a middleman in the United States for a fictitious sweepstakes operating from Jamaica.  According to the indictment, a co-conspirator induced elderly victims in the United States to send thousands of dollars to Ricketts to cover fees for purported lottery winnings that, in fact, the victims had not won. 

This case is part of the government’s crackdown on international fraudulent lottery schemes that target elderly individuals in the United States.  The indictment alleged that the co-conspirator instructed the victims to send their payments to Ricketts in the form of cash and checks via mail and as wire transfers. 

As part of his guilty plea, Ricketts acknowledged that, had the case gone to trial, the government would have proved beyond a reasonable doubt that he received payments at his home address in Stephens City, Virginia, and at another address in Winchester, Virginia, sometimes using his own name and at other times used the name “Kevin Brown” to receive the money.  Ricketts further acknowledged that had the case gone to trial, the government would have proved that he kept part of the money for himself and then sent the remainder of the money in wire transfers to Jamaica, sometimes using the “Kevin Brown” name and addresses other than his own in order to evade detection.   

“Fraud schemes like this one that prey on senior citizens will not be tolerated,” said Acting U.S. Attorney Anthony P. Giorno of the Western District of Virginia.  “Our office will provide whatever resources and assistance may be required in order to identify and bring these criminals to justice.”

“Homeland Security Investigations is committed to disrupting and combatting these international lottery schemes,” said Special Agent in Charge Clark E. Settles of HSI Washington, D.C., which oversees the agency’s Harrisonburg office.  “While fraudulent schemes of any kind are despicable, targeting vulnerable populations is especially depraved and will not be tolerated.”

Principal Deputy Assistant Attorney General Mizer and Acting U.S. Attorney Giorno commended HSI’s investigative efforts.  The case was prosecuted by Trial Attorney Kathryn Drenning of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Grayson Hoffman of the Western District of Virginia.

On her first official visit to her home state of North Carolina, Attorney General Loretta E. Lynch traveled today to Durham and Raleigh to attend meetings with civil rights leaders and individuals combatting human trafficking.

In Durham, the Attorney General held a civil rights roundtable meeting with law enforcement, local officials, community leaders, students and faith leaders.  The topics discussed at the roundtable, which was held at the North Carolina Central University the School of Law, included hate crimes, voting rights and community-police relations.

During the roundtable, the Attorney General noted recent events in the South have brought back painful memories of the past for many.

“These are in fact challenging times as we all know,” the Attorney General told those assembled.  “You’ve alluded to the recent events that have traumatized many of our houses of worship.  There have also been events traumatizing many of our individuals of color.  Also, of course, the events just a few weeks ago in Charleston highlight days that I think many of us thought were behind us.”

The Attorney General also noted that the Justice Department continues to investigate the heartbreaking church shooting in Charleston, reiterating that the investigation will explore “all angles, be it hate crime or domestic terrorism.”

She also spoke about the recent spate of church fires in southern states, saying that the department does not yet have all the details but that those incidents “have our full attention.”

“This is a serious issue that we will be addressing with the appropriate care and we will see where those matters lead us,” she said.

The Attorney General also emphasized her commitment to pursuing the justice in the face of hate crimes and civil rights abuses.

“While we cannot guarantee the absence of hate, we can guarantee the presence of justice. We could do that. And I am committed, as Attorney General, to making good on that guarantee,” the Attorney General said.  “And I know that everyone in this room has spent most of their lives working towards living up to that guarantee and I’m so happy to count you as partners in this fight because it’s a fight that will cover all types of issues -- the traditional ones that we’ve seen here as well as the new threats that our newest citizens face, all of the things that make this country great.  Sometimes people are looking to push back on that. But I want you to know that the Department of Justice and this Attorney General is committed to working with you in this fight.” 

While in Raleigh, the Attorney General met with the North Carolina Coalition Against Human Trafficking and lauded their “cooperative and innovative approach,” including their efforts to bring together state and local leaders, law enforcement officials and legal and social service organizations.  She highlighted the importance of having law enforcement team up with direct service agencies and first responders as a way to ensure that traffickers are brought to justice and survivors receive the support they need.

“One of my top priorities as Attorney General is to bring human traffickers to justice, assist trafficking survivors and secure the rights and dignity of anyone unable to do so for themselves,” the Attorney General said.  “But as the people in this room are all too aware, responding to a crime as complex and as devastating as human trafficking is neither easy nor straightforward.  Such crimes must be fought persistently and aggressively, while drawing on ingenuity and collaboration across many disciplines, organizations and professions.”

The Attorney General also praised the work of U.S. Attorney Thomas G. Walker of the Eastern District of North Carolina and U.S. Attorney Ripley Rand of the Middle District of North Carolina, whose offices have had recent successes in holding traffickers accountable.  The Attorney General highlighted the Justice Department’s recent announcement on the success of an interagency Anti-Trafficking Coordination Team Initiative – or ACTeam Initiative – and the expansion of those efforts to other parts of the country.

The Attorney General also met with local officers from the Durham Police Department to thank them for their service and for being on the front lines to advance public safety. The Attorney General also stressed the importance of improving relationships, trust and respect between law enforcement and the communities they serve. 

The Attorney General was joined on her visits in Durham and Raleigh by U.S. Attorney Walker and U.S. Attorney Rand.

Participants in the Durham civil rights roundtable included: 

• Attorney General Loretta E. Lynch, Office of the Attorney General

• U.S. Attorney Thomas G. Walker, United States Attorney’s Office for the Eastern District of North Carolina

• Mayor William “Bill” Bell, City of Durham

• U.S. Representative G.K. Butterfield

• District Liaison Sonia Price, Office of U.S. Representative David Price

• Professor James Coleman, Duke Law School

• Chancellor Debra Saunders-White, North Carolina Central University

• Dean Phyliss Craig Taylor, North Carolina Central University School of Law

• Professor Irving Joyner, North Carolina Central School of Law

• President Everett Ward, St. Augustine’s University

• President-Elect Tashni Dubroy, Shaw University

• Chief Cassandra Deck-Brown, Raleigh Police Department

• Chief Jose Lopez, Durham Police Department

• Chief Chris Blue, Chapel Hill Police

• Reverend Lorenzo Lynch

• Reverend Marion Robinson, St. Matthews AME Church

• Reverend Earl Johnson, President, Raleigh-Wake Citizens Association; Martin Street Baptist Church

• Reverend Nancy Petty, Pullen Memorial Baptist Church

• Reverend Paul Anderson, President of Raleigh Ministerial Alliance

• Reverend William Everett, President of Interdenominational Ministers Alliance of Durham

• Imam Adeel Zeb, Director of Muslim Life at Duke University

• Imam Oliver Mohammed, Chaplain at Butner Federal Correctional Complex and As Salaam Islamic Center

• Zainab Baloch, North Carolina State Muslim Association

• Hamzu Butler, UNC-Chapel Hill Muslim Association

• Rabbi Lucy Dinner, Temple Beth Or

• Rabbi Larry Bach, Judea Reform Congregation

• Bhupinder Singh, Sihk Gurdwara of North Carolina

• President William Barber, North Carolina NAACP

• President Fred Foster, North Carolina NAACP (Durham)

• President Ralph Hunt Sr., Durham Committee on the Affairs of Black People

• Chris Sgro, Executive Director of Equality NC

• Helena Cragg, LGBT Center of Durham

• Civic Engagement Manager Juliana Cabrales, National Association of Latino Elected and Appointed Officials

• Executive Director Angeline Echevarria, El Pueblo Inc.

• President Pilar Rocha-Goldberg, El Centro Hispano

• Janice McKenzie Cole, Cole Immigration Law Center

The Department of Justice filed a civil antitrust lawsuit today seeking to block the acquisition of General Electric Company’s appliance business by AB Electrolux and Electrolux North America Inc., whose brands include Frigidaire.  The department said that the $3.3 billion acquisition would combine two of the leading manufacturers of ranges, cooktops and wall ovens sold in the United States, eliminating competition that has benefited American consumers through lower prices and more options.  According to the department’s complaint, purchasers in the United States spent over $4 billion on these major cooking appliances in 2014.

“Electrolux’s proposed acquisition of General Electric’s appliance business would leave millions of Americans vulnerable to price increases for ranges, cooktops and wall ovens, products that serve an important role in family life and represent large purchases for many households,” said Deputy Assistant Attorney General Leslie C. Overton of the Justice Department’s Antitrust Division.  “This lawsuit also seeks to prevent a duopoly in the sale of these major cooking appliances to builders and other commercial purchasers, who often pass on price increases to home buyers or renters.”   

The Antitrust Division’s lawsuit, which seeks to prevent the companies from merging and to preserve their existing head-to-head competition, was filed in the U.S. District Court for the District of Columbia.

Electrolux North America Inc. is an Ohio corporation headquartered in Charlotte, North Carolina.  Electrolux North America Inc. makes and sells major appliances, including those under the brand names Frigidaire, Tappan and Electrolux.  Electrolux’s annual major-appliance sales in the United States total approximately $2.6 billion.  Electrolux North America Inc. is a wholly owned subsidiary of defendant AB Electrolux.

General Electric Company is a New York corporation headquartered in Fairfield, Connecticut.  General Electric’s appliance business is based in Louisville, Kentucky.  It makes and sells major appliances, including those under the brand names GE Monogram, GE Café, GE Profile, GE, GE Artistry and Hotpoint.  In the United States, General Electric’s annual major appliance sales total approximately $3.4 billion.

Four individuals were arraigned today in Newark, New Jersey, based on charges for allegedly smuggling counterfeit Sony Camcorders, Apple iPhones, iPads and iPods, from China for sale in the United States, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Paul Fishman of the District of New Jersey, Acting Special Agent in Charge Kevin Kelly of U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) in Newark and Bergen County Prosecutor John Molinelli.

Andreina Becerra, 30, a Venezuelan national, and Roberto Volpe, 33, an Italian national, both residing in Miami; Jianhua Li, 40, a Chinese national and resident of Guangzhou, China; and Rosario La Marca, 52, an Italian national and resident of Italy, are charged in an eight-count indictment with importing and trafficking fake iPhones, iPads and iPods bearing counterfeit Apple trademarks and fake Camcorders bearing counterfeit Sony trademarks, as well as smuggling, structuring and international money laundering.

The defendants were arrested last week in a coordinated multi-district effort by HSI in Los Angeles, Miami and Newark.  The defendants were arraigned this afternoon before U.S. District Judge Kevin McNulty of the District of New Jersey.

According to the allegations in the indictment, from July 2009 through February 2014, the defendants conspired to smuggle into the United States from China over 40,000 electronic devices and accessories, including fake iPads, iPhones and iPods, along with labels and packaging, most bearing counterfeit Apple trademarks.  The indictment alleges that the estimated manufacturers’ suggested retail prices for an equivalent number of genuine items would have exceeded $15 million. 

The indictment alleges that, to avoid detection by U.S. Customs officials, the devices often were shipped separately from the labels bearing counterfeit trademarks, and then were labeled and packaged after they passed through U.S. Customs and Border Protection.  According to the indictment, the defendants then re-shipped the devices throughout the United States to co-conspirators.  According to the indictment, proceeds from the sales of the devices were funneled back to the defendants’ accounts in Florida and New Jersey via structured cash deposits – broken into multiple deposits of less than $10,000 each to avoid bank reporting requirements.  The indictment further alleges that a portion of the proceeds was then transferred to co-conspirators in Italy, further disguising the source of the funds.  According to the indictment, the defendants made more than 100 illegal wire transfers totaling over $1.1 million to Li’s Hong Kong accounts to facilitate their criminal activity.

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

This case was investigated by the HSI Newark Seaport Investigations Group and the Bergen County Prosecutor’s Office White Collar Crimes Squad, with significant assistance from Europol and Italian law enforcement authorities.  The case is being prosecuted by Senior Counsel Evan Williams and Rudy Orjales of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorneys Leslie Schwartz and Sarah Devlin of the District of New Jersey.

The enforcement action announced today is one of many efforts being undertaken by the Department of Justice Task Force on Intellectual Property (IP Task Force).  The IP Task Force supports prosecution priorities, promotes innovation through heightened civil enforcement, enhances coordination among federal, state, and local law enforcement partners, and focuses on international enforcement efforts, including reinforcing relationships with key foreign partners and U.S. industry leaders.  To learn more about the IP Task Force, go to www.justice.gov/dag/iptaskforce/.

Becerra et al Indictment

Ex-DEA Agent Used Undercover Status to Fraudulently Obtain Digital Currency Worth Over $700,000

A former DEA agent pleaded guilty today to extortion, money laundering and obstruction of justice, which he committed while working as an undercover agent investigating Silk Road, an online marketplace used to facilitate the purchase and sale of illegal drugs and other contraband.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Melinda Haag of the Northern District of California, Chief Richard Weber of the IRS-Criminal Investigation (IRS-CI), Special Agent in Charge David J. Johnson of  FBI’s San Francisco Division, Special Agent in Charge Michael P. Tompkins of the Department of Justice Office of the Inspector General’s Washington, D.C. Field Office and Special Agent in Charge Lori Hazenstab of the Department of Homeland Security’s Office of the Inspector General in Washington D.C. made the announcement.

“While investigating the Silk Road, former DEA Agent Carl Force crossed the line from enforcing the law to breaking it,” said Assistant Attorney General Caldwell.  “Seduced by the perceived anonymity of virtual currency and the dark web, Force used invented online personas and encrypted messaging to fraudulently obtain bitcoin worth hundreds of thousands of dollars from the government and investigative targets alike.  This guilty plea should send a strong message: neither the supposed anonymity of the dark web nor the use of virtual currency nor the misuse of a law enforcement badge will serve as a shield from the reach of the law.”

“Mr. Force has admitted using his position of authority to weave a complex veil of deception for personal profit,” said U.S. Attorney Haag.  “Mr. Force’s actions put at risk other important investigations and betrayed the trust placed in him by his law enforcement partners and the public.  We are grateful for the work done by our federal partners to assist in unraveling this crime.”

“Through following the money in the Silk Road investigation it became clear that the defendant was engaged in wire fraud, money laundering, and other related offenses,” said Chief Weber.  “He used his position in the investigation to bring himself significant personal financial gain.  This investigation sends a clear message -- no person, especially those entrusted with the public’s trust such as federal law enforcement, is above the law and IRS-CI will use their financial investigative skills to track you down.”

Carl M. Force, 46, of Baltimore, Maryland, pleaded guilty before U.S. District Judge Richard Seeborg of the Northern District of California to an information charging him with money laundering, obstruction of justice and extortion under color of official right.  Force’s sentencing hearing is scheduled for Oct. 19, 2015.

Force was a Special Agent with the DEA for 15 years.  Between 2012 and 2014, he was assigned to the Baltimore Silk Road Task Force, a multi-agency group investigating illegal activity on the Silk Road.  Force was the lead undercover agent in communication with Ross Ulbricht, aka “Dread Pirate Roberts,” who ran the Silk Road.

In connection with his guilty plea, Force admitted that, while working in an undercover capacity using his DEA-sanctioned persona, “Nob,” in the summer of 2013, Force offered to sell Ulbricht fake drivers’ licenses and “inside” law enforcement information about the Silk Road investigation, which information Nob claimed to have accessed through a corrupt government employee.  Force admitted that he attempted to conceal his communications with Ulbricht about the payments by directing Ulbricht to use encrypted messaging.  Although Force understood these payments, which were made in bitcoin, to be government property, as they constituted evidence of a crime, he admitted that he falsified official reports and stole the funds, depositing the bitcoin into his own personal account and then converting them into dollars.  Force admitted that, at the time, the value of the bitcoin he received from Ulbricht was in excess of approximately $100,000.

Force also admitted that he devised and participated in a scheme to fraudulently obtain additional funds from Ulbricht through another online persona, “French Maid,” of which his Task Force colleagues were not aware.  Force admitted that, as French Maid, he solicited and received bitcoin payments from Ulbricht worth approximately $100,000 in exchange for information concerning the government’s investigation into the Silk Road.

In connection with his guilty plea, Force also admitted that, in late 2013, in his personal capacity, he invested $110,000 worth of bitcoin in CoinMKT, a digital currency exchange company.  Although he did not receive permission from the DEA to do so, he served as CoinMKT’s Chief Compliance Officer.  In this role, in February 2014, Force was alerted by CoinMKT to what the company initially believed to be suspicious activity in a particular account.  Force admitted that, thereafter, in his capacity as a DEA agent, but without authority or a legal basis to do so, he directed CoinMKT to freeze $337,000 in cash and digital currency from the account and he subsequently transferred the approximately $300,000 of digital currency funds into a personal account that he controlled.

Force also admitted to entering into a $240,000 contract with 20th Century Fox Film Studios related to a film concerning the government’s investigation into the Silk Road.  Force admitted that he did not secure the necessary approvals from the DEA to do so.

According to his plea agreement, Force admitted that he had obstructed justice both by soliciting and accepting bitcoin from Ulricht and by lying to federal prosecutors and agents who were investigating potential misconduct by Force and others.

The investigation is ongoing.  To date, Force is one of two federal agents charged with crimes in connection to their roles in investigating the Silk Road.  Shaun W. Bridges, 32, of Laurel, Maryland, a former Special Agent with the U.S. Secret Service, is charged in a two-count information with money laundering and obstruction of justice related to his diversion of over $800,000 in digital currency that he gained control over as part of the Silk Road investigation.  The charges contained in an information are merely accusations, and a defendant is presumed innocent until and unless proven guilty.

The case was investigated by the FBI’s San Francisco Division, the IRS-CI’s San Francisco Division, the Department of Justice Office of the Inspector General and the Department of Homeland Security Office of the Inspector General in Washington, D.C.  The following additional components assisted with the investigation: IRS-CI’s New York Field Office, HSI’s Chicago/O’Hare Division, the U.S. Attorney’s Office for the Southern District of New York, the Criminal Division’s Computer Crime and Intellectual Property Section, the Criminal Division’s Office of International Affairs, the U.S. Embassy in Slovenia and the FBI Legal Attaché Office in Tokyo. 

The case is being prosecuted by Assistant U.S. Attorneys Kathryn Haun and William Frentzen of the Northern District of California and Trial Attorney Richard B. Evans of the Criminal Division’s Public Integrity Section, with assistance from Assistant U.S. Attorney Arvon Perteet. 

Force Plea Agreement

The U.S. District Court for the District of New Jersey entered a consent decree of permanent injunction against Acino Products LLC, of Hamilton, New Jersey, and its president, Ravi Deshpande, to prevent the distribution of unapproved and misbranded drugs, the Department of Justice announced today. 

Acino manufactures and distributes hydrocortisone acetate suppositories under the brand names Rectacort-HC and GRx HiCort 25.  Deshpande is Acino’s president and is responsible for, and has authority over, all operations at the firm. 

The department filed a complaint in the U.S. District Court for the District of New Jersey at the request of the U.S. Food and Drug Administration (FDA), alleging that the company’s suppositories are not approved by the FDA and that they are misbranded because they do not bear adequate directions for use as required by law. 

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.  The consent decree requires the drug manufacturer to cease all manufacture and distribution of the unapproved and misbranded suppositories, and to destroy any such suppositories already in existence.

“The department will not hesitate to bring enforcement actions against manufacturers who do not follow the necessary procedures to comply with our nation’s drug safety laws,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division.

“Companies that manufacture and distribute drugs must comply with FDA regulations,” said FDA Associate Commissioner Melinda Plaisier of Regulatory Affairs.  “Acino repeatedly violated federal law through their actions.  We must continue to oversee manufacturers to ensure that patients have access to safe and effective approved drugs.”

The FDA has conducted at least three inspections of the facility between Feb. 6, 2014, and March 5, 2014; Aug. 7, 2014, and 19, 2014; and Jan. 12, 2015, and 25, 2015.

According to the complaint, during the February/March 2014 inspection, FDA investigators documented the company’s manufacturing of hydrocortisone acetate suppositories on behalf of Ascend Laboratories LLC.  The complaint alleges that at the conclusion of the inspection, Deshpande indicated that he was aware that the suppositories were being marketed by Ascend as prescription drugs without FDA approval.    

In May 2014, the government conducted a seizure of certain unapproved and misbranded drugs that were being distributed by Ascend, including suppositories that Acino had manufactured for Ascend.  The government notified Acino and Deshpande of the seizure by a letter dated May 15, 2014.  According to the complaint, the letter made clear that the suppositories were unapproved and misbranded drugs, however, Acino and Deshpande continued to manufacture the products. 

According to the complaint, at the conclusion of the August 2014 and January 2015 inspections, FDA investigators again discussed the unapproved status of the hydrocortisone acetate 25 mg suppositories with Deshpande, who indicated that he was aware of the need to pursue FDA approval for the drug.  As alleged in the complaint, to date, Acino and Deshpande have not filed the necessary application with the FDA to gain approval for the unapproved drug products.

The government is represented by Trial Attorney Heide L. Herrmann of the Civil Division’s Consumer Protection Branch, with the assistance of Associate Chief Counsel Yen Hoang of the Department of Health and Human Services’ Office of General Counsel – Food and Drug Division, and Assistant U.S. Attorney Bernard J. Cooney of the District of New Jersey.

VMware Inc. and Carahsoft Technology Corporation have agreed to pay $75.5 million to resolve allegations that they violated the False Claims Act by misrepresenting their commercial pricing practices and overcharging the government on VMware software products and related services, the Department of Justice announced today.  VMware is a Delaware corporation that specializes in computer virtualization software and has its principal place of business in Palo Alto, California.  Carahsoft is a privately held Maryland corporation that distributes information technology products to federal, state and local governments and has its principal place of business in Reston, Virginia. 

“Today’s settlement demonstrates our continuing vigilance to ensure that those doing business with the government give the taxpayers a fair deal,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division.  “Government contractors who seek to profit improperly at the expense of taxpayers face serious consequences.”

“Transparency by contractors in the disclosure of their discounts and prices offered to commercial customers is critical in the award of GSA Multiple Award Schedule contracts and the prices charged to government agency purchasers,” said U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

“We will continue to look into all allegations of false claims in GSA contracts,” said Acting Inspector General Robert C. Erickson of the U.S. General Services Administration (GSA).  “I appreciate the hard work of our auditors, our agents and the attorneys on this complex case that has resulted in a large amount of money being returned to the United States.” Under the Multiple Award Schedule (MAS) Program, prospective vendors agree to disclose commercial pricing policies and practices to the GSA in exchange for the opportunity to gain access to the broad federal marketplace and the ease of administration that comes from selling to any government purchaser under one central contract.  GSA regulations require that, during contract negotiations with GSA, prospective vendors seeking an MAS contract make “current, accurate and complete” disclosures of the standard and non-standard discounts they offer to commercial customers.  The GSA relies on the accuracy of these disclosures in order to negotiate fair pricing for government purchasers.  Additionally, after the MAS contract is awarded, regulations require that MAS Program vendors disclose to the GSA changes in their commercial pricing practices, including improved discounts that are offered to commercial customers, after the MAS contract is in place.

The settlement resolves allegations that VMware and Carahsoft made false statements to the government in connection with the sale of VMware products and services under Carahsoft’s MAS contract.  These false statements allegedly concealed the companies’ commercial pricing practices and enabled the companies to overcharge the government for VMware’s products and services from 2007 through 2013. 

The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  The civil lawsuit was filed in the Eastern District of Virginia by Dane Smith, who is a former vice president of the Americas at VMware Inc.  Mr. Smith’s share of the recovery has not been determined.

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Virginia and the GSA’s Office of Inspector General, with assistance from the Defense Criminal Investigative Service Mid-Atlantic Field Office.  The case is captioned United States ex rel. Smith v. VMware, Inc., et al., Case No. 10-CV-769 (E.D. Va.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.     

Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division released the following statement today after the U.S. Court of Appeals for the Second Circuit ruling in United States v. Apple Inc.:

“We are gratified by the court’s decision.  The decision confirms that it is unlawful for a company to knowingly participate in a price-fixing conspiracy, whatever its specific role in the conspiracy or reason for joining it.  Because Apple and the defendant publishers sought to eliminate price competition in the sale of e-books, consumers were forced to pay higher prices for many e-book titles.

“I am proud of the outstanding work done by the trial team who initially established Apple’s liability and by the lawyers who defended the district court’s decision in this appeal.  The Antitrust Division will continue to vigorously protect competition and enforce the antitrust laws in this important business, and in other industries that affect the everyday lives of consumers.”

Background

On April 11, 2012, the department filed a civil antitrust lawsuit in the U.S. District Court for the Southern District of New York against Apple, Hachette Book Group (USA), HarperCollins Publishers L.L.C., Holtzbrinck Publishers LLC (which does business as Macmillan), Penguin Group (USA) Inc. and Simon & Schuster Inc. for conspiring to end e-book retailers’ freedom to compete on price by taking control of pricing from e-book retailers and substantially increasing the prices that consumers paid for e-books.

At the same time that it filed the lawsuit, which was consolidated with suits brought by 33 states and territories, the department reached settlements with three of the publishers – Hachette, HarperCollins and Simon & Schuster.  Those settlements were approved by the court in September 2012.  The department settled with Penguin on Dec. 18, 2012, and with Macmillan on Feb. 8, 2013.  The Penguin settlement was approved by the court in May 2013 and the Macmillan settlement was approved in August 2013.  Under the settlements, each publisher was required (a) to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers and (b) to allow for retail price competition in renegotiated e-book distribution agreements.

The department’s trial against Apple, which was overseen by U.S. District Judge Denise L. Cote of the Southern District of New York, began on June 3, 2013.  The trial lasted for three weeks, with closing arguments taking place on June 20, 2013.  Judge Cote issued her opinion and order on July 10, 2013, finding Apple liable for knowingly participating in and facilitating a conspiracy with the publishers.  On Sept. 5, 2013, Judge Cote entered a final judgment prohibiting Apple from immediately reestablishing e-book distribution agreements with the defendant publishers similar to the agreements that were established through the conspiracy and from entering e-book distribution agreements containing most-favored-nations provisions; requiring Apple to adopt a rigorous antitrust compliance program; and imposing an external compliance monitor to evaluate and recommend improvements to Apple’s antitrust compliance and training programs.

Yesterday, the Foreign Intelligence Surveillance Court (FISC) issued an opinion and primary order approving the government’s application to renew the Section 215 bulk telephony program.  The USA FREEDOM Act of 2015 banned bulk collection under Section 215 of the USA PATRIOT Act, but provided a new mechanism to allow the government to obtain data held by the providers.  To ensure an orderly transition to this new mechanism, the USA FREEDOM Act provides for a 180-day transition period during which the existing National Security Agency (NSA) bulk telephony metadata program may continue.  After considering the views of amici, the court held that the continuation of the NSA’s bulk telephony metadata program during the transition period remains consistent with both the statute and the Fourth Amendment.

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

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

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

In addition to the release of the court’s opinion, the administration is undertaking a declassification review of this most recent primary order, and when complete, the Office of the Director of National Intelligence will post the document to its website and icontherecord.tumblr.com.

FISC Opinion and Order

The Department filed a complaint today seeking the civil forfeiture of approximately $34 million, which represents the cash value of shares in a Canadian energy company that the company used to bribe Chad’s former Ambassador to the United States and Canada for the purpose of influencing the award of oil development rights.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Assistant Director Joseph S. Campbell of the FBI’s Criminal Investigative Division made the announcement.

From 2004 to 2012, Mahamoud Adam Bechir, 50, served as Chad’s Ambassador to the United States and Canada.  From approximately 2007 to 2015, Youssouf Hamid Takane, 52, was the Deputy Chief of Mission.  As alleged in the complaint, in 2009, Bechir and Takane agreed to use their official positions to influence the award of oil development rights in Chad to Griffiths Energy International Inc., a Canadian oil company, in exchange for shares in the company.  Thereafter, in or about October 2009, Griffiths Energy issued four million shares to the wives of Bechir and Takane and to another associate.

The complaint further alleges that Griffiths Energy agreed with Bechir and his wife that the company would pay a $2 million “consulting fee” to Bechir’s wife to influence the award of oil development rights in Chad.  After securing the desired oil development rights in February 2011, Griffiths Energy allegedly transferred $2 million to an account held by a shell company created by Bechir’s wife.  This bribe payment was commingled and laundered through U.S. bank accounts and real property, and eventually was transferred to Bechir’s bank account in South Africa, where he is now serving as Chad’s Ambassador.  In 2013, Griffiths Energy pleaded guilty in Canadian court to bribing Bechir.

The $34 million that the United States seeks in forfeiture represents the cash value of the four million shares in Griffiths Energy that were provided to the wives of Bechir and Takane and to their associate.  In a separate action filed in 2014, the United States also is seeking the civil forfeiture of over $100,000 in allegedly laundered funds traceable to the $2 million bribe payment.  Takane resides in the United States.

The investigation was conducted by the FBI.  The case is being handled by Trial Attorney Nalina Sombuntham and Senior Trial Attorney Steven C. Parker of the Criminal Division’s Asset Forfeiture and Money Laundering Section.

This case was brought under the Kleptocracy Asset Recovery Initiative by a team of dedicated prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section, working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, return those proceeds to benefit the people harmed by these acts of corruption and abuse of office.  Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov.

Griffiths Energy Complaint

A senior paramilitary leader and one of Colombia’s most notorious drug traffickers was sentenced today to serve 190 months in prison for leading an international drug trafficking conspiracy that imported into the United States ton-quantities of cocaine.  Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting Deputy Administrator Jack Riley of the U.S. Drug Enforcement Administration (DEA) made the announcement.

“Through his leadership position in the AUC, Salvatore Mancuso-Gomez directed the manufacture and shipment of over 100,000 kilograms of cocaine into the United States and elsewhere,” said Assistant Attorney General Caldwell.  “In addition to enriching himself, Mancuso-Gomez and the AUC used this drug money to raise and arm a paramilitary force of more than 30,000 fighters and cement his control over regions of Colombia.  This case is yet another example of our continued commitment to collaborating with our international partners to prosecute criminals and warlords who traffic in illegal narcotics, violence and intimidation.”

“DEA is committed to relentlessly attacking global criminal networks who use drug trafficking as a means to finance their terrorist activities,” said Acting Deputy Administrator Riley.  “The arrest and prosecution of Salvatore Mancuso-Gomez clearly illustrates this dedication.  As a senior leader in the AUC, Mancuso-Gomez controlled huge amounts of cocaine production in Colombia, and oversaw its movement to the United States and other parts of the world.  Proceeds from his drug trafficking enterprise were used to acquire weapons and further the AUC’s violent criminal agenda.  DEA is pleased that this significant narco-terror leader has faced justice in a U.S. court of law.”

Salvatore Mancuso-Gomez, aka El Mono and Santander Lozada, formerly of Monteria, Colombia, pleaded guilty in October 2008 to one count of conspiracy to distribute cocaine knowing and intending that it would be imported into the United States.  U.S. District Judge Ellen Segal Huvelle of the District of Columbia imposed the sentence.

According to the statement of facts agreed to as part of his guilty plea, Mancuso-Gomez held one of the highest level leadership positions within the Autodefensas Unidas de Colombia (United Self Defense Forces of Colombia or AUC), a terrorist and paramilitary organization in Colombia.  In September 2001, the AUC was designated a Foreign Terrorist Organization by the U.S. Department of State.  In May 2003, the AUC was placed on the Significant Foreign Narcotics Traffickers list by order of the President, pursuant to the Foreign Narcotics Kingpin Designation Act.  In February 2004, Mancuso-Gomez individually was designated as a Tier II Kingpin by the Department of Treasury’s Office of Foreign Assets Control, subjecting him to severe economic sanctions under the Kingpin Act.

The statement of facts also established that the AUC consisted of approximately 30,000 armed soldiers organized into blocs (or regions) with commanders for each bloc.  In connection with his guilty plea, Mancuso-Gomez admitted that, from the mid-1990s through 2004, he directed thousands of soldiers in two blocs of the AUC, controlling large areas where cocaine was produced.

Mancuso-Gomez admitted that the AUC produced approximately 2,000 kilograms of cocaine per month during the conspiracy, and that he and members of the organization transported the cocaine to the coastal areas of Colombia where it was loaded onto go-fast boats and other vessels for ultimate transportation to the United States and Europe.  Mancuso-Gomez also admitted that he levied taxes on other narcotics traffickers who needed passage through AUC-controlled territories, and that he used proceeds from his drug trafficking activities to purchase weapons and other supplies for AUC activities.  Mancuso-Gomez further admitted that he and the AUC maintained tight control of their territories in Colombia through intimidation of corrupt members of the Colombian government, including law enforcement and military personnel and politicians.

Today’s sentence does not account for violations of Colombian human rights-related laws allegedly committed by Mancuso-Gomez, which are being addressed in Colombia through the Justice and Peace process – a legal framework enacted in 2005 to facilitate the demobilization of its paramilitary organizations – and Colombian criminal justice system.

The case was investigated by DEA’s Bogotá and Cartagena, Colombia, Country Offices, and the DEA Special Operations Division.  The government of Colombia provided unprecedented assistance through the investigation, prosecution and sentencing phase of this case.

The case was prosecuted by Trial Attorneys Paul W. Laymon and Carmen Colon of the Criminal Division’s Narcotic and Dangerous Drug Section (NDDS).  NDDS Judicial Attachés in Bogotá, Colombia; the Criminal Division’s Office of International Affairs; and the Prosecutor General’s Office of the Republic of Colombia (Fiscalia), including the Fiscalia’s Transitional Justice program, provided significant assistance.

A Hudson County, New Jersey, man was arrested today on charges of conspiring to provide material support to the Islamic State of Iraq and the Levant (ISIL), a designated foreign terrorist organization, and aiding and abetting an attempt to do so, announced Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Paul J. Fishman of the District of New Jersey and Special Agent in Charge Richard M. Frankel of the FBI’s Newark, New Jersey, Division.

Alaa Saadeh, 23, of West New York, New Jersey, was arrested early this morning at his home.  He is charged in a complaint with conspiring with other individuals in New Jersey and New York to provide services and personnel to ISIL, aiding and abetting an attempt to provide services and personnel to ISIL and attempting to persuade a witness to lie to the FBI.  The defendant is scheduled to make his initial appearance at 2:30 p.m. today before U.S. Magistrate Judge Cathy L. Waldor of the District of New Jersey.

According to documents filed in this case:

The FBI and the Joint Terrorism Task Force (JTTF) have been investigating a group of individuals from New York and New Jersey who have allegedly conspired to provide material support to ISIL.  Co-Conspirator 1 (CC-1) is Saadeh’s brother and was a resident of Rutherford, New Jersey, until departing the United States on May 5, 2015, allegedly to join ISIL.  Co-Conspirator 2 (CC-2) was a resident of Queens, New York, until he was arrested on June 13, 2015, in New York on terrorism charges.  Samuel Rahamin Topaz was a resident of Fort Lee, New Jersey, until he was arrested on June 17, 2015, in New Jersey and charged with conspiring to provide services and personnel to ISIL.

On May 5, 2015, CC-1 attempted to travel from New Jersey to the Middle East, via John F. Kennedy International Airport, allegedly in order to join ISIL.  CC-1 was accompanied to JFK by Saadeh and CC-2.  On the way to the airport, CC-1 stated that he, Saadeh, CC-2 and Topaz had plans to reunite overseas within a few weeks.

After CC-1’s departure, and despite learning from CC-1’s family that he had been arrested in Jordan on suspicion of supporting ISIL, Saadeh, CC-2 and Topaz continued to discuss their plan to travel overseas to join ISIL.  Electronic communications later recovered from Topaz’s phone corroborated their plans.  On May 21, 2015, Saadeh and Topaz discussed that they needed to “lay low” and refrain from taking action in furtherance of the conspiracy to provide material support to ISIL that might be detected by law enforcement.  Saadeh and Topaz also discussed needing to meet in person to discuss “hijra.”  Topaz later told members of the JTTF that he and his conspirators used the term “hijra” (often spelled “hijrah”) to refer to traveling overseas to join ISIL.  The next day, Saadeh told another individual that he suspected that CC-2 or Topaz had “snitched” on CC-1 and caused his arrest overseas, and that, if true, Saadeh thought he would have to “kill someone.”

In recorded conversations with an informant, Saadeh revealed his support for ISIL, including the terrorist organization’s use of beheadings and mass killings to impose its violent agenda.  Saadeh also stated that he planned to travel overseas with CC-2 “at some point.”  Saadeh further stated that he knew CC-1 planned to travel to join ISIL before CC-1 departed the United States, and that he bought CC-1’s airline ticket despite knowing this.  The investigation revealed that Saadeh provided CC-1 transportation and removed a SIM card from CC-1’s phone in an apparent effort hide incriminating communications and other data.

In June, after becoming aware that he was under FBI surveillance, Saadeh directed an individual in New Jersey not to tell the FBI about CC-1’s support for ISIL or CC-1’s plans to travel to Syria and Iraq to join ISIL.  Saadeh instructed the individual to “play dumb” and be “honest up to a point,” but to be sure not to tell the FBI anything about ISIL.

Each count in the complaint carries a maximum potential penalty of 20 years in prison and a fine of $250,000.

The case is being investigated by the FBI and JTTF.  The case is being prosecuted by Assistant U.S. Attorneys L. Judson Welle, Dennis C. Carletta and Francisco J. Navarro of the District of New Jersey, with the assistance of Trial Attorney Robert Sander of the National Security Division’s Counterterrorism Section.

The charge and allegations contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Saadeh Criminal Complaint

The former owner of Ezcor Medical Supply was sentenced today to serve 97 months in prison for her role in a fraud scheme that resulted in $3.5 million in fraudulent claims to Medicare and Medi-Cal.

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, Special Agent in Charge Glenn R. Ferry of the U.S. Department of Health and Human Services, Office of Inspector General’s (HHS-OIG) Los Angeles Region, Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Division and Special Agent in Charge Joseph Fendrick of the California Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse made the announcement.

Sylvia Walter-Eze, 48, of Stevenson Ranch, California, was found guilty by a federal jury on March 20, 2015, of conspiracy to commit health care fraud, four counts of health care fraud, and one count of conspiracy to pay illegal health care kickbacks.  In addition to imposing the term of imprisonment, U.S District Judge R. Gary Klausner ordered Walter-Eze to pay restitution in the amounts of $1,866,260 to Medicare and $73,268 to Medi-Cal.

The evidence presented at trial showed that Walter-Eze, the former owner of Ezcor, a durable medical equipment (DME) supply company located in Valencia, California, fraudulently billed more than $3.5 million to Medicare and Medi-Cal for DME that was not medically necessary.  The trial evidence also demonstrated that Walter-Eze paid illegal kickbacks to patient recruiters in exchange for patient referrals.  The evidence further showed that Walter-Eze paid kickbacks to physicians for fraudulent prescriptions for medically unnecessary, and expensive, power wheelchairs, which prescriptions Walter-Eze then used to support her fraudulent claims to Medicare and Medi-Cal.  The evidence showed that, between 2007 and 2012, Walter-Eze submitted $3,521,786 in fraudulent claims to Medicare and Medi-Cal, and that she received $1,939,529 in reimbursement for those claims.

The case was investigated by the FBI, HHS-OIG’s Los Angeles Regional Office and the California Department of Justice, 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 was prosecuted by Trial Attorneys Blanca Quintero and Alexander F. Porter of the Criminal Division’s Fraud Section.

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

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

Used Fraudulently Acquired Government Credit Cards to Obtain Over $113,000 in Cash

A former Drug Enforcement Administration (DEA) employee was sentenced today to two years in prison for defrauding JPMorgan Chase & Co. out of more than $113,000 using fraudulently issued government credit cards.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Rod J. Rosenstein of the District of Maryland and Special Agent in Charge Michael P. Tompkins of the the Department of Justice Office of the Inspector General’s (DOJ OIG) Washington, D.C. Field Office made the announcement. 

Keenya Meshell Banks, 41, of Upper Marlboro, Maryland, pleaded guilty in April 2015 to one count of wire fraud.  In addition to imposing the term of imprisonment, U.S. District Judge Deborah K. Chasanow ordered Banks to pay restitution in the amount of $113,841. 

According to her plea agreement, Banks was employed by the DEA as a Program Manager, and was responsible for the approval and issuance of government credit cards to DEA employees.  Banks admitted that, while serving in that role, she submitted dozens of fake credit card applications to JPMorgan Chase & Co. for fictitious DEA employees, using names and identifying information of individuals who did not work at the DEA.  In at least one instance, however, Banks submitted the identifying information of an actual DEA employee.  Through this scheme, Banks admitted that she obtained at least 32 fraudulent credit cards, which she then used to withdraw more than $113,000 from ATMs in Maryland and Northern Virginia.  As part of her plea agreement, Banks agreed to forfeit the proceeds she received as a result of the scheme and to pay full restitution.

The case was investigated by the DOJ OIG.  The case was prosecuted by Trial Attorneys Richard B. Evans and Justin Weitz of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Thomas P. Windom of the  District of Maryland.

Attorney General Loretta E. Lynch released the following statement today after the Supreme Court ruling in Arizona State Legislature v. Arizona Independent Redistricting Commission:

“I am pleased that the Supreme Court has vindicated the rights of voters who want their electoral districts drawn fairly, independently and without undue emphasis on partisan affiliation or political creed.  Arizona’s approach to redistricting is an innovative and effective advance in the effort to reduce gerrymandering and give all Americans an opportunity to make their voices heard.  Today’s decision is a victory for the people of Arizona, for the promise of fair and competitive elections and for the principles of democratic self-governance that make our nation exceptional.”

 

A Tennessee man pleaded guilty to Hobbs Act robbery and use of a handgun in a crime of violence, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney David Rivera of the Middle District of Tennessee.

Deonte Graham, 34, of Clarksville Tennessee, pleaded guilty before Chief U.S. District Judge Kevin Sharp of the Middle District of Tennessee. 

On Oct. 21, 2011, Singletary Construction in Clarksville, Tennessee, was robbed of $17,000 in cash by two masked men with a gun.  Physical evidence recovered in connection with the robbery resulted in the identification of Michael Massey as one of the robbery suspects.  In May 2015, Massey pleaded guilty to his role in the robbery. 

In connection with today’s guilty plea, Graham admitted that, in October 2011, he had worked for Singletary for more than one year.  According to Graham’s admissions, after the owner of the company accused Graham of misrepresenting the hours he worked and docked his pay, Graham and Massey devised a plan to rob Singletary.  Graham also admitted that, in December 2012, he bragged to a former Singletary employee about arranging the robbery because Singletary owed him money.

This case was investigated by Clarksville, Tennessee, Police Department and the Drug Enforcement Administration.  The case is being prosecuted by Trial Attorney Laura Gwinn of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorney Lynne T. Ingram of the Middle District of Tennessee.

Deonte Graham Plea Agreement

The Department of Justice announced today that Ersparniskasse Schaffhausen AG (EKS) 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, EKS 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 EKS for tax-related criminal offenses.

EKS was founded in 1817 and is wholly owned by a Swiss charitable foundation.  It is headquartered in the city and canton of Schaffhausen, Switzerland.  EKS opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the Internal Revenue Service (IRS) or the U.S. Department of the Treasury as required by U.S. law.

From 2004 through 2011, EKS accepted referrals of U.S. persons as new clients from an external asset manager who, until 2009, resided in the United States and conducted some of his business through a corporation organized under the laws of the United States.  The majority of the accounts that came to EKS as a result of these referrals were held in the names of non-U.S. entities that were beneficially owned by U.S. persons. 

In May 2008, with the knowledge and approval of EKS management, the external asset manager and an EKS relationship manager visited five U.S. cities to meet with U.S. clients and attorneys who had the potential to refer new clients.  Topics discussed during their meetings included the “crisis” involving Swiss bank UBS AG, client satisfaction with EKS, the performance of client accounts at EKS and the “asset protection” benefits of EKS.

Until 2009, EKS opened numbered accounts for U.S. persons, including code-name or pseudonym accounts, upon request.  Upon opening this type of account, an EKS employee would  enter the accountholder’s name in a physical register rather than in the bank’s electronic records system.  This action limited the number of EKS personnel who knew the client’s identity.  Holders of these accounts could also provide documents to EKS using only their code names or numbers as their authorized signatures. 

EKS provided all of its clients, including U.S. persons, with the option to request that EKS retain all mail related to a client’s financial accounts in exchange for a standard service fee.  EKS understood that providing such hold-mail agreements upon request could allow U.S. persons to keep evidence of their EKS accounts outside of the United States and thus assist them in concealing assets and income from the IRS.  

EKS also accepted IRS Forms W-8BEN for U.S.-related accounts held in the names of non-U.S. entities, such as foreign corporations, trusts or foundations.  Because Swiss law required EKS to identify the true beneficial owners of the entities on a document called a Form A, EKS knew that these accounts were beneficially owned by U.S. persons.  Nonetheless, EKS accepted Forms W-8BEN that it knew falsely stated that the entities were the beneficial owners of the accounts. 

EKS was aware of the 2009 IRS Offshore Voluntary Disclosure Program for U.S. persons.  Despite knowing of that program and knowing or having reason to know that some of its U.S. clients had likely not declared their EKS accounts to the IRS, EKS made no effort to encourage its U.S. clients to disclose their accounts through that program.

During 2009, consultants reported to EKS, among other things, that EKS had increased risks because of its relationship with the external asset manager; that it was only a matter of time until small banks came into contact with U.S. authorities; and that there was a latent risk that previous revenues from EKS’s “U.S. strategy” could be seized or corresponding fines imposed.  According to minutes of a 2009 meeting of the EKS board of directors, an EKS executive stated, among other things, that “there is practically no risk if U.S. customers travel to Switzerland and a customer account is handled locally,” and that he had been informed that Swiss bank Wegelin & Co. was going to keep its previous U.S. customers.

In October 2009, the EKS board of directors voted to continue the account relationships with clients of the external asset manager, including his U.S. clients, under certain conditions, including that his business be relocated to Switzerland.  The board also voted to “have the option of entering into new cross-border business relationships.”

Since Aug. 1, 2008, EKS provided private banking services for 90 U.S.-related accounts with approximately $65 million in assets.  Thirty-seven of these accounts were opened after Aug. 1, 2008.  EKS will pay a penalty of $2.066 million.

In accordance with the terms of the Swiss Bank Program, EKS 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 EKS who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of this non-prosecution agreement, noncompliant U.S. accountholders at EKS 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, Gregory E. Van Hoey and Michael R. Pahl, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer and Senior Litigation Counsel Nanette L. Davis of the Tax Division.

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

A federal grand jury in San Francisco returned an indictment against a Northern California real estate investor for his role in bid-rigging and fraud conspiracies at public foreclosure auctions in Northern California, the Department of Justice announced today.

A two-count indictment has been filed in the U.S. District Court of the Northern District of California in Oakland, charging Ramin Rad “Ray” Yeganeh of San Mateo, California, with participating in conspiracies to rig bids and defraud mortgage holders and others in Alameda County.

“This defendant conspired to rig bids at home mortgage foreclosure auctions in Alameda County,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “Lenders and those who lost their homes to foreclosure are entitled to the proceeds of a competitive auction, and they did not get that here.  Whether a conspiracy is local, national or international in scope, the division will investigate and prosecute those who conspire rather than compete.” 

To date, 54 individuals have pleaded guilty to criminal charges as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public foreclosure auctions in Northern California.  In addition, 21 real estate investors have been charged in six multi-count indictments for their roles in bid-rigging and fraud schemes at foreclosure auctions in Alameda, Contra Costa, San Mateo and San Francisco counties in California. 

The indictment alleges, among other things, that as early as September 2008 and continuing until about January 2011, Yeganeh conspired with others not to bid against one another and instead designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in Alameda County.  Yeganeh was also charged with conspiring to use the mail to carry out a scheme to fraudulently acquire title to selected Alameda County properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have otherwise gone to mortgage holders and other beneficiaries by holding second, private auctions open only to members of the conspiracy.  Selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions.  The private auctions often took place at or near the courthouse steps where the public auctions were held.

“This is another example of justice being served in preserving the fairness of public real estate foreclosure auctions as well as the FBI’s commitment in investigating those who take advantage of a competitive marketplace,” said Special Agent in Charge David J. Johnson of the FBI’s San Francisco Field Office.  “The FBI will continue to aggressively investigate real estate-related frauds and other violations of federal law which victimize distressed homeowners and financial institutions through the exploitation of the housing crisis.”                                                                                                                             

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.  The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million.  A count of conspiracy to commit mail fraud carries a maximum sentence of 20 years in prison and a $1 million fine.  The government can also seek to forfeit the proceeds earned from the scheme.             

Today’s charges are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties.  These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Office.  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-934-5300 or call the FBI tip line at 415-553-7400.           

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

A Douglas, Massachusetts, dentist was sentenced today to serve 16 months in prison for tax evasion in the U.S. District Court for the District of Massachusetts, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.   

George Fenzell was indicted in February 2014 by a federal grand jury sitting in Boston on multiple counts of tax evasion and one count of corruptly endeavoring to obstruct the Internal Revenue Service (IRS).  In November 2014, he pleaded guilty to one count of tax evasion. 

U.S. District Court Judge Timothy S. Hillman also sentenced Fenzell to one year of supervised release and ordered him to pay $157,407 in restitution to the IRS.  In sentencing Fenzell, Judge Hillman departed downward from the recommended U.S. Sentencing Guidelines range due, in part, to Fenzell’s cooperation with the government on other matters.

According to court documents, from 1999 through 2012, Fenzell engaged in conduct intended to obstruct the IRS.  For the years 1999 through 2007, he failed to file timely federal income tax returns and concealed income that he earned from his dental practice from the IRS.  Fenzell operated a dental office located in Shrewsbury, Massachusetts.  He concealed his dental business receipts by diverting the funds through nominee entities, including River Valley Dental.  He used multiple nominee bank accounts to conceal his ownership of his income and assets.  Fenzell also titled and registered a Lincoln Navigator and Ducati motorcycle with another nominee entity, Smiling Trust, and made extensive use of cash in order to conceal his fraud from the IRS.

In response to a Massachusetts Department of Revenue investigation and collection action in 2007, Fenzell filed his delinquent federal tax returns for 2000 through 2005.  In filing those returns, Fenzell admitted that he owed federal income taxes totaling $129,841.  Fenzell had not made any tax payments to the IRS for those years.  Rather than pay the federal income taxes and additional interest and penalties that were due and owing, between 2007 and 2012, Fenzell evaded IRS collection efforts by diverting his business receipts to nominee entities and using nominee bank accounts in Florida and Rhode Island to hide his income and assets.  During the same period, he falsified his 2006 and 2007 tax returns that he filed late in 2009, and also failed to file his tax returns for 2008 through 2011.

Acting Assistant Attorney General Ciraolo commended the special agents of IRS-Criminal Investigation, who investigated the case, and Assistant Chief John N. Kane Jr. and Trial Attorney Thomas Koelbl 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.

A federal judge in Boston formally sentenced Dzhokhar A. Tsarnaev on June 24, for his role in using weapons of mass destruction at the 2013 Boston Marathon.  U.S. District Judge George A. O’Toole of the District of Massachusetts imposed a sentence of death and multiple consecutive life sentences. 

U.S. Attorney Carmen M. Ortiz of the District of Massachusetts, Assistant Attorney General for National Security John P. Carlin, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Special Agent in Charge Vincent B. Lisi of the FBI’s Boston Division, Commissioner William B. Evans of the Boston Police Department, Colonel Timothy P. Alben of the Massachusetts State Police, Special Agent in Charge Daniel J. Kumor of the Bureau of Alcohol, Tobacco, Firearms and Explosives’s Boston Field Division and Deputy Special Agent in Charge Michael Shea of Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) in Boston made the announcement. 

In May 2014, a federal jury in Boston recommended that Tsarnaev be sentenced to death.  The counts on which the jury recommended a death sentence all related to the pressure cooker bomb Tsarnaev planted and detonated in front of the Forum restaurant, killing Lingzi Lu and Martin Richard.  The same jury convicted Tsarnaev on all 30 counts of the indictment on April 8, 2015. 

Tsarnaev, 21, a U.S. citizen formerly residing in Cambridge, Massachusetts, was convicted of use of a weapon of mass destruction resulting in death and conspiracy; bombing of a place of public use resulting in death and conspiracy; malicious destruction of property resulting in death and conspiracy; use of a firearm during and in relation to a crime of violence; use of a firearm during and in relation to a crime of violence causing death; carjacking resulting in serious bodily injury; interference with commerce by threats or violence; and aiding and abetting. 

Beginning no later than February 2013, Tsarnaev and his brother, Tamerlan Tsarnaev, conspired to detonate improvised explosive devices (IEDs), bomb places of public use and destroy property.  On April 15, 2013, during the 117th running of the Boston Marathon, the brothers placed two pressure cooker bombs filled with shrapnel among the crowds of spectators on Boylston Street and then detonated the bombs seconds apart, killing three people, maiming 17 and injuring hundreds more.  The brothers fled the scene in the chaos of the destruction.  Three days later, on April 18, Tsarnaev and his brother, armed with five IEDs and a Ruger semiautomatic pistol that Tsarnaev had borrowed from a friend, drove to the Massachusetts Institute of Technology (MIT) campus where they shot and killed MIT Police Officer Sean Collier and attempted to steal his service weapon.  Approximately 20 minutes later, they carjacked a Mercedes SUV, kidnapped the driver and forced him to drive to a gas station, and  robbed him of $800 along the way.  After the driver managed to escape, the brothers drove to Laurel Street and Dexter Avenue in Watertown, Massachusetts, where they exploded additional IEDs and engaged in a firefight with Watertown police officers.  During the stand-off, Tsarnaev drove the carjacked vehicle at three officers, attempting to kill them and ran over his brother as he escaped.  Tsarnaev hid in a winterized boat in a backyard in Watertown until his apprehension and arrest the following night.  His brother died from injuries sustained at the scene.

This investigation was conducted by the FBI’s Boston Division, Boston Police Department, Massachusetts State Police, Department of Justice’s National Security Division and member agencies of the Boston Joint Terrorism Task Force, including the ATF, HSI, U.S. Marshals Service, Massachusetts Bay Transit Authority and others.  In addition, the Watertown Police Department; the Cambridge, Massachusetts, Police Department; the MIT Police Department; the Boston Fire Department; the National Guard and police, fire and emergency responders from across Massachusetts and New England played critical roles in the investigation and response.

This case was prosecuted by Assistant U.S. Attorneys William Weinreb, Aloke Chakravarty and Nadine Pellegrini of the District of Massachusetts's Anti-Terrorism and National Security Unit, and Trial Attorney Steve Mellin of the Justice Department’s Capital Case Section.  Vital assistance was also provided by attorneys from the National Security Division’s Counterterrorism Section and the Criminal Division’s Capital Case Section.

Calumite Company LLC, a manufacturer of an additive used in the production of glass, was sentenced today in U.S. District Court in Hammond, Indiana, in connection with its September 2014 plea of guilty to two Clean Air Act false statement violations.  The company was sentenced to pay a $325,000 fine, serve a two year term of probation and implement an environmental compliance plan that includes an annual environmental compliance training program.    

Calumite, located near the shores of Lake Michigan in Portage, Indiana, manufactures and sells a powdery substance of the same name to various glass manufacturers.  The company collects slag, a waste product of the steel industry, dries it in a hot gas oven, crushes it into a fine powder and then ships it off-site to glass manufacturers, who use it as an additive to lower the temperature at which glass can be produced.   

Calumite's Portage facility was subject to a Title V Clean Air Act Operating Permit issued by the Indiana Department of Environmental Management (IDEM).  Among other things, the permit required that Calumite operate, maintain and monitor several “baghouses” on site that are used to control and minimize emissions of a fine particulates.  One of the baghouses, known as the loadout baghouse, was used to collect emissions of particulate that occurred during the loading of product onto tractor trailers and rail cars for shipment to customers.  

A differential pressure gauge (DP gauge) attached to each baghouse continuously monitored and measured the efficiency and effectiveness of the baghouses, to determine whether they were operating properly.  Calumite's Clean Air Act permit required that DP gauges on the baghouses be read daily, while the baghouses were operating and that the results be recorded on daily maintenance log sheets.  The company also was required to submit quarterly reports to IDEM that stated whether the company was in compliance with permit requirements. 

From Dec. 5, 2008, through late July 2009, Calumite did not maintain the loadout baghouse in operating condition and the DP gauge was broken.  Nevertheless, during this same time period, employees continued to load tractor trailers and rail cars with product for shipment off-site.  Calumite employees also knowingly continued to routinely fill out daily logs that falsely reflected DP gauge monitoring readings that were within the range allowed by the permit and caused false information to be submitted to IDEM in the company’s quarterly reports. 

The Clean Air Act makes it a crime to knowing make a material false statement or omit material information from a document that is required to be filed or maintained under the statute.  Both the daily maintenance logs and the quarterly reports were required by Calumite’s permit and the Clean Air Act.    

The case was investigated by the Northern District of Indiana Environmental Crimes Task Force, including agents from the U.S. Environmental Protection Agency’s Criminal Investigation Division and the Indiana Department of Environmental Management’s Office of Criminal Investigations.  The case was prosecuted by the U.S. Attorney’s Office for the Northern District of Indiana and the Environmental Crimes Section of the Justice Department’s Environment and Natural Resources Division.   

Kyle Allen Smith, 21, of Oshkosh, Wisconsin, was sentenced today to 40 months in federal prison for possession of ricin by the Chief District Judge William C. Griesbach of the Eastern District of Wisconsin, announced Assistant Attorney General for National Security John P. Carlin and U.S. Attorney James L. Santelle of the Eastern District of Wisconsin.

Smith was arrested on October 31, 2014, after two professors at the University of Wisconsin at Oshkosh reported to campus authorities that Smith was making unusual inquiries about chemical processes, including extracting of ribosomal inhibiting protein.  According to the plea agreement, Smith admitted growing castor bean plants and extracting ricin from the beans.  A substance found in Smith’s residence was sent to the Department of Homeland Security’s National Bioforensics Analysis Center at Fort Detrick, Maryland, and tested positive for the toxin ricin.  Ricin is a toxin that infects human cells and blocks their ability to synthesize their own protein.  Small doses of ricin may be lethal to human beings if ingested, inhaled or injected.  Symptoms of ricin poisoning can include difficulty breathing, nausea, vomiting and diarrhea, with possible death occurring within 36 to 72 hours.  According to information posted on the website of the Centers for Disease Control and Prevention (CDC), there are no known antidotes for ricin poisoning.

Smith admitted having homicidal thoughts and that these thoughts might have sparked his curiosity about the production of ricin.  He stated he would not use or test the ricin on any human because too many people knew what he was doing and would turn him in.

Assistant Attorney General Carlin joined U.S. Attorney Santelle in praising the actions of the professors and the University administration in bringing Smith to the prompt attention of law enforcement authorities.  It is a perfect example of “see something, say something,” which guides the required vigilance of our times.  Assistant Attorney General Carlin and U.S. Attorney Santelle also thanked the Wisconsin National Guard, 54th Civil Support Team, for the critical assistance they provided in the safe recovery of the ricin.

The case was investigated by the Oshkosh Police Department, the FBI and the University of Wisconsin – Oshkosh Police Department.  The case was prosecuted by Assistant U.S. Attorney Paul L. Kanter of the Eastern District of Wisconsin and the Justice Department’s National Security Division.

The former Executive Vice President and President of Global Business Operations for Qualcomm Inc., was sentenced today to 18 months in prison and fined $500,000 for his role in a three-year insider trading scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Laura E. Duffy of the Southern District of California made the announcement.

“Through his position as a high-ranking executive at Qualcomm, Jing Wang gained unique access to information about the company’s earnings and intended acquisitions and illegally exploited that inside information for personal gain,” said Assistant Attorney General Caldwell.  “He then enlisted the services of others – his stock broker and his brother – to cover up the scheme.  This prosecution demonstrates the Criminal Division’s commitment to holding accountable corporate executives who would undermine the integrity of the financial marketplace.”

“Jing Wang was a powerful insider at one of the world’s top corporations – but he threw it all away to make a few hundred thousand dollars,” said U.S. Attorney Duffy. “While Wang has lost his power, his position and his freedom, the real losers here are investors who play by the rules, and our nation’s financial system, which is diminished with every one of these schemes.”

Jing Wang, 52, of Del Mar, California, pleaded guilty in July 2014 to insider trading, money laundering and obstruction of justice for orchestrating a multi-year scheme to trade on the confidential information of Qualcomm and cover up his criminal conduct.  The sentence was imposed by U.S. District Judge William Q. Hayes of the Southern District of California. 

In connection with his plea, Wang admitted that he made three, separate insider trades using a brokerage account in the name of his British Virgin Island (BVI) shell company, Unicorn Global Enterprises.  First, in early 2010, prior to Qualcomm’s announcement of a dividend increase and stock repurchase, Wang bought company stock valued at approximately $277,000.  He also admitted that, in December 2010, while attending Qualcomm’s Board of Directors meeting in Hong Kong, and hours after the Board approved a non-public offer to purchase Atheros, a developer of semiconductors for wireless communications, Wang purchased stock in Atheros.  Wang further admitted that, just a few weeks later, he directed his stockbroker, Gary Yin, to sell the Atheros stock, for approximately $481,000, and purchase Qualcomm stock one day before the company announced record earnings.

Wang also pleaded guilty to money laundering for transferring the illegal proceeds from Unicorn’s account to an account of a new BVI shell company he controlled.  He further admitted to obstructing justice by creating a false cover story in which he and co-conspirator Yin would blame Wang’s brother Bing Wang, who resides in rural China, for the insider trading and ownership of the Unicorn Account.  Among other acts, Wang collected incriminating evidence and provided it to Yin to take to China, and arranged meetings between Yin and Bing Wang during which the two rehearsed the false account.                                                                                                

Yin pleaded guilty to conspiring to obstruct justice and launder money, and currently is scheduled to be sentenced on July 17, 2015.  Bing Wang has been charged in connection with the scheme, and is wanted on an international arrest warrant. 

This case was investigated by the FBI’s San Diego Field Office and the Internal Revenue Service-Criminal Investigation’s San Diego Field Division.  The SEC’s Los Angeles Regional Office provided substantial assistance.  The case is being prosecuted by Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Eric J. Beste of the Southern District of California.

Corporation Previously Paid More Than $80 million to Resolve Criminal and Civil Investigations

The former president and CEO of OtisMed Corporation was sentenced today to serve two years in prison for intentionally distributing a medical device used in knee replacement surgery after its application for marketing clearance had been rejected by the Food and Drug Administration (FDA), the Department of Justice announced.

Charlie Chi, 46, of San Francisco, pleaded guilty in December 2014 to three counts of distributing adulterated medical devices in interstate commerce in violation of the federal Food, Drug, and Cosmetic Act (FDCA) after having been told by the FDA, legal counsel and his own board of directors not to do so.  U.S. District Judge Claire C. Cecchi in Newark, New Jersey, delivered Chi’s 24-month sentence today and also ordered him to serve one year of supervised release and to pay a $75,000 fine.  In September 2014, Judge Cecchi sentenced OtisMed Corporation, now a subsidiary of Stryker Corporation, to a criminal fine of $34.4 million and ordered the company to pay $5.16 million in criminal forfeiture.  Stryker acquired the company after the criminal conduct for which he was sentenced today.  In a related civil settlement, OtisMed agreed to pay approximately $41.2 million, including interest, to resolve its civil liability for submitting false claims to the Medicare, TRICARE, Federal Employees Health Benefits and Medicaid programs.

“Today’s sentencing of OtisMed’s CEO ought to send a clear message to others in positions of authority within the medical device and pharmaceutical industries: the Department of Justice will vigorously prosecute not only corporations, but also the individuals at their helm who are responsible for endangering public health and safety in pursuit of profit,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.

“The defendant betrayed the trust of patients whose doctors were using his unapproved surgical device for a serious medical procedure,” said U.S. Attorney Paul J. Fishman of the U.S. Attorney’s Office of the District of New Jersey.  “With everything else people have to deal with when they are facing surgery, they shouldn’t have to worry whether their doctor is using equipment that has been approved for use. The punishment meted out to Chi and his company is appropriate.”

According to documents filed in this case and statements made in court:

In August 2005, Chi was among the founders of OtisMed and conceived of the OtisKnee orthopedic cutting guide, its primary product.  Chi acted as OtisMed’s president, CEO and chairman of its board of directors until OtisMed was acquired by Stryker in November 2009.  The OtisKnee was used by surgeons during total knee arthroplasty (TKA), commonly known as knee replacement surgery.  The surgical procedure requires a surgeon to remove the ends of the leg bones and to reshape the remaining bone to accommodate the implantation of an artificial knee prosthesis.  The cuts to the bone must be made at precise angles because they are critical to the clinical result; failure to achieve the correct angle in TKA procedures can result in failure of the bones and/or the implanted prosthetic joint.

OtisMed marketed the OtisKnee cutting guide as a tool to assist surgeons in making bone cuts specific to individual patients’ anatomy based on MRIs performed prior to surgery.  None of OtisMed’s claims regarding the OtisKnee device were evaluated by the FDA before the company used them in advertisements and promotional material.

Between May 2006 and September 2009, OtisMed sold more than 18,000 OtisKnee devices, generating revenue of approximately $27.1 million. 

On Oct. 2, 2008, OtisMed submitted a pre-market notification to the FDA seeking clearance to market the OtisKnee.  The company had not previously sought the FDA’s clearance or approval and had been falsely representing to physicians and other potential purchasers that the product was exempt from such pre-market requirements.

On Sept. 2, 2009, the FDA sent OtisMed a notice that its submission had been denied, noting that the company had failed to demonstrate that the OtisKnee was as safe and effective as other legally marketed devices.  The letter warned OtisMed that distribution of the OtisKnee prior to approval would be an FDCA violation, and indicated the FDA viewed the product as part of a “significant risk device system,” which is defined as presenting a potential for serious risk to the health, safety or welfare of a subject.  Chi and others at OtisMed received advice from legal and regulatory counsel confirming it would be unlawful for OtisMed to continue distributing the OtisKnee.

Though the board of directors unanimously decided to stop further shipments of the devices, Chi was concerned that inconveniencing surgeons planning to use the OtisKnee in scheduled surgeries would exacerbate the negative impact of the FDA letter on the reputation of OtisMed and the device.  Chi directed OtisMed employees to organize a mass shipment of all OtisKnee devices that had been manufactured but had not yet been shipped and suggested ways for the employees to hide the shipments from FDA regulators.

At Chi’s direction, OtisMed shipped approximately 218 OtisKnee guides from California to surgeons throughout the United States, including 16 to surgeons in New Jersey, a week after the FDA expressly denied OtisMed’s request for clearance.

“With more than 600,000 knee replacements performed each year, patients rely on FDA to help ensure that the devices are safe and work as intended,” said Director George M. Karavetsos of the FDA’s Office of Criminal Investigations.  “When manufacturers ignore FDA requirements, they risk endangering patients’ health and quality of life.  We will continue to protect the public health by bringing to justice those who disregard FDA regulations.”

Chi’s sentence marks the culmination of a long-term investigation conducted jointly by the FDA’s Office of Criminal Investigations, under the direction of Special Agent in Charge Antoinette V. Henry, and the Department of Health and Human Services’ Office of Inspector General (HHS-OIG), under the direction of Special Agent in Charge Scott J. Lampert.  Counsel to the HHS-OIG and FDA’s Office of Chief Counsel to the FDA also assisted.  The National Association of Medicaid Fraud Control Units, along with the Medicaid Fraud Control Unit of the Massachusetts Attorney General’s Office, assisted in coordinating the settlements with the various states.

The government is represented by Chief Jacob T. Elberg of the U.S. Attorney’s Office of the District of New Jersey Health Care and Government Fraud Unit and Trial Attorney Ross S. Goldstein of the Civil Division’s Consumer Protection Branch.

U.S. Attorney Fishman reorganized the health care fraud practice at the New Jersey U.S. Attorney’s Office shortly after taking office, including creating a stand-alone Health Care and Government Fraud Unit to handle both criminal and civil investigations and prosecutions of health care fraud offenses.  Since 2010, the office has recovered more than $635 million in health care fraud and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the Food, Drug and Cosmetic Act and other statutes.

A Jamaican man was sentenced today in Fort Lauderdale, Florida, after he pleaded guilty to his role in an international lottery scheme against elderly victims in the United States. 

Damion Bryan Barrett, 28, was sentenced by U.S. District Court Judge William J. Zloch of the Southern District of Florida to serve 46 months in prison and five years of supervised release.  Barrett was also ordered to pay $94,456 in restitution. 

Barrett was indicted by a federal grand jury in Fort Lauderdale on Aug. 9, 2012, and was arrested in Jan. 2015 in Jamaica based on the United States’ request that he be extradited to this country.  Barrett was extradited to the United States on Feb. 12 and was the first Jamaican to be extradited to the United States based on charges that he committed fraud as part of an international lottery scheme.

On April 10, Barrett pleaded guilty to one count of conspiracy to commit wire fraud.  The prosecution is part of the United States’ ongoing crackdown on fraudulent international lottery schemes.

“This sentence sends a very strong message that scammers operating in foreign countries will be held accountable for the laws they break in the United States,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department is committed to bringing these international fraudsters to justice.”

“This case is an excellent example of coordination between domestic and international law enforcement agencies to hold those who facilitate and participate in fraudulent schemes accountable,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.  “We will continue to foster this cooperation in order to crackdown on international lottery fraud so that members of our community are protected and are not deprived of their hard earned savings.” 

As part of his guilty plea, Barrett acknowledged that had the case gone to trial, the United States would have proved beyond a reasonable doubt that from 2008 through 2012, he was a member of a conspiracy in which elderly victims were informed that they had won a large amount of money in a lottery and were induced to pay bogus fees in advance of receiving their purported lottery winnings.  Barrett also admitted that the United States would have proved that he knew the claims of lottery winnings were completely fabricated and that he and his co-conspirators kept the victims’ money for their own benefit without paying any lottery winnings.  Barrett also admitted that the United States would have proved that in an effort to convince the victims that the lottery winnings were real, the conspirators sent the victims communications discussing their purported lottery winnings, which falsely claimed to be from a genuine sweepstakes company and from federal agencies including the Internal Revenue Service and the Federal Reserve.  In fact, these communications were not from a genuine sweepstakes company or from agencies of the United States.        

Barrett’s co-defendant, Oneike Barnett, 29, pleaded guilty on Feb. 28, 2014, to conspiracy to commit wire fraud.  On April 29, 2014, U.S. District Court Judge Zloch sentenced Barnett to serve 60 months in prison and five years of supervised release, and to pay $94,456 in restitution for his role in this case.    

Principal Deputy Assistant Attorney General Mizer and U.S. Attorney Ferrer commended the investigative efforts of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the U.S. Postal Inspection Service and the U.S. Marshals Service.  The case was prosecuted by Trial Attorney Kathryn Drenning of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Bertha Mitrani of the Southern District of Florida.

Attorney General Loretta E. Lynch released the following statement today after the Supreme Court ruling in Obergefell v. Hodges:

“Today, the Supreme Court of the United States has recognized the equality, dignity and essential humanity of our gay and lesbian brothers and sisters and reaffirmed this country’s bedrock principle – engraved over the entrance to the Court itself – that all Americans are entitled to equal justice under law.  By putting an end to an era of state-sanctioned discrimination, the decision lights the way to a future of acceptance, inclusion and opportunity for gay and lesbian Americans and their families.  It encapsulates a nation’s enormous leap of understanding – rooted in compassion, tolerance and empathy – and reflects the countless hearts touched and minds opened along the way.  It vindicates an idea whose time has come at last. 

Today’s result would not have been possible without the passionate advocacy and innumerable acts of personal bravery of generations of leaders, who have fought for the simple freedom to pursue their own happiness with those whom they love.  Their fight, galvanized by the Stonewall riots nearly a half-century ago, was waged in the face of pervasive bigotry and widespread resistance and its progress was never guaranteed.  But after too many lifetimes of isolation, humiliation and harassment – and steeled by unimaginable courage and indomitable conviction – gay and lesbian citizens across the country bravely came out into the open and awakened the conscience of a nation.  Their courage has led us to this day; to a decision from the nation’s highest court declaring them to have full and equal rights to marry in the country they fought to change; and to a victory that they have justly and finally won.

I have no illusions that Obergefell v. Hodges spells the end of anti-gay prejudice.  Difficult legal issues lie ahead and the protections written into law are not all they should be.  That’s why this march must go on and why this cause will endure, until all Americans – regardless of sexual orientation – are afforded the equal rights, equal treatment and equal opportunity they deserve.  But on a day like today – a day that marks a watershed moment in the progress of this movement, in the story of this community and in the history of this nation – it is proper that we pause and take stock of just how far we have come.  The Justice Department is proud to have been a part of this journey, from Attorney General Eric Holder’s unwavering leadership in advancing the cause of equality to the groundbreaking progress we have witnessed today.  Going forward, we are committed to standing on the side of equality – and standing with the LGBT community – to keep up the fight for safety, opportunity, dignity and justice for all.”

District Court Ruled that the Fruits of FISA Surveillance Were Admissible in this Case

Agron Hasbajrami, 31, an Albanian citizen and resident of Brooklyn, New York, pleaded guilty today to attempting and conspiring to provide material support to terrorists before U.S. District Judge John Gleeson of the Eastern District of New York.  At sentencing, the defendant faces up to 20 years in prison. 

The guilty plea was announced by Assistant Attorney General for National Security John P. Carlin, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI’s New York Field Office and Commissioner William J. Bratton of the New York City Police Department. 

As part of the plea, Hasbajrami agreed to be deported from the United States at the conclusion of his sentence, and the government agreed to allow the defendant to preserve his right to challenge on appeal the lawfulness of surveillance obtained or derived from the FISA Amendments Act of 2008 (FAA), a question of first impression in the Second Circuit.  The U.S. District Court of the Eastern District of New York ruled in February 2015 that the fruits of FISA surveillance in this case were admissible.

“This case, like many others before it, has shown that the application of lawful surveillance can allow the United States government to detect and disrupt a terrorist in the United States,” said Acting U.S. Attorney Currie.  “The defendant’s plea today leaves no question as to his role in a very serious terrorism offense, and if he chooses to bring an appeal, we are confident we will prevail in the appellate court as well.”  

“Today’s guilty plea is the result of a thorough investigation conducted by the New York FBI’s Joint Terrorism Task Force,” said Assistant Director in Charge Rodriguez.  “I want to thank all of the agencies that participate on the FBI JTTF.  Together we are able to use our combined legal and investigative tools to quickly identify and disrupt threats to our community.”

“This case is another example that shows that when people in the New York area conspire with, attempt to join, or fund a terrorist organization, even in the Tribal Area of Pakistan, they will be uncovered by the agents and detectives of the JTTF, and they will face the full consequences of the law,” said Commissioner Bratton. 

According to court documents and statements made in court today, in September 2011, Hasbajrami attempted to travel to the Federally Administered Tribal Areas of Pakistan (the FATA) for the purpose of joining a radical jihadist insurgent group.  In addition, he sent over $1,000 in multiple wire transfers abroad to support terrorist activities in Pakistan and Afghanistan.  In pursuing his goal of fighting jihad, the defendant exchanged email messages with an individual in Pakistan who told him that he was a member of an armed group that had murdered American soldiers and kidnapped Westerners.  In one email message, Hasbajrami stated that it was difficult to ask for money from fellow Muslims because they became apprehensive “when they hear it is for jihad.”  In another email, he stated that he wished to travel abroad to “marry with the girls in paradise,” using jihadist rhetoric to describe a reference to his desire to die as a martyr himself.

On Sept. 5, 2011, Hasbajrami purchased a one-way airline ticket to travel to Turkey the following day.  Based on Hasbajrami’s email communications, he intended to travel from Turkey to the FATA to join a jihadist group.  On Sept. 6, 2011, the defendant was arrested at John F. Kennedy International Airport.  At the time of his arrest, he was carrying a tent, boots and cold weather gear.  A search of the defendant’s residence revealed, among other items, a note reading “Do not wait for invasion, the time is martyrdom time.”

Upon receiving notice that evidence in his case had been obtained or derived from surveillance conducted pursuant to the FAA, Hasbajrami was permitted by the District Court to withdraw his prior plea, and he thereafter moved to suppress the fruits of such evidence, arguing that certain provisions of the act were unconstitutional.  On Feb. 20, 2015, the District Court denied the defendant’s motion, ruling that the fruits of the FAA surveillance, including the defendant’s post-arrest statements, were admissible.  Under the terms of the plea agreement,  Hasbajrami preserved his right to appeal the District Court’s decision on his suppression motion to the Second Circuit Court of Appeals.

Assistant Attorney General Carlin joined Acting U.S. Attorney Currie in thanking the federal, state and local law enforcement agencies who participate in the FBI’s Joint Terrorism Task Force in New York.

The government’s case is being prosecuted by Assistant U.S. Attorneys Seth D. DuCharme, Saritha Komatireddy, Peter Baldwin and Matthew Amatruda of the Eastern District of New York, and Trial Attorney Danya Atiyeh of the National Security Division’s Counterterrorism Section.